AMENDED EMPLOYMENT AGREEMENT
THIS
AMENDED EMPLOYMENT AGREEMENT (“Agreement”) dated
September 27, 2007 (the “Amendment Date”), between
MRU Holdings, Inc., a Delaware corporation with its principal
place of business located at 590 Madison Avenue 13th Floor,
New York, NY 10022, its affiliates, subsidiaries, successors
and assigns (the “Company”), and Edwin J. McGuinn,
an individual residing at 20 Cobb Island Drive, Greenwich, CT
06830 (the “Executive”).
WHEREAS,
prior to the Effective Date, the Executive has both consulted
for and been employed by, and has been performing executive
services for, the Company; and
WHEREAS,
the Company and the Executive (the “Parties”)
entered into an Employment Agreement dated November 17, 2004
(the “Initial Agreement”) which was effective as
of November 1, 2004 (the “Effective Date”);
and
WHEREAS,
the Parties wish to amend the Initial Agreement in order to
continue Executive’s employment by the Company upon the
terms and conditions set forth herein and otherwise to
continue the terms and conditions of the Executive’s
employment as set forth in the Initial Agreement (as amended
herein, the “Agreement”).
NOW,
THEREFORE, in consideration of the covenants and promises
contained herein, the Parties agree as follows:
1.
Interim Periods .
The Parties acknowledge that during the period from April 12, 2004
to July 8, 2004 (the “Interim Period”), the Executive
served Iempower, Inc. (acquired by the Company on July 8, 2004 and
a wholly owned subsidiary of the Company “Iempower”) in
the position of senior consultant and member of Iempower’s
board of directors. The Parties further acknowledge that during the
Interim Period, the Executive has been entitled to receive
compensation from the Company in the amount of $1,500 per day or
fractional equivalent thereof, as applicable (the “Interim
Compensation”). In full satisfaction of the Company’s
obligation to pay such Interim Compensation, the Company has issued
the Executive 46,875 shares of its common stock together with
warrants to acquire 8,844 shares of common stock at an initial
exercise price of $2.00 per share. The Parties also acknowledge
that during the period from July 9, 2004 until October 31, 2004
(the “Second Interim Period”), Executive served the
Company as Chairman of the Board and Interim Chief Executive
Officer. The Parties acknowledge that during the Second Interim
Period, the Executive has been entitled to compensation at the rate
of $125,000 per year, with a guaranteed bonus the pro rata portion
of $50,000 per year (“Second Interim Compensation”). In
full satisfaction of the Company’s obligation to pay such
Second Interim Compensation, the Company has paid to the Executive
his pro-rata salary for this period and has issued to the Executive
options to acquire 410,000 shares of common stock under the
Company’s 2004 Omnibus Incentive Plan (the
“Plan”). These options vested and became exercisable on
a quarterly basis over a period of one year, with 25% of such
options being vested and exercisable on November 1, 2004 (the
“Grant Date”) and an additional 25% of such options
becoming vested and exercisable on the first day of each calendar
quarter thereafter until all options are fully vested. The options
granted shall be exercisable for a period of ten years following
the Grant Date and shall have an initial exercise price of
$1.60.
2.
Periods of Service .
(a)
Employment Period .
As of the Effective Date, the Company shall employ the Executive,
and the Executive agrees to be employed by Company in the position
of Chairman of the Board of Directors and Chief Executive Officer
in accordance with the terms and subject to the conditions of this
Agreement, commencing on the Effective Date and terminating on
October 31, 2008 (the “Scheduled Termination Date”),
unless terminated in accordance with the provisions of paragraph 11
below, in which case the provisions of paragraph 11 shall control
(the “Term”). Upon expiration of the Term and
thereafter, it shall automatically renew itself and continue in
full force and effect from year to year unless written notice of
election not to renew, or written notice of election to modify any
provision of this Agreement, is given by one party, and received by
the other not later than sixty (60) days prior to the expiration of
this Agreement or any extension hereto.
The
Executive affirms that, except as otherwise set forth herein,
no obligation exists between the Executive and any other
entity which would prevent or impede the Executive’s
immediate and full performance of every obligation of this
Agreement.
(b)
Additional Service .
Provided that this Agreement has not been terminated by reason of
Death, Disability or Cause, all as defined in paragraph 11 hereof,
then, in the event that the Executive’s employment hereunder
is not renewed in accordance with paragraph 2(a) after the
Scheduled Termination Date, the Executive shall nevertheless
continue to serve the Company for a minimum period of one year
after the expiration of the Term either (i) as a member of the
Company’s Board of Directors, in which case the Company shall
take all appropriate action to nominate the Executive for election
as a Director or (ii) as a member of the Board of Directors of a
Subsidiary of the Company, as defined in the MRU Holdings, Inc.
