HUDSON HIGHLAND GROUP CEO EMPLOYMENT AGREEMENT

 

Employment Agreement (the “Agreement”), by and between Hudson Highland Group, Inc. (the “Company”) and Manuel Marquez Dorsch (the “Executive”), dated March 7, 2011.

 

WHEREAS, the Company wishes to employ the Executive and the Executive wishes to be employed in accordance with the terms and conditions set forth below.

 

NOW, THEREFORE, in consideration of the conditions and mutual covenants contained in this Agreement, the parties agree as follows:

 

1.           Defined Terms.

 

(a)           Accrued Compensation and Benefits.  The term “Accrued Compensation and Benefits” means the aggregate of:

 

(i)           any unpaid Base Salary (as defined in Section 6(a)) through and including the date of the Executive’s Separation from Service (as defined in Section 1(e));

 

(ii)           any Bonus (as defined in Section 6(g)) earned, but unpaid, for the year prior to the year in which the Executive’s Separation from Service occurs;

 

(iii)           a prorated Bonus for the year of the Executive’s Separation from Service equal to [x] the Bonus that would have been paid to the Executive under Section 6(g) had the Executive been employed for the entire year multiplied by [y] a fraction, the numerator of which is the number of days the Executive was employed during the year of his Separation from Service and the denominator of which is 365;

 

(iv)           pay for accrued but unused vacation;

 

(v)           unreimbursed business expenses to which the Executive is entitled to reimbursement under the Company’s expense reimbursement policy;

 

(vi)           rights to indemnification the Executive may have under the Company’s Articles of Incorporation, Bylaws, this Agreement, or separate indemnification agreement, as applicable, including any rights the Executive may have under directors and officers insurance policies; and

 

(vii)           any other amounts or benefits required to be paid or provided by law or under any agreement (including any incentive award agreement), plan, program, policy or practice of the Company.

 

Whenever this Agreement provides for the Company to pay Accrued Compensation and Benefits in connection with the Executive’s Separation from Service, the Company shall make such payment promptly, and in any case within ten (10) business days following the effective date of the Executive’s Separation from Service, except that the payments described in clauses (ii) and (iii) above will be made in accordance with Section 6(g), and the payments described in clause (vii) above will be made in accordance with the terms of the respective agreement, plan, program, policy or practice of the Company under which such payments are due.

 

(b)           Affiliate.  The term “Affiliate” means each entity that is required to be included in the Company’s controlled group of corporations within the meaning of Code Section 414(b), or that is under common control with the Company within the meaning of Code Section 414(c); provided that the phrase “at least 50 percent” shall be used in place of the phrase “at least 80 percent” each place it appears therein or in the regulations thereunder.

 

(c)           Board.  The term “Board” means the Company’s Board of Directors.

 

(d)           Code.  The term “Code” means the Internal Revenue Code of 1986, including any amendments thereto or successor tax codes thereof and the rules and regulations promulgated thereunder.

 

(e)           Separation from Service.  The term “Separation from Service” means the Executive’s separation from service from the Company for purposes of Code Section 409A determined using the default provisions set forth in Treasury Regulation §1.409A-1(h) or any successor regulation thereto.

 

2.           Employment.  The Company will employ the Executive and the Executive accepts employment as the Company’s Chairman and Chief Executive Officer reporting solely and directly to the Board, subject to the Executive’s obtaining a United States visa and being admitted to the United States in an immigration classification and for such a time period (including time obtained through extensions of authorized stay) that permits him to accept an executive position with the Company for the intended Term, as defined in Section 4.  The Executive’s employment hereunder will commence on the later of April 1, 2011 or the first business day following the date on which such visa is issued and such admission has occurred (the “Effective Date”).  Executive will render such business and professional services in the performance of his duties, consistent with Executive’s positions within the Company.  Executive will be the highest ranking executive officer of the Company, with the full powers, responsibilities and authorities customary for chief executive officers of U.S. public corporations, together with such other powers, authorities and responsibilities consistent with his position as Chairman and Chief Executive Officer as may reasonably be assigned to him by the Board.  The Executive must acknowledge receipt of the Company’s Code of Business Conduct and Ethics and the Company’s Code of Ethics for the Chief Executive Officer and the Senior Financial and Accounting Officers (collectively, the “Ethics Policy”) and confirm that he will comply with the Ethics Policy.  The Executive’s workplace will be based at the Company’s principal offices in New York, New York, USA, unless the Executive and the Board agree to another location; provided, however, that the Executive understands and agrees that he will be required to travel from time to time for business reasons.  Prior to the Effective Date, and starting immediately upon execution of this Agreement, the Executive and the Company will cooperate and will use their respective reasonable best efforts in taking all actions necessary or appropriate to complete and submit an application for the visa (or any extension thereof) referred to in the first sentence of this Section 2 and to advance its processing by the United States Department of State so that the visa will be issued at the earliest possible date.

 

 

3.           Board Membership.  Executive will be appointed to serve as a member of the Board as soon as practicable after the execution of this Agreement.  Thereafter, at each annual meeting of the Company’s stockholders held while this Agreement remains in effect, the Company will nominate Executive to serve as a member of the Board.  Executive’s service as a member of the Board will be subject to any required stockholder approval.  Upon the termination of Executive’s employment for any reason, Executive will be deemed to have resigned from the Board (and any boards of directors of subsidiaries) voluntarily, without any further required action by Executive, as of the end of Executive’s employment and Executive, at the Board’s request, will execute any documents necessary to reflect his resignation.

 

4.           Term of Employment.  The Executive's employment under this Agreement will commence on the Effective Date and will continue for a period of four (4) years thereafter, subject to earlier termination (a) based on a determination of the Board, if the Executive is no longer authorized to work lawfully in the United States as an executive of the Company or (b) as provided in Section 10 (the “Term”).  In the event of termination pursuant to clause (a) of the foregoing sentence, the Company will have no further obligation to the Executive, except to pay the Executive the Accrued Compensation and Benefits.  This Agreement and the Term will be automatically renewed and extended for periods of one (1) year unless the Company or the Executive provides written notice no less than thirty (30) days prior to the expiration of the then-current Term of its or the Executive’s desire not to renew this Agreement.

 

5.           Scope of Responsibilities and Duties.  The Executive agrees to devote the Executive’s full business time, attention, efforts and energies in performance of the Executive’s duties and responsibilities hereunder.  While employed by the Company, the Executive may not engage in any employment other than for the Company, in any conflicting business activities, or have any financial interest, directly or indirectly, in any business competing with the Company or otherwise engaged in the business of the Company or its Affiliates.  The foregoing does not prevent the Executive from (1) serving on the board of directors of another organization with the consent of the Board, provided, that the Executive may, without the approval of the Board, serve on the board (or similar governing authority) of any civic, educational, or charitable organization and serve on the board(s) set forth on Schedule A attached hereto, provided such services do not materially interfere with the performance of the Executive’s duties pursuant to this Agreement or (2) managing his personal investments, provided such activities do not materially interfere with the Executive’s performance of his duties and responsibilities hereunder.

 

6.           Compensation and Benefits.  The Company will provide the Executive with the following compensation and benefits during the Term:

 

(a)           The Company will pay the Executive a salary of $600,000 on an annualized basis, payable in accordance with the payroll practices of the Company in effect from time to time, and less such taxes and other deductions required by applicable law or authorized by the Executive (the “Base Salary”).  In addition, the Executive will receive a four percent (4%) increase in Base Salary in each of 2013 and 2015.

