EXHIBIT 10.1
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FIRST AMENDMENT
TO
EMPLOYMENT AGREEMENT
This First Amendment to Employment Agreement (the "First Amendment") is
made the 29th day of December, 2008, between CAS Medical Systems, Inc., a
Delaware corporation (the "Company"), and Xxxxxx Xxxxxx (the "Employee").
WHEREAS, the Company previously entered into an Employment Agreement
with the Employee dated March 16, 2007 (the "Employment Agreement"); and
WHEREAS, in light of changes to the law concerning severance and
deferred compensation, including Internal Revenue Code Section 409A and related
Treasury Regulations, the Company and the Employee wish to amend the Agreement
by this First Amendment to clarify certain provisions in the Agreement.
NOW THEREFORE, the following Sections of the Agreement are hereby
amended as follows:
1. Section 5 of the Agreement is amended by the addition of the following
at the end thereof.
"Any bonus payable hereunder shall be paid by no later than the 15th
day of the third month following the end of the calendar year in which
the right to the bonus is no longer subject to a substantial risk of
forfeiture (as defined for purposes of Internal Revenue Code Section
409A, including Treasury Regulations Section 1.409A-1(d))."
2. Section 9(b) of the Agreement is deleted in its entirety and the
following substituted therefor:
"(b) Termination by Employee for Good Reason. The Employee may
terminate his employment and the Term of Employment in the event of
"Good Reason." Termination for Good Reason means a resignation of
employment and Separation from Service (as defined for purposes of
Internal Revenue Code Section 409A) within 120 days following the
initial existence of one or more of the following conditions arising
without the Employee's consent:
(i) a material reduction in the Employee's base
salary or benefits, other than an across-the-board reduction
affecting all members of senior management;
(ii) a material reduction in the Employee's duties
and significant responsibilities hereunder (not including
reasonable changes in title or in corporate structure); or
(iii) a material breach of this Agreement by the
Company (which shall include a failure to make payments due
hereunder);
provided, in any such case, that (1) a prior written notice specifying
the reasons within sixty (60) after the initial existence of the
condition and an opportunity to cure such condition (if curable) shall
be afforded the Company, and (2) "Good Reason" shall exist only if the
Company shall fail to cure such condition within 31 days after its
receipt of such prior written notice. In addition, until the actual
Separation from Service the Employee must remain willing and able to
continue to perform services in accordance with the terms of this
Agreement and the Employee must not be in breach of any of the
Employee's obligations hereunder."
3. Section 9(e) of the Agreement is deleted in its entirety and the
following substituted therefor:
"(e) Effect of Termination Without Serious Cause or With Good
Reason. If the Company terminates the Term of Employment and the
Employee's employment herein without Serious Cause or the Employee
terminates the Term of Employment and his employment hereunder for Good
Reason, and, in either case, the Employee's employment is terminated
under circumstances constituting an Involuntary Separation from Service
within the meaning of Treasury Regulations Section 1.409A-1(n) other
than within the period beginning on the date that a Change in Control
is formally proposed to the Company's Board of Directors and ending on
the second anniversary of the date on which such Change of Control
occurs, the Company shall pay the Employee a separation pay benefit
(the "Severance Payments") equal to six (6) months of the Employee's
annual rate of base salary (as of the Employee's Separation from
Service date) and will make available a subsidized healthcare benefit,
as described below.
(1) Payment of the Severance Payments shall commence
as of the Employee's Separation from Service date, and shall
continue thereafter in equal fixed installments over a six
month period in accordance with the Company's standard payroll
procedures and normal payroll dates then in effect.
(2) In the event the value of the Severance Payments
shall exceed two times the lesser of the Employee's annualized
compensation or the maximum amount that may be taken into
account for qualified plan purposes (in each case, as
determined in accordance with Treasury Regulation Section
1.409A-1(b)(9)(iii)(A)), the excess shall not be paid as
provided in (1), above, but instead shall be withheld and paid
on the first regularly scheduled payroll date immediately
following the date that is six months after the Employee's
Separation from Service date, without adjustment for the delay
in payment.
