Employment Agreement by and between Pomeroy IT Solutions, Inc. and Keith R. Coogan, effective October 15, 2007

 

(a)

Executive shall serve as the President and Chief Executive Officer of the Company.  In this capacity, Executive shall have such duties, authorities and responsibilities commensurate with the duties, authorities and responsibilities of persons in similar capacities in similar size companies and such other duties and responsibilities as the Board of Directors of the Company (“Board”) shall from time to time assign to him consistent with the Executive’s position as President and Chief Executive Officer of the Company.

 

(b)

During the Employment Term (as defined in Section 2), the Executive shall devote substantially all his business time and efforts to the business and affairs of the Company and the performance of his duties hereunder.   The Executive, who currently serves as a member of the Board of Directors of Titanium Metals Corporation and Kronos Worldwide Inc., shall not accept any other outside directorships of business enterprises during the Employment Term without the consent of the Board.  In addition, Executive shall not render services of a business, professional or commercial nature to any other person, firm or corporation, whether for compensation or otherwise, during the Employment Term.

 

(c)

Executive’s primary workplace shall be the Company’s offices in Hebron, Kentucky, except for usual and customary travel on the Company’s business.  Pursuant to the provisions of Section 7(d), Executive will lease temporary housing in the Greater Cincinnati/Northern Kentucky area during the Employment Term.  Company acknowledges that Executive will be commuting to Company’s headquarters from Plano, Texas during the term of this Agreement.  Executive shall be permitted to work in Plano, Texas, for  such periods of time as may be agreed upon by Executive and the Board, but in no event less than one day each week.

 

(d)

Upon the Effective Date, Executive shall be appointed a member of the Company’s Board of Directors to serve without compensation until the next Annual Shareholders Meeting of the Company.  Thereafter, during the remaining Employment Term, the Board or, if applicable, a committee thereof, shall nominate the Executive for re-election as a member of the Board at the expiration of each then-current term.

 

(e)

Executive further agrees to serve without additional compensation as an Officer and Director of any direct or indirect subsidiaries and affiliates of the Company as the Company, acting through the Board, may request from time to time.  In addition, it is agreed that the Company may deem the Executive to be an employee of one of its subsidiaries for payroll purposes but said arrangement shall not relieve the Company of its obligations hereunder.

 

(i)

Upon the Effective Date of this Agreement, Executive shall be awarded an option to acquire Two Hundred Forty (240,000) shares of the common stock of the Company under the Company’s Amended and Restated 2002 Stock Incentive Plan (“Plan”) at the fair market value of such common shares as of the date of the award.  For purposes of this Agreement, the fair market value as of the applicable date shall mean, with respect to the common shares, the closing sales price of a share of the Company’s common stock on the over-the-counter market on the last market trading day prior to the date on which the value is to be determined (or the next preceding date on which sales occurred, if there were no sales on such date).  Seventy-Five Thousand (75,000) shares shall vest upon the Effective Date of Executive’s employment and Fifty-Five Thousand (55,000) shares shall vest on each of the first three annual anniversaries of the Effective Date. The term of the award set forth above shall be for a period of five (5) years from the date of such award.  A copy of the Award Agreement is attached hereto as Exhibit A.  The options to be granted incident hereto shall be non-qualified stock options and shall not be treated by the Company or the Executive as an incentive stock option for federal income tax purposes.

 

(ii)

In the event a Change In Control (as defined in Section 10) occurs after the six month anniversary of the Effective Date but before the first annual anniversary of the Effective Date, an additional Forty-Five Thousand (45,000) shares shall vest immediately prior to the Change In Control.  In the event a Change In Control occurs on or after the first annual anniversary of the Effective Date, but before the third (3^rd) annual anniversary of the Effective Date, then all Two Hundred Forty Thousand (240,000) shares shall be fully vested immediately prior to the Change In Control.

 

(iii)

In addition, on each annual anniversary of the Effective Date, Executive shall be awarded an option to acquire Seventy-Five Thousand (75,000) shares of the common stock of the Company at the fair market value of such common shares as of the date of the award.  Eighteen Thousand Seven Hundred and Fifty (18,750) of such shares shall vest at the time of the award of such option and Eighteen Thousand Seven Hundred and Fifty (18,750) shares shall vest on each of the first three annual anniversaries of such grant.  The term of such award shall be for a period of five (5) years from the date of grant of each such award.  In the event a Change In Control occurs before the third (3^rd) annual anniversary of the date of such grant, then all Seventy-Five Thousand (75,000) shares shall be fully vested immediately prior to the Change In Control.  Any subsequent annual award shall be subject to these terms.