 

 

(b)           The Executive will be entitled to accrue paid vacation at the rate of no less than four (4) weeks per year.  In addition, the Company will provide the Executive with other benefits of employment, including health insurance and 401(k), offered from time to time to other senior executives of the Company at the office location at which the Executive is based.  On the Effective Date, the Executive shall be awarded 100,000 restricted stock units and options to purchase 400,000 shares of Company common stock at market price pursuant to separate award agreements in the forms attached hereto as Attachments A and B.  During the initial four-year Term, the Executive shall have no entitlement to receive any other awards under the Company’s 2009 Incentive Stock and Awards Plan (or any successor plan thereto), provided, that the Board or the compensation committee thereof may in its discretion grant additional equity-based or other incentive awards to the Executive.

 

(c)           The Company will reimburse the travel expenses for the Executive and the Executive’s spouse for their first trip to New York, and will also pay for business class travel tickets for both of them and their three children between New York and Madrid, Spain, twice each year during the Term.

 

(d)           The Company will provide the Executive with a relocation and temporary housing allowance as follows:

 

(i)           An amount of $200,000 payable in equal installments on dates corresponding with the Company’s regular pay dates during the period from the Effective Date to December 31, 2011; and

 

(ii)           An amount of $150,000 payable in equal installments on dates corresponding with the Company’s regular pay dates during the period from January 1, 2012 to December 31, 2012.

 

The Company’s ongoing obligation to make the foregoing payments shall be contingent on the Executive’s continued employment with the Company.  Prior to December 31, 2012, the Board will consider and discuss with the Executive the amount of any such allowance to be paid by the Company to the Executive after such date.

 

(e)           During the Term, the Executive shall be entitled to first class travel and accommodations when traveling on the Company’s business.

 

(f)           Attachment C to this Agreement reflects the Company’s undertaking to provide tax equalization payments to the extent any are required pursuant to the terms thereof, and is incorporated herein by reference as part of this Agreement.

 

 

(g)           The Executive will receive an annual cash bonus (a “Bonus”) as provided under the Company’s Senior Management Bonus Plan (the “Bonus Plan”) as is in effect from time to time, modified as follows:  Executive’s target bonus (the “Target Bonus”) will be ninety percent (90%) of Base Salary.  For 2011 and 2012, the Executive’s minimum Bonus will be the Target Bonus, prorated for 2011 for the partial year represented by the number of days between the Effective Date and December 31, 2011, inclusive, divided by 365.  The minimum Bonus for 2011 will be payable in three equal installments on (a) the later of April 1, 2011 or the Effective Date, (b) July 1, 2011 and (c) October 1, 2011.  The minimum Bonus for 2012 will be payable in equal installments on dates corresponding with the Company’s regular pay dates during the period from January 1, 2012 to December 31, 2012.  The Company’s ongoing obligation to make the foregoing minimum Bonus payments shall be contingent on the Executive’s continued employment with the Company.  The amount of the actual Bonuses for 2011 and 2012 payable by the Company to the Executive pursuant to the terms of the Bonus Plan shall be reduced by the amount of the minimum Bonus for such year paid by the Company prior to payment of the actual Bonus.  The Executive shall have the opportunity to make recommendations to the compensation committee of the Board prior to the determination of the performance goal(s) under the Bonus Plan for each performance period, but the compensation committee will have final power and authority concerning the establishment of such goal(s).  The Executive’s Bonus for any year (other than the minimum Bonuses for 2011 and 2012) will be paid no later than the 15th day of the third month of the following fiscal year.  In addition, the Company will pay the Executive a retention bonus of $125,000 in respect of 2013 and $75,000 in respect of 2014, in each case payable in twelve monthly installments on the dates nearest the end of each month corresponding with the Company’s regular pay dates during such years and contingent on the Executive’s continued employment with the Company on the relevant pay dates.

 

7.           Additional Agreements.  The Executive’s employment hereunder is further contingent upon the Executive’s simultaneous execution of the Confidentiality, Non-Solicitation and Work Product Assignment Agreement and Mutual Agreement to Arbitrate Claims, which is attached as Attachment D and forms a part of this Agreement.

 

8.           Representations and Warranties of the Executive.  The Executive represents and warrants as follows:

 

(a)           All information, oral and written (including, but not limited to information contained on the Executive’s resume), provided by the Executive during the recruiting and employment process is accurate and true to the best of the Executive’s knowledge, and such information does not include any misleading or untrue statement or omit to state any fact necessary to make the information provided not misleading.

 

(b)           The Executive has never been the subject of any investigation or subject to any disciplinary action by any governmental agency, industry self-regulatory body or other employer.

 

(c)           The execution, delivery and performance of this Agreement by the Executive and the Executive’s employment hereunder are not in violation of:

 

(i)           the terms, including any non-competition, non-disclosure, non-solicitation or confidentiality provisions, of any written or oral agreement, arrangement or understanding to which the Executive is a party or by which the Executive is bound; or

 

 

(ii)           any statute, rule, regulation, or other law, or any judgment, decree or order applicable or binding upon the Executive.

 

9.           Representations and Warranties of the Company.  The Company represents and warrants as follows:

 

(a)           All information, oral and written, provided by the Company during the recruiting and employment process is accurate and true to the best of the Company’s knowledge, and such information does not include any misleading or untrue statement or omit to state any fact necessary to make the information provided not misleading.

 

(b)           The execution, delivery and performance of this Agreement by the Company have been duly and validly authorized and the Agreement is a valid and binding agreement of the Company enforceable in accordance with its terms.

 

10.           Termination.  This Agreement and the Executive’s employment may be terminated prior to the expiration of the Term as follows:

 

(a)           Death.  If the Executive dies during the Term, this Agreement shall automatically terminate and the Company shall have no further obligation to the Executive or the Executive’s estate, except to pay the Executive’s estate (or designated beneficiary to the extent applicable) the Accrued Compensation and Benefits.

 

(b)           Disability.  If the Executive is unable to perform the Executive’s essential job duties and responsibilities due to Disability (as defined below) for a total of one hundred eighty (180 days), whether consecutive or not, during any rolling twelve (12) month period, then either the Company or the Executive may terminate the Executive’s employment and this Agreement upon five (5) days’ written notice to the other party.  For purposes of this Agreement, the Executive will be considered to have incurred a disability (a “Disability”) if the Company, with the advice of a qualified physician, reasonably acceptable to the Executive and the Company, determines that the Executive is physically or mentally incapable (excluding infrequent and temporary absences due to ordinary illness) of performing the Executive’s essential job duties or any substantially similar position of employment by reason of any medically determinable physical or mental impairment.  The Executive shall cooperate with the Company in obtaining the advice of a qualified physician regarding the Executive’s condition.  In the event of termination pursuant to this Section 10(b), the Company will have no further obligation to the Executive, except to pay the Executive the Accrued Compensation and Benefits.

