Document:

Exhibit

Employment Agreement
This Employment Agreement (the "Agreement") is made and entered into as of May 19, 2016 (the “Signing Date”), by and between David G. Burke (the "Executive") and Diversified Restaurant Holdings, Inc., a Nevada corporation (the "Company").
WHEREAS, the Executive currently serves as the Chief Financial Officer of the Company; and 
WHEREAS, Company desires to transition and employ the Executive as its President and Chief Executive Officer on the terms and conditions set forth herein; and
WHEREAS, the Executive desires to be employed by the Company on such terms and conditions.
NOW, THEREFORE, in consideration of the mutual covenants, promises and obligations set forth herein, the parties agree as follows:
1.    Transition Period; Term. The Executive shall continue to serve as the Company’s Chief Financial Officer from the Signing Date until the Effective Date (as defined below) (the “Transition Period”). During the Transition Period, the Executive’s prorated annual base salary and annual bonus target shall be as set forth on Schedule 1.1. The Executive's initial employment as President and Chief Executive Officer of the Company hereunder shall be effective as of January 1, 2017 (the "Effective Date") and shall continue until the third anniversary thereof and thereafter as mutually agreed by the parties, unless terminated earlier pursuant to Section 5 of this Agreement. The period during which the Executive is employed by the Company hereunder is hereinafter referred to as the "Employment Term".
2.    Position and Duties.
2.1    Position. During the Employment Term, the Executive shall serve as the President and Chief Executive Officer of the Company, reporting to the Board of Directors. In such position, the Executive shall have such duties, authority and responsibility as shall be determined from time to time by the Board of Directors, as long as such duties, authority and responsibility are consistent with the Executive's position. The Executive shall also serve as a member of the board of directors of the Company (the "Board") (subject to election by the shareholders) or as an officer or director of any affiliate of the Company for no additional compensation.
2.2    Duties. During the Employment Term, the Executive shall devote substantially all of his business time and attention to the performance of the Executive's duties hereunder and will not engage in any other business, profession or occupation for compensation or otherwise which 

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would conflict or interfere with the performance of such services either directly or indirectly without the prior written consent of the Board. Notwithstanding the foregoing, the Executive will be permitted to (a) with the prior written consent of the Board (which consent will not be unreasonably withheld or delayed) act or serve as a director, trustee, committee member or principal of any type of business, civic or charitable organization as long as such activities are disclosed in writing to the Company's Code of Ethics Contact Person in accordance with the Company's Code of Business Conduct and Ethics, and (b) purchase or own less than five percent (5%) of the publicly traded securities of any corporation; provided that, such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation; provided further that, the activities described in clauses (a) and (b) do not interfere with the performance of the Executive's duties and responsibilities to the Company as provided hereunder, including, but not limited to, the obligations set forth in Section 2 hereof.
3.    Place of Performance. The principal place of Executive's employment shall be the Company's principal executive office currently located in Southfield, Michigan; provided that, the Executive may be required to travel on Company business during the Employment Term.
4.    Compensation.
4.1    Base Salary. During the Employment Term, the Company shall pay the Executive an annual rate of base salary of as set forth on Schedule 4.1 in periodic installments in accordance with the Company's customary payroll practices, but no less frequently than monthly. The Executive's annual base salary, as in effect from time to time, is hereinafter referred to as "Base Salary".
4.2    Annual Bonus.  
(a)    For each complete fiscal year of the Employment Term, the Executive shall have the opportunity to earn an annual bonus (the "Annual Bonus") equal to the percentage of Base Salary set forth on Schedule 4.2 (the "Target Bonus"), as in effect at the beginning of the applicable fiscal year, based on achievement of annual target performance goals established by the Compensation Committee of the Board (the "Compensation Committee"). 
(b)    The Annual Bonus, if any, will be paid in accordance with the terms of the Company’s annual bonus plan.  
(c)    Except as otherwise provided in Section 5, (i) the Annual Bonus will be subject to the terms of the Company annual bonus plan under which it is granted and (ii) in order to be 

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eligible to receive an Annual Bonus, the Executive must be employed by the Company at the end of the applicable fiscal year.
4.3    Signing Bonus. 
(a)    The Company shall pay the Executive a lump sum cash signing bonus of $100,000 (the "Signing Bonus") within two weeks following the Signing Date of this Agreement; provided that, the Executive shall repay a pro rata portion of the Signing Bonus if, prior to the first anniversary of the effective date, the Executive terminates his employment without Good Reason (as defined below) or is terminated by the Company for Cause (as defined below).
(b)    The Company will cause the Compensation Committee to grant the Executive 100,000 shares of the Company’s common stock within two weeks following the Signing Date of the Employment Agreement.  The award will be subject to the terms and conditions of the Company’s Stock Incentive Plan of 2011(the “Stock Incentive Plan”) and will vest ratably on January 1, 2018, January 1, 2019 and January 1, 2020.
4.4    Equity Awards. With respect to each fiscal year of the Company ending during the Employment Term, the Executive shall receive an annual long-term incentive award of 50,000 shares of common stock. Each such award shall vest three years from the date of grant and shall be subject to the terms and conditions of the Stock Incentive Plan. All other terms and conditions applicable to each such award shall be determined by the Compensation Committee and shall be no less favorable than those that apply to similarly situated executive officers of the Company.
4.5    Fringe Benefits and Perquisites. During the Employment Term, the Executive shall be entitled to fringe benefits and perquisites consistent with the practices of the Company, and to the extent the Company provides similar benefits or perquisites (or both) to similarly situated executives of the Company, including without limitation, a car allowance. 
4.6    Employee Benefits. During the Employment Term, the Executive shall be entitled to participate in all employee benefit plans, practices and programs maintained by the Company, as in effect from time to time (collectively, "Employee Benefit Plans"), on a basis which is no less favorable than is provided to other similarly situated executives of the Company, to the extent consistent with applicable law and the terms of the applicable Employee Benefit Plans. The Company reserves the right to amend or cancel any Employee Benefit Plans at any time in its sole discretion, subject to the terms of such Employee Benefit Plan and applicable law.  All payments for benefits are the responsibility of the Company.

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4.7    Vacation; Paid Time-off. During the Employment Term, the Executive shall be entitled to four weeks of paid vacation per calendar year (prorated for partial years) in accordance with the Company's vacation policies, as in effect from time to time. The Executive shall receive other paid time-off in accordance with the Company's policies for executive officers as such policies may exist from time to time.
4.8    Business Expenses. The Executive shall be entitled to reimbursement for all reasonable and necessary out-of-pocket business, entertainment and travel expenses incurred by the Executive in connection with the performance of the Executive's duties hereunder in accordance with the Company's expense reimbursement policies and procedures.
4.9    Indemnification.  
(a)    In the event that the Executive is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative (a "Proceeding"), other than any Proceeding initiated by the Executive or the Company related to any contest or dispute between the Executive and the Company or any of its affiliates with respect to this Agreement or the Executive's employment hereunder, by reason of the fact that the Executive entered into this Agreement, is or was a director or officer of the Company, or any affiliate of the Company, or is or was serving at the request of the Company as a director, officer, member, employee or agent of another corporation or a partnership, joint venture, trust or other enterprise, the Executive shall be indemnified and held harmless by the Company to the maximum extent permitted under applicable law and the Company's bylaws from and against any liabilities, costs, claims and expenses, including all costs and expenses incurred in defense of any Proceeding (including attorneys' fees). Costs and expenses incurred by the Executive in defense or prosecution of such Proceeding (including reasonable attorneys' fees) shall be paid by the Company as incurred month to month upon receipt by the Company of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought; and (iii) an undertaking adequate under applicable law made by or on behalf of the Executive to repay the amounts so paid if it shall ultimately be determined by court of law and/or arbitration panel that the Executive is not entitled to be indemnified by the Company under this Agreement. 
(b)    During the Employment Term and for a period of two (2) years thereafter, the Company or any successor to the Company shall purchase and maintain, at its own expense, directors' and officers' liability insurance providing coverage to the Executive on terms that are no less favorable than the coverage provided to other directors and similarly situated executives of the Company.