 

(i)

Upon the Effective Date of this Agreement, the Company shall grant Executive an equity award of Eighty Thousand (80,000) shares of restricted stock under the Plan.  Said restricted stock shall vest and the restrictions thereon shall lapse in full on the third (3^rd) annual anniversary of the Effective Date. In the event a Change In Control occurs after the six month anniversary of the Effective Date, but before the first annual anniversary of the Effective Date, Fifty Percent (50%) of said restricted stock shall vest and the restrictions thereon shall lapse immediately prior to the Change In Control.  In the event a Change In Control occurs on or after the first annual anniversary of the Effective Date, but before the third (3^rd) annual anniversary of the Effective Date, One Hundred Percent (100%) of such restricted stock shall fully vest and the restrictions thereon shall lapse immediately prior to the Change In Control.  A copy of the Restricted Stock Award Agreement is attached hereto as Exhibit B.

 

(ii)

In addition, Executive shall receive on the second annual anniversary of the Effective Date (the “Grant Date”), a grant of restricted shares that shall be based on the increase in the per share value of the Company’s common stock from the Effective Date to the Grant Date based on the following formula:  Executive shall be entitled to One Thousand (1,000) restricted shares for each ten (10) cent per share increase in the fair market value of the Company’s common stock from the Effective Date to the Grant Date.  For purposes of this Agreement, the fair market value of the common stock as of the Effective Date shall be the fair market value utilized for the strike price for the stock option award made to Executive under Section 6(a)(i).  For purposes of this Agreement, the fair market value as of the Grant Date shall be determined by taking the average of the closing sales prices of a share of the Company’s common stock as reported for each of the market trading days within the ninety (90) day period (ending on the first market trading date prior to the Grant Date) preceding the Grant Date.

 

(iii)

Notwithstanding anything herein to the contrary, in the event of the death, Disability, termination by the Company with Cause or resignation by the Executive without Good Reason or in the event of a Change In Control as defined in Section 10 occurring prior to the second annual anniversary of the Effective Date, Executive shall not be entitled to a grant of performance restricted shares pursuant to Section 6(b)(ii), it being the intent of the parties that Executive must be employed by the Company on the second annual anniversary of the Effective Date in order for any performance restricted shares to be issued under Section 6(b)(ii).  Notwithstanding anything contained herein, if Executive’s employment is terminated by the Company without Cause or by Executive for Good Reason prior to the second annual anniversary of the Effective Date, Executive shall be granted the performance restricted shares described in Section 6(b)(ii) on the second annual anniversary of the Effective Date; provided that in lieu of issuing such restricted shares, the Company shall have the option to pay Executive an amount in cash equal to the fair market value of such restricted shares as of the second annual anniversary of the Effective Date.  Any payment in lieu of issuing restricted shares shall be made on the second annual anniversary of the Effective Date.

 

(iv)

Executive acknowledges that the grants of restricted shares made or to be made hereunder shall be in lieu of any other grant of restricted shares that may be made to senior management as part of their pay plan.

 

(c)

Adjustments to Number of Shares.  The provisions of this Section 6 shall be appropriately adjusted for any stock splits, reverse splits, stock dividends, combinations or reclassifications of the Company’s common stock, or any other similar increases or decreases in the number of issued shares of such common stock effected without receipt of consideration by the Company.

 

(d)

Representations and Warranties of the Company.  The Company represents and warrants to Executive that (i) the shares he acquires pursuant to options and restricted stock awards as provided for in this Agreement will be issued under the Plan; (ii) the Plan and the options and restricted stock awards to be made hereunder are covered under a Form S-8 registration statement (the effectiveness of which shall continue to be maintained so that Executive can resell the shares he receives pursuant to options and restricted stock awards pursuant to this Agreement on a current basis once exercised or vested, as applicable), (iii) there are currently, and will continue to be, adequate shares available under the Plan for the issuance of stock pursuant to all options and the restricted stock awards provided for in this Agreement; and (iv) the Plan permits the contemplated provisions of such grants.

 

(a)

Insurance.  Executive shall be provided with standard medical, health, and other insurance coverage in accordance with the plans from time to time maintained by the Company for its senior management employees.

 

(b)

Vacation.  Executive shall be entitled each year to four (4) weeks of vacation, during which his compensation will be paid in full; provided, however, Executive shall not take more than two weeks of vacation consecutively without the prior written consent of the Board.

 

(c)

Insurance During the Term of Employment Agreement.  Company shall maintain on the life of the Executive, provided he is insurable at standard rates, a term life insurance policy in the amount of One Million Dollars ($1,000,000.00).  Executive shall have the right to designate the beneficiary of such policy.  Executive agrees to take any and all physicals that are necessary incident to the issuance and/or renewal of said policy.  In addition, Executive agrees to take any and all physicals necessary incident to the procurement of Key Man insurance upon his life by Company.  In the event that Executive is not insurable at standard rates during the term of this Agreement, but Executive is able to procure rated coverage, Executive has the right to procure coverage at a lower amount of insurance, the cost of which is equivalent to the standard term rate cost of One Million Dollars ($1,000,000.00) in coverage.  In the event Executive is not insurable, then Company shall, within thirty (30) days following the date that Executive is determined to be uninsurable, pay Executive an amount equal to the projected cost of the contemplated term insurance of One Million Dollars ($1,000.000.00) at standard rates.  In the event that Executive should die prior to the insurance being obtained hereunder or in the event insurance cannot be obtained for medical reasons, Company shall have no obligation to Executive or his beneficiary for payment of any of the death benefit amount upon Executive’s death.  Company and Executive agree to use diligent efforts after the Effective Date to obtain the coverage upon Executive’s life hereunder.