 

(c)           Termination by the Company without Cause or on Expiration or by the Executive for Good Reason.  The Company may terminate the Executive’s employment and this Agreement at any time during the Term for any reason, without Cause (as defined in Section 10(e) below), upon thirty (30) days’ written notice to the Executive.  If the Company gives notice of non-renewal of employment within the 30-day period as provided in Section 4, it will be treated as a termination without Cause.  In addition, the Executive may terminate his employment and this Agreement at any time for Good Reason (as defined, and subject to the procedures provided for, in Section 10(f)).  Upon any such termination, the Company will have no further liability to the Executive other than:

 

 

(i)           to pay the Accrued Compensation and Benefits (except that the Company shall not be obligated to pay any amount pursuant to clause (iii) of the definition of “Accrued Compensation and Benefits” in the case of a termination on or prior to December 31, 2013); and

 

(ii)           to pay severance in an amount equal to [a] if the termination occurs prior to the second anniversary of this Agreement, the Executive’s Target Bonus plus the Executive’s then-current Base Salary for a period of twenty-four (24) months following the Executive’s Separation from Service or [b] if termination occurs on or after the second anniversary of this Agreement, the Executive’s then-current Base Salary for a period of twelve (12) months following the Executive’s Separation from Service, in each case less applicable deductions (such twenty-four (24) or twelve (12) month period, as the case may be, the “Severance Period”); and

 

(iii)           to provide the Executive and his eligible dependents with the opportunity to elect to continue participation in the Company’s health, dental and other welfare benefit plans during the Severance Period at the same cost as other Company senior executives during the Severance Period or until such time as the Executive and his eligible dependents are covered by a successor employer’s comparable benefit plans, whichever is sooner; provided that to the extent that any benefit plan does not permit continuation of the Executive’s or his eligible dependents’ participation throughout such period, or that such continuation would violate applicable law or subject the Company to penalties under applicable law, the Company shall provide the Executive, on the first business day of each calendar quarter, in advance, with an amount which is equal to the Company’s cost of providing such benefits.

 

The Executive’s receipt of the severance payments by the Company set forth in this Section 10(c) is conditioned upon the Executive executing a comprehensive release and waiver agreement and covenant not to sue substantially in the form of Attachment E to this Agreement and such release not having been revoked and having become effective in accordance with its terms by the fortieth (40th) day following the Executive’s termination date.  Subject to Section 25, severance payments will be made in equal installments on dates corresponding with the Company’s regular pay dates during the Severance Period, except that [x] no payments will be made before the fortieth (40th) day following the Executive’s termination date, and any such payment that otherwise would have been made during such period shall instead be aggregated and paid with the payment scheduled to be made on the first regular pay date after such fortieth (40th) day and [y] if the termination occurs on or before the second anniversary of this Agreement, any Target Bonus payable as severance as a result of such termination will be paid in a lump sum within forty-five (45) days following the Executive’s Separation from Service (with the date of payment to be determined by the Company in its discretion).

 

 

(d)           Termination for Cause.  The Company may terminate the Executive’s employment and this Agreement at any time during the Term for Cause as defined below.  In such case, this Agreement and the Executive’s employment shall terminate immediately and the Company shall have no further obligation to the Executive, except that the Company shall pay to the Executive the Accrued Compensation and Benefits (except that the Company shall not be obligated to pay any amount pursuant to clause (iii) of the definition of “Accrued Compensation and Benefits”).

 

(e)           Definition of Cause.  For purposes of this Agreement, “Cause” shall be defined as:

 

(i)           the willful failure of the Executive to perform the Executive's duties and obligations in any material respect (other than any failure resulting from Executive's illness or Disability);

 

(ii)           acts of dishonesty or willful misconduct by the Executive with respect to the Company;

 

(iii)           conviction of a felony or of a violation of any law involving moral turpitude, dishonesty or fraud, or a pleading of guilty or nolo contendere to such charge;

 

(iv)           any material breach of this Agreement or Attachment D; or

 

(v)           failure to confirm material compliance with the Company’s Ethics Policy after 10 days’ written notice requesting confirmation.

 

For purposes of the foregoing definition, an act or omission shall be considered “willful”

if it is done, or omitted to be done, by the Executive with knowledge and intent.  Except for actions or circumstances which, in the reasonable good faith judgment of the Board cannot be cured, the Executive will have thirty (30) calendar days from his receipt of notice from the Company setting forth in reasonable detail the circumstances constituting Cause within which to cure.  The Executive’s termination of employment will not be considered to be for Cause unless it is approved by a majority vote of the members of the Board or an independent committee thereof.  The Company acknowledges that good faith decisions of the Executive relating to the conduct of the Company’s business or the Company’s business strategy will not constitute “Cause”.

(f)           Definition of Good Reason.  For purposes of the Agreement, other than for purposes of Section 11, “Good Reason” shall be defined as:

 

(i)           any changes in the Executive’s authority, duties and responsibilities which are materially inconsistent with his duties and responsibilities provided for under this Agreement;

 

(ii)           any material reduction of the Executive’s salary, aggregate incentive compensation opportunities (excluding any reduction in incentive compensation awards due to the economic performance of the Company) or aggregate benefits;

 

 

(iii)           any required relocation of the Executive’s office beyond a 50 mile radius from Manhattan;

 

(iv)           any failure by the Company to obtain the assumption of this Agreement by a successor of the Company in accordance with Section 22; or

 

(v)           a material breach of this Agreement by the Company.

 

No event or condition described in clauses (i) through (v) above shall constitute Good Reason unless (x) the Executive gives the Company written notice of his intention to terminate his employment for Good Reason and the grounds for such termination within ninety (90) days of the occurrence of such event or the initial existence of such condition and (y) such grounds for termination (if susceptible to cure) are not cured by the Company within thirty (30) calendar days of its receipt of such notice.  If the Company fails to cure the event or condition giving rise to Good Reason within such 30-day period, then the Executive’s termination of employment shall occur at the close of business on the last day of such 30-day period.

(g)           Voluntary Termination.  The Executive may voluntarily terminate his employment at any time during the Term upon 3 months’ written notice and in compliance with the provisions of Attachment D.  In such event, the Company shall be relieved of all its obligations under this Agreement, except that the Company shall pay to the Executive the Accrued Compensation and Benefits (except that the Company shall not be obligated to pay any amount pursuant to clause (iii) of the definition of “Accrued Compensation and Benefits”).

 

(h)           Equity Awards.  In the event of the Executive’s termination of employment, his outstanding equity awards will be treated in accordance with the terms and conditions of the applicable award agreement(s).

 

(i)           Continuance of Obligations.  The Executive remains obligated to comply with the Executive's obligations and duties pursuant to Attachment D despite the termination of this Agreement and the Executive's employment for any reason.

 

(j)           Cooperation.  During employment and after the termination of this Agreement and the Executive’s employment for any reason, the Executive agrees to cooperate with and at the request of the Company in the defense or prosecution of any legal matter or claim in which the Company, any of its Affiliates, or any of their past or present employees, agents, officers, directors, attorneys, successors or assigns, may be or become involved and which arises or arose during the Executive’s employment, to the extent such cooperation does not unreasonably interfere with the Executive’s personal or professional schedule.  The Executive will be reimbursed for any reasonable out-of-pocket expenses incurred thereby (including, without limitation, the fees and expenses of the Executive’s counsel).

 

 

(k)           No Disparagement.  During and for one (1) year after the termination of this Agreement and the Executive’s employment for any reason, the Executive will not knowingly disparage, criticize, or otherwise make any derogatory statements regarding the Company, its directors, its officers or its regional chief executive officers and chief financial officers, and the Company will not knowingly disparage, criticize or otherwise make any derogatory statements regarding Executive.  The Company’s obligations under the preceding sentence shall be limited to official communications by the Company and statements by its senior corporate executives having the rank of Senior Vice President or above and members of the Board.  The foregoing restrictions will not apply to any statements that are made truthfully in response to a subpoena or other compulsory legal process.

