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Exhibit 10.1
EMPLOYMENT AGREEMENT
(As amended and restated as of December 31,
2008)
AGREEMENT initially made as of the 19th day of October
2006, by and between Barnes Group Inc., a Delaware corporation (the
"Company"), and Gregory F. Milzcik (the "Executive"), as amended
and restated as of December 31, 2008.
WHEREAS , the Company desires to retain the services and
employment of the Executive as the President and Chief Executive
Officer of the Company and the Executive is willing to render such
services in such positions, on the terms and conditions set forth
herein.
NOW, THEREFORE , in consideration of the mutual covenants
contained herein, the parties hereto agree as follows:
1. Employment Term . Subject to the terms and provisions
of this Agreement, the Company hereby agrees to employ the
Executive and the Executive hereby agrees to be employed by the
Company for the period commencing on October 19, 2006 (the
"Commencement Date") and ending on October 19, 2011, unless
extended as provided below or terminated sooner as provided in
Section 6 hereof (the "Employment Term"); provided ,
however , that on October 19, 2009 and on each
October 19 thereafter, the Employment Term shall be
automatically extended for an additional one (1) year period
so long as neither the Company nor the Executive has provided the
other party with not less than ninety (90) days prior written
notice that the Employment Term shall not be so extended.
Notwithstanding the foregoing, in no event shall the Employment
Term extend beyond October 19 of the calendar year in which
the Executive attains age 65.
2. Position and Duties . During the Employment Term the
Executive shall be employed and shall serve as the President and
Chief Executive Officer of the Company and shall have complete
responsibility for the day-to-day management and operations of the
Company and such duties as are specified for such position in the
Company’s By-Laws and such other duties consistent with the
position of chief executive officer of a publicly-held company as
are reasonably assigned to him by the Board of Directors of the
Company (the "Board"). The Executive shall report solely and
directly to the Board and shall perform such other duties, services
and responsibilities as may from time to time be requested by the
Board. As of the Commencement Date and thereafter during the
Employment Term, all other officers of the Company and any of its
subsidiaries shall report to the Executive or to one of his
designees, except that (i) the leader of the
Company’s Internal Audit Department shall
report directly to the Audit Committee of the Board, (ii) the
Secretary of the Company shall, upon request of the Chairman of the
Board, report directly to the Chairman, and (iii) any other
Company officer required under applicable rules of the Securities
and Exchange Commission or the New York Stock Exchange to report to
another person or body shall report to such person or body. The
Executive shall devote his full business time, attention and skill
to the performance of his duties, services and responsibilities
hereunder, and shall use his best efforts to promote the interests
of the Company; provided , however , that the
Executive may ( a ) serve on the board of directors of
not more than two corporations with the prior written approval of
the Corporate Governance Committee of the Board (the "Governance
Committee"), it being understood that such approval shall be at the
Governance Committee’s sole discretion, ( b
) serve on civic or charitable boards or committees, with the
prior written approval of the Governance Committee, which approval
shall not be unreasonably withheld, ( c ) deliver
lectures, fulfill speaking engagements or teach at educational
institutions, and ( d ) manage his and his
family’s private investments, so long as such activities do
not, individually or in the aggregate, materially interfere with
the performance of Executive’s duties hereunder.
During the Employment Term, the Company shall ( i
) use its reasonable best efforts to cause the Executive to
serve as a member of the Board, and ( ii ) appoint the
Executive to serve as a member of the boards of directors of the
Company’s subsidiaries on which the Executive desires to
serve (each a "Subsidiary Board").
3. Location . The Executive shall perform his duties
hereunder primarily at the Company’s executive office in
Bristol, Connecticut, and shall perform duties at such other
locations as are reasonably designated by the Board. During the
Employment Term, the Executive shall maintain his principal
residence within 50 miles of Bristol, Connecticut.