 

(d)

Housing Allowance.  Company shall provide Executive with a housing allowance of up to Two Thousand Five Hundred Dollars ($2,500.00) per month to be paid on the first of every month.  The Executive shall enter into a lease agreement that shall provide housing for Executive near the Company’s headquarters during the Employment Term, provided that the term of such lease shall not exceed six months at any time.  In the event the Executive terminates his employment with the Company following a Change In Control or with Good Reason, or the Company terminates his employment with the Company without Cause, and he thereafter vacates the leased premises, the Company shall reimburse the Executive for any lease termination expense or for all remaining obligations under the lease within ten (10) days after the date Executive submits such expenses to the Company.

 

(e)

Automobile Allowance.  Company shall provide Executive with an automobile allowance of Nine Hundred Dollars ($900.00) per month to be paid on the first of every month.

 

(f)

Travel Allowance.  Company shall provide Executive with a travel allowance of Four Thousand Five Hundred Dollars ($4,500.00) per month to be paid on the first of every month.

 

(g)

Expenses.   During the Employment Term, Executive shall be entitled to receive prompt reimbursement for all reasonable and customary travel and entertainment expenses or other out-of-pocket business expenses incurred by Executive in preparing for and fulfilling the Executive’s duties and responsibilities hereunder, including all expenses for (i) travel while away from home on business or at the request or in the service of the Company (but excluding any commuting expenses covered by Section 7(f)), (ii) mobile phone service, (iii) email, fax and long distance communications expenses in respect of the Executive’s home office in Plano, Texas, and (iv) legal fees and expenses related to the negotiation and preparation of this Agreement and the documents referred to herein in an amount not to exceed Twenty Thousand Dollars ($20,000.00); provided that such expenses are incurred and accounted for in accordance with the policies and procedures established by the Company.  Executive shall use reasonable best efforts to take advantage of advance purchase pricing for airplane tickets.  Amounts reimbursable pursuant to this subparagraph (g) shall be paid upon the earlier of (i) thirty (30) days after Executive’s submission of a request for reimbursement and (ii) the fifteenth (15^th) day of the third (3^rd) month of the Company’s fiscal year following the year in which the expense was incurred.

 

(h)

Benefit Plans.  Executive shall participate, after meeting eligibility requirements, in any qualified retirement plans and/or welfare plans maintained by the Company during the Employment Term.

 

(a)

Death.  The Executive’s employment hereunder shall automatically terminate upon the death of the Executive.

 

(b)

Disability.  The Executive’s employment hereunder shall terminate upon written notice by the Company to the Executive, of termination due to Disability.  For purposes of this Agreement, “Disability” or “Disabled” shall mean the Executive’s incapacity due to physical or mental illness to substantially perform his duties and the essential functions of his position, with or without reasonable accommodation on a full-time basis for One Hundred Eighty (180) days (including weekends and holidays) in any Three Hundred Sixty-Five (365) day period.  The existence or non-existence of a physical or mental injury, infirmity or incapacity shall be determined by an independent physician mutually agreed to by the Company and the Executive (provided that neither party shall unreasonably withhold their consent).

 

(c)

Cause. The Company may terminate the Executive’s employment hereunder for Cause.  For purposes of this Agreement, the Company shall have “Cause” to terminate the Executive’s employment hereunder upon:

 

(i)

The conviction of Executive of a felony or other crime involving theft, misappropriation of funds, fraud or moral turpitude;

 

(ii)

The engaging by Executive in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise, including but not limited to any material misrepresentation related to the performance of his duties, misappropriation, fraud, including with respect to the Company’s accounting and financial statements, embezzlement or conversion by Executive of the Company’s or any of its subsidiaries’ property in connection with Executive’s duties or in the course of the Executive’s employment with the Company;

 

(iii)

Executive’s gross negligence or gross misconduct in carrying out his duties hereunder resulting, in either case, in material harm to the Company; or

 

(iv)

Any act or omission constituting a material breach by the Executive of any material provision of this Agreement.

 

(d)

Without Cause.  Upon written notice by the Company to the Executive of an involuntary termination without Cause, other than for death or Disability.

 

(e)

Good Reason.  Upon written notice by the Executive to the Company of the termination of his employment hereunder for Good Reason.  “Good Reason” shall mean Executive’s resignation from employment within ninety (90) days after the occurrence of one of the events hereinafter enumerated; provided, however, that Executive must provide written notice to the Company within thirty (30) days after the occurrence of the event allegedly constituting Good Reason and the Company shall have thirty (30) days after such notice is given to cure:  (i) a material diminution in Executive’s authority, duties or responsibilities without Executive’s written consent; (ii) a material diminution in Executive’s  Base Salary or targeted annual bonus at any time during the Employment Term without Executive’s written consent; (iii) a requirement that Executive report to an officer or employee of the Company instead of reporting directly to the Board and (iv) any other action or inaction that constitutes a material breach by Company of this Agreement.

