AMENDMENT
NO. 1 TO XXXX XXXXX'X
SEVERANCE AGREEMENT
THIS AMENDMENT NO. 1 TO XXXX XXXXX'X XXXXXXXXX AGREEMENT
(the "mendment") is entered into as of
December 12, 2007, by and between RCM Technologies, Inc. (the "Company") and
Xxxx Xxxxx ("Employee").
WHEREAS, the Company and the Employee previously entered into a
Severance Agreement, dated as of June 10, 2002 (the "Severance Agreement");
WHEREAS, in order to comply with the requirements of section 409A of
the Internal Revenue Code of 1986, as amended (the "Code"), the Company desires
to amend the Severance Agreement; and
WHEREAS, Employee has agreed to the changes to the Severance Agreement
to comply with the requirements of section 409A of the Code.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
hereby agree that the Severance Agreement is hereby amended as follows:
1. A new subsection 1.b. is hereby added to the Severance Agreement to read in
its entirety as follows, and the remainder of Section 1 is renumbered
accordingly:
"b. `Code' shall mean the Internal Revenue Code of 1986, as
amended."
2. Subsection 2.b. of the Severance Agreement is hereby amended in its entirety
to read as follows:
"b. Within five (5) days following Employee's termination of
employment, but subject to subsection 2.g. below, a lump sum
cash payment which is equal to one-sixth (1/6) of the
aggregate of Employee's then-current gross annual salary (for
federal income tax purposes) and ascertainable bonus (i.e. the
maximum bonus that Employee was eligible to receive during the
Company's most recently completed fiscal year) multiplied by
the number of years or partial years that Employee has been
employed by the Company;"
3. Subsection 2.c. of the Severance Agreement is hereby amended in its entirety
to read as follows:
"c. For a period of three (3) years following Employee's
termination of employment, Employee shall receive and, where
applicable, his spouse and dependents shall receive medical
insurance coverage that is equivalent to the coverage that
Employee would have been eligible to receive if Employee
continued in employment during such period; provided, that in
order to receive such continued coverage, Employee shall be
required to pay to the Company at the same time that premium
payments are due for the month an amount equal to the full
monthly premium payments required for such coverage and the
Company shall reimburse to Employee the amount of such monthly
premium, less the amount that Employee was required to pay for
such coverage immediately prior to the date of his termination
of employment (the `Medical Payment'), no later than five (5)
days following the date the premium for the month is paid by
Employee. In addition, on each date on which the Medical
Payments are made, but subject to subsection 2.g. below, the
Company shall pay to Employee an additional amount equal to
the federal, state and local income and payroll taxes that
Employee incurs on each monthly Medical Payment (the `Medical
Gross-up Payment'). The Medical Payment paid to Employee
during the period of time during which Employee would be
entitled to continuation coverage under the Company's group
health plan pursuant to section 4980B of the Code (or any
replacement or successor provision of the United States tax
law) if Employee elected such coverage and paid the applicable
premiums is intended to qualify for the exception from
deferred compensation as a medical benefit provided in
accordance with the requirements of Treas. Reg.
ss.1.409A-1(b)(9)(v)(B). The Medical Payment and the Medical
Gross-up Payment shall be reimbursed to Employee in a manner
that complies with the requirements of Treas. Reg.
ss.1.409A-3(i)(1)(iv);"
4. A new subsection 2.d. is hereby added to the Severance Agreement to read in
its entirety as follows, and the remainder of Section 2 is renumbered
accordingly:
"d. Within five (5) days following Employee's termination of
employment, but subject to subsection 2.g. below, the Company
shall pay Employee a lump sum cash payment equal to the
aggregate value of continuing Employee's life and disability
coverage, long term care insurance and automobile lease in
effect immediately prior to Employee's termination of employment
for the three (3)-year period following Employee's termination
of employment as if Employee continued to be employed by the
Company for such three (3)-year period. In addition, subject to
subsection 2.g. below, the Company shall pay to Employee an
additional amount equal to the federal, state and local income
and payroll taxes that Employee incurs on the lump sum cash
payment for the cost of continuing of all of the abovementioned
benefits pursuant to this Section 2.d.;"
5. A new subsection 2.e., as renumbered, is hereby added to the Severance
Agreement to read in its entirety as follows, and the remainder of Section 2 is
renumbered accordingly:
"e. Within five (5) days following Employee's termination of
employment, but subject to subsection 2.g. below, the Company
shall pay Employee a lump sum cash payment equal to the
aggregate value of continuing all employee benefits (other than
those in subsections 2.c. and d.) provided to Employee
immediately prior to his termination of employment for the three
(3)-year period following Employee's termination of employment
as if Employee continued to be employed by the Company for such
three (3)-year period. In addition, subject to subsection 2.g.