 

11.           Change in Control.  Notwithstanding any other provisions of this Agreement to the contrary:

 

(a)           Employment Period.  If a Change in Control (as defined below) occurs when the Executive is employed by the Company, the Company will continue thereafter to employ the Executive during the period commencing on the date of a Change in Control and ending on the second anniversary of such date (the “Employment Period”) and thereafter in accordance with Section 4 of this Agreement, and the Executive will remain in the employ of the Company in accordance with and subject to the terms and provisions of this Agreement.

 

(b)           Covered Termination.  If there is any termination of the Executive’s employment during the Employment Period (subject to Section 11(d)) by the Executive for Good Reason (as defined below), or by the Company other than by reason of (i) death (in which case Section 10(a) shall apply), (ii) Disability (in which case Section 10(b) shall apply), or (iii) Cause (a “Covered Termination”), then the Executive shall be entitled to receive, and the Company shall pay, the Accrued Compensation and Benefits and, in lieu of further base salary for periods following such termination, as liquidated damages and additional severance pay, the Termination Payment pursuant to Section 11(c).   In such event, the Executive will not be entitled to the severance payments and benefits described in Section 10(c). In addition, the Executive and his eligible dependents will remain eligible to elect to continue participation in the Company’s health, dental and other welfare benefit plans at the same cost as other Company senior executives for the period during which the Company remains obligated to pay the Termination Payment or until such time as the Executive and his eligible dependents are covered by a successor employer’s comparable benefit plans, whichever is sooner; provided that to the extent that any benefit plan does not permit continuation of the Executive’s or his eligible dependents’ participation throughout such period, or that such continuation would violate applicable law or subject the Company to penalties under applicable law, the Company shall provide the Executive, on the first business day of each calendar quarter, in advance, with an amount which is equal to the Company’s cost of providing such benefits.

 

(c)           Termination Payment.  The “Termination Payment” shall be an amount equal to two (2) times:

 

(i)           the Executive’s annual base salary immediately prior to the termination of the Executive’s employment; plus

 

(ii)           the Executive’s Target Bonus under the Company’s Senior Management Bonus Plan for the year in which the termination of the Executive’s employment occurs.

 

Subject to Section 25, the Termination Payment shall be paid to the Executive at the time and in the manner specified in Section 10(c) for the twenty-four (24) month Severance Period.

 

(d)           Anticipatory Termination.  Anything in this Agreement to the contrary notwithstanding, if a Change in Control occurs and if the Executive’s employment with the Company is terminated (other than a termination due to the Executive’s death or as a result of the Executive’s Disability) during the period of 180 days prior to the date on which the Change in Control occurs, and if it is reasonably demonstrated by the Executive that such termination of employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or in anticipation of a Change in Control, then for all purposes of this Section 11 such termination of employment shall be deemed a “Covered Termination” and the “Employment Period” shall be deemed to have begun on the date of such termination.

 

(e)           Definition of Change in Control.  For purposes hereof, a “Change in Control” shall be deemed to occur on the first to occur of any one of the following events:

 

(i)           the consummation of a consolidation, merger, share exchange or reorganization involving the Company, unless such consolidation, merger, share exchange or reorganization is a “Non-Control Transaction” (as defined below);

 

(ii)           the stockholders of the Company approve a plan of complete liquidation or dissolution of the Company or an agreement for the sale or disposition by the Company of all, or substantially all, of the assets of the Company (in one transaction or a series of related transactions within any period of 24 consecutive months), other than a sale or disposition by the Company of all, or substantially all, of the Company’s assets to an entity at least 75% of the combined voting power of the voting securities of which are owned by stockholders of the Company in substantially the same proportions as their ownership of the Company immediately prior to such sale;

 

(iii)           any person (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (other than (1) the Company, (2) any subsidiary of the Company, (3) a trustee or other fiduciary holding securities under any employee benefit plan (or any trust forming a part thereof) maintained by the Company or any subsidiary or (4) a corporation owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock in the Company) is or becomes the beneficial owner (within the meaning of Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company after the date hereof pursuant to express authorization by the Board that refers to this exception) representing more than 20% of the then outstanding shares of Common Stock or the combined voting power of the Company’s then outstanding voting securities; or

 

 

(iv)           the following individuals cease for any reason to constitute a majority of the number of directors then serving:  individuals who, as of the date hereof, constitute the entire Board and any new director (other than a director whose initial assumption of office is in connection with an actual or threatened election contest) whose appointment or election by the Board or nomination for election by the Company’s stockholders was approved or recommended by a vote of at least two-thirds of the directors then still in office who either were directors on the date hereof or whose appointment, election or nomination for election was previously so approved or recommended.

 

Notwithstanding the foregoing, no “Change in Control” shall be deemed to have occurred if there is consummated any transaction or series of integrated transactions immediately following which the record holders of the Common Stock immediately prior to such transaction or series of transactions continue to have substantially the same proportionate ownership in an entity that owns all or substantially all of the assets or voting securities of the Company immediately following such transaction or series of transactions.  A “Non-Control Transaction” shall mean a consolidation, merger, share exchange or reorganization of the Company where:

 

(i)           the stockholders of the Company immediately before such consolidation, merger, share exchange or reorganization beneficially own, directly or indirectly, more than 50% of the then outstanding shares of common stock and the combined voting power of the outstanding voting securities of the corporation resulting from such consolidation, merger, share exchange or reorganization (the “Surviving Corporation”);

 

(ii)           the individuals who were members of the Board immediately prior to the execution of the agreement providing for such consolidation, merger, share exchange or reorganization constitute at least 50% of the members of the board of directors of the Surviving Corporation; and

 

(iii)           no person (other than (1) the Company, (2) any subsidiary of the Company or (3) any employee benefit plan (or any trust forming a part thereof) maintained by the Company, the Surviving Corporation or any subsidiary) is or becomes the beneficial owner, directly or indirectly, of securities of the Company (not including in the securities beneficially owned by such person any securities acquired directly from the Company after the date hereof pursuant to express authorization by the Board that refers to this exception) representing more than 20% of the then outstanding shares of the common stock of the Surviving Corporation or the combined voting power of the Surviving Corporation’s then outstanding voting securities.

 

 

(f)           Good Reason.  Solely for purposes of this Section 11, the Executive shall have “Good Reason” for termination of employment in connection with a Change in Control of the Company in the event of:

 

(i)           any breach of this Agreement by the Company, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith that the Company remedies promptly after receipt of notice thereof given by the Executive;

 

(ii)           any reduction in the Executive’s base salary, percentage of base salary available as incentive compensation or bonus opportunity or benefits, in each case relative to those most favorable to the Executive in effect at any time during the 180-day period prior to the Change in Control;

 

(iii)           the removal of the Executive from, or any failure to reelect or reappoint the Executive to, any of the positions held with the Company on the date of the Change in Control or any other positions with the Company to which the Executive shall thereafter be elected, appointed or assigned, except in the event that such removal or failure to reelect or reappoint relates to the termination by the Company of the Executive’s employment for Cause or by reason of Disability pursuant to Section 10(b);

 

(iv)           a good faith determination by the Executive that there has been a material adverse change, without the Executive’s written consent, in the Executive’s working conditions or status with the Company relative to the most favorable working conditions or status in effect during the 180-day period prior to the Change in Control, including but not limited to (A) a significant change in the nature or scope of the Executive’s authority, powers, functions, duties or responsibilities, or (B) a significant reduction in the level of support services, staff, secretarial and other assistance, office space and accoutrements, but in each case excluding for this purpose an isolated, insubstantial and inadvertent event not occurring in bad faith that the Company remedies within ten (10) days after receipt of notice thereof given by the Executive;

 

(v)           the relocation of the Executive’s principal place of employment to a location more than 50 miles from the Executive’s principal place of employment on the date 180 days prior to the Change in Control;

 

(vi)           the Company requires the Executive to travel on Company business 20% in excess of the average number of days per month the Executive was required to travel during the 180-day period prior to the Change in Control; or

 

 

(vii)           the Executive’s voluntary termination of his employment for any reason during the 30-day period beginning on the first anniversary of the Change in Control.