4. Compensation and Benefits .
4.1 Base Salary . In consideration of the performance of
all of the Executive’s obligations during the Employment Term
(including any services as an officer, director, employee, member
of the Board or Subsidiary Board or any committee thereof, or
otherwise), the Company shall during the Employment Term pay the
Executive a base salary (the "Salary") at an annual rate of
$800,000. Commencing not later than March 1, 2009, the
Compensation and Management Development Committee of the Board (the
"Compensation Committee") shall annually review the
Executive’s Salary and may increase (but not decrease) such
Salary, at its sole discretion. Any increased Salary shall then
constitute the "Salary" for purposes of this Agreement. The
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Salary shall be payable in equal installments on
the first working day of each month (or at such other times at, or
in such other installments, in which the Company shall pay base
salary to its other executive officers).
4.2 Annual Bonus . For each full calendar year during the
Employment Term the Executive shall be eligible to receive an
annual bonus pursuant to the Company’s Performance-Linked
Bonus Plan for Selected Executive Officers or a successor plan
thereto (the "Bonus Plan"). For 2007, the Executive shall have the
opportunity under the Bonus Plan to receive an annual bonus equal
to:
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(i)
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75% of Salary upon the attainment of
the applicable performance goals established by the Compensation
Committee as the target level:
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(ii)
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a maximum annual bonus of 225% of
Salary upon the attainment of the applicable performance goals
established by the Compensation Committee as the maximum
level;
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(iii)
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18.75% of Salary upon the attainment
of the applicable performance goals established by the Compensation
Committee as the threshold level;
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(iv)
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$0, if the attainment of the
applicable performance goals is at a level below that established
by the Compensation Committee as the threshold level.
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For years during the Employment Term after 2007,
while the Compensation Committee shall have the discretion to
change the structure and payment terms of the Executive’s
awards under the Bonus Plan at threshold, target and maximum levels
of performance, the Executive’s annual bonus opportunity for
each calendar performance year, upon achieving target level
performance for such year, shall not be less than 75% of his Salary
as in effect on July 1 of such year (or such earlier date as
may be required to assure that the amount payable can qualify as
other performance-based compensation under Section 162(m) of
the Internal Revenue Code of 1986, as amended (the
"Code")).
The amount of any bonus actually payable to the Executive under
the Bonus Plan with respect to any given year shall be determined
by the Compensation Committee based upon its assessment of the
level at which the performance goals established for that year have
been attained, with such adjustments to actual performance results
as the
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Compensation Committee may deem appropriate to
achieve the objectives of the Bonus Plan. Upon attainment of
performance goals in any year between the threshold and the target
levels, or between the target and the maximum levels, established
for such year by the Compensation Committee, the amount payable as
an annual bonus shall be determined using mathematical
interpolation between the percentages of Salary that would have
been payable for such year at threshold and target, or target and
maximum, as applicable.
4.3 Long-Term Incentive Compensation . During the
Employment Term, the Executive shall be eligible to receive awards
under the long-term incentive compensation plans, programs or
arrangements maintained by the Company at such level and subject to
such conditions as the Compensation Committee may determine from
time to time in a manner consistent with the Company’s
generally applicable compensation practices for its executive
officers and giving due consideration to the Executive’s
position and contribution to the Company.
4.4 Commencement Options . The Company granted the
Executive on the Commencement Date options (the "Commencement
Option") to acquire 247,525 shares of Company Stock. Except as
expressly otherwise set forth in this amended and restated
Agreement, all of the original terms applicable to the Commencement
Options shall remain in full force and effect.
4.5 Commencement Stock Grant . The Company granted the
Executive on the Commencement Date 24,741 restricted stock units in
relation to a corresponding number of shares of Company Stock (the
"Commencement Units"). Except as expressly otherwise set forth in
this amended and restated Agreement, all of the original terms
applicable to the Commencement Units shall remain in full force and
effect.
4.6 Other Benefits . During the Employment Term, the
Executive (and his dependents, if eligible thereunder) shall
participate in all existing and future employee benefit plans,
programs and policies (other than severance plans) generally
available to executive officers of the Company, including, but not
limited to, the following:
(a) Life Insurance . Pursuant to the Executive’s
participation in the Company’s Senior Executive Enhanced Life
Insurance Program (the "SEELIP"), the Company shall pay all
premiums for a life insurance policy on the life of the Executive.