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4.10    Clawback Provisions. Any incentive-based compensation, or any other compensation, paid to the Executive pursuant to this Agreement or any other agreement or arrangement with the Company which is subject to recovery under any law, government regulation or stock exchange listing requirement, will be subject to such deductions and clawback as may be required to be made pursuant to such law, government regulation or stock exchange listing requirement (or any policy adopted by the Company pursuant to any such law, government regulation or stock exchange listing requirement).
5.    Termination of Employment. The Employment Term and the Executive's employment hereunder may be terminated by either the Company or the Executive at any time and for any reason; provided that, unless otherwise provided herein, either party shall be required to give the other party at least thirty days advance written notice of any termination of the Executive's employment. Upon termination of the Executive's employment during the Employment Term, the Executive shall be entitled to the compensation and benefits described in this Section 5 and shall have no further rights to any compensation or any other benefits from the Company or any of its affiliates. 
5.1    Termination for Cause or Without Good Reason.  
(d)    The Executive's employment hereunder may be terminated by the Company for Cause or by the Executive without Good Reason. If the Executive's employment is terminated by the Company for Cause or by the Executive without Good Reason, the Executive shall be entitled to receive:
		
	(i)
	any accrued but unpaid Base Salary and accrued but unused vacation which shall be paid on the pay date immediately following the Termination Date (as defined below) in accordance with the Company's customary payroll procedures; 

		
	(ii)
	any earned but unpaid Annual Bonus with respect to any completed fiscal year immediately preceding the Termination Date, which shall be paid on the otherwise applicable payment date; provided that, if the Executive's employment is terminated by the Company for Cause, then any such accrued but unpaid Annual Bonus shall be forfeited;

		
	(iii)
	reimbursement for unreimbursed business expenses properly incurred by the Executive prior to the Termination Date, which shall be subject to and paid in accordance with the Company's expense reimbursement policy; and

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	(iv)
	such employee benefits (including equity compensation), if any, to which the Executive may be entitled under the Company's employee benefit plans as of the Termination Date; provided that, in no event shall the Executive be entitled to any payments in the nature of severance or termination payments except as specifically provided herein.

Items 5.1(a)(i) through 5.1(a)(iv) are referred to herein collectively as the "Accrued Amounts".
(e)    For purposes of this Agreement, "Cause" shall mean:
		
	(i)
	the Executive's willful failure to perform his duties (other than any such failure resulting from incapacity due to physical or mental illness);

		
	(ii)
	the Executive's willful failure to comply with any valid and legal directive of the Board of Directors;

		
	(iii)
	the Executive's engagement in dishonesty, illegal conduct or gross misconduct, which is, in each case, materially injurious to the Company or its affiliates;

		
	(iv)
	the Executive's embezzlement, misappropriation or fraud, whether or not related to the Executive's employment with the Company;

		
	(v)
	the Executive's conviction of or plea of guilty or nolo contendere to a crime that constitutes a felony (or state law equivalent) or a crime that constitutes a misdemeanor involving moral turpitude;

		
	(vi)
	the Executive's willful unauthorized disclosure of Confidential Information (as defined below);

		
	(vii)
	the Executive's material breach of any material obligation under this Agreement or any other written agreement between the Executive and the Company; or

(viii) any material failure by the Executive to comply with the Company's written policies or rules, as they may be in effect from time to time during the Employment Term, if such failure causes material reputational or financial harm to the Company.
For purposes of this provision, no act or failure to act on the part of the Executive shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the 

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Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company.
Termination of the Executive's employment shall not be deemed to be for Cause unless and until the Company delivers to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than a majority of the Board (after reasonable written notice of at least 10 days is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board), finding that the Executive has engaged in the conduct described in any of (i)-(viii) above. 
(f)    For purposes of this Agreement, "Good Reason" shall mean the occurrence of any of the following, in each case during the Employment Term without the Executive's written consent:
		
	(i)
	a material reduction in the Executive's Base Salary;

		
	(ii)
	a material reduction in the Executive's Target Bonus opportunity;

		
	(iii)
	a relocation of the Executive's principal place of employment by more than 50 miles;

		
	(iv)
	any material breach by the Company of any material provision of this Agreement;

		
	(v)
	the Company's failure to obtain an agreement from any successor to the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform if no succession had taken place, except where such assumption occurs by operation of law; or

		
	(vi)
	a material, adverse change in the Executive's title, authority, duties or responsibilities (other than temporarily while the Executive is physically or mentally incapacitated or as required by applicable law) taking into account the Company's size, status as a public company and capitalization as of the Effective Date.

The Executive cannot terminate his employment for Good Reason unless he has provided written notice to the Company of the existence of the circumstances providing grounds for termination 

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for Good Reason and the Company has had at least 30 days from the date on which such notice is provided to cure such circumstances. If the Executive does not terminate his employment for Good Reason within 60 days after the first occurrence of the applicable grounds, or within 60 days of the Company’s failed effort to cure such circumstances then the Executive will be deemed to have waived his right to terminate for Good Reason with respect to such grounds.
5.2    Termination without Cause or for Good Reason. The Employment Term and the Executive's employment hereunder may be terminated by the Executive for Good Reason or by the Company without Cause. In the event of such termination, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive's compliance with Section 6, Section 7 and Section 8 of this Agreement and his execution of a release of claims in favor of the Company, its affiliates and their respective officers and directors in a form provided by the Company (the "Release") and such Release becoming effective within 30 days following the Termination Date (such 30-day period, the "Release Execution Period"), the Executive shall be entitled to receive the following: 
(c)    Subject to the requirements of Section 22.2 of this Agreement, continued Base Salary in effect on the Termination Date for one year following the Termination Date payable in equal installments in accordance with the Company's normal payroll practices, but no less frequently than monthly, which shall commence within 30 days following the Termination Date; provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payments shall not begin until the beginning of the second taxable year; provided further that, the first installment payment shall include all amounts of Base Salary that would otherwise have been paid to the Executive during the period beginning on the Termination Date and ending on the first payment date if no delay had been imposed;
(d)    a payment equal to the product of (i) the Annual Bonus, if any, that the Executive would have earned for the fiscal year in which the Termination Date (as determined in accordance with Section 5.6) occurs based on achievement of the applicable performance goals for such year and (ii) a fraction, the numerator of which is the number of days the Executive was employed by the Company during the year of termination and the denominator of which is the number of days in such year (the "Pro-Rata Bonus"). This amount shall be paid on the date that annual bonuses are paid to similarly situated executives;
(e)    If the Executive timely and properly elects group health plan continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985 ("COBRA"), the Company shall reimburse the Executive for the monthly COBRA premium paid by the Executive for himself and his dependents. Such reimbursement shall be paid to the Executive on the 15th of the 

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month immediately following the month in which the Executive timely remits the premium payment. The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the six-month anniversary of the Termination Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive becomes eligible to receive substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company's making payments under this Section 5.2(c) would violate the nondiscrimination rules applicable to non-grandfathered plans under the Affordable Care Act (the "ACA"), or result in the imposition of penalties under the ACA and the related regulations and guidance promulgated thereunder), the parties agree to reform this Section 5.2(c) in a manner as is necessary to comply with the ACA.
(f)    The treatment of any outstanding equity awards shall be determined in accordance with the terms of the Stock Incentive Plan and the applicable award agreements. 
5.3    Death or Disability.  
(a)    The Executive's employment hereunder shall terminate automatically upon the Executive's death during the Employment Term, and the Company may terminate the Executive's employment on account of the Executive's Disability. 
(b)    If the Executive's employment is terminated during the Employment Term on account of the Executive's death or Disability, the Executive (or the Executive's estate and/or beneficiaries, as the case may be) shall be entitled to receive the following:
		
	(v)
	the Accrued Amounts; and

		
	(vi)
	a lump sum payment equal to the Pro-Rata Bonus, if any, that the Executive would have earned for the fiscal year in which the Termination Date occurs based on the achievement of applicable performance goals for such year, which shall be payable on the date that annual bonuses are paid to the Company's similarly situated executives.

Notwithstanding any other provision contained herein, all payments made in connection with the Executive's Disability shall be provided in a manner which is consistent with federal and state law.
(c)    For purposes of this Agreement, Disability shall mean the Executive is entitled to receive long-term disability benefits under the Company's long-term disability plan, or if there is no such plan, the Executive's inability, due to physical or mental incapacity, to substantially perform his duties and responsibilities under this Agreement for one hundred eighty (180) days 

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out of any three hundred sixty-five (365) day period or one hundred twenty (120) consecutive days; provided however, in the event the Company temporarily replaces the Executive, or transfers the Executive's duties or responsibilities to another individual on account of the Executive's inability to perform such duties due to a mental or physical incapacity which is, or is reasonably expected to become, a Disability, then the Executive's employment shall not be deemed terminated by the Company and will for all other purposes of this Employment Agreement be considered an ongoing employee in good standing of the Company and the Executive shall not be able to resign with Good Reason as a result thereof. Any question as to the existence of the Executive's Disability as to which the Executive and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive and the Company. If the Executive and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of Disability made in writing to the Company and the Executive shall be final and conclusive for all purposes of this Agreement.
5.4    Change in Control Termination.  
(a)    Notwithstanding any other provision contained herein, if the Executive's employment hereunder is terminated by the Executive for Good Reason or by the Company without Cause (other than on account of the Executive's death or Disability), in each case within twelve (12) months following a Change in Control, the Executive shall be entitled to receive the Accrued Amounts and subject to the Executive's compliance with Section 6, Section 7 and Section 8 of this Agreement and his execution of a Release which becomes effective within 30 days following the Termination Date, the Executive shall be entitled to receive the following: 
		