below, the Company shall pay to Employee an additional amount
equal to the federal, state and local income and payroll taxes
that Employee incurs on the lump sum cash payment for the cost
of continuing all employee benefits pursuant to this Section
2.e.;"
6. A new subsection 2.g., as renumbered, is hereby added to the Severance
Agreement to read in its entirety as follows:
"g. i. Notwithstanding any provision to the contrary in this
Agreement, if Employee is deemed at the time of his
termination of employment to be a `key employee' within the
meaning of that term under Code section 416(i) (as used for
purposes of defining a "specified employee" under section 409A
of the Code) and delayed payment of an amount that is payable
to or on behalf of Employee in connection with a termination
of employment is required in order to avoid a prohibited
distribution under section 409A(a)(2) of the Code, no such
amount shall be provided to or paid on behalf of Employee
prior to the earlier of (x) the expiration of the six
(6)-month period measured from the date of Employee's
`separation from service' (as such term is defined in Treasury
Regulations issued under Code section 409A) or (y) the date of
Employee's death; provided, however, that upon the expiration
of the applicable Code section 409A(a)(2) postponement period
referred to herein, all amounts delayed pursuant to this
subsection 2.g., with accrued interest as described below,
shall be paid in a lump sum payment to or on behalf of
Employee within five (5) days after the end of the
postponement period. The determination of who is a `key
employee', including the number and identity of persons
considered officers and the identification date, shall be made
by the Compensation Committee of the Board of Directors of the
Company or its delegate in accordance with the provisions of
section 409A of the Code and the regulations issued
thereunder.
ii. If payment of any amounts under this Agreement is
required to be delayed pursuant to section 409A of the Code,
the Company shall pay interest on the postponed payments from
the date on which the amounts otherwise would have been paid
to the date on which such amounts are paid at an annual rate
equal to the prime rate listed in the Wall Street Journal as
of Employee's date of termination.
iii. In the event that any payments payable to
Employee pursuant to subsections 2.a. through 2.e. are delayed
because of this subsection 2.g., the Company shall establish
an irrevocable rabbi trust based on the Internal Revenue
Service model rabbi trust and contribute to such rabbi trust
within five (5) days following the date of Employee's
termination of employment with the Company an amount
sufficient to cover the amounts payable to Employee which are
delayed pursuant to this subsection 2.g. because of section
409A of the Code, plus an additional amount to cover the
interest that is payable on such amounts, as calculated
pursuant to subsection 2.g.ii. above."
7. A new Section 4 is hereby added to the Severance Agreement to read in its
entirety as follows, and the remaining Sections of the Severance Agreement are
renumbered accordingly:
"4. Certain Increases in Payment.
x. Xxxxx-up Payment. Anything in this Agreement to
the contrary notwithstanding, in the event that it shall be
determined that any payment or distribution by the Company to
or for the benefit of Employee, whether paid or payable or
distributed or distributable pursuant to the terms of this
Agreement or otherwise (a `Payment'), would constitute an
`excess parachute payment' within the meaning of section 280G
of the Code, Employee shall be paid an additional amount (the
`Gross-Up Payment') such that the net amount retained by
Employee after deduction of any excise tax imposed under
section 4999 of the Code, and any federal, state and local
income and employment tax and excise tax imposed upon the
Gross-Up Payment shall be equal to the Payment. For purposes
of determining the amount of the Gross-Up Payment, Employee
shall be deemed to pay federal income tax and employment taxes
at the highest marginal rate of federal income and employment
taxation in the calendar year in which the Gross-Up Payment is
to be made and state and local income taxes at the highest
marginal rate of taxation in the state and locality of
Employee's residence on the termination date, net of the
maximum reduction in federal income taxes that may be obtained
from the deduction of such state and local taxes.
b. Determination. All determinations to be made under
this Section 4 shall be made by the Company's independent
public accountant or another independent public accountant
selected by mutual agreement of the Company and Employee (the
`Accounting Firm'), which firm shall provide its
determinations and any supporting calculations both to the
Company and Employee within ten (10) days of the triggering
event. Any such determination by the Accounting Firm shall be
binding upon the Company and Employee. The Company shall pay
the Gross-Up Payment to Employee within ten (10) days after
the Accounting Firm's determination. All payments made
pursuant to this Section 4 shall be paid, in any event, in a
manner that is consistent with Treas. Reg.