The insurance policy shall be owned by the Executive and shall have
a death benefit equal to four (4) times the Salary. The
Company shall
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fully gross up the Executive for any income tax
attributable to the premiums paid by the Company in accordance with
the SEELIP (but the effective rate of tax for this purpose shall
not exceed 45%); such gross-up payment to be paid by the Company to
the Executive no later than March 15 of the calendar year
immediately following the calendar year in which any such SEELIP
premium is paid by the Company.
(b) Financial Planning . The Company shall reimburse the
Executive in an amount up to $5,000 for financial planning
assistance and related services for each calendar year during the
Employment Term, upon presentation of documentation reasonably
acceptable to the Company, and, in each case, fully grossed-up for
taxes (but the effective rate of tax for this purpose shall not
exceed 45%); provided, however, that, in accordance with Treas.
Reg. § 1.409A-3(i)(iv), the amount reimbursable hereunder in
respect of one calendar year shall not affect the amount
reimbursable in respect of any other calendar year. For purposes of
the preceding sentence, "related services" means investment
planning, estate planning, retirement planning, tax advice, tax
return preparation, insurance planning and financial counseling
services.
(c) Leased Automobile, Club Membership . During the
Employment Term, the Company shall either ( i ) provide
the Executive with ( A ) the use of a leased car with a
monthly leasing cost to the Company not to exceed $1,131 per month,
( B ) reimbursement for other expenses associated with
the use of such leased car, in either case, in accordance with the
Company’s automobile policy as from time to time in effect,
and (C) reimbursement (not grossed-up for taxes) in accordance
with Company policy as in effect from time to time for membership
in one (1) club, or ( ii ) provide a monthly cash
allowance of $25,000 in lieu of providing the benefits described in
subclauses (A), (B) and (C) of subclause (i) of this
Section 4.6(c).
(d) Vacation . For each full calendar year during the
Employment Term, the Executive shall be entitled to four
(4) weeks of paid vacation (or such greater amount as shall be
provided to executives in accordance with the vacation policy of
the Company as in effect from time to time during the Employment
Term).
(e) Additional Conditions in Respect to Reimbursements .
For the avoidance of doubt, the Executive’s entitlement to be
reimbursed for any expense as provided in this Section 4.6 is
subject to the Executive’s continued employment with the
Company on the date such expense is incurred. Unless such
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requirement shall be waived by the Company, with
the consent of the Compensation Committee, any and all
documentation required for the reimbursement of any expense
incurred in accordance with this Section 4.6 must be provided
to the Company on or before February 15 of the calendar year
following the year in which such expenses were incurred, provided
that, with respect to expenses incurred after 2007, documentation
of expenses incurred prior to September 30 shall be required
to be submitted by December 31 of the calendar year in which
incurred. Any expense for which any required documentation is not
timely received (or waived) by the Company shall not be reimbursed
hereunder. The Company shall make all reimbursements of the
Executive’s financial planning, leased automobile and club
membership expenses for which appropriate documentation has been
received (or waived) and all payments of any tax gross-up in
respect of any reimbursable financial planning expenses within 90
days of the submission of the requisite documentation, but in all
events on or before March 15 of the year following the year in
which the related expense was incurred. The amount of expenses
eligible for reimbursement, or in-kind benefits provided, during
the Executive’s taxable year pursuant to any provision above
of this Section 4.6 may not affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other
calendar year, within the meaning of Treasury Regulation
1.409A-3(i)(iv).
Notwithstanding anything else contained in this Agreement to the
contrary, the Company may, at any time or from time to time, amend
or terminate any of its employee benefit plans, programs or
policies, in which event such amendments and terminations may be
applied to the Executive in the same manner as to other Company
executive officers, except that the Executive’s vacation
benefit may not be reduced below the level described in
Section 4.6(d).