	(vii)
	a lump sum payment equal to 1.5 times the sum of the Executive's Base Salary and Target Bonus for the year in which the Termination Date occurs (or if greater, the year immediately preceding the year in which the Change in Control occurs), which shall be paid within 45 days following the Termination Date: provided that, if the Release Execution Period begins in one taxable year and ends in another taxable year, payment shall not be made until the beginning of the second taxable year; 

(b)    If the Executive timely and properly elects health continuation coverage under COBRA, the Company shall reimburse the Executive for the monthly COBRA premium paid by the Executive for himself and his dependents. Such reimbursement shall be paid to the Executive on the 15th day of the month immediately following the month in which the Executive timely 

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remits the premium payment. The Executive shall be eligible to receive such reimbursement until the earliest of: (i) the six-month anniversary of the Termination Date; (ii) the date the Executive is no longer eligible to receive COBRA continuation coverage; and (iii) the date on which the Executive becomes eligible to receive substantially similar coverage from another employer or other source. Notwithstanding the foregoing, if the Company's making payments under this Section 5.4(b) would violate the nondiscrimination rules applicable to non-grandfathered plans under the ACA, or result in the imposition of penalties under the ACA, the parties agree to reform this Section 5.4(b) in a manner as is necessary to comply with the ACA.
(c)    For purposes of this Agreement, "Change in Control" shall mean the occurrence of any of the following after the Effective Date:
		
	(vii)
	one person (or more than one person acting as a group) acquires ownership of stock of the Company that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation; provided that, a Change in Control shall not occur if any person (or more than one person acting as a group) owns more than 50% of the total fair market value or total voting power of the Company's stock and acquires additional stock;

		
	(viii)
	one person (or more than one person acting as a group) acquires (or has acquired during the twelve-month period ending on the date of the most recent acquisition) ownership of the Company's stock possessing 30% or more of the total voting power of the stock of such corporation;

		
	(ix)
	a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or

		
	(x)
	the sale of all or substantially all of the Company's assets.

Notwithstanding the foregoing, a Change in Control shall not occur unless such transaction constitutes a change in the ownership of the Company, a change in effective control of the Company, or a change in the ownership of a substantial portion of the Company's assets under Section 409A.
5.5    Notice of Termination. Any termination of the Executive's employment hereunder by the Company or by the Executive during the Employment Term (other than termination pursuant to Section 5.3(a) on account of the Executive's death) shall be communicated by written notice of 

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termination ("Notice of Termination") to the other party hereto in accordance with Section 27. The Notice of Termination shall specify: 
(a)    The termination provision of this Agreement relied upon; 
(b)    To the extent applicable, the facts and circumstances claimed to provide a basis for termination of the Executive's employment under the provision so indicated; and
(c)    The applicable Termination Date.
5.6    Termination Date. The Executive's "Termination Date" shall be: 
(a)    If the Executive's employment hereunder terminates on account of the Executive's death, the date of the Executive's death; 
(b)    If the Executive's employment hereunder is terminated on account of the Executive's Disability, the date that it is determined that the Executive has a Disability;
(c)    If the Company terminates the Executive's employment hereunder for Cause, the date the Notice of Termination is delivered to the Executive;
(d)    If the Company terminates the Executive's employment hereunder without Cause, the date specified in the Notice of Termination, which shall be no less than 30 days following the date on which the Notice of Termination is delivered; provided that, the Company shall have the option to provide the Executive with a lump sum payment equal to 30 days' Base Salary in lieu of such notice, which shall be paid in a lump sum on the Executive's Termination Date and for all purposes of this Agreement, the Executive's Termination Date shall be the date on which such Notice of Termination is delivered; and
(e)    If the Executive terminates his employment hereunder with or without Good Reason, the date specified in the Executive's Notice of Termination, which shall be no less than 30 days following the date on which the Notice of Termination is delivered; provided that, the Company may waive all or any part of the 30-day notice period for no consideration by giving written notice to the Executive and for all purposes of this Agreement, the Executive's Termination Date shall be the date of the Company’s written notice. 

Notwithstanding anything contained herein, the Termination Date shall not occur until the date on which the Executive incurs a "separation from service" within the meaning of Section 409A.

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5.7    Resignation of All Other Positions. Upon termination of the Executive's employment hereunder for any reason, the Executive shall be deemed to have resigned from all positions that the Executive holds as an officer or member of the board of directors (or a committee thereof) of the Company or any of its affiliates, except as otherwise agreed by the Company.
5.8    Section 280G.
(c)    If any of the payments or benefits received or to be received by the Executive (including, without limitation, any payment or benefits received in connection with a Change in Control or the Executive’s termination of employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement, or otherwise) (all such payments collectively referred to herein as the “280G Payments”) constitute “parachute payments” within the meaning of Section 280G of the Code and would, but for this Section 5.8, be subject to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”), then such 280G Payments shall be reduced in a manner determined by the Company (by the minimum possible amounts) that is consistent with the requirements of Section 409A until no amount payable to the Executive will be subject to the Excise Tax. If two economically equivalent amounts are subject to reduction but are payable at different times, the amounts shall be reduced (but not below zero) on a pro rata basis.  
(d)    All calculations and determinations under this Section 5.8 shall be made by an independent accounting firm or independent tax counsel appointed by the Company (the “Tax Counsel”) whose determinations shall be conclusive and binding on the Company and the Executive for all purposes. For purposes of making the calculations and determinations required by this Section 5.8, the Tax Counsel may rely on reasonable, good faith assumptions and approximations concerning the application of Section 280G and Section 4999 of the Code. The Company and the Executive shall furnish the Tax Counsel with such information and documents as the Tax Counsel may reasonably request in order to make its determinations under this Section 5.8. The Company shall bear all costs the Tax Counsel may reasonably incur in connection with its services. 
6.    Confidential Information. The Executive understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.
6.1    Confidential Information Defined.  
(g)    Definition.

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For purposes of this Agreement, "Confidential Information" includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, know-how, trade secrets,  manuals, records, supplier information, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, recipes, notes, communications, algorithms, product plans, designs, styles, ideas, audiovisual programs, inventions and original works of authorship, of the Company or its businesses, or of any other person or entity that has entrusted information to the Company in confidence. 
The Executive understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used. 
The Executive understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Executive in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Executive; provided that, such disclosure is through no direct or indirect fault of the Executive or person(s) acting on the Executive's behalf.
(h)    Company Creation and Use of Confidential Information.
The Executive understands and acknowledges that the Company has invested, and continues to invest, substantial time, money and specialized knowledge into developing its resources, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the restaurant industry. The Executive understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace. 
(i)    Disclosure and Use Restrictions.

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The Executive agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate or make available Confidential Information, or allow it to be disclosed, published, communicated or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Executive's authorized employment duties to the Company (and then, such disclosure shall be made only within the limits and to the extent of such duties); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media or other resources containing any Confidential Information, or remove any such documents, records, files, media or other resources from the premises or control of the Company, except as required in the performance of the Executive's authorized employment duties to the Company acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency. 
The Executive understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Executive first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Executive's breach of this Agreement or breach by those acting in concert with the Executive or on the Executive's behalf.
7.    Restrictive Covenants.
7.1    Acknowledgement. The Executive understands that the nature of the Executive's position gives him access to and knowledge of Confidential Information and places him in a position of trust and confidence with the Company. 
7.2    Non-competition. Because of the Company's legitimate business interest as described herein and the good and valuable consideration offered to the Executive, during the Employment Term and for the 18 months, to run consecutively, beginning on the last day of the Executive's employment with the Company, if employment is terminated at the option of the Company or by the Executive without Good Reason, the Executive agrees and covenants not to engage in Prohibited Activity within the States of Michigan, Florida, or Missouri.

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For purposes of this Section 7, "Prohibited Activity" is activity in which the Executive contributes his knowledge, directly or indirectly, in whole or in part, as an employee, employer, owner, operator, manager, advisor, consultant, agent, employee, partner, director, stockholder, officer, volunteer, intern or any other similar capacity to an entity engaged in the same or similar business as the Company, including those engaged in sports themed restaurants in the casual and fast-casual dining segments. Prohibited Activity also includes activity that may require or inevitably requires disclosure of trade secrets, proprietary information or Confidential Information.
Nothing herein shall prohibit the Executive from purchasing or owning less than five percent (5%) of the publicly traded securities of any corporation, provided that such ownership represents a passive investment and that the Executive is not a controlling person of, or a member of a group that controls, such corporation.
This Section 7 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall promptly provide written notice of any such order to the Chairman of the Board.
7.3    Non-solicitation of Employees. The Executive agrees and covenants not to directly or indirectly solicit, hire, recruit, attempt to hire or recruit, or induce the termination of employment of any employee of the Company during two years, to run consecutively, beginning on the last day of the Executive's employment with the Company.
8.    Non-disparagement. The Executive agrees and covenants that he will not at any time make, publish or communicate to any person or entity or in any public forum any defamatory or disparaging remarks, comments or statements concerning the Company or its businesses, or any of its employees, officers. 
This Section 8 does not, in any way, restrict or impede the Executive from exercising protected rights to the extent that such rights cannot be waived by agreement or from complying with any applicable law or regulation or a valid order of a court of competent jurisdiction or an authorized government agency, provided that such compliance does not exceed that required by the law, regulation or order. The Executive shall promptly provide written notice of any such order to the Chairman of the Board.