 

(g)           Funding of Rabbi Trust.  Upon a Change in Control, the Company (or its successor) shall transfer to an irrevocable rabbi trust (to the extent not prohibited by Code Section 409A) an amount in cash, determined on an undiscounted basis, which will be sufficient to fund the Company’s obligations under Section 11(c).

 

12.           Limitations on Severance Payment and Other Payments or Benefits.

 

(a)           Notwithstanding any provision of this Agreement, if any portion of the severance payments or any other payment under this Agreement, or under any other agreement with the Executive or plan of the Company or its affiliates (in the aggregate, “Total Payments”), would constitute an “excess parachute payment” and would, but for this Section 12, result in the imposition on the Executive of an excise tax under Code Section 4999, then the Total Payments to be made to the Executive shall either be (i) delivered in full, or (ii) delivered in the greatest amount such that no portion of such Total Payment would be subject to the Excise Tax, whichever of the foregoing results in the receipt by the Executive of the greatest benefit on an after-tax basis (taking into account the applicable federal, state and local income taxes and the Excise Tax).

 

(b)           Within forty (40) days following the Executive’s termination of employment or notice by one party to the other of its belief that there is a payment or benefit due the Executive that will result in an excess parachute payment, the Executive and the Company, at the Company’s expense, shall obtain the opinion (which need not be unqualified) of a nationally recognized tax counsel (“National Tax Counsel”) selected by the Company (which may be regular outside counsel to the Company) and reasonably acceptable to the Executive, which opinion sets forth (i) the amount of the Base Period Income (as defined below), (ii) the amount and present value of the Total Payments, (iii) the amount and present value of any excess parachute payments determined without regard to any reduction of Total Payments pursuant to Section 12(a), and (iv) the net after-tax proceeds to the Executive, taking into account the tax imposed under Code Section 4999 if (x) the Total Payments were reduced in accordance with Section 12(a) or (y) the Total Payments were not so reduced.  The opinion of National Tax Counsel shall be addressed to the Company and the Executive and shall be binding upon the Company and the Executive.  If such National Tax Counsel opinion determines that Section 12(a)(ii) above applies, then the Termination Payment hereunder or any other payment or benefit determined by such counsel to be includable in Total Payments shall be reduced or eliminated so that under the bases of calculations set forth in such opinion there will be no excess parachute payment.  In such event, payments or benefits included in the Total Payments shall be reduced or eliminated by applying the following principles, in order: (1) the payment or benefit with the higher ratio of the parachute payment value to present economic value (determined using reasonable actuarial assumptions) shall be reduced or eliminated before a payment or benefit with a lower ratio; (2) the payment or benefit with the later possible payment date shall be reduced or eliminated before a payment or benefit with an earlier payment date; and (3) cash payments shall be reduced prior to non-cash benefits; provided that if the foregoing order of reduction or elimination would violate Code Section 409A, then the reduction shall be made pro rata among the payments or benefits included in the Total Payments (on the basis of the relative present value of the parachute payments).

 

 

(c)           For purposes of this Agreement: (i) the terms “excess parachute payment” and “parachute payments” shall have the meanings assigned to them in Code Section 280G and such “parachute payments” shall be valued as provided therein; (ii) present value shall be calculated in accordance with Code Section 280G(d)(4); (iii) the term “Base Period Income” means an amount equal to the Executive’s “annualized includible compensation for the base period” as defined in Code Section 280G(d)(1); (iv) for purposes of the opinion of National Tax Counsel, the value of any noncash benefits or any deferred payment or benefit shall be determined by the Company’s independent auditors in accordance with the principles of Code Sections 280G(d)(3) and (4), which determination shall be evidenced in a certificate of such auditors addressed to the Company and the Executive; and (v) the Executive shall be deemed to pay federal income tax and employment taxes at his actual marginal rate of federal income and employment taxation, and state and local income taxes at his actual marginal rate of taxation in the state or locality of the Executive’s domicile (determined in both cases in the calendar year in which the termination of employment or notice described in Section 12(b) above is given, whichever is earlier), net of the maximum reduction in federal income taxes that may be obtained from the deduction of such state and local taxes.

 

(d)           If such National Tax Counsel so requests in connection with the opinion required by this Section 12, the Executive and the Company shall obtain, at the Company’s expense, and the National Tax Counsel may rely on, the advice of a firm of recognized executive compensation consultants as to the reasonableness of any item of compensation to be received by the Executive solely with respect to its status under Code Section 280G.

 

(e)           The Company agrees to bear all costs associated with, and to indemnify and hold harmless, the National Tax Counsel of and from any and all claims, damages, and expenses resulting from or relating to its determinations pursuant to this Section 12, except for claims, damages or expenses resulting from the gross negligence or willful misconduct of such firm.

 

(f)           This Section 12 shall be amended to comply with any amendment or successor provision to Sections 280G or 4999 of the Code.  If such provisions are repealed without successor, then this Section 12 shall be cancelled without further effect.

 

13.           No Mitigation.  The Executive’s right to severance (pursuant to Section 10(c)) or of the Termination Payment (pursuant to Section 11(b) or 11(d)) is not subject to any requirement that the Executive seek other employment or otherwise attempt in any way to reduce any amounts payable to him.  Further, the amount payable to the Executive shall not be reduced by any compensation or income earned by the Executive as the result of employment by another employer or self-employment, by retirement benefits, by offset against any amount claimed to be owed by the Executive to the Company, or otherwise.

 

 

14.           Severability.  Whenever possible, each portion, provision or section of this Agreement will be interpreted in such a way as to be effective and valid under applicable law, but if any portion, provision or section of this Agreement is held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability will not affect any other portions, provisions or sections.  Rather, this Agreement will be reformed, construed and enforced as if such invalid, illegal or unenforceable portion, provision or section had never been contained herein.

 

15.           Legal Fees.  The Company shall pay the reasonable legal fees and expenses of the Executive’s counsel in connection with the negotiation, drafting and review of this Agreement, the other agreements referred to herein and related advice, subject to documentation being submitted to the Company.