4.7 Reimbursement of Legal Fees . Upon presentation of
documentation reasonably acceptable to the Company, the Company
shall reimburse the Executive for reasonable legal fees and
expenses incurred in connection with ( i ) any good
faith action brought by the Executive to enforce his rights under
this Agreement (or to respond to any action commenced by the
Company) but only those fees and expenses attributable to claims
with respect to which there was a substantial likelihood that the
Executive would prevail on the merits, and ( ii ) the
negotiation and documentation of this Agreement and any other
agreement referenced herein. Unless such requirement shall be
waived by the Company, with the consent of the Compensation
Committee, any and all documentation required for the reimbursement
in accordance with this Section 4.7 of any legal fees incurred
must be provided to the Company on or before March 15 of the
calendar year following the year in which such expenses were
incurred. Any expense for which any required documentation is not
timely received (or waived) by the Company shall not be reimbursed
hereunder. The Company shall make all required
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reimbursements of the Executive’s legal
fees under this Section 4.7 for which appropriate
documentation has been received (or waived) within 90 days of
receipt of the required documentation, but in no event later than
the end of the calendar year following the year in which such
expenses were incurred. No expenses incurred more than ten
(10) years after the date of the Executive’s termination
of employment with the Company shall be subject to reimbursement
under this Section 4.7. The amount of any expenses for legal
fees incurred by the Executive in any given calendar year shall not
affect the Executive’s right to be reimbursed for any
expenses for legal fees incurred by the Executive in any other
calendar year. In no event may the Executive’s right to have
his legal fees reimbursed pursuant to this Section 4.7 be
exchanged for any other benefit.
4.8 Expenses . The Company shall reimburse the Executive
for all reasonable expenses incurred by the Executive in connection
with the performance of his duties, services and responsibilities
under this Agreement in accordance with the Company’s expense
reimbursement policy then in effect.
4.9 Stock Ownership Guidelines . The Executive
understands that compliance by the Company’s executive
officers with the stock ownership guidelines it has established is
of significant importance to the Company and the Executive agrees
to comply with such guidelines as in effect from time to time,
within the time frame established thereunder. The Executive further
understands and acknowledges that the Commencement Options and
Commencement Units, the commitment to make 2007 long-term incentive
grants and the continued opportunity for the Executive to receive
further long-term incentive grants are made or provided by the
Company in reliance on the Executive’s commitment to comply
with such share ownership guidelines.
4.10 Recovery of Amounts Related to Restatement The
Executive agrees and acknowledges that, notwithstanding anything
else contained in this Agreement or in any compensatory plan,
agreement, program, policy or arrangement, the Executive shall be
responsible for reimbursing the Company for some or all of any
amounts paid or received (or to be paid or received) in respect of
any annual incentive compensation or any long-term incentive
compensation awarded to the Executive after the Commencement Date,
whether awarded before or after termination of employment, if
(I) payment of such compensation was contingent, in whole or
in part, upon the achievement of one or more specified financial
targets, and (ii) the Company implements a Mandatory
Restatement (as hereinafter defined). For the avoidance of doubt,
this Section 4.10 shall not relate to the gain recognized on
any stock option, the compensation received in respect of any
restricted stock or restricted stock unit grant, or any other
variety of equity-based compensation, whether made on, before or
after the Commencement Date, that has a vesting schedule based on
the passage of time and the continued performance of services, and
not on the achievement of any performance objectives. Similarly,
this
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Section 4.10 shall not apply to any award
that has or had alternative vesting criteria unrelated to the
performance objective affected by the Mandatory Restatement (an
"Alternative Vesting Award") that have otherwise been satisfied at
the time of the Mandatory Restatement.