 

(f)

Voluntary Termination.  If Executive terminates employment with Company without Good Reason, Executive agrees to provide the Company with thirty (30) days prior written notice.  Company, in its sole discretion, following its receipt of such written notice from Executive may accelerate the termination of Executive’s employment and the right to any further compensation to a date prior to the thirtieth (30^th) day after such written notice is given.

 

(g)

Date of Termination.  For purposes of this Agreement, “Date of Termination” shall mean (i) if Executive is terminated as Chief Executive Officer/President by the Company for Disability, thirty (30) days after written notice of such determination is given to Executive (provided that Executive shall not have returned to perform his duties on a full time basis during such thirty (30) day period); (ii) if Executive’s employment is terminated by the Company for any other reason, the date on which a written notice of termination is given, provided that, in the case of the termination for Cause under Sections 8(c)(iii) or (iv), Executive shall not have cured the matter or matters stated in the Notice of Termination within the thirty (30) day period provided in Section 8(c)(iii) or (iv); (iii) if Executive terminates his employment for Good Reason, the date of Executive’s resignation, provided that the notice and cure provisions in Section 8(e) have been complied with; (iv) if Executive terminates employment for other than Good Reason, the date specified in Executive’s notice in compliance with Section 8(f) or, (v) in the event of Executive’s death, the date of death.

 

(h)

Notice of Termination.  Any termination of Executive’s employment by the Company or by Executive under this Section 8 (other than in the case of death) shall be communicated by a written notice (“Notice of Termination”) to the other party hereto, indicating the specific termination provision in this Agreement relied upon. If the termination provision relied upon requires notice and an opportunity to cure, then the Notice of Termination shall set forth in reasonable detail any facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated.   The Notice of Termination shall specify a date of termination and shall be delivered within the time period set forth in the various paragraphs of this Section 8, as applicable (the “Notice Period”).

 

(i)

Compliance with 409A.  To the extent any payment under Section 9 is subject to Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) or exempt therefrom solely by virtue of the separation pay plan exceptions under Treasury Regulations Section 1.409A-1(b)(9), a termination of Executive’s employment will not be deemed to occur unless such termination constitutes a separation from service under Section 409A of the Code and the regulations promulgated thereunder.

 

(a)

Disability.  In the event the Employment Term ends on account of Executive’s Disability, the Company shall pay or provide Executive (i) any unpaid Base Salary through the date of termination and any accrued vacation in accordance with Company policy; (ii) any unpaid bonus earned with respect to any fiscal year or any fiscal quarter ending on or preceding the date of termination; and (iii) reimbursements for any unreimbursed expenses incurred through the date of termination (collectively “Accrued Amounts”).  In addition, Executive shall receive any Prorata Bonus as hereinafter defined.  For purposes hereof, a “Prorata Bonus” shall be determined by calculating a prorata portion of the Executive’s targeted bonus for the performance year in which the Executive’s termination occurs (determined by multiplying the amount the Executive would have received had his employment continued through the end of the performance year, assuming 100% achievement of the targeted amount, by a fraction, the number of which is the number of days during the performance year of termination that the Executive is employed by the Company and the denominator of which is Three Hundred Sixty-Five (365)).  The Accrued Amounts and Prorata Bonus shall be paid within ten (10) days after the Date of Termination.  In addition, Executive shall be entitled to the following:

 

(i)

an amount equal to his then-applicable full Base Salary minus Eighty-Four Thousand Dollars ($84,000) (or such other amount as may be available to Executive pursuant to any salary continuation benefits under an accident and health benefit plan sponsored by the Company) to be paid within ten (10) days after the Date of Termination; and

 

(ii)

Executive shall be entitled to any rights he may have under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”). Company shall reimburse Executive for any premium for COBRA health, dental, and vision coverage paid by Executive (including coverage for Executive’s family) for a period of one (1) year after the Date of Termination.  To the extent permitted by the terms of any other welfare benefit program sponsored by the Company and to the extent such coverage can be provided in a manner that will not result in a violation of Code Section 409A (based upon applicable regulations and other published guidance thereunder), Executive shall continue to be eligible to participate in any other welfare benefit program sponsored by the Company for a period of one (1) year following the Date of Termination.

 

(b)

Death.  In the event of Executive’s death, the Executive’s estate (or to the extent a beneficiary has been designated in accordance with a program, the beneficiary under such program) shall be entitled to any Accrued Amounts and a Prorata Bonus (as defined in Section 9(a).  Such Accrued Amounts and Prorata Bonus shall be paid within ten (10) days after the date of Executive’s death.

 

(c)

Termination for Cause or Without Good Reason.  If the Executive’s employment should be terminated (i) by the Company for Cause, or (ii) by the Executive without Good Reason, Company shall pay to the Executive any Accrued Amounts within ten (10) days after the Date of Termination.