ss.1.409A-(i)(1)(v).
c. Fees and Expenses. All of the fees and expenses of
the Accounting Firm in performing the determinations referred
to in this Section 4 shall be borne solely by the Company. The
Company agrees to indemnify and hold harmless the Accounting
Firm of and from any and all claims, damages and expenses
resulting from or relating to its determinations pursuant to
this Section, except for claims, damages or expenses resulting
from the gross negligence or willful misconduct of the
Accounting Firm."
8. A new Section 10 is hereby added to the Severance Agreement to read in its
entirety as follows, and the remaining Sections of the Severance Agreement are
renumbered accordingly:
"10. Legal Fees. Except as provided in Section 9 of this
Agreement, it is the intent of the Company that Employee not
be required to incur the expenses associated with the
enforcement of any rights under this Agreement by litigation
or other legal action, because the cost and expense of such
legal action would substantially detract from the benefits
untended to be extended to Employee hereunder. Accordingly if
Employee is required to take any legal action to enforce his
rights under this Agreement, the Company irrevocably
authorizes Employee to retain counsel of Employee's choice, at
the expense of the Company as provided in this Section 10, to
represent Employee in connection with the initiation or
defense of any litigation or other legal action, whether such
legal action is by or against the Company or any director,
officer, shareholder, or other person affiliated with the
Company, in any jurisdiction. Notwithstanding any existing or
prior attorney-client relationship between the Company and
such counsel, the Company irrevocably consents to Employee
entering into an attorney-client relationship with such
counsel, and in that connection the Company and Employee agree
that a confidential relationship shall exist between Employee
and such counsel. The reasonable fees and expenses of counsel
selected from time to time by Employee as hereinabove provided
shall be paid in advance or reimbursed to Employee, by the
Company within five (5) days following presentation by
Employee of a statement or statements or customary retainer
letter prepared by such counsel in accordance with its
customary practices, but not later than December 31 of the
calendar year following the calendar year in which the fees or
expenses are actually incurred. Except as provided in Section
9 of this Agreement, any legal fees incurred by the Company by
reason of any dispute between the parties as to enforceability
of or the terms contained in this Agreement, notwithstanding
the outcome of any such dispute, shall be the sole
responsibility of the Company, and the Company shall not take
any action to seek reimbursement from Employee for such
expense."
9. A new Section 17 is hereby added to the Severance Agreement to read in
its entirety as follows:
"Section 409A of the Code. This Agreement is intended to
comply with section 409A of the Code and its corresponding
regulations, to the extent applicable. Notwithstanding
anything in this Agreement to the contrary, payments may only
be made under this Agreement upon an event and in a manner
permitted by section 409A of the Code, to the extent
applicable. All payments to be made upon Employee's
termination of employment under this Agreement may only be
made upon a `separation from service' as provided in section
409A of the Code. In no event may Employee, directly or
indirectly, designate the calendar year of payment. All
reimbursements and in-kind benefits provided under the
Agreement shall be made or provided in accordance with the
requirements of section 409A of the Code, including, where
applicable, the requirement that (i) any reimbursement shall
be for expenses incurred during Employee's lifetime (or during
a shorter period of time specified in this Agreement), (ii)
the amount of expenses eligible for reimbursement, or in-kind
benefits provided, during a calendar year may not affect the
expenses eligible for reimbursement, or in-kind benefits to be
provided, in any other calendar year, (iii) the reimbursement
of an eligible expense will be made on or before the last day
of the calendar year following the year in which the expense
is incurred, and (iv) the right to reimbursement or in-kind
benefits is not subject to liquidation or exchange for another
benefit."
10. In all respects not amended, the Severance Agreement is hereby ratified and
confirmed.
11. This Amendment No. 1 shall be effective as of December 12, 2007.
IN WITNESS WHEREOF, the Company and Employee agree to the terms of the
foregoing Amendment No. 1, effective as of the date set forth above.
RCM TECHNOLOGIES, INC.
By:s//Xxxxxxxx Xxxxxxxxx
--------------------------------
Chairman of Compensation Committee
s//Xxxx Xxxxx
-------------------------------
Employee
