AMENDMENT No. 1 TO EMPLOYMENT AGREEMENT
Exhibit
99.3
AMENDMENT
No. 1
TO
This
Amendment No. 1 (the “Amendment”) to the
Employment Agreement is made and entered into as of this 12th day of April,
2010, by and between Life Quotes, Inc. (the “Company”) and Xxxxxxx X.
Xxxxxxx.
RECITALS
WHEREAS,
the Company and Xx. Xxxxxxx (the “Parties”) entered
into an Employment Agreement effective January 1, 2003 (the “Agreement”);
and
WHEREAS,
the Parties wish to amend certain provisions of the Agreement.
NOW
THEREFORE, in consideration of the premises contained herein and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Parties hereto agree as follows:
FIRST. Section
4(j) shall be replaced in its entirety to read as follows:
“(j)
CHANGE OF CONTROL. Within three months preceding or twenty four
months following a Change of Control (as defined below), should the Executive’s
employment be terminated without Cause or should the Executive voluntary
separate from service for Good Reason (as defined below), the Executive shall be
entitled to a severance payment equal to the product of two and the sum of the
(y) Executive’s Base Salary in effect on the Termination Date plus (z) his
annual then current targeted bonus amount, all payable in lump sum on or before
the fifteenth day following the Date of Termination (or if he shall have died
after termination but prior to payment, his surviving spouse, his personal
representative, as successor in interest). A “Separation from
Service” shall mean the Executive’s termination of employment with the Company
beginning on the Date of Termination. A “Change of Control” means the
occurrence of subparagraph (1), (2), or (3) below or any combination of said
event(s). Notwithstanding the foregoing, the term “Change of Control”
shall also have such additional meanings as are permitted or required under
Section 409A:
(1) Change of Ownership of the
Company. A change of ownership of the Company occurs on the
date that any one person or persons acting as a Group (as that term is defined
in Subparagraph (b) below) acquires ownership of the stock of the Company, that,
together with stock held by such person or Group, constitutes more than fifty
percent (50%) of the total fair market value or total voting power of the stock
of the Company or of any corporation that owns at least fifty percent (50%) of
the total fair market value and total voting power of Company.
(a) However,
if any person or Group is considered to own more than fifty percent (50%) of the
total fair market value or total voting power of the stock of the Company, the
acquisition of additional stock by the same person or Group of persons is not
considered to cause a Change of Control. In addition, the term Change
of Control shall apply if there is an increase in the percentage of stock owned
by any one person or persons, acting as a Group, as a result of a transaction in
which the Company acquires its stock in exchange for property. The
rule set forth in the immediately preceding sentence applies only when there is
a transfer of stock of Company (or issuance of stock of Company) and the stock
of Company remains outstanding after the transaction.
(b) Persons
will not be considered to be acting as a Group solely because they purchase or
own stock of the Company at the same time, or as a result of the same public
offering. However, persons will be considered to be acting as a Group
if they are shareholders of Company and it, or its parent, enters into a merger,
consolidation, purchase or acquisition of stock or similar business transaction
with another corporation. If a person owns stock in Company and
another corporation is involved in a business transaction, then the shareholder
of Company is deemed to be acting as a Group with other shareholders in the
Company prior to the transaction.
(2) Effective
Change of Control. If the Company does not qualify under Subparagraph
(1), above, then it may still meet the definition of Change of Control, on
either of the following dates:
(a) The
date any one person, or more than one person, acting as a Group acquires (or has
acquired during the twelve (12) month period ending on the date of the most
recent acquisition by such person or persons) ownership of stock of Company
possessing thirty percent (30%) or more of the total voting power of the stock
of Company; or
(b) The
date a majority of the numbers of the Company’s Board of Directors are replaced
during any 12-month period by directors whose appointment or election is not
endorsed by a majority of the members of the Company’s Board of Directors before
the date of the appointment or election.
(3) Change
in Ownership of Company’s Assets. A change in the ownership of a
substantial portion of Company’s assets occurs on the date that any person, or
more than one person acting as a Group, acquires or has acquired during the
12-month period ending on the date of the most recent acquisition by such person
or persons) assets from the Company that have a total fair market value equal to
more than forty percent (40%) of the total gross fair market value of all of the
assets of the Company immediately before such acquisition or
acquisitions. For this purpose, gross fair market value means the
value of the assets of the Company, or the value of the assets being disposed
of, determined without regard to any liabilities associated with such
assets.