 

(d)

Termination Without Cause or For Good Reason.  If Executive’s employment is terminated by the Company without Cause or the Executive terminates his employment for Good Reason, Executive shall be entitled to receive from the Company all Accrued Amounts through the Date of Termination and a Prorata Bonus (as defined in Section 9(a).  Such Accrued Amounts and Prorata Bonus shall be paid within ten (10) days after the Date of Termination.  Contingent upon Executive delivering to the Company a release in the form attached hereto as Exhibit C, and the expiration of all revocation periods related thereto, Executive shall be entitled to the following:

 

(i)

within ten (10) days following the Date of Termination, the Company shall pay Executive an amount equal to the Executive’s then-applicable full Base Salary, the targeted bonus amount for the year in which the Termination without Cause or for Good Reason occurs minus the amount of the Prorata Bonus determined under Section 9(d), and the targeted bonus amounts for the remaining balance of the Initial Term or any Renewal Term; provided that if Executive’s targeted bonus amount has not been determined for any period of the remainder of the Initial Term or any Renewal Term as of the Date of Termination, it shall be deemed for the remainder of the Initial Term or any Renewal Term to be on the terms most recently determined, based upon 100% achievement of the targeted amount, and all applicable criteria shall be deemed to have been satisfied for the remainder of the Initial Term or any Renewal Term (including the year in which the Date of Termination occurs) to achieve the targeted bonus amounts; and provided further that in no event shall the payment of Base Salary be for a period of less than one year, even if less than one year remains in the Initial Term or any Renewal Term as of the Date of Termination; and

 

(ii)

Executive shall be entitled to his COBRA rights under the Company’s group health plans and Company shall reimburse Executive for any premiums paid by Executive for COBRA health, dental, and vision coverage (including coverage for Executive’s family) for the balance of the Initial Term or any Renewal Term or the period that Executive is eligible for coverage pursuant to COBRA, whichever is less.  If the period of COBRA coverage expires prior to the expiration of the Initial Term or any Renewal Term, the Company shall provide Executive with an insurance policy or policies that provide benefits comparable to the health, dental, and vision coverage provided to Executive and his family immediately prior to the expiration of the period of COBRA coverage, provided he and his family are insurable at standard or reasonably standard rates. The Company will provide such policies through the remainder of the Initial Term or any Renewal Term or, if earlier, the last day of the second calendar year following the calendar year of the Date of Termination or until Executive obtains employment that offers similar or improved benefits.  The Executive shall notify the Company within thirty (30) days after becoming eligible for coverage of any such benefits.  To the extent permitted by the terms of any other welfare benefit program sponsored by the Company and to the extent such coverage can be provided in a manner that will not result in a violation of Code Section 409A (based upon applicable regulations and other published guidance thereunder), Executive shall continue to be eligible to participate in any other welfare benefit program sponsored by the Company for the remainder of the Initial Term or any Renewal Term; and

 

(iii)

all of Executive’s options to purchase stock of the Company and all restricted stock that has been granted to him shall be fully vested, effective as of the date of the termination of his employment.

 

(a)

For purposes of this Agreement, “Change In Control” shall mean the first to occur of any of the following events:

 

(i)

any “person” (as defined in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), excluding for this purpose, (A) the Company or any subsidiary of the Company, or (B) any employee benefit plan of the Company or any subsidiary of the Company, or any person or entity organized, appointed or established by the Company for or pursuant to the terms of any such plan, which acquires beneficial ownership of voting securities of the Company, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then outstanding securities; provided, however, that no Change In Control will be deemed to have occurred as a result of a change in ownership percentage resulting solely from an acquisition of securities by the Company; or

 

(ii)

persons who, as of the Effective Date constitute the Board (the “Incumbent Directors”) cease for any reason, including without limitation, as a result of a tender offer, proxy contest, merger or similar transaction, to constitute at least a majority thereof, provided that any person becoming a director of the Company subsequent to the Effective Date shall be considered an Incumbent Director if such person’s election or nomination for election was approved by a vote of at least fifty percent (50%) of the Incumbent Directors; but provided further, that any such person whose initial assumption of office is in connection with an actual or threatened election contest relating to the election of members of the Board or other actual or threatened solicitation of proxies or consents by or on behalf of a “person” (as defined in Section 13(d) and 14(d) of the Exchange Act) other than the Board, including by reason of agreement intended to avoid or settle any such actual or threatened contest or solicitation, shall not be considered an Incumbent Director; or

 

(iii)

consummation of a reorganization, merger or consolidation or sale or other disposition of at least eighty percent (80%) of the assets of the Company (a “Business Combination”), unless, in each case, following such Business Combination, all or substantially all of the individuals and entities who were the beneficial owners of outstanding voting securities of the Company immediately prior to such Business Combination beneficially own, directly or indirectly, more than fifty percent (50%) of the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors of the company resulting from such Business Combination (including, without limitation, a company which, as a result of such transaction, owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination, of the outstanding voting securities of the Company; or

 

(iv)

approval by the stockholders of the Company of a complete liquidation or dissolution of the Company.