 

16.           Disputes.  If (i) a dispute arises with respect to the enforcement of the Executive’s rights under this Agreement or (ii) any legal or arbitration proceeding shall be brought to enforce or interpret any provision contained herein or to recover damages for breach hereof, in either case so long as the Executive is not acting in bad faith, then the Company shall reimburse the Executive for any reasonable attorneys’ fees and necessary costs and disbursements incurred by the Executive during his or her lifetime as a result of the dispute, legal or arbitration proceeding (“Expenses ”), and prejudgment interest on any money judgment or arbitration award obtained by the Executive calculated at the rate of interest announced by The Bank of New York, from time to time at its prime or base lending rate from the date that payments to him or her should have been made under this Agreement.  Within ten days after the Executive’s written request therefor, the Company shall pay to the Executive, or such other person or entity as the Executive may designate in writing to the Company, the Executive’s reasonable Expenses in advance of the final disposition or conclusion of any such dispute, legal or arbitration proceeding.  Any reimbursements provided hereunder shall be made promptly (but not later than the last day of the calendar year following the calendar year in which the legal fees or expenses were incurred by the Executive) following the receipt by the Company of a written notice from the Executive requesting such reimbursement, accompanied by documentation substantiating the amount of such fees and expenses.

 

17.           Indemnification.  To the fullest extent permitted by the indemnification provisions of the certificate of incorporation and bylaws of the Company in effect from time to time and the indemnification provisions of the laws of the State of Delaware in effect from time to time (collectively, the "Indemnification Provisions"), and in each case subject to the conditions thereof, the Company shall (i) indemnify the Executive, as a director and officer of the Company or a trustee or fiduciary of an employee benefit plan of the Company against all liabilities and reasonable expenses that the Executive may incur in any threatened, pending, or completed action, suit or proceeding, whether civil, criminal or administrative, or investigative and whether formal or informal, because the Executive is or was a director or officer of the Company or a trustee or fiduciary of such employee benefit plan, and against which the Executive may be indemnified by the Company, and (ii) pay for or reimburse the reasonable expenses upon submission of appropriate documentation incurred by the Executive in the defense of any proceeding to which the Executive is a party because the Executive is or was a director or officer of the Company or a trustee or fiduciary of such employee benefit plan.  To the extent that the Company maintains a directors' and officers' liability insurance policy (or policies), or an errors and omissions liability insurance policy (or policies), in place covering individuals who are current or former officers or directors of the Company, the Executive shall be entitled to coverage under such policies on the same terms and conditions (including, without limitation, with respect to scope, exclusions, amounts and deductibles) as are available to other senior executives of the Company, while the Executive is employed with the Company and thereafter.  Nothing in this Agreement shall require the Company to purchase or maintain any such insurance policy.  The rights of the Executive under the Indemnification Provisions shall survive the termination of the employment of the Executive by the Company.

 

18.           Complete Agreement.  This Agreement, including the Attachments hereto, contain the complete agreement and understanding between the parties and supersede and preempt any prior understanding, agreement or representation by or between the parties, written or oral.

 

19.           Additional Rights and Causes of Action.  This Agreement, including  the Attachments hereto, are in addition to and do not in any way waive or detract from any rights or causes of action the Company may have relating to Confidential Information or other protectable information or interests under statutory or common law or under any other agreement.

 

20.           Governing Law.  Notwithstanding principles of conflicts of law of any jurisdiction to the contrary, all terms and provisions to this Agreement are to be construed and governed by the laws of the State of New York without regard to the laws of any other jurisdiction in which the Executive resides or performs any duties hereunder or where any violation of this Agreement occurs.

 

21.           Notices.  All notices, requests, demands, and other communications called for hereunder will be in writing and will be deemed given (a) on the date of delivery if delivered personally, (b) one (1) day after being sent overnight by a well established commercial overnight service, or (c) four (4) days after being mailed by registered or certified mail, return receipt requested, prepaid and addressed to the parties or their successors at the following addresses, or at such other addresses as the parties may later designate in writing:

 

If to the Company:

Latham Williams, Esq.

Senior Vice President, Legal Affairs and Administration, Corporate Secretary

Hudson Highland Group, Inc.

560 Lexington Avenue

New York, NY 10022

 

 

with a copy to:

Benjamin F. Garmer, III, Esq.

Foley & Lardner LLP

777 East Wisconsin Avenue

Milwaukee, WI 53202

If to the Executive:

at the last residential address known by the Company

with a copy to:

Linda E. Rappaport, Esq.

Shearman & Sterling LLP

599 Lexington Avenue

New York, NY 10022

22.           Successors and Assigns; Survival.

 

(a)           This is an Agreement for the performance of personal services by the Executive and may not be assigned by the Executive or the Company except that the Company may assign this Agreement to any successor in interest to the Company, provided that such assignee assumes all of the obligations of the Company hereunder. The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of its business and/or assets to expressly assume and agree to perform this Agreement in the same manner and to the same extent that Company would be required to perform it if no such succession had taken place.

 

(b)           The Agreements set forth on the Attachments hereto and the Company’s and Executive’s responsibilities under Sections 10, 11, 12, 13, 14, 15, 16, 17, 19, 20, 21, 22, 23, 24 and 25 will survive the termination of this Agreement.

 

23.           Waivers.  The waiver by either the Executive or the Company of a breach by the other party of any provision of this Agreement shall not operate or be construed as a waiver of any subsequent breach by the breaching party.

 

24.           Withholding.  The Company shall be entitled to withhold from amounts to be paid to the Executive hereunder any federal, state or local withholding or other taxes or charges which it is from time to time required to withhold.  The Company shall be entitled to rely on an opinion of National Tax Counsel if any question as to the amount or requirement of any such withholding shall arise.  In addition, if  prior to the date of payment of any amount hereunder, the Federal Insurance Contributions Act (FICA) tax imposed under Code Sections 3101, 3121(a) and 3121(v)(2), where applicable, becomes due, a payment will be made to the Executive from the cash payments otherwise owing hereunder (without regard to the six-month delay, if applicable, otherwise provided for in Section 25(b)) equal to the amount needed to pay the Executive’s portion of such tax, as well as withholding taxes resulting therefrom (including the additional taxes attributable to the pyramiding of such distributions and taxes), and any subsequent payment shall be reduced accordingly.

 

 

25.           Compliance with Code Section 409A.

 

(a)           This Agreement shall be construed and interpreted in a manner that will cause any payment hereunder that is considered deferred compensation and that is not exempt from Code Section 409A to meet the requirements thereof such that no additional tax will be due under Code Section 409A on such payment.  Each payment of compensation under this Agreement shall be treated as a separate payment of compensation for purposes of applying the Code Section 409A deferral election rules and the exclusion from Code Section 409A for certain short-term deferral amounts.

 

(b)           If, as of the date of the Executive’s Separation from Service, the Executive is a “specified employee” for purposes of Code Section 409A as determined by the Company, then to the extent that any amount or benefit that would be paid or provided to Executive under this Agreement within six (6) months of his Separation from Service constitutes an amount of deferred compensation for purposes of Code Section 409A and is considered for purposes of Code Section 409A to be owed to Executive by virtue of his Separation from Service, then (except to the extent that, in the Company’s reasonable judgment, payment during such six-month period would not cause Executive to incur additional tax, interest or penalties under Code Section 409A) such amount or benefit will not be paid or provided during the six-month period following the date of Executive’s Separation from Service and instead shall be paid or provided on the first business day that is at least seven (7) months following the date of Executive’s Separation from Service, and in such event, the payment shall be accompanied by a payment of interest calculated at the rate of interest announced by the Federal Reserve Board (or any successor thereto) from time to time as the “federal funds rate”, such rate to be determined on the date of the Executive’s Separation from Service, compounded quarterly.