16

9.    Acknowledgement. The Executive acknowledges and agrees that the services to be rendered by him to the Company are of a special and unique character; that the Executive will obtain knowledge and skill relevant to the Company's industry, methods of doing business and marketing strategies by virtue of the Executive's employment; and that the restrictive covenants and other terms and conditions of this Agreement are reasonable and reasonably necessary to protect the legitimate business interest of the Company. 
The Executive further acknowledges that the amount of his compensation reflects, in part, his obligations and the Company's rights under Section 6, Section 7 and Section 8 of this Agreement; that he has no expectation of any additional compensation, royalties or other payment of any kind not otherwise referenced herein in connection herewith; that he will not be subject to undue hardship by reason of his full compliance with the terms and conditions of Section 6, Section 7 and Section 8 of this Agreement or the Company's enforcement thereof.
10.    Remedies. In the event of a breach or threatened breach by the Executive of Section 6, Section 7 or Section 8 of this Agreement, the Executive hereby consents and agrees that the Company shall be entitled to seek, in addition to other available remedies, a temporary or permanent injunction or other equitable relief against such breach or threatened breach from any court of competent jurisdiction, without the necessity of showing any actual damages or that money damages would not afford an adequate remedy, and without the necessity of posting any bond or other security. The aforementioned equitable relief shall be in addition to, not in lieu of, legal remedies, monetary damages or other available forms of relief.
11.    Proprietary Rights.
11.1    Work Product. The Executive acknowledges and agrees that all right, title and interest in and to all writings, works of authorship, technology, inventions, discoveries, processes, techniques, methods, ideas, concepts, research, proposals, materials and all other work product of any nature whatsoever, that are created, prepared, produced, authored, edited, amended, conceived or reduced to practice by the Executive individually or jointly with others during the period of his employment by the Company and relate in any way to the business or contemplated business, products, activities, research or development of the Company or result from any work performed by the Executive for the Company (in each case, regardless of when or where prepared or whose equipment or other resources is used in preparing the same) all rights and claims related to the foregoing, and all printed, physical and electronic copies, and other tangible embodiments thereof (collectively, "Work Product"), as well as any and all rights in and to US and foreign (a) patents, patent disclosures and inventions (whether patentable or not), (b) trademarks, service marks, trade dress, trade names, logos, corporate names and domain names, 

17

and other similar designations of source or origin, together with the goodwill symbolized by any of the foregoing, (c) copyrights and copyrightable works (including computer programs), and rights in data and databases, (d) trade secrets, know-how and other confidential information, and (e) all other intellectual property rights, in each case whether registered or unregistered and including all registrations and applications for, and renewals and extensions of, such rights, all improvements thereto and all similar or equivalent rights or forms of protection in any part of the world (collectively, "Intellectual Property Rights"), shall be the sole and exclusive property of the Company.
For purposes of this Agreement, Work Product includes, but is not limited to, Company information, including plans, publications, research, strategies, techniques, agreements, documents, contracts, terms of agreements, negotiations, know-how, computer programs, computer applications, software design, web design, work in process, databases, manuals, results, developments, reports, graphics, drawings, sketches, market studies, formulae, notes, communications, algorithms, product plans, product designs, styles, models, audiovisual programs, inventions, unpublished patent applications, original works of authorship, discoveries, experimental processes, experimental results, specifications, customer information, client information, customer lists, client lists, manufacturing information, marketing information, advertising information, and sales information]. 
11.2    Work Made for Hire; Assignment. The Executive acknowledges that, by reason of being employed by the Company at the relevant times, to the extent permitted by law, all of the Work Product consisting of copyrightable subject matter is "work made for hire" as defined in 17 U.S.C. § 101 and such copyrights are therefore owned by the Company. To the extent that the foregoing does not apply, the Executive hereby irrevocably assigns to the Company, for no additional consideration, the Executive's entire right, title and interest in and to all Work Product and Intellectual Property Rights therein, including the right to sue, counterclaim and recover for all past, present and future infringement, misappropriation or dilution thereof, and all rights corresponding thereto throughout the world. Nothing contained in this Agreement shall be construed to reduce or limit the Company's rights, title or interest in any Work Product or Intellectual Property Rights so as to be less in any respect than that the Company would have had in the absence of this Agreement. 
11.3    Further Assurances; Power of Attorney. During and after his employment, the Executive agrees to reasonably cooperate with the Company to (a) apply for, obtain, perfect and transfer to the Company the Work Product as well as any and all Intellectual Property Rights in the Work Product in any jurisdiction in the world; and (b) maintain, protect and enforce the same, including, without limitation, giving testimony and executing and delivering to the Company any 

18

and all applications, oaths, declarations, affidavits, waivers, assignments and other documents and instruments as shall be requested by the Company. The Executive hereby irrevocably grants the Company power of attorney to execute and deliver any such documents on the Executive's behalf in his name and to do all other lawfully permitted acts to transfer the Work Product to the Company and further the transfer, prosecution, issuance and maintenance of all Intellectual Property Rights therein, to the full extent permitted by law, if the Executive does not promptly cooperate with the Company's request (without limiting the rights the Company shall have in such circumstances by operation of law). The power of attorney is coupled with an interest and shall not be effected by the Executive's subsequent incapacity.
11.4    No License. The Executive understands that this Agreement does not, and shall not be construed to, grant the Executive any license or right of any nature with respect to any Work Product or Intellectual Property Rights or any Confidential Information, materials, software or other tools made available to him by the Company.
12.    Security.
12.1    Security and Access. The Executive agrees and covenants (a) to comply with all Company security policies and procedures as in force from time to time including without limitation those regarding computer equipment, telephone systems, voicemail systems, facilities access, monitoring, key cards, access codes, Company intranet, internet, social media and instant messaging systems, computer systems, e-mail systems, computer networks, document storage systems, software, data security, encryption, firewalls, passwords and any and all other Company facilities, IT resources and communication technologies ("Facilities and Information Technology Resources"); (b) not to access or use any Facilities and Information Technology Resources except as authorized by the Company; and (iii) not to access or use any Facilities and Information Technology Resources in any manner after the termination of the Executive's employment by the Company, whether termination is voluntary or involuntary. The Executive agrees to notify the Company promptly in the event he learns of any violation of the foregoing by others, or of any other misappropriation or unauthorized access, use, reproduction or reverse engineering of, or tampering with any Facilities and Information Technology Resources or other Company property or materials by others. 
12.2    Exit Obligations. Upon (a) voluntary or involuntary termination of the Executive's employment or (b) the Company's request at any time during the Executive's employment, the Executive shall (i) provide or return to the Company any and all Company property, including keys, key cards, access cards, identification cards, security devices, employer credit cards, network access devices, computers, cell phones, smartphones, PDAs, pagers, fax machines, 

19

equipment, speakers, webcams, manuals, reports, files, books, compilations, work product, e-mail messages, recordings, tapes, disks, thumb drives or other removable information storage devices, hard drives, negatives and data and all Company documents and materials belonging to the Company and stored in any fashion, including but not limited to those that constitute or contain any Confidential Information or Work Product, that are in the possession or control of the Executive, whether they were provided to the Executive by the Company or any of its business associates or created by the Executive in connection with his employment by the Company; and (ii) delete or destroy all copies of any such documents and materials not returned to the Company that remain in the Executive's possession or control, including those stored on any non-Company devices, networks, storage locations and media in the Executive's possession or control.
13.    Publicity. The Executive hereby irrevocably consents to any and all uses and displays, by the Company and its agents, representatives and licensees, of the Executive's name, voice, likeness, image, appearance and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company ("Permitted Uses") without further consent from or royalty, payment or other compensation to the Executive. The Executive hereby forever waives and releases the Company and its directors, officers, employees and agents from any and all claims, actions, damages, losses, costs, expenses and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by the Company, arising directly or indirectly from the Company's and its agents', representatives' and licensees' exercise of their rights in connection with any Permitted Uses.
14.    Governing Law: Jurisdiction and Venue. This Agreement, for all purposes, shall be construed in accordance with the laws of Michigan without regard to conflicts of law principles. Any action or proceeding by either of the parties to enforce this Agreement shall be brought only in a state or federal court located in the state of Michigan, county of Oakland. The parties hereby irrevocably submit to the exclusive jurisdiction of such courts and waive the defense of inconvenient forum to the maintenance of any such action or proceeding in such venue.
15.    Stock Ownership Requirements. During the Employment Term or commencing with transfer of 100,000 shares of the Company’s common stock as set forth in Section 4.3(a), the Executive 