 

(b)

Upon a Change In Control of the Company, the Executive shall be entitled to receive the following:

 

(i)

The Company shall pay or provide to the Executive the Accrued Amounts within ten (10) days after the Change In Control.

 

(ii)

In addition, all of Executive’s stock options and restricted shares shall vest according to the terms contained in the respective award agreement(s) executed incident to the grant of such options or restricted shares.

 

(iii)

Within ten (10) days following the Change In Control, the Company shall pay Executive an amount equal to the Executive’s full Base Salary, the targeted bonus amount for the year in which the Change In Control occurs, and the targeted bonus amounts for the remaining balance of the Initial Term or any Renewal Term; provided that if Executive’s targeted bonus amount has not been determined for any period of the remainder of the Initial Term or any Renewal Term as of the Change In Control, it shall be deemed for the remainder of the Initial Term or any Renewal Term to be on the terms most recently determined, based upon 100% achievement of the targeted amount, and all applicable criteria shall be deemed to have been satisfied for the remainder of the Initial Term or any Renewal Term (including the year in which the Change In Control occurs) to achieve the targeted bonus amounts; and provided further that in no event shall the payment of Base Salary be for a period of less than one year, even if less than one year remains in the Initial Term or any Renewal Term as of the Change In Control.

 

(iv)

If Executive’s employment is terminated by the Company without Cause or the Executive terminates his employment for Good Reason upon the Change In Control, Executive shall be entitled to the benefits set forth in Section 9(d)(ii).

 

(v)

Anything in this Agreement to the contrary notwithstanding, in the event that it is determined that any payment (other than the Gross-Up payments provided for in this subsection) or distribution by the Company or any of its affiliates to or for the benefit of the Executive, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise pursuant to or by reason of any other agreement, policy, plan, program or arrangement, including without limitation any stock option or similar right, or the lapse or termination of any restriction on or the vesting or exercisability of any of the foregoing (a “Payment”), would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (or any successor provision thereto) by reason of being considered “contingent on a change in ownership or control” of Company or any of its affiliates, within the meaning of Section 280G of the Code (or any successor provision thereto) or to any similar tax imposed by state or local law, or any interest or penalties with respect to such tax (such tax or  taxes, together with any such interest and penalties, being hereafter collectively referred to as the “Excise Tax”), then the Executive will be entitled to receive an additional payment or payments (collectively, a “Gross-Up Payment”).  The Gross-Up Payment will be in an amount such that, after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any Excise Tax imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payment.  For purposes of determining the amount of the Gross-Up Payment, the Executive will be considered to pay (1) federal income taxes at the highest rate in effect in the year in which the Gross-Up Payment will be made and (2) state and local income taxes at the highest rate in effect in the state or locality in which the Gross-Up Payment would be subject to state or local tax, net of the maximum reduction in federal income tax that could be obtained from deduction of such state and local taxes.  The Gross-Up Payment shall be made to Executive on or as soon as practicable following the date of the closing of the transaction resulting in such change in control, and in no event later than the end of the calendar year next following the calendar year in which Executive pays the Excise Taxes.

 

(a)

Confidentiality.  The Executive agrees that he shall not, directly or indirectly, make available, sell, disclose or otherwise communicate to any person, other than in the course of the Executive’s employment and for the benefit of the Company (as determined by the Executive in good faith), either during the period of the Executive’s employment or at any time thereafter, any nonpublic, proprietary or confidential information, knowledge or data relating to the Company, any of its subsidiaries, affiliated companies or businesses, which shall have been obtained by the Executive during the Executive’s employment by the Company. The foregoing shall not apply to information that (i) was known to the public prior to its disclosure to the Executive; (ii) becomes known to the public subsequent to disclosure to the Executive through no wrongful act of the Executive or any representative of the Executive; or (iii) the Executive is required to disclose by applicable law, regulation or legal process (provided that the Executive provides the Company with prior notice of the contemplated disclosure and reasonably cooperates with the Company at its expense in seeking a protective order or other appropriate protection of such information). Notwithstanding clauses (i) and (ii) of the preceding sentence, the Executive’s obligation to maintain such disclosed information in confidence shall not terminate where only portions of the information are in the public domain.

 

(b)

Nonsolicitation. During the Executive’s employment with the Company and for the one (1) year period thereafter, the Executive agrees that he will not, directly or indirectly, individually or on behalf of any other person, firm, corporation or other entity, knowingly solicit, aid or induce (i) any managerial level employee of the Company or any of its subsidiaries or affiliates to leave such employment in order to accept employment with or render services to or with any other person, firm, corporation or other entity unaffiliated with the Company or knowingly take any action to materially assist or aid any other person, firm, corporation or other entity in hiring any such employee (provided, that the foregoing shall not be violated by general advertising not targeted at Company employees nor by serving as a reference for an employee with regard to an entity with which the Executive is not affiliated), or (ii) any customer of the Company or any of its subsidiaries or affiliates to purchase goods or services then sold by the Company or any of its subsidiaries or affiliates from another person, firm, corporation or other entity or assist or aid any other persons or entity in identifying or soliciting any such customer (provided, that the foregoing shall not apply to any product or service which is not covered by the noncompetition provision set forth In Section 11(c), below).