 

(c)           Any reimbursements or in-kind benefits provided under the Agreement shall be made or provided in accordance with the requirements of Code Section 409A, including, where applicable, the requirement that (i) any reimbursement is for expenses incurred during the period of time specified in the Agreement, (ii) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during a calendar year may not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year, (iii) the reimbursement of an eligible expense will be made no later than the last day of the calendar year following the year in which the expense is incurred, and (iv) the right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.  Anything to the contrary in the attached Attachment C notwithstanding, all tax equalization payments due under the provisions of Attachment C must be made not later than the last day of the calendar year following the year in which the Executive remits the related taxes to the taxing authority.

 

 

(d)           The Executive acknowledges that to avoid an additional tax on payments that may be payable under this Agreement and that constitute deferred compensation that is not exempt from Code Section 409A, the Executive may be required to make a reasonable, good faith effort to collect any payment or benefit to which Executive believes he or she is entitled hereunder no later than ninety (90) days of the latest date upon which the payment could under this Agreement could have been timely paid pursuant to Code Section 409A, and if not paid or provided, take further enforcement measures within 180 days after such latest date.

 

26.           Counterparts.  This Agreement may be executed in one or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument.

 

THE COMPANY AND THE EXECUTIVE ACKNOWLEDGE THAT (A) EACH HAS CAREFULLY READ THIS AGREEMENT, (B) EACH UNDERSTANDS ITS TERMS, (C) ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND THE EXECUTIVE RELATING TO THE SUBJECTS COVERED IN THE AGREEMENT ARE CONTAINED IN IT, AND (D) EACH HAS ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY PROMISES OR REPRESENTATIONS BY THE OTHER, OTHER THAN THOSE CONTAINED IN THIS AGREEMENT ITSELF.

 

[Rest of page intentionally left blank]

 

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement.

 

			Hudson Highland Group, Inc.
/s/ Manuel Marquez Dorsch			By:	/s/ David G. Offensend
Signature of Executive				Signature of Authorized Representative
Manuel Marquez Dorsch			Its:	Director
Print Name				Title of Representative

STOCK OPTION AGREEMENT (this “Agreement”) made as of the [DAY]th day of [MONTH], 2011 (the “Grant Date”)1, by and between HUDSON HIGHLAND GROUP, INC., a Delaware corporation (the “Company”) and MANUEL MARQUEZ DORSCH (the “Optionee”).

 

WHEREAS, the Company and the Optionee have entered into an employment agreement, dated March 7, 2011 (the “Employment Agreement”) providing for the Optionee to be employed by and serve as the Chairman and Chief Executive Officer of the Company (capitalized terms used herein without definition to have the meanings attributed thereto in the Employment Agreement); and

 

WHEREAS, the Employment Agreement provides for the Company to grant to the Optionee the option evidenced by this Agreement; and

 

WHEREAS, in order to fulfill its obligations under the Employment Agreement, and as an inducement material to the Optionee’s accepting employment with the Company, the Company desires to grant to the Optionee and the Optionee desires to accept an option to purchase shares of common stock, $.001 par value, of the Company (the “Common Stock”) upon the terms and conditions set forth in this Agreement;

 

NOW, THEREFORE, the parties hereto agree as follows:

 

1.           Grant.  Subject to the terms and conditions set forth herein, the Company hereby grants to the Optionee an option to purchase 400,000 shares of Common Stock at a purchase price per share of $[•].2  This option is intended to be treated as an option that does not qualify as an incentive stock option within the meaning of Section 422 of the Internal Revenue Code of 1986, as amended.

 

2.           Vesting.  Except as specifically provided otherwise herein, fifty percent (50%) of the option will vest and become exercisable, if at all, on the second anniversary of the Optionee’s continuous employment with the Company following the Grant Date and the remaining fifty percent (50%) of the option will vest and become exercisable, if at all, on the third anniversary of the Optionee’s continuous employment with the Company following the Grant Date.  Unless sooner terminated, the option will expire on the tenth anniversary of the Grant Date (the “Expiration Date”).

 

3.           Exercise.  Any portion of the option which has vested and is exercisable may be exercised in whole or in part by delivering to the Executive Vice President, Human Resources of the Company (or such other executive officer of the Company performing a similar function) at its corporate headquarters in New York, New York (a) a written notice specifying (1) the number of shares of Common Stock to be purchased, (2) the Grant Date and the specific number of shares of Common Stock referred to in Section 1 of this Agreement, (3) the Optionee’s home address and, if the Optionee has one, the Optionee’s social security or U.S. taxpayer identification number and (4) delivery instructions with respect to the shares of Common Stock issuable upon exercise, and (b) cash payment in full of the exercise price, together with the amount, if any, deemed necessary by the Company to enable it to satisfy any federal, foreign or other tax withholding obligations with respect to the exercise (unless other arrangements acceptable to the Company in its sole discretion have been made).  The Company may from time to time change (or provide alternatives to) the method of exercise of the option granted hereunder by notice to the Optionee, it being understood that from and after such notice the Optionee will be bound by the method (or alternatives) specified in any such notice.  The Company (in its sole and absolute discretion) may permit all or part of the exercise price or tax withholding obligations to be paid with shares of Common Stock owned by the Optionee or shares of Common Stock that otherwise would be delivered to the Optionee upon exercise of the option, or in installments (together with interest) evidenced by the Optionee’s secured promissory note.  For purposes of valuing shares tendered or withheld to pay the option’s exercise price or to settle tax withholding obligations, each share shall be deemed to have a value equal to the average closing price of the Common Stock on the Nasdaq Global Market (or such other U.S. exchange or market on which the Common Stock is then primarily traded) on the five (5) trading days up to and including the date of vesting.

 

4.           Issuance of Shares.  No shares of Common Stock shall be delivered hereunder until full payment of the exercise price for such shares and all related withholding taxes has been made.  The Optionee shall have no rights as a stockholder with respect to any shares of Common Stock covered by the option until the shares are issued to the Optionee.  Except as otherwise provided herein, no adjustment shall be made for dividends or distributions of other rights for which the record date is prior to the date such stock certificate is issued.

 

5.           No Assignment of Option.  This option is not assignable or transferable except upon the Optionee’s death to a beneficiary designated by the Optionee in a written beneficiary designation filed with the Company or, if no duly designated beneficiary shall survive the Optionee, pursuant to the Optionee’s will and/or by the laws of descent and distribution, and is exercisable during the Optionee’s lifetime only by the Optionee or the Optionee’s guardian or legal representative.  Notwithstanding the foregoing, this option may be transferred, in whole or in part, to (a) the spouse, children or grandchildren (the “Immediate Family Members”) of the Optionee, (b) a trust established for the principal benefit of the Optionee’s Immediate Family Members, (c) a partnership in which the Optionee’s Immediate Family Members are the only partners, or (d) the former spouse of the Optionee as required by a domestic relations order incident to a divorce. The Optionee may not receive consideration for such transfer. The Optionee must notify the Company of any transfers and any subsequent transfers must be approved by the Company. Following transfer, this option shall continue to be subject to the same terms and conditions as were applicable immediately before the transfer, except that the transferee shall have the right to exercise the option upon the terms and conditions described herein.

 

 

6.           Termination of Employment for Cause.  If the Optionee’s employment is terminated by the Company for Cause, then any option held by the Optionee, whether or not otherwise exercisable on the date of the Optionee’s termination of employment, shall immediately terminate and cease to be exercisable.