20

shall be expected to maintain ownership of at least 100,000 shares of Company common stock in accordance with guidelines established by the Compensation Committee from time to time. 
16.    Entire Agreement. Unless specifically provided herein, this Agreement contains all of the understandings and representations between the Executive and the Company pertaining to the subject matter hereof and supersedes all prior and contemporaneous understandings, agreements, representations and warranties, both written and oral, with respect to such subject matter. The parties mutually agree that the Agreement can be specifically enforced in court and can be cited as evidence in legal proceedings alleging breach of the Agreement. 
17.    Modification and Waiver. No provision of this Agreement may be amended or modified unless such amendment or modification is agreed to in writing and signed by the Executive and by the Chairman of the Company. No waiver by either of the parties of any breach by the other party hereto of any condition or provision of this Agreement to be performed by the other party hereto shall be deemed a waiver of any similar or dissimilar provision or condition at the same or any prior or subsequent time, nor shall the failure of or delay by either of the parties in exercising any right, power or privilege hereunder operate as a waiver thereof to preclude any other or further exercise thereof or the exercise of any other such right, power or privilege.
18.    Severability. Should any provision of this Agreement be held by a court of competent jurisdiction to be enforceable only if modified, or if any portion of this Agreement shall be held as unenforceable and thus stricken, such holding shall not affect the validity of the remainder of this Agreement, the balance of which shall continue to be binding upon the parties with any such modification to become a part hereof and treated as though originally set forth in this Agreement. 
The parties further agree that any such court is expressly authorized to modify any such unenforceable provision of this Agreement in lieu of severing such unenforceable provision from this Agreement in its entirety, whether by rewriting the offending provision, deleting any or all of the offending provision, adding additional language to this Agreement or by making such other modifications as it deems warranted to carry out the intent and agreement of the parties as embodied herein to the maximum extent permitted by law. 
The parties expressly agree that this Agreement as so modified by the court shall be binding upon and enforceable against each of them. In any event, should one or more of the provisions of this Agreement be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions hereof, and if such provision or provisions are not modified as provided above, this Agreement shall be construed as if such invalid, illegal or unenforceable provisions had not been set forth herein.

21

19.    Captions. Captions and headings of the sections and paragraphs of this Agreement are intended solely for convenience and no provision of this Agreement is to be construed by reference to the caption or heading of any section or paragraph.
20.    Counterparts. This Agreement may be executed in separate counterparts, each of which shall be deemed an original, but all of which taken together shall constitute one and the same instrument.
21.    Tolling. Should the Executive violate any of the terms of the restrictive covenant obligations articulated herein, the obligation at issue will run from the first date on which the Executive ceases to be in violation of such obligation.
22.    Section 409A.
22.1    General Compliance. This Agreement is intended to comply with Section 409A or an exemption thereunder and shall be construed and administered in accordance with Section 409A. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a "separation from service" under Section 409A. Notwithstanding the foregoing, the Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A and in no event shall the Company be liable for all or any portion of any taxes, penalties, interest or other expenses that may be incurred by the Executive on account of non-compliance with Section 409A.
22.2    Specified Employees. Notwithstanding any other provision of this Agreement, if any payment or benefit provided to the Executive in connection with his termination of employment is determined to constitute "nonqualified deferred compensation" within the meaning of Section 409A and the Executive is determined to be a "specified employee" as defined in Section 409A(a)(2)(b)(i), then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the Termination Date or, if earlier, on the Executive's death (the "Specified Employee Payment Date") . The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to the Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.

22

22.3    Reimbursements. To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following:
(a)    the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year;
(b)    any reimbursement of an eligible expense shall be paid to the Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and
(c)    any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
22.4    Tax Gross-ups. Any tax gross-up payments provided under this Agreement shall be paid to the Executive on or before December 31 of the calendar year immediately following the calendar year in which the Executive remits the related taxes.
23.    Notification to Subsequent Employer. When the Executive's employment with the Company terminates, the Executive agrees to notify any subsequent employer of the restrictive covenants sections contained in this Agreement. The Executive will also deliver a copy of such notice to the Company before the Executive commences employment with any subsequent employer. In addition, the Executive authorizes the Company to provide a copy of the restrictive covenants sections of this Agreement to third parties, including but not limited to, the Executive's subsequent, anticipated or possible future employer.
24.    Successors and Assigns. This Agreement is personal to the Executive and shall not be assigned by the Executive. Any purported assignment by the Executive shall be null and void from the initial date of the purported assignment. The Company may assign this Agreement to any successor or assign (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business or assets of the Company. This Agreement shall inure to the benefit of the Company and permitted successors and assigns.
25.    Notice. Notices and all other communications provided for in this Agreement shall be in writing and shall be delivered personally or sent by registered or certified mail, return receipt requested, or by overnight carrier to the parties at the addresses set forth below (or such other addresses as specified by the parties by like notice):
If to the Company:

23

Diversified Restaurant Holdings, Inc. 
27680 Franklin Rd. 
    Southfield, MI 48034  
    Attention: Chairman of the Board 
If to the Executive:
David G. Burke 
Personal address as placed on file with the Company from time to time.  
26.    Representations of the Executive. The Executive represents and warrants to the Company that:
26.1    The Executive's acceptance of employment with the Company and the performance of his duties hereunder will not conflict with or result in a violation of, a breach of, or a default under any contract, agreement or understanding to which he is a party or is otherwise bound.
26.2    The Executive's acceptance of employment with the Company and the performance of his duties hereunder will not violate any non-solicitation, non-competition or other similar covenant or agreement of a prior employer.
27.    Withholding. The Company shall have the right to withhold from any amount payable hereunder any Federal, state and local taxes in order for the Company to satisfy any withholding tax obligation it may have under any applicable law or regulation.
28.    Arbitration.  Any dispute, controversy or claim arising out of or related to this Agreement or any breach of this Agreement shall be submitted to and decided by binding arbitration. Arbitration shall be administered exclusively by the American Arbitration Association and shall be conducted consistent with the rules, regulations and requirements thereof as well as any requirements imposed by state law. Any arbitral award determination shall be final and binding upon the Parties.  
29.    Survival. Upon the expiration or other termination of this Agreement, the respective rights and obligations of the parties hereto shall survive such expiration or other termination to the extent necessary to carry out the intentions of the parties under this Agreement.
30.    Acknowledgement of Full Understanding. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE HAS FULLY READ, UNDERSTANDS AND VOLUNTARILY ENTERS INTO THIS AGREEMENT. THE EXECUTIVE ACKNOWLEDGES AND AGREES THAT HE 

24

HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND CONSULT WITH AN ATTORNEY OF HIS CHOICE BEFORE SIGNING THIS AGREEMENT. 

[SIGNATURE PAGE FOLLOWS]

25

IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
	
		
	 
	Diversified Restaurant Holdings, Inc.

	 
	By: /s/ T. Michael Ansley   

Name: T. Michael Ansley
Title: Chairman of the Board

	
		
	 
	EXECUTIVE

	 
	Signature: /s/ David G. Burke   

Print Name: David G. Burke 

Schedule 1.1

The Executive’s base salary during the transition period shall be $360,000 on an annualized basis (or approximately $221,538 on a prorated basis), payable in periodic installments in accordance with the Company's customary payroll practices, but no less frequently than monthly (the “Transition Period Base Salary”)

The Executive’s target annual bonus for 2016 will be prorated based on two separate, but related, metrics.  For the period prior to the Signing Date, the target bonus will be based on the Executive’s salary as CFO prior to the Signing Date.  For the Transition Period, the target bonus will be 40% of the Transition Period Base Salary.  The annual bonus will be based on achievement of annual target performance goals established by the Compensation Committee.  The annual bonus, if any, will be paid in accordance with the terms of the Company’s annual bonus plan.    