 

(c)

Noncompetition. The Executive acknowledges that he performs services of a unique nature for the Company that are irreplaceable, and that his performance of such services to a competing entity that (i) is a value added reseller of computer hardware or software or (ii) provides product services, consulting services and professional services, including but not limited to advisory services, deployment services, staffing services and information technology outsourcing services (collectively, “Infrastructure Solutions Services”) will result in irreparable harm to the Company. Accordingly, during the Executive’s employment hereunder, and, except as provided in Section 11(h), for the one (1) year period thereafter, the Executive agrees that the Executive will not, directly or indirectly, own, manage, operate, control, be employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation), or render services to, any person, firm, corporation or other entity, in whatever form, that is (i) a value added reseller of computer hardware or software or (ii) an Infrastructure Solution Services provider, and, in either case, provides goods or services primarily to customers in North America.  This Section 11(c) shall not prevent the Executive from (i) owning not more than one percent (1%) of the total shares of all classes of stock outstanding of any publicly traded entity that is a value added reseller of computer hardware or software, (ii) rendering services to charitable organizations, as such term is defined in Section 501(c) of the Code, or (iii) directly or indirectly owning, managing, operating, controlling, or being employed by (whether as an employee, consultant, independent contractor or otherwise, and whether or not for compensation), or rendering services to, any person, firm, corporation or other entity, in whatever form, that is in any of the following businesses: (A) developing computer software (but not such a developer that sells software directly to end users), (B) selling computer hardware or software to persons or entities other than end users, and (C) providing consulting services to clients in industries to which the Company has not provided Infrastructure Solution Services during the year preceding termination of the Executive’s employment with the Company.

 

(d)

Nondisparagement. Each of the Executive and the Company (for purposes hereof, “the Company” shall mean only (i) the Company by press release or other formally released announcement and (ii) the executive officers and directors thereof and not any other employees) agrees that during the Employment Term and for five (5) years thereafter not to make any public statements that disparage the other party, or in the case of the Company, its respective affiliates, employees, officers, directors, products or services.  Notwithstanding the foregoing, statements made in the course of sworn testimony in administrative, judicial or arbitral proceedings (including, without limitation, depositions in connection with such proceedings) shall not be subject to this Section 11(d). This provision shall also not cover normal competitive statements which do not cite the Executive’s employment by the Company.

 

(e)

Equitable Relief and Other Remedies. The parties acknowledge and agree that the other party’s remedies at law for a breach or threatened breach of any of the provisions of this Section would be inadequate and, in recognition of this fact, the parties agree that, in the event of such a breach or threatened breach, in addition to any remedies at law, the other party, without posting any bond, shall be entitled to obtain equitable relief in the form of specific performance, temporary restraining order, a temporary or permanent injunction or any other equitable remedy which may then be available.

 

(f)

Reformation. If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 11 is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

 

(g)

Survival of Provisions. The obligations contained in this Section 11 shall survive the termination or expiration of the Executive’s employment with the Company and shall be fully enforceable thereafter.

 

(h)

Non-Competition Not Applicable.  The one (1) year non-competition provision set forth in Section 11(c) commencing on the date of Executive’s termination of employment shall not be applicable if the Executive’s employment with the Company is terminated without Cause pursuant to Section 8(d), by the Executive for Good Reason pursuant to Section 8(e),  or if Company does not renew this Agreement upon the expiration of the Initial Term of this Agreement or any Renewal Term; provided, however, such one (1) year non-competition provision shall be applicable in any such instance if the Company elects in writing to compensate Executive pursuant to Section 11(i) of this Agreement.

 

(i)

Optional Payment for Non-Competition.  In the event that (i) the Company does not renew this Agreement upon the expiration of the Initial Term of this Agreement or any Renewal Term with notice to Executive of such nonrenewal at least thirty (30) days prior to the expiration of the Initial Term or any Renewal Term, (ii) if Company terminates Executive’s employment with the Company without Cause, or (iii) Executive terminates his employment for Good Reason, and Company provides Executive notice of its intent to exercise its option under this Section 11(i) on or before the Date of Termination, Company shall have the option to pay Executive an amount equal to his Base Salary that was in effect prior to such non-renewal or other termination as set forth above within ten (10) days after the Date of Termination in consideration for Executive not competing with Company for a period of twelve (12) months from the Date of Termination for any of the reasons set forth above.