Amended and Restated 2004 Incentive Plan.
(c)
Position and Duties .
During the Term of the Executive’s employment hereunder, the
Executive shall continue to serve in, and assume duties and
responsibilities consistent with, the position of Chairman of the
Board of Directors, unless and until otherwise instructed by the
Company, and shall also serve as the Company’s Chief
Executive Officer. The Executive agrees to devote his
working
time,
as
set forth in Paragraph 5 hereof, utilizing his skill, energy and
best business efforts on behalf of the Company. Notwithstanding
anything to the contrary above, the Company acknowledges and agrees
that the Executive: (i) will continue to serve as an officer and
director of eLOT, Inc, formerly a public company (and now a private
holding company for intellectual property); (ii)
serve as a director of Enigma Software, a privately owned software
company (not involved in the educational finance sector);
and
(iii) is and expects to continue to be involved in civic and
charitable endeavors. However, the Executive shall not engage in
activities outside the scope of his employment with the Company if
such activities would detract from or interfere with his ability to
fulfill his responsibilities and duties under this Agreement or
require substantial amounts of his time or of his services.
Notwithstanding anything to the contrary contained herein, upon
written notice to the Board of Directors the Executive may hold
officer and non-executive director positions (or the equivalent
position) in or at other entities not inconsistent with the best
interests of the Company so long as the Board of Directors has not
provided Executive written notice that it has determined that such
activities will interfere with his ability to perform his duties
and responsibilities hereunder.
3.
No Conflicts .
The Executive covenants and agrees that for so long as he is
employed by the Company, he shall inform the Company of each and
every business opportunity related to the business of the Company
of which he becomes aware, and that he will not, directly or
indirectly, exploit any such opportunity for his own account, nor
will he render any services to any other person or business,
acquire any interest of any type in any other business or engage in
any activities that conflict with the Company’s best
interests or which is in competition with the Company.
4.
Days/Hours of Work and Work Week .
The Executive shall normally work five (5) days per week and his
hours of work shall be appropriate to the nature of the
Executive’s duties and responsibilities with the Company, it
being recognized that such duties and responsibilities require
flexibility in the Executive’s work schedule.
5.
Location .
For at least three days per week, the locus of the
Executive’s employment with the Company shall be the
Company’s office located at 590 Madison Avenue, New York, NY
10022. The Executive may spend two days a week at an office in
Stamford, Connecticut or at such other location within Fairfield
County, Connecticut, as the Executive may choose. The Company
agrees that it shall provide a rental allowance of $1,200.00 per
month for the Executive’s Connecticut office, such allowance
to be paid as the within five (5) days of the beginning of each
month, to the Executive or to such person or entity as the
Executive may direct.
6.
Compensation .
(a)
Base Salary .
During the Term of this Agreement, the Company shall pay, and the
Executive agrees to accept, in consideration for the
Executive’s services hereunder,
pro rata bi-weekly
payments of the annual salary which shall remain at its current
rate until January 1, 2008 at which time Executive’s annual
salary shall increase to $250,000, less all applicable taxes and
other appropriate deductions. The
Executive’s base salary shall be increased annually,
effective on January 1 of each calendar year, beginning on January
1, 2009, in an amount no less than ten percent (10%). In addition,
the Company’s Board of Directors (the “Board”)
shall review the Executive’s base salary annually to
determine whether it should be increased more than ten percent
(10%). The decision to increase the Executive’s base salary
more than ten percent (10%) and the amount of any such increase
shall be within the Board’s sole discretion.
(b)
Annual Bonus .
During the Term of this Agreement, the Executive
shall be entitled to an annual bonus in an amount no less than
$50,000.00 for each
calendar year (or
pro-rata portion
thereof in the case of a period of less than twelve (12)
months .
The decision to pay any annual bonus to the Executive in excess of
$50,000.00, and the amount of any annual bonus increment in excess
of $50,000.00, shall
be within the Board’s sole discretion based on its review
of the
operating performance of the Company during the fiscal year to
which the bonus pertains. Each annual bonus shall be paid by the
Company to the Executive promptly after
the first meeting of the Board following the previous
calendar year,
but in no case later than March 30th of each year.
7.
Expenses .
(a)
Business Expenses .