The amount which the Executive shall be obligated to reimburse
the Company shall be the amount, if any, by which the compensation
paid or received (or to be paid or received) exceeds the amount
that would have been paid or received based on the financial
results reported in the restated financial statements, in each case
as determined in good faith by the Compensation Committee, as
constituted at the time of the relevant action; provided, however,
that (i) no repayment will be payable in respect of an
Alternative Vesting Award where the alternative vesting criteria
have not yet been, but can still be, satisfied and the Compensation
Committee has determined in good faith that the likelihood that
such criteria will be satisfied is not immaterial; provided that
the amount that would otherwise have been repaid to the Company in
respect of any portion of such Alternative Vesting Award that does
not become vested based on such alternative vesting criteria shall
be due and payable promptly after the opportunity to satisfy the
alternative vesting criteria has expired; (ii) the amount that
the Executive shall be required to reimburse the Company from
previously received compensation shall be reduced by the Net Tax
Cost (as hereinafter defined) to the Executive of such compensation
and (iii) to the extent that the price of the Company’s
common stock is or was a component of the performance objectives
upon which the compensation was payable, the value of the stock
taken into account for purposes of re-determining the level of
achievement based on the restated financial results will be
determined by reducing the reported stock prices during each
accounting year affected by the Mandatory Restatement by an amount
per share equal to the product of (A) the average weekly
earnings per share multiples at which the Company’s common
stock traded for the 52 week period for such accounting year
multiplied by (B) the amount by which earnings per share for
such accounting year was reduced as a result of the Mandatory
Restatement. If the Executive concludes that the amount to be
repaid to the Company in accordance with subclause (iii) of
the immediately preceding sentence is excessive and inequitable, he
may petition the Compensation Committee to review that
determination. If the Compensation Committee agrees with the
Executive’s conclusion, it shall, in its sole discretion,
specify an amount to be repaid to the Company that it concludes is
equitable and appropriate under the circumstances. If the
Compensation Committee does not agree that the formula produces a
result that is excessive and inequitable, no adjustment shall be
made in the amount to be repaid to the Company. The determinations,
conclusions and other actions of the Compensation Committee in
accordance with the two immediately preceding sentences shall be
final, binding and conclusive on the Company and the Executive, and
all persons claiming an interest through either such party.
A "Mandatory Restatement" shall mean a restatement of the
Company’s financial statements for 2006 or any year
thereafter which, in the good faith opinion of the
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Company’s Independent Registered Public
Accounting Firm, is required to be implemented pursuant to
generally accepted accounting principles, but excluding any
restatement which is required with respect to a particular year as
a consequence of a change in generally accepted accounting rules
effective after the publication of the financial statements for
such year. Notwithstanding the immediately preceding sentence, a
Mandatory Restatement shall not include any restatement that
(i) occurs more than three years following the date that the
Employment Term ends pursuant to Section 5 hereof or
(ii) in the good faith judgment of the Audit Committee of the
Board (the "Audit Committee"), (A) is required due to a change
in the manner in which the Company’s auditors interpret the
application of generally accepted accounting principles (as opposed
to a change in a prior accounting conclusion due to a change in the
facts upon which such conclusion was based), or (B) is
otherwise required due to events, facts or changes in law or
practice that the Audit Committee concludes were beyond the control
and responsibility of the Executive and that occurred regardless of
the Executive’s diligent and thorough performance of his
duties and responsibilities. In addition, in determining the
amounts, if any, that the Executive shall be required to reimburse
the Company pursuant to this Section 4.10 (or that would be
payable to the Executive in respect of any then in progress
awards), all effects, whether positive or negative, of any change
in the manner of reporting any transaction or class of transactions
that the Audit Committee shall specifically agree to exclude for
this purpose shall be disregarded.
"Net Tax Cost" shall mean the net amount of any federal,
foreign, state or local income and employment taxes paid by the
Executive in respect of the compensation received that is subject
to reimbursement, after taking into account any and all available
deductions, credits or other offsets allowable to the Executive
(including, without limitation, any deduction permitted under the
claim of right doctrine), and regardless of whether the Executive
would be required to amend any prior income or other tax returns.
The Executive agrees that, to the extent permitted under applicable
law, the Company may seek reimbursement of such amounts from the
Executive and may recapture such amounts by retaining the
compensation or other amounts that would otherwise be due or
payable to the Executive.
5. Termination . The Executive’s employment with
the Company and the Employment Term shall terminate upon the
expiration of the Employment Term, as specified in Section 1
hereof, or upon the earlier occurrence of any of the following
events of termination:
(a) By the Company (other than for Cause), immediately upon
delivery of written notice to the Executive.