Schedule 4.1 Base Salary 

	
		
	Fiscal Year Ending
	Base Salary

	December 31, 2017
	$405,000

	December 30, 2018
	$450,000

	December 29, 2019
	TBD

Schedule 4.2 Annual Bonus 

	
			
	Fiscal Year Ending
	Annual Bonus Target

	 
	(Percentage of Base Salary)
	(Dollars)

	December 31, 2017
	55%
	$222,750

	December 30, 2018
	65%
	$292,500

	December 29, 2019
	TBD
	TBD

2Exhibit

Exhibit 10.1

 

REXNORD CORPORATION

EXECUTIVE SEVERANCE PLAN

Effective May 18, 2016

1

Table of Contents

	
						
	 
	 
	 
	Page

	 
	 
	 
	 

	ARTICLE 1
	 
	Purpose of the Plan
	1
	

	 
	 
	 
	 

	ARTICLE 2
	 
	Definitions
	1
	

	2.1
	

	 
	Base Salary
	1
	

	2.2
	

	 
	Board
	1
	

	2.3
	

	 
	Cause
	1
	

	2.4
	

	 
	CIC Plan
	1
	

	2.5
	

	 
	Code
	1
	

	2.6
	

	 
	Company
	1
	

	2.7
	

	 
	Disability
	1
	

	2.8
	

	 
	Eligible Executive
	1
	

	2.9
	

	 
	Employer
	1
	

	2.10
	

	 
	Executive
	1
	

	2.11
	

	 
	Plan
	1
	

	2.12
	

	 
	Plan Administrator
	2
	

	2.13
	

	 
	Qualifying Termination
	2
	

	2.14
	

	 
	Severance Pay
	2
	

	2.15
	

	 
	Subsidized COBRA
	2
	

	 
	 
	 
	 

	ARTICLE 3
	 
	Eligibility for Participation
	2
	

	 
	 
	 
	 

	ARTICLE 4
	 
	Benefits
	2
	

	4.1
	

	 
	Eligibility for Benefits
	2
	

	4.2
	

	 
	Severance Payment
	2
	

	4.3
	

	 
	Subsidized COBRA Coverage
	2
	

	4.4
	

	 
	No Accelerated Vesting
	2
	

	4.5
	

	 
	Death of Executive
	2
	

	4.6
	

	 
	Compliance with Code Section 409A
	2
	

	4.7
	

	 
	No Duplication of Benefits
	3
	

	 
	 
	 
	 

	ARTICLE 5
	 
	Conditions for Payment and Right to Terminate Severance Benefits
	3
	

	5.1
	

	 
	Conditions for Payment of Benefits
	3
	

	5.2
	

	 
	Right to Terminate Severance Benefits
	3
	

	5.3
	

	 
	Clawback
	3
	

	 
	 
	 
	 

	ARTICLE 6
	 
	Executive Covenants
	4
	

	6.1
	

	 
	Reasonableness of Restrictions
	4
	

	6.2
	

	 
	Restricted Services Obligation
	4
	

	6.3
	

	 
	Customer Non-Solicitation
	4
	

	6.4
	

	 
	Non-Solicitation of Employees
	4
	

	6.5
	

	 
	Non-Disparagement
	4
	

	6.6
	

	 
	Non-Disclosure of Confidential Information
	4
	

	6.7
	

	 
	Return of Company Property
	5
	

	6.8
	

	 
	Injunctive Relief
	5
	

	 
	 
	 
	 

	 
	 
	 
	 

	 
	 
	 
	 

i

	
						
	 
	 
	Table of Contents 
(continued)
	 

	 
	 
	 
	Page

	ARTICLE 7
	 
	General Rules
	5
	

	7.1
	

	 
	Right to Withhold Taxes
	5
	

	7.2
	

	 
	Assignment
	5
	

	7.3
	

	 
	Unfunded Plan
	5
	

	7.4
	

	 
	Code Section 409A
	5
	

	7.5
	

	 
	Governing Laws; Other Obligations
	6
	

	 
	 
	 
	 

	ARTICLE 8
	 
	Amendment and Termination
	6
	

	 
	 
	 
	 

	ARTICLE 9
	 
	Administration
	6
	

	9.1
	

	 
	Powers and Duties
	6
	

	9.2
	

	 
	Finality of Action
	6
	

	9.3
	

	 
	Claim Procedure
	6
	

ii

Rexnord Corporation
Executive Severance Plan

Article 1
Purpose of the Plan

The Rexnord Corporation Executive Severance Plan (the “Plan”) outlines certain benefits available to eligible Executives whose employment with the Company is involuntarily terminated under the conditions described below.  The purpose of the Plan is to financially assist eligible Executives with their transitions following certain involuntary terminations of employment and to resolve any potential claims arising out of employment, including termination of employment.

Article 2
Definitions

As used in the Plan, the following words and phrases shall have the following respective meanings:

2.1    Base Salary means an Eligible Executive’s annual base salary in effect on the date of his or her Qualifying Termination.

2.2    Board means the Board of Directors of the Company.

2.3    Cause means any of the following: 
		
	(a)
	An Executive’s willful and continued failure to perform substantially his or her duties owed to the Employer after a written demand for substantial performance is delivered to the Executive specifically identifying the nature of such unacceptable performance and is not cured by the Executive within a reasonable period, not to exceed 30 days; 

		
	(b)
	An Executive is convicted of (or pleads guilty or no contest to) a felony or any crime involving moral turpitude; 

		
	(c)
	An Executive has engaged in conduct that constitutes gross misconduct in the performance of his or her employment duties; or

		
	(d)
	An Executive's breach of any representation, warranty or covenant under this Plan, an award agreement or an employment agreement or other agreement or arrangement with an Employer.   

An act or omission by an Executive shall not be “willful” if conducted in good faith and with the Executive’s reasonable belief that such conduct is in the best interests of the Employer. 

2.4    CIC Plan means the Rexnord Corporation Executive Change in Control Plan. 
 
2.5    Code means the Internal Revenue Code of 1986, as amended.  

2.6    Company means Rexnord Corporation.

2.7    Disability means disability as defined under the Employer's then-current long term disability insurance plan in which the Executive participates.  

2.8    Eligible Executive is defined in Section 4.1 of this Plan. 

2.9    Employer means Rexnord Corporation or any of its subsidiaries that employs an Eligible Executive on the applicable date.  

2.10    Executive means the Company's officers as designated in accordance with Rule 16a-1(f) under the Securities Exchange Act of 1934, members of the Company's Executive Council and any other executive, officer or key employee of an Employer designed by the Chief Executive Officer of the Company as eligible to participate in the Plan. 

2.11    Plan means this Rexnord Corporation Executive Severance Plan.

1

2.12    Plan Administrator means the Compensation Committee of the Board or such other person or committee appointed from time to time by the Plan Administrator to administer the Plan. 

2.13    Qualifying Termination means a termination of an Executive's employment with all Employers prior to his or her attainment of age 65 (i) involuntarily by the Company without Cause (and other than due to his or her death or Disability) and (ii) other than during a Protection Period as defined in the CIC Plan. 

2.14    Severance Pay is defined in Section 4.2 of the Plan.  

2.15    Subsidized COBRA is defined in Section 4.3 of the Plan.   

Article 3
Eligibility for participation

All Executives are eligible to participate in the Plan.    

Article 4
Benefits

4.1    Eligibility for Benefits.  An Executive (i) whose employment with the Employer ends due to a Qualifying Termination and (ii) who satisfies the "Conditions for Payment of Benefits" set forth in Article 5 below (an "Eligible Executive") shall be eligible for the benefits described in this Article 4.  For avoidance of doubt, an Executive shall not be eligible to receive the benefits under the Plan if the Company, in its sole discretion, determines that the Executive’s employment is terminated due to a resignation or voluntary termination of employment, due to the Executive's death or Disability, for Cause or for any reason other than a Qualifying Termination. 

4.2    Severance Payment.  An Eligible Executive shall receive severance pay equal to the Eligible Executive's  Base Salary ("Severance Pay").  The Severance Pay will be paid in equal bi-weekly payroll installments over a period of 12 months.  Each installment payment under this Section 4.2 shall be treated as a separate payment within the meaning of Code Section 409A.  

4.3    Subsidized COBRA Coverage.  Subject to the Eligible Executive’s continued co-payment of premiums, an Eligible Executive may continue participation for 12 months in the medical, dental and vision benefits under the Company’s health benefits plan which covers the Eligible Executive (and his or her eligible dependents) upon the same terms and conditions (except for the requirement of the Eligible Executive’s continued employment) in effect for active employees of the Employer ("Subsidized COBRA"). In the event the Eligible Executive obtains other employment that offers substantially similar or more favorable medical benefits, such continuation of Subsidized COBRA coverage by the Employer under this subsection shall immediately cease. The continuation of health benefits under this Section shall reduce the period of coverage and count against the Eligible Executive’s right to healthcare continuation benefits under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended. ("COBRA")     

4.4    No Accelerated Vesting.  All of an Eligible Executive's unvested options and long-term incentive awards granted to the Executive through the date of  termination shall vest or be forfeited, and any such vested awards granted as stock options shall be exercisable, in accordance with the terms and conditions set forth in such awards or the plans governing such awards. 