During the Term of this Agreement, the Executive shall be entitled
to payment or reimbursement of any and all reasonable expenses paid
or incurred by him in connection with and related to the
performance of his duties and responsibilities hereunder for the
Company. All requests by the Executive for payment
of
reimbursement
of such expenses shall be supported by appropriate invoices,
vouchers, receipts or such other supporting documentation in such
form and containing such information as the Company may from time
to time reasonably require, evidencing that the Executive, in fact,
incurred or paid said expenses.
(b)
Agreement Expenses .
The
Company agrees that it shall reimburse the Executive for his
attorney’s fees and legal expenses in the negotiation, review
and drafting of this Agreement and Amended Agreement up to the
amount of $3,500.00. The Executive shall be responsible for any
such expenses in excess of $3,500.00.
8.
Vacation .
During the Term of this Agreement, the Executive shall be entitled
to accrue 20 vacation days, per year. The Executive shall be
entitled to carry over any accrued, unused vacation days from year
to year without limitation.
9.
Stock Options/Warrants .
(a)
Grant of Options .
Upon the decisions of the Board of Directors and the approval of
the Company’s stockholders to increase the number of shares
of common stock available under the Plan, the Company has granted
the Executive options to acquire 250,000 shares of common stock on
September 20, 2005 and 200,000 shares of common stock on January 9,
2006. The
per
share exercise price of options granted prior to the Amendment Date
pursuant to this paragraph 9(a) is $ 3.00 and $3.85 respectively,
the fair market value per share of Company common voting stock on
the date of issuance. The Executive shall, in the discretion of the
Board of Directors and subject to the terms of the Plan and any
subsequent stock incentive plan as may be approved by the
Company’s stockholders, continue to be eligible to be granted
further options after the Amendment Date. Such grant and each
subsequent grant of options to the Executive during the Term shall
be evidenced by an Option Agreement in a form substantially similar
to Exhibit A, attached hereto and made a part hereof.
(b)
Vesting and Exercise .
The options granted on September 20, 2005 pursuant to the terms of
this paragraph 9 vest and became exercisable on a quarterly basis
over a period of two years, with 25% of such options being vested
and exercisable on the grant date and an additional 12½% of
such options becoming vested and exercisable on the first day of
each calendar quarter thereafter until all options became fully
vested. The options granted on January 9, 2006 became exercisable
on an annual basis over a period of three years, with 33.3% of such
options being vested and exercisable one year after the grant date
and an additional 33.3% of such options becoming vested and
exercisable two years after the grant date thereafter until all
options became fully vested. The options granted shall be
exercisable for a period of ten years following the grant date.
Subsequent grants of stock options shall vest and be exercisable
pursuant to the terms and conditions of the Plan.
(c)
Accelerated Vesting .
In
the event the Executive’s employment with the Company is
terminated by reason of Death, Disability or without Cause, all as
defined in paragraph 11 hereof, or in the event that the Executive
terminates this Agreement for Good Reason, as defined in paragraph
11 hereof, or in the event that the Executive shall no longer be
employed in the position of Chairman of the Board and Chief
Executive Officer for any reason other than a termination for
Cause, all of Executive’s granted and unvested options and
warrants shall immediately vest and become immediately exercisable
by the Executive.
Said
options and warrants may be exercised by the Executive, or in the
event of Death or Disability by the Executive’s legal
representative, as appropriate, for a period of one year following
the date of termination of the Executive’s employment with
the Company.
(d)
Payment .
The full consideration for any shares purchased by the Executive
shall be paid in cash or on such other terms as the Parties may
agree. Subject to the terms and conditions of the Plan and any
subsequent stock incentive plan, the Option Agreement shall permit
cashless exercise of options by the Executive.
10.
Other Benefits .
(a)
During the Term of this Agreement, the Executive shall be eligible
to participate in incentive, savings, retirement (401(k)), and
welfare benefit plans, including, without limitation,
health, medical,
dental,
vision,
life (including accidental death and dismemberment)
and
disability insurance plans (collectively, “Benefit
Plans”), in substantially the same manner and
at
substantially the same levels as the Company makes
such
opportunities available to the Company’s executive
employees.
(b)
Notwithstanding anything contained in paragraph 10(a) hereinabove
to the contrary:
(i)
The cost of the Executive’s coverage under the Benefit Plans
providing health, medical, dental, vision ,
life (including accidental death and dismemberment) and
disability
insurance, shall be paid by the Company.
(ii)
The Executive’s spouse and dependent minor children will be
covered under the Benefit Plans providing health, medical, dental,
and vision benefits, and the cost of such coverage shall be paid by
the Company.