 

7.           Other Termination of Employment.  If the Company terminates the Optionee’s employment for any reason other than Cause (including termination if the Optionee is no longer authorized to work lawfully in the United States as an executive of the Company), if the Optionee terminates his employment for Good Reason, or if the Optionee’s employment terminates by reason of Disability, then, unless sooner terminated, the option will become vested and exercisable as to a number of shares of Common Stock determined by dividing the number of days elapsed from the Grant Date until the date of the Optionee’s termination of employment with the Company by 1,460 and subtracting from the result of such division the number of shares as to which the option had previously vested.

 

If the Optionee terminates his employment with the Company other than for Good Reason or Disability, then, unless sooner terminated, any portion of the option that is not vested and exercisable on the date of the Optionee’s termination of employment shall immediately terminate.

 

In all of the foregoing cases, that portion of the option which is exercisable on the date of the Optionee’s termination of employment will remain exercisable for a period of six months after such date (one year if the Optionee’s employment terminates by reason of Disability) but in no event after the Expiration Date.  If any fractional shares would result from the strict application of the formula set forth in the first paragraph hereof, then the actual portion of the option vesting on any specific date will cover only the full number of shares determined by rounding the number of shares to be issued from the strict application of the formula set forth above to the nearest whole number of shares.  If the Optionee’s employment terminates by reason of the Optionee’s death, then, unless sooner terminated, the option will become fully vested (to the extent it was not vested on the date of death) and will remain exercisable by the Optionee’s beneficiary for a period of one year after the date of the Optionee’s death but in no event after the Expiration Date.  To the extent that any vested portion of the option is not exercised within the applicable six month or one-year period following termination of employment, it will automatically expire.

 

8.           Securities Law Restrictions.  Notwithstanding anything herein to the contrary, the option shall in no event be exercisable and shares of Common Stock shall not be issued hereunder if, in the opinion of counsel to the Company, such exercise and/or issuance may result in a violation of federal or state securities laws or the securities laws of any other relevant jurisdiction.  The Company undertakes to exercise commercially reasonable efforts to file a registration statement on Form S-8 covering the shares of Common Stock that may be sold to the Optionee pursuant to the option granted hereunder prior to the option becoming exercisable in whole or in part and to keep such registration statement (or another registration statement covering such shares of Common Stock) effective throughout the period during which the option is exercisable in whole or in part.

 

 

9.           Capital and Corporate Changes.

 

(a)           Adjustments Upon Changes in Capitalization.  If (i) the Company shall at any time be involved in a merger or other transaction in which the Common Stock is  changed or exchanged; or (ii) the Company shall subdivide or combine the Common Stock or the Company shall declare a dividend payable in Common Stock other securities (other than any associated preferred stock purchase rights issued pursuant to that certain Rights Agreement, dated February 2, 2005, between the Company and The Bank of New York, as rights agent, or similar stock purchase rights that the Company might authorize and issue in the future) or other property; or (iii) the Company shall effect a cash dividend the amount of which exceeds 10% of the trading price of the Common Stock at the time the dividend is declared, or the Company shall effect any other dividend or other distribution on the Common Stock in the form of cash, or a repurchase of Common Stock, that the Board determines by resolution is special or extraordinary in nature or that is in connection with a transaction that the Company characterizes publicly as a recapitalization or reorganization involving the Common Stock; or (iv) any other event shall occur which, in the case of this clause (iv), in the judgment of the Compensation Committee of the Board or a successor committee with the same or similar authority (the “Committee”) necessitates an adjustment to prevent dilution or enlargement of the benefits or potential benefits intended to be made available hereunder, then the Committee shall, in such manner as it may deem equitable, adjust any or all of the number and type of shares subject to this option and the exercise price as are necessary to maintain the relative proportionate interest the Option represented immediately prior to any such event and to preserve, without exceeding, the value of the option.  In any such case, the Committee may also make provision for a cash payment in exchange for the cancellation of all or a portion of the option in an amount determined by the Committee effective at such time as the Committee specifies (which may be the time such transaction or event is effective). The number of shares of Common Stock or other securities subject to this option must always be a whole number. Without limitation, in the event of any such merger or similar transaction, subdivision or combination of the Common Stock, dividend or other event described above (other than any such transaction in which the Company is the continuing corporation and in which the outstanding Common Stock is not being converted into or exchanged for different securities, cash or other property, or any combination thereof), the Committee shall substitute, on an equitable basis as the Committee determines, for each share of Common Stock then subject to an Award, the number and kind of shares of stock, other securities, cash or other property to which holders of Common Stock are or will be entitled in respect of each share of Common Stock pursuant to the transaction.  Notwithstanding the foregoing, if the Company shall subdivide the Common Stock or the Company shall declare a dividend payable in Common Stock, and if no action is taken by the Board or the Committee, then the adjustments contemplated by this Section 9(a) that are proportionate shall nevertheless automatically be made as of the date of such subdivision of the Common Stock or dividend in Common Stock.

 

(b)           Change in Control.  The option will vest in full and immediately become exercisable upon the date of a Covered Termination following the occurrence of a Change in Control.  If, in connection with a Change in Control, the stockholders of the Company will receive capital stock of another corporation (“Exchange Stock”) in exchange for their shares of Common Stock (whether or not such Exchange Stock is the sole consideration), and if the Committee so directs, then this option will be converted into an option to purchase shares of Exchange Stock; provided that such conversion shall not effect the exercisability of the option pursuant to the foregoing sentence.  The number of shares and exercise price under the converted option will be determined by adjusting the number of shares and exercise price under this option on the same basis as the determination of the number of shares of Exchange Stock the holders of Common Stock will receive in connection with the Change in Control.

 

 

(c)           Fractional Shares.  In the event of any adjustment in the number of shares covered by this option pursuant to the provisions hereof, any fractional shares resulting from such adjustment will be disregarded, and the option, as adjusted, will cover only the number of full shares resulting from the adjustment.

 

(d)           Determination of the Committee to be Final.  All adjustments under this Section shall be made by the Committee, and its determination as to what adjustments shall be made, and the extent thereof, shall be final, binding and conclusive.

 

10.           No Employment Rights.  Nothing in this Agreement shall give the Optionee any right to continue in the employment of the Company, or interfere in any way with the right of the Company to terminate the employment of the Optionee.

 

11.           Administration.  The Committee will have full power and authority to interpret and apply the provisions of this Agreement and act on behalf of the Company and the Board in connection with this Agreement, and the decision of the Committee as to any matter arising under this Agreement shall be binding and conclusive as to all persons.

 

12.           Confidentiality, Non-Solicitation, Work Product Assignment and Arbitration.  As a material inducement to the Company to grant this option and enter into this Agreement, the Optionee hereby expressly agrees to be bound by the covenants, terms and conditions contained in the Confidentiality, Non-Solicitation and Work Product Assignment Agreement, and Mutual Agreement to Arbitrate Claims, by and between the Optionee and the Company dated as of the date hereof.

 

13.           Binding Effect; Headings.  This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns.  The subject headings of Sections of this Agreement are included for the purpose of convenience only and shall not affect the construction or interpretation of any of its provisions.  All references in this Agreement to “$” or “dollars” are to United States dollars.

 

 

14.           Applicable Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of Delaware, without regard to conflict of law principles thereof.  This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and controls and supersedes any prior understandings, agreements or representations by or between the parties, written or oral with respect to its subject matter and may not be modified except by written instrument executed by the parties.

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IN WITNESS WHEREOF, this Agreement has been executed as of the date first above written.

 

 

[List of Boards of Directors]