4.5    Death of Executive.  In the event of an Eligible Executive's death prior to receipt of all Severance Pay, the balance of such benefits shall be paid in a lump sum to the Eligible Executive’s spouse, if any, or if none, to the Eligible Executive's estate.

4.6    Compliance with Code Section 409A.  Notwithstanding the foregoing or any provision of the Plan to the contrary, to the extent that the Severance Pay hereunder constitutes a "deferral of compensation" under a "nonqualified deferred compensation plan" under Code Section 409A and regulations thereunder, the following provisions shall apply:
		
	(a)
	If such Severance Pay is payable on account of an Executive’s “involuntary separation from service” as defined in Treasury Regulation Section 1.409A-1(n) (an "Involuntary Separation from Service"), the Executive shall receive such amount of his or her Severance Pay during the 6-month period immediately following the date of termination as equals the lesser of: (x) such Severance Pay amount due Executive under Section 4.2 during such 6-month period or (y) two multiplied by the compensation limit in effect under Section 401(a)(17) of the Code for the calendar year in which the date of termination occurs and as otherwise provided under Treasury Regulation Section 1.409A-1(b)(9)(iii) and shall be entitled to such of his or her Severance Pay benefits as satisfy the exception under Treasury Regulation Section 1.409A-1(b)(9)(v) (the “Limitation Amount”). 

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	(b)
	To the extent that, upon such Involuntary Separation from Service, the amount of Severance Pay that would have been payable to the Executive during the 6-month period following the last day of his or her employment exceeds the Limitation Amount, such excess shall be paid on the first regular bi-weekly payroll date following the expiration of such 6-month period.

		
	(c)
	If the Company reasonably determines that such employment termination is not an Involuntary Separation from Service, all Severance Pay that would have been payable to the Executive under the Plan during the 6-month period immediately following the date of termination, but for such determination, shall be paid on the first regular bi-weekly payroll date immediately following the expiration of such 6-month period following the date of termination. 

		
	(d)
	Any Severance Pay payments that are postponed shall accrue interest at an annual rate (compounded monthly) equal to the short-term applicable federal rate (as in effect under Section 1274(d) of the Code on the last day of the Executive’s employment) plus 100 basis points, which interest shall be paid on the first regular bi-weekly payroll date immediately following the expiration of the 6-month period following the date of termination.  

4.7    No Duplication of Benefits.  Notwithstanding the provisions of Article 4 or any other provision of the Plan to the contrary, any benefits provided under this Plan to an Eligible Executive shall be in lieu of any termination or severance payments or benefits for which such Executive may be eligible under any plan of or agreement or arrangement with an Employer, including but not limited to benefits under the Rexnord LLC Severance Pay Plan.  For avoidance of doubt, upon a Qualifying Termination, an Executive shall only be entitled to Severance Pay and Subsidized COBRA under this Plan and shall not be entitled to severance benefits, change in control benefits or subsidized COBRA under another plan of or arrangement with an Employer.  

Article 5
Conditions for Payment and right to Terminate 
Severance Benefits

5.1    Conditions for Payment of Benefits.  An Executive who has a Qualifying Termination will not be eligible for Severance Pay or Subsidized COBRA unless the Company determines that the Executive has satisfied all of the following conditions:

		
	(a)
	Consent to and compliance with the "Executive Covenants" in Article 6 below;

		
	(b)
	Delivery, within 21 days after presentation thereof by the Company to the Executive, to the Company of an executed Agreement and general release (the “General Release”) in the form determined by the Company and which may be revised by the Company in its sole discretion; and 

		
	(c)
	Delivery to the Company of a resignation from all offices, directorships and fiduciary positions with the Company, its affiliates and employee benefit plans.

Notwithstanding the due date of any benefits or payments under Article 4, any amounts due following a Qualifying Termination under the Plan shall not be payable until after the expiration of any statutory revocation period applicable to the General Release without Executive having revoked such General Release which must occur by the 53rd day after the Executive’s termination of employment (the “Release Condition”) and any such amounts shall commence on the later of the applicable due date or five (5) business days after the Release Condition is satisfied, provided that, if the 60-day period following termination of employment spans two calendar years, then any payments and benefits subject to Code Section 409A shall commence on the later of the applicable due date or on a date during that portion of such 60-day period occurring in the calendar year following the year of termination of employment, provided that the Release Condition is satisfied.

5.2    Right to Terminate Severance Benefits.  Notwithstanding anything in this Plan to the contrary, the Company shall have the right to terminate the benefits payable under this Plan at any time in the event that the Company determines that a former Executive receiving benefits under this Plan has breached any of the terms and conditions set forth in any agreement executed by the former Executive as a condition to receiving benefits under the Plan, including, but not limited to, the General Release, or violation of any non-disclosure, non-competition or non-solicitation or provisions contained in such other plans or agreements.
5.3    Clawback.  The benefits under this Plan are subject to the terms of the Company's or any other Employer's recoupment, clawback or similar policies as may be in effect from time to time, as well as any similar provisions of applicable law, any of which could in certain circumstances require repayment or forfeiture of any cash or other property received under this Plan.  

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Article 6
Executive Covenants

6.1    Reasonableness of Restrictions.  Each Executive shall acknowledge that he or she has had and will continue to have access to Confidential Information (as defined below), that such Confidential Information is of economic value to the Employer, that such Confidential Information would be of value to a competitor of the Employer in competing against the Employer, and that it would be unfair for the Executive to exploit such Confidential Information for the Executive’s personal benefit or for the benefit of a competitor.  Each Executive shall further acknowledge that he or she has had and/or will have an opportunity to learn about, and develop relationships with, customers of the Employer and that the Employer have a legitimate interest in protecting relationships with such customers, and that it would be unfair for the Executive to exploit information the Executive has learned about such customers and relationships that the Executive has developed with such customers for the Executive’s personal benefit or for the benefit of a competitor.  The Executive further acknowledges that the Employer currently markets and sells products and services to customers throughout the world and that the Executive’s job duties have included and/or will include contact with products that are marketed throughout the United States or, for an Executive employed outside the United States, the country in which the Executive is employed and that the Confidential Information to which the Executive has had and/or and will have access to, and the Executive’s customer knowledge and contacts and relationships, would be of value to a competitor in competing against the Employer anywhere in the country in which the Executive is employed.  Accordingly, each Executive shall acknowledge that the protections provided to the Employer in this Article 6 are reasonable and necessary to protect the legitimate interests of the Employer and that abiding by the Executive’s obligations under this Article 6 will not impose an undue hardship on the Executive. 

6.2    Restricted Services Obligation.  For a period of two years following the end, for whatever reason, of an Executive’s employment with the Employer, the Executive shall agree not to directly or indirectly provide Restricted Services to any Competitor respecting its operations in the country in which the Executive was employed.  For purposes of this Section, (i) “Restricted Services” means services of any kind or character comparable to those the Executive provided to the Employer during the one year period preceding the end of the Executive’s employment with the Employer, and (ii) “Competitor” means any business located in the country in which the Executive was employed that is engaged in the development and/or sale of any product line or service offering that is substantially similar (and thus competitive with) to a product line or service offering sold by the Employer for which the Executive had direct managerial responsibility during the last year of the term of the Executive’s employment with the Employer.  Notwithstanding the foregoing, this Section 6.2 shall not apply to an Executive whose principal place of employment with an Employer is in the State of California.

6.3    Customer Non-Solicitation.  For a period of two years following the end, for whatever reason, of the Executive's employment with the Employer, the Executive shall agree not to directly or indirectly attempt to sell or otherwise provide to any Restricted Customer any goods, products or services of the type or substantially similar to the type sold or otherwise provided by the Employer (and thus competitive with such goods, products or services) for which the Executive was employed during the twelve months prior to termination of the Executive’s employment.  For purposes of this Section 6.3, “Restricted Customer” means any individual or entity (i) for whom/which the Employer provided goods, products or services, and (ii) with whom/which the Executive was the primary contact on behalf of the Company during the Executive’s last twelve months of employment or about whom/which the Executive acquired non-public information during the Executive’s last twelve months of employment that would be of benefit to the Executive in selling or attempting to sell such goods, products or services in competition with the Employer.

6.4    Non-Solicitation of Employees.  During the term of the Executive’s employment with the Employer and for a period of one year thereafter, the Executive shall agree not to directly or indirectly encourage any employee of the Employer with whom the Executive has worked to terminate his or her employment with the Employer or solicit such an individual for employment outside the Employer in a manner which would end or diminish that employee’s services to the Employer.

6.5    Non-Disparagement.  During the term of the Executive’s employment with the Employer and thereafter in perpetuity, the Executive shall not knowingly disparage, criticize, or otherwise make derogatory statements regarding the Employer or any of its affiliates, successors, directors, officers, customers or suppliers.  During the term of the Executive’s employment with the Employer and thereafter in perpetuity, none of the Company, Rexnord LLC, or any other Employer nor any of their respective officers shall knowingly disparage, criticize, or otherwise make derogatory statements regarding the Executive.  The restrictions of this Section 6.5 shall not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process.