(iii)
The Company shall reimburse the Executive for any out-of-pocket
expenses incurred in connection with the Benefit Plan coverages
provided in this paragraph 10 as the result of any
deductible
or co-insurance provision of any
insurance policy; provided, that any such reimbursements shall
not exceed
Ten Thousand Dollars ($10,000.00) per calendar
year.
(iv)
The Company will purchase, at its expense, long-term
disability insurance providing the Executive with payments of
$10,000.00 per month until age sixty-five (65);
provided
however ,
that if the
cost of such long-term disability insurance coverage
exceeds
$12,000.00 per year, the
Executive shall be required to pay any premium amount in excess of
$12,000.00 per year and if the Executive chooses not to pay such
excess premium amount, the Company shall only be required to
provide as much long-term disability insurance as can be
purchased
for
$12,000 .00
per year .
(v)
The Company has purchased a directors and officers liability
insurance policy or has otherwise obtained directors and officers
liability insurance coverage, in the amount of Three Million
Dollars ($3,000,000.00), covering the Executive and commits to
increase such coverage to Five Million Dollars ($5,000,000.00) as
soon as possible, but in no event later than January 1,
2005.
11.
Termination of Employment .
(a)
Death .
In the event that, during the Term of this Agreement, the Executive
dies, this Agreement and the Executive’s employment with the
Company shall automatically terminate and the Company shall have no
further obligations to the Executive or his heirs, administrators
or executors with respect to compensation and benefits accruing
thereafter, except for the obligation to pay the Executor’s
heirs, administrators or executors any earned but unpaid base
salary, unpaid
pro rata annual
bonus and unused vacation days accrued through the date of death,
including any carryover days. The Company shall deduct, from all
payments made hereunder, all applicable taxes, including income
tax, FICA and FUTA, and other appropriate deductions.
(b)
“Disability.”
In
the event that, during the Term of this Agreement, the Executive
shall be prevented from performing his duties and responsibilities
hereunder to the full extent required by the Company by reason of
“Disability,” as defined hereinbelow,
this
Agreement and the Executive’s employment with the Company
shall automatically terminate and the Company shall have no further
obligations to the Executive or his heirs, administrators or
executors with respect to compensation and benefits accruing
thereafter, except for the obligation to pay the Executor’s
heirs, administrators or executors any earned but unpaid base
salary, unpaid
pro rata annual
bonus and unused vacation days accrued through the date of
Disability, including any carryover days. The Company shall deduct,
from all payments made hereunder, all applicable taxes, including
income tax, FICA and FUTA, and other appropriate deductions
through
the last date of the Executive’s employment with the Company.
For purposes of this Agreement, “Disability” shall mean
a physical or mental disability that, in the Board’s
discretion, based upon the medical opinions of two qualified
physicians specializing in the area or areas of the
Executive’s affliction, one of whom shall be chosen by the
Board and one of whom shall be chosen by the Executive, prevents
the performance by the Executive, with or without reasonable
accommodation, of his duties and responsibilities hereunder for a
continuous period of not less than six consecutive
months.
(c)
“Cause.”
(i)
At any time during the Term of this Agreement, the Company may
terminate this Agreement and the Executive’s employment
hereunder for “Cause.” For purposes of this Agreement,
“Cause” shall mean: (a)
the
willful and continued failure of the Executive to perform
substantially his duties and responsibilities for the Company
(other than any such failure resulting from a Disability) after a
written demand by the Board for substantial performance is
delivered to the Executive by the Company, which specifically
identifies the manner in which the Board believes that the
Executive has not substantially performed his duties and
responsibilities, which willful and continued failure is not cured
by the Executive within thirty (30) days of his receipt of said
written demand; (b) the
conviction of, or plea of guilty or
nolo contendere to
a felony, after the exhaustion of all available appeals; or
(c) fraud,
dishonesty, competition with the Company, unauthorized use of any
of the Company’s or any such subsidiary’s trade secrets
or confidential information,
or
gross misconduct which is materially and demonstratively injurious
to the Company. Termination under paragraphs 11(c)(i)(b) and
11(c)(i)(c) above shall not be subject to cure.
(ii)
Termination of the Executive for “Cause” pursuant to
paragraph 11(c)(i)(a) shall be made by delivery to the Executive of
a copy of the written demand referred to in paragraph 12(c)(i)(a),
or pursuant to paragraphs 11(c)(i)(b) or (c) by delivery to the
Executive of a written notice from the Board, either of which shall
specify the basis of suc
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