(a) There
will be no Change in Control under this Subparagraph (3) when there is a
transfer to an entity that is controlled by the shareholders of the Company
immediately after the transfer. A transfer of assets by Company is
not treated as a change in ownership of such assets if the assets are
transferred to:
(i) A
shareholder of Company (immediately before the asset transfer) in exchange for
or with respect to its stock;
(ii) An
entity, fifty percent (50%) or more of the total value or voting power of which
is owned directly or indirectly, by the Company;
(iii) A
person, or more than one person, acting as a Group, that owns, directly or
indirectly, fifty percent (50%) or more of the total value or voting power of
all the outstanding stock of the Company; or
(iv) An
entity, at least fifty percent (50%) of the total value or voting power of which
is owned, directly or indirectly, by a person described in Subparagraph iii,
above.
“Good
Reason” shall occur when the Executive separates from service:
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(i)
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Within
a twenty four month period following the initial existence of one or more
of the following conditions arising without the consent of the
Executive:
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(a)
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A
material diminution in the Executive’s Base
Salary;
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(b)
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A
material diminution in the Executive’s authority, duties or
responsibilities. For purposes of this subsection, a “material
diminution” shall exclude changes to the Executive’s authority, duties or
responsibilities caused solely because the Company’s equity securities are
not listed and traded on an
exchange;
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(c)
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A
material diminution in the Authority, duties, or responsibilities of the
supervisor to whom the Executive is required to report, including a
requirement that the Executive report to a corporate officer or employee
instead of reporting directly to the board of directors of the Company (or
similar governing body);
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(d)
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A
material diminution in the budget over which the Executive retains
authority;
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(e)
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A
material change in the Executive’s geographic location including the
relocation of the Executive’s office more than 40 miles from the Company’s
present executive offices without the Executive’s consent;
or
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(f)
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Any
other action or inaction that constitutes a material breach by the Company
of the Agreement in which the Executive provides written notice to the
Company within 60 days of the material breach and Company fails to remedy
within 60 days from the date of written notice of such noncompliance given
by the Executive to the Company.
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SECOND: A
new Section 4(k) is added to the end of Section 4 to read as
follows:
“4(k)
Excise Tax
Gross-Up. If Executive becomes entitled to one or more
payments (with a “payment” including, but not limited to, the vesting of an
option or other non-cash benefit or property), whether pursuant to the terms of
this Agreement or any other plan, arrangement, or agreement with the Company or
any affiliated company (the “Total Payments”), which are or become subject to
the tax imposed by Section 4999 of the Code (or any similar tax that may
hereafter be imposed) (the “Excise Tax”), the Company shall pay to Executive at
the time specified below an additional amount (the “Gross-Up Payment”) (which
shall include, but not be limited to, reimbursement for any penalties and
interest that may accrue in respect of such Excise Tax) such that the net amount
retained by Executive, after reduction for any Excise Tax (including any
penalties or interest thereon) on the Total Payments and any federal, state and
local income or employment tax and Excise Tax on the Gross-Up Payment provided
for by this subparagraph (l), but before reduction for any federal, state, or
local income or employment tax on the Total Payments, shall be equal to the sum
of (a) the Total Payments, and (b) an amount equal to the product of any
deductions disallowed to Executive for federal, state, or local income tax
purposes because of the inclusion of the Gross-Up Payment in Executive’s
adjusted gross income multiplied by the highest applicable marginal rate of
federal, state, or local income taxation, respectively, for the calendar year in
which the Gross-Up Payment is to be made.
For
purposes of determining whether any of the Total Payments will be subject to the
Excise Tax and the amount of such Excise Tax:
(1) The
Total Payments shall be treated as “parachute payments” within the meaning of
Section 280G(b)(2) of the Code, and all “excess parachute payments” within the
meaning of Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless, and except to the extent that, in the written opinion of
independent compensation consultants or auditors of nationally recognized
standing (“Independent Advisors”) selected by the Company and reasonably
acceptable to Executive, the Total Payments (in whole or in part) do not
constitute parachute payments, or such excess parachute payments (in whole or in
part) represent reasonable compensation for services actually rendered within
the meaning of Section 280G(b)(4) of the Code in excess of the base amount
within the meaning of Section 280G(b)(3) of the Code or are otherwise not
subject to the Excise Tax;
(2) The
amount of the Total Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of the Total Payments or
(B) the total amount of excess parachute payments within the meaning of Section
280G(b)(1) of the Code (after applying clause (i) above); and
(3) The
value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Independent Advisors in accordance with the principles of
Sections 280G(d)(3) and (4) of the Code.