6.6    Non-Disclosure of Confidential Information.  

		
	(a)
	The Executive shall maintain in confidence and shall not directly, indirectly or otherwise, use, disseminate, disclose, publish or otherwise misappropriate, or use for the Executive’s benefit or the benefit of any Person, or deliver to any Person any Confidential Information (as defined herein) or trade secrets of the Company.  "Confidential Information" means any document, record, notebook, computer program or similar repository of or containing, 

4

any confidential or proprietary information of or relating to the Employer, including, without limitation, information with respect to the Employer’s operations, processes, products, inventions, business practices, finances, principals, vendors, suppliers, customers, potential customers, marketing methods, costs, prices, contractual relationships, regulatory status, compensation paid to employees or other terms of employment.  Confidential Information shall be defined to exclude information which is or becomes public knowledge through no fault of the Executive, or which was known to the Executive before the start of the Executive’s earliest relationship with the Employer, or which is otherwise not subject to protection under applicable law.  The Executive’s obligations under this Section 6.6 shall apply for so long as the Executive continues in the employment of the Employer and for two years following the termination of such employment, for whatever reason, as to any Confidential Information that does not constitute a trade secret under applicable law.  As to any Confidential Information that does constitute a trade secret under applicable law, the Executive shall agree that the Executive's obligations under this Section 6.6 shall apply for so long as the item qualifies as a trade secret.

		
	(b)
	The Executive is advised that he or she may not be held criminally or civilly liable under any federal or state trade secret law for the disclosure of a trade secret that is made: (i) in confidence to a federal, state, or local government official, either directly or indirectly, or to an attorney, and provided that such disclosure is solely for the purpose of reporting or investigating a suspected violation of the law, or (ii) in a complaint or other document filed in a lawsuit or other proceeding, provided that such filing is made under seal.  Additionally, in the event the Executive files a lawsuit against the Employer for retaliation by the Employer against the Executive for reporting a suspected violation of law, the Executive has the right to provide trade secret information to the Executive's attorney and use the trade secret information in the court proceeding, although the Executive must file any document containing the trade secret under seal and may do not disclose the trade secret, except pursuant to court order.

6.7    Return of Company Property.  All correspondence, drawings, manuals, letters, notes, notebooks, reports, programs, plans, proposals, financial documents, or any other documents concerning the Employer’s customers, business plans, marketing strategies, products or processes, whether confidential or not, is the property of the Company (the “Company Property”).  Accordingly, upon the Executive’s Termination of Employment for any reason, the Executive shall promptly deliver to the Company all such Company Property, including any and all copies of any such Company Property, and shall not make any notes of or relating to any information contained in any such Company Property.  The Executive may respond to a lawful and valid subpoena or other legal process but shall give the Company the earliest possible notice thereof, shall, as much in advance of the return date as possible, make available to the Company and its counsel the documents and other information sought and shall assist such counsel in resisting or otherwise responding to such process.

6.8    Injunctive Relief.  The Executive shall acknowledge that a breach of the covenants contained in this Article 6 will cause irreparable damage to the Company and its goodwill, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, the Executive shall agree that, in the event of an actual or threatened breach of any of the covenants contained in this Article 6, in addition to any other remedy which may be available at law or in equity, the Company shall be entitled to specific performance and injunctive relief.  The Company acknowledges that a breach of the Company’s covenant contained in Section 6.5 will cause irreparable damage to the Executive, the exact amount of which will be difficult or impossible to ascertain, and that the remedies at law for any such breach will be inadequate.  Accordingly, the Company agrees that, in the event of an actual or threatened breach of the Company’s covenant contained in Section 6.5, in addition to any other remedy which may be available at law or in equity, the Executive shall be entitled to specific performance and injunctive relief.

Article 7
General Rules

7.1    Right to Withhold Taxes.  The Employer shall withhold such amounts from payments under the Plan as it determines necessary to fulfill any country,  federal, state, or local wage or compensation withholding requirements.

7.2    Assignment.  Benefits under the Plan may not be assigned.

7.3    Unfunded Plan.  The Employer will make all payments under the Plan, and pay all expenses of the Plan, from its general assets.  Nothing contained in the Plan shall give any eligible Executive any right, title or interest in any property of the Employer.

7.4    Code Section 409A.   It is intended that any amounts payable under the Plan shall comply with the provisions of Code Section 409A and the Treasury Regulations relating thereto so as not to subject an Executive to the payment of interest and tax penalty which may be imposed under Code Section 409A. In furtherance of this interest, anything to the contrary herein notwithstanding, no amounts shall be payable to an Eligible Executive before such time as such payment fully complies with the 

5

provisions of Code Section 409A and, to the extent that any regulations or other guidance issued under Code Section 409A after the date of this Agreement would result in the Executive being subject to payment of interest and tax penalty under Code Section 409A, the parties agree to amend this Agreement in order to bring this Agreement into compliance with Code Section 409A. In addition, solely for purposes of compliance with Code Section 409A,  Qualifying Termination shall not be deemed to have occurred for purposes of the Plan unless such termination is also a separation from service (within the meaning of Treasury Regulation Section 1.409A-1(h) (applying the 20% default post-separation limit thereunder)) as an employee and references to a “termination” or “termination of employment” shall mean separation from service as an employee. 

7.5    Governing Laws; Other Obligations.  The provisions of the Plan shall be construed, administered and enforced in accordance with the laws of the State of Wisconsin and any applicable federal laws.  The obligations and restrictions set forth in this Plan are in addition to and not in lieu of any obligations or restrictions imposed upon Executive under any other agreement or any other law or statute including, but not limited to, any obligations Executive may owe under any law governing trade secrets, any common law duty of loyalty, or any fiduciary duty.  No time or geographic restriction provided above shall affect the availability or scope of protection afforded to the Compay's trade secrets.

Article 8
Amendment and Termination

The Compensation Committee may modify, amend, or terminate the Plan at any time without prior notice, and the Company's Chief Executive Officer or Chief Human Resources Officer may also amend or modify the plan to reflect administrative or other changes that do not have a material effect on the amount of benefits  provided under the Plan.  However, the Company will pay or continue to pay benefits in accordance with the provisions of the Plan to the Executives whose employment is terminated prior to any modification, amendment or termination of the Plan.

Article 9
Administration

9.1    Powers and Duties.  The Plan Administrator shall have sole authority and discretion to administer and construe the terms of the Plan, subject to applicable requirements of law.  Without limiting the foregoing, the Plan Administrator shall have power to:
		
	(a)
	Provide rules and regulations for the administration of the Plan and, from time to time, to amend or supplement such rules and regulations;

		
	(b)
	Construe the Plan, which construction shall be final and binding; 

		
	(c)
	Correct any defect, supply any omission, or reconcile any inconsistency in the Plan in such manner and to such extent as it shall deem expedient to effect the purpose of the Plan; and

		
	(d)
	Delegate to such other parties as are appropriate all or any part of the responsibilities specifically required of the Plan Administrator under the terms of the Plan.

No benefits shall be paid under the Plan unless the Plan Administrator, in its sole discretion, determines that an Eligible Executive is entitled to such benefits.

9.2    Finality of Action.  Except as provided in Section 9.3, the acts and determinations of the Compensation Committee and Company within the powers conferred by the Plan shall be final and conclusive for all purposes of the Plan.

9.3    Claim Procedure.    An Executive who believes that he or she is entitled to benefits under the Plan in an amount greater than what the Executive is receiving or has received may file a claim within 12 months of his or her termination of employment for such benefits by writing directly to the corporate offices of the Company, located in Milwaukee, Wisconsin.  Such claims shall be referred to a person designated by the Company, who shall prepare an appropriate written response.

Every claim that is filed timely shall be answered in writing stating whether the claim is granted or denied.  If the claim is denied, the reasons for denial and reference to the relevant plan provisions shall be set forth in a written notice to the claimant.  Such notice shall also describe information necessary for the claimant to perfect an appeal and include an explanation of the Plan’s claim appeal procedure.

Within 90 days of notice that a claim is denied, the claimant may file a written appeal to the Company, including any comments, statements or documents the claimant may wish to provide.  Appeals shall be considered by the Compensation Committee or a 

6

committee of not less than three persons designated by the Compensation Committee, none of whom shall be the person who responded to the initial claim.  In the event the claim is denied upon appeal, the Compensation Committee  or its designee shall set forth in writing the reasons for denial and the relevant provisions of the Plan.  

The Company shall comply with any reasonable written request from a claimant for documents or information relevant to this claim prior to the filing of an appeal.

* * *

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