 

(a)

Following termination of the Executive’s employment with the Company, the Executive shall cooperate fully with the Company and with the Company’s counsel in connection with any present and future actual or threatened litigation, administrative proceeding or investigation involving the Company that relates to events, occurrences or conduct occurring (or claimed to have occurred) during the period of the Executive’s employment by the Company. Cooperation will include, but is not limited to:

 

(i)

making himself reasonably available for interviews and discussions with the Company’s counsel as well as for depositions and trial testimony;

 

(ii)

if depositions or trial testimony are to occur, making himself reasonably available and cooperating in the preparation therefore, as and to the extent that the Company or the Company’s counsel reasonably requests;

 

(iii)

refraining from impeding in any way the Company’s prosecution or defense of such litigation or administrative proceeding; and

 

(iv)

cooperating fully in the development and presentation of the Company’s prosecution or defense of such litigation or administrative proceeding.

 

(a)

In the event that the parties are unable to resolve any controversy or claim arising out of or in connection with this Agreement or breach thereof, either Party shall refer the dispute to binding arbitration, which shall be the exclusive forum for resolving such claims. Such arbitration will be administered by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) pursuant to its Employment Arbitration Rules and Procedures and governed by Kentucky law. The arbitration shall be conducted by a single arbitrator selected by the parties according to the rules of JAMS. In the event that the parties fail to agree on the selection of the arbitrator within thirty (30) days after either party’s request for arbitration, the arbitrator will be chosen by JAMS. The arbitration proceeding shall commence on a mutually agreeable date within ninety (90) days after the request for arbitration, unless otherwise agreed by the parties, and shall be conducted in the Commonwealth of Kentucky.

 

(b)

The parties agree that each will bear their own costs and attorneys’ fees. The arbitrator shall not have authority to award attorneys’ fees or costs to any party.

 

(c)

The arbitrator shall have no power or authority to make awards or orders granting relief that would not be available to a party in a court of law. The arbitrator’s award is limited by and must comply with this Agreement and applicable federal, state, and local laws. The decision of the arbitrator shall be final and binding on the parties.

 

(d)

Notwithstanding the foregoing, no claim or controversy for injunctive or equitable relief contemplated by or allowed under applicable law pursuant to Section 11 of this Agreement will be subject to arbitration under this Section 13, but will instead be subject to determination in a court of competent jurisdiction in the state of the place of performance, which court shall apply Kentucky law consistent with Section 13 of this Agreement, where either party may seek injunctive or equitable relief.

 

(a)

The Company will require any successor (whether direct or indirect, by purchase of assets or stock, merger, consolidation, reorganization or otherwise) to all or substantially all of the business or assets of the Company expressly to assume and agree to perform this Agreement in the same manner and to the same extent the Company would be required to perform if no such succession had taken place. This Agreement will be binding upon and inure to the benefit of the Company and any successor to the Company, including without limitation any persons acquiring directly or indirectly all or substantially all of the business or assets of the Company whether by purchase, merger, consolidation, reorganization or otherwise (and such successor shall thereafter be deemed the “Company” for the purposes of this Agreement), but will not otherwise be assignable, transferable or delegable by the Company, except that the Company may assign and transfer this Agreement and delegate its duties thereunder to a wholly owned Subsidiary; provided that following any such assignment the Company shall remain fully liable with respect to all of its obligations under this Agreement.

 

(b)

This Agreement will inure to the benefit of and be enforceable by the Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees and legatees.

 

(c)

This Agreement is personal in nature and neither of the parties hereto shall, without the consent of the other, assign, transfer or delegate this Agreement or any rights or obligations hereunder except as expressly provided in Sections 16(a) and 16(b). Without limiting the generality or effect of the foregoing, the Executive’s right to receive payments hereunder will not be assignable, transferable or delegable, whether by pledge, creation of a security interest, or otherwise, other than by a transfer by the Executive’s will or by the laws of descent and distribution and, in the event of any attempted assignment or transfer contrary to this Section 16(c), the Company shall have no liability to pay any amount so attempted to be assigned, transferred or delegated.

 

(a)

This Agreement will be construed and enforced according to the laws of the Commonwealth of Kentucky, without giving effect to the conflict of laws principles thereof.

 

(b)

To the extent not otherwise provided for by Section 13 of this Agreement, the Executive and the Company consent to the jurisdiction of all state and federal courts located in Boone County, Kentucky, as well as to the jurisdiction of all courts of which an appeal may be taken from such courts, for the purpose of any suit, action, or other proceeding arising out of, or in connection with, this Agreement or that otherwise arises out of the employment relationship. Each party hereby expressly waives any and all rights to bring any suit, action, or other proceeding in or before any court or tribunal other than the courts described above and covenants that it shall not seek in any manner to resolve any dispute other than as set forth in this paragraph and Section 13 of this Agreement. Further, the Executive and the Company hereby expressly waive any and all objections either may have to venue, including, without limitation, the inconvenience of such forum, in any of such courts. In addition, each of the parties consents to the service of process by personal service or any manner in which notices may be delivered hereunder in accordance with this Agreement.

By:  /s/    Kevin G. Gregory

Kevin Gregory

 

Its:  Chief Executive Officer

/s/  Keith R. Coogan