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(b) By the Company for Cause upon thirty
(30) days prior written notice (the "Cause Notice") to the
Executive. The Company may not terminate the Executive’s
employment for Cause unless such written notice is delivered to the
Executive within ninety (90) days of the Board having actual
knowledge of the action or omission constituting Cause (it being
understood that knowledge by the Executive or any officer who
reports to the Executive shall not constitute knowledge by the
Board). Notwithstanding the foregoing, following receipt of such
notice the Company may place the Executive on an administrative
leave pending completion of the process established under this
Section 5(b). During the term of such leave, the Executive
shall be entitled to receive all compensation and benefits due
under this Agreement pending completion of the process described
herein, and the consequences of placing the Executive on such leave
shall not constitute a breach of this Agreement or Good Reason for
the Executive to terminate his employment hereunder. "Cause" shall
mean ( i ) the willful and continued failure by the
Executive to substantially perform the Executive’s duties
with the Company (other than any such failure resulting from the
Executive’s incapacity due to physical or mental illness)
after a written demand for substantial performance is delivered to
the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not
substantially performed the Executive’s duties, ( ii
) the willful engaging by the Executive in conduct which is
demonstrably and materially injurious to the Company or its
subsidiaries, monetarily or otherwise, ( iii ) the
Executive’s conviction for the commission of ( A
) a felony or ( B ) any other crime involving
moral turpitude, ( iv ) a willful and material breach
by the Executive of any provision of this Agreement which is not
cured within twenty (20) days of receipt of written notice
thereof from the Board which specifies the nature of such breach, (
v ) a violation by the Executive of any policy of the
Company that is generally applicable to all employees or all
officers of the Company including, but not limited to, policies
concerning insider trading or sexual harassment, or the
Company’s code of conduct, that the Executive knows or
reasonably should know could reasonably be expected to result in a
material adverse effect on the Company or material damage to its
business reputation; and ( vi ) the Executive’s
failure to cooperate, if requested by the Board, with any
investigation or inquiry into his or the Company’s business
practices, whether internal or external, including, but not limited
to, the Executive’s refusal, after a written request by the
Company’s internal or external legal counsel, to be deposed
or to provide testimony at any trial or inquiry, which is not cured
within twenty (20) days of written notice from the Board which
specifies such failure. For purposes of clauses (i), (ii) and
(iv) of this definition, no act, or failure to act, on the
Executive’s part shall be deemed "willful" unless done, or
omitted to be done, by the Executive not in good faith and without
reasonable belief that the Executive’s act, or failure to
act, was in the best interest of the Company. The Executive shall
have the right to appear before the Board, with his counsel
present
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if he so elects, prior to any final determination
by the Board to terminate his employment for Cause. The Executive
may request a meeting with the Board by submitting a written
request to the Board within ten (10) days of receipt of the
Cause Notice. Such meeting with the Board shall be fixed and shall
occur on a date selected by the Board (such date being not less
than five (5) nor more than twenty (20) days after the
Board receives the Executive’s written request). Such meeting
shall take place at the executive offices of the Company and the
Executive shall have the right to address the Board for such period
of time as established by the Board, but in no event less than
thirty (30) minutes. For all purposes of this Agreement, if
the Executive’s employment is terminated for Cause, the
effective date of such termination shall be the date of delivery of
the Cause Notice.
(c) By the Executive for Good Reason upon thirty (30) days
prior written notice to the Board. The Executive may not terminate
his employment for Good Reason by reason of any event or action
unless such written notice is delivered within ninety
(90) days of the Executive having actual knowledge of such
event or action. "Good Reason" shall mean the occurrence of any of
the following, unless specifically approved by the Executive in
writing prior to the event or action: ( i ) a
materially adverse change in the Executive’s title, position,
duties, responsibilities or reporting relationships, ( ii
) a reduction in the Salary or failure to pay compensation or
benefits, ( iii ) a change in location of the
Company’s executive offices to a location which is more than
fifty (50) miles away from both the location of the
Company’s current executive offices and the Executive’s
residence, ( iv ) the assignment to the Executive of
duties materially inconsistent with the Executive’s status as
Chief Executive Officer of the Company, ( v ) if the
Company purports to terminate the Executive under Section 5(b)
hereof, the Company’s failure to provide the Executive (
A ) thirty (30) days prior written notice of its
intention to terminate his employment for Cause in accordance with
Section 5(b) hereof or ( B ) the opportunity to appear
before the Board in accordance with Section 5(b) hereof, (
vi ) the Company notifies the Executive of its
intention not to extend the Employment Term pursuant to
Section 1 hereof, ( vii ) at any time during the
Employment Term, the Company does not nominate the Executive for
re-election to the Board or fails to use its reasonable best
efforts to cause the Executive to be re-elected to the Board, in
either case, in accordance wit
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