For
purposes of determining the amount of the Gross-Up Payment, Executive shall be
deemed (A) to pay federal income taxes at the highest marginal rate of federal
income taxation for the calendar year in which the Gross-Up Payment is to be
made; (B) to pay any applicable state and local income taxes at the highest
marginal rate of taxation for the calendar year in which the Gross-Up Payment is
to be made, net of the maximum reduction in federal income taxes which could be
obtained from deduction of such state and local taxes if paid in such year
(determined without regard to limitations on deductions based upon the amount of
Executive’s adjusted gross income); and (C) to have otherwise allowable
deductions for federal, state, and local income tax purposes at least equal to
those disallowed because of the inclusion of the Gross-Up Payment in Executive’s
adjusted gross income. In the event that the Excise Tax is
subsequently determined to be less than the amount taken into account hereunder
at the time the Gross-Up Payment is made, Executive shall repay to the Company
at the time that the amount of such reduction in Excise Tax is finally
determined (but, if previously paid to the taxing authorities, not prior to the
time the amount of such reduction is refunded to Executive or otherwise realized
as a benefit of Executive) the portion of the Gross-Up Payment that would not
have been paid if such Excise Tax had been applied in initially calculating the
Gross-Up Payment, plus interest on the amount of such repayment at the rate
provided in Section 1274(b)(2)(B) of the Code. In the event that the
Excise Tax is determined to exceed the amount taken into account hereunder at
the time the Gross-Up Payment is made (including by reason of any payment the
existence or amount of which cannot be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest and penalties payable with respect to such
excess) at the time that the amount of such excess is finally
determined.
The
Gross-Up Payment provided for above shall be paid on the 30th day (or
such earlier date as the Excise Tax becomes due and payable to the taxing
authorities) after it has been determined that the Total Payments (or any
portion thereof) are subject to the Excise Tax; provided, however, that if the
amount of such Gross-Up Payment or portion thereof cannot be finally determined
on or before such day, the Company shall pay to Executive on such day an
estimate, as determined by the Independent Advisors, of the minimum amount of
such payments and shall pay the remainder of such payments (together with
interest at the rate provided in Section 1274(b)(2)(B) of the Code), as soon as
the amount thereof can be determined. In the event that the amount of
the estimated payments exceeds the amount subsequently determined to have been
due, such excess shall constitute a loan by the Company to Executive, payable on
the fifth day after demand by the Company (together with interest at the rate
provided in Section 1274(b)(2)(B) of the Code). If more than one
Gross-Up Payment is made, the amount of each Gross-Up Payment shall be computed
so as not to duplicate any prior Gross-Up Payment. The Company shall
have the right to control all proceedings with the Internal Revenue Service that
may arise in connection with the determination and assessment of any Excise Tax
and, at its sole option, the Company may pursue or forego any and all
administrative appeals, proceedings, hearings, and conferences with any taxing
authority in respect of such Excise Tax (including any interest or penalties
thereon); provided, however, that the
Company’s control over any such proceedings shall be limited to issues with
respect to which a Gross-Up Payment would be payable hereunder, and Executive
shall be entitled to settle or contest any other issue raised by the Internal
Revenue Service or any other taxing authority. Executive shall
cooperate with the Company in any proceedings relating to the determination and
assessment of any Excise Tax and shall not take any position or action that
would materially increase the amount of any Gross-Up Payment
hereunder. Notwithstanding any provision in the Agreement to the
contrary, the Gross-Up Payment shall be paid no later than the end of the year
in which the Company remits the related taxes.
THIRD. A
new Section 14 shall be added to the end of the Agreement to read as
follows:
“14. Code Section 409A
Compliance. It is intended that this Agreement be drafted and
administered in compliance with Code Section 409A including, but not limited to,
any future amendments to Code Section 409A, and any other Internal Revenue
Service or other governmental rulings or interpretations (“IRS Guidance”) issued
pursuant to Section 409A so as to not subject the Executive to payment of
interest or additional tax under Code Section 409A. In furtherance
thereof, if payment or provision of any amount or benefit thereunder that is
subject to Code Section 409A at the time specified herein would subject such
amount or benefit to any additional tax under Code Section 409A, the payment or
provision of such amount or benefit shall be postponed to the earliest
commencement date on which the payment or provision of such amount or benefit
could be made without incurring such additional tax. In addition, to
the extent that any IRS guidance issued under Code Section 409A would result in
the Employee being subject to the payment of interest or any additional tax
under Code Section 409A, the parties agree to the extent reasonably possible, to
amend this Agreement in order to avoid the imposition of any such interest or
additional tax under Code Section 409A, which amendment shall have the minimum
economic effect necessary and be reasonable determined in good faith by the
Company and the Employee.”
FOURTH: Effect in the
Agreement. Except as specifically amended herein, the
Agreement is and shall continue to be in full force and effect and is hereby in
all respects ratified and confirmed.
FIFTH: Governing
Law. This Amendment shall be governed by and construed in
accordance with the internal laws of the State of Illinois, without giving
effect to the principles of conflicts of laws.
IN
WITNESS WHEREOF, the Parties have caused this Amendment No. 1 to be executed as
of the date first above written.
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By:
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/s/ Xxxxxxx X. Xxxxxxx | |
| Xxxxxxx X. Xxxxxxx |
| Life Quotes, Inc. | |||
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By:
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/s/ Xxxxxx X. Xxxxx | |
| A duly authorized signatory | |||