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(3) In no event shall Severance Payments be
accelerated, nor shall the Employee be eligible to defer
payment of Severance Payments to a later date.
(4) If COBRA continuation coverage under any Company
healthcare plan is elected by the Employee, the Company shall
provide such coverage on the same terms with respect to
employee cost and employer subsidy as was being made available
to the Employee immediately prior to his Separation from
Service for the period of the COBRA coverage or six months,
whichever is shorter.
In addition, the Employee will be entitled to prompt payment
of (A) any accrued but unpaid salary and vacation, (B) any earned but
unpaid bonus from a prior fiscal year (subject, if applicable, to the
terms of any deferred compensation arrangements), and (C) reimbursement
of business expenses incurred prior to the date of termination, and all
of the Employee's equity-linked grants (e.g., stock options, restricted
stock) shall immediately accelerate and vest in full."
4. Section 10(a) of the Agreement is deleted in its entirety and the
following substituted therefor:
"(a) Effect of Termination. If the employment of the Employee
is terminated by the Company (or a successor thereto) without Serious
Cause or the Employee terminates employment with the Company (or a
successor thereto) for Good Reason, and, in either case, the Employee's
employment is terminated under circumstances constituting an
Involuntary Separation from Service within the meaning of Treasury
Regulations Section 1.409A-1(n) and within the period beginning on the
date that a Change of Control is formally proposed to the Company's
Board of Directors and ending on the second anniversary of the date on
which such Change of Control occurs, the Company shall pay the Employee
a separation pay benefit (the "Change of Control Severance Payments")
equal to the Employee's annual base salary (as of the Employee's
Separation from Service date) and will make available a subsidized
healthcare benefit, as described below.
(1) Payment of the Change of Control Severance
Payments shall commence as of the Employee's Separation from
Service date, and shall continue thereafter in equal fixed
installments over a one year period in accordance with the
Company's standard payroll procedures and normal payroll dates
then in effect.
(2) In the event the value of the Severance Payments
shall exceed two times the lesser of the Employee's annualized
compensation or the maximum amount that may be taken into
account for qualified plan purposes (in each case, as
determined in accordance with Treasury Regulation Section
1.409A-1(b)(9)(iii)(A)), the excess shall not be paid as
provided in (1), above, but instead shall be withheld and paid
on the first regularly scheduled payroll date immediately
following the date that is six months after the Employee's
Separation from Service date, without adjustment for the delay
in payment.
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(3) In no event shall Change of Control Severance
Payments be accelerated, nor shall the Employee be eligible to
defer payment of Change of Control Severance Payments to a
later date.
(4) If COBRA continuation coverage under any Company
healthcare plan is elected by the Employee, the Company shall
provide such coverage on the same terms with respect to
employee cost and employer subsidy as was being made available
to the Employee immediately prior to his Separation from
Service for the period of the COBRA coverage or one year,
whichever is shorter.
In addition, the Employee will be entitled to prompt payment
of (A) any accrued but unpaid salary and vacation, (B) any earned but
unpaid bonus from a prior fiscal year (subject, if applicable, to the
terms of any deferred compensation arrangements), and (C) reimbursement
of business expenses incurred prior to the date of termination.
If any portion of the payments which the Employee has the
right to receive from the Company, or any affiliated entity or
successor, hereunder would constitute "excess parachute payments" (as
defined in Section 280G of the Internal Revenue Code) subject to the
excise tax imposed by Section 4999 of the Internal Revenue Code, such
excess parachute payments shall be reduced to the largest amount that
will result in no portion of such excess parachute payments being
subject to the excise tax imposed by Section 4999 of the Internal
Revenue Code. In the event a reduction must be in accordance with this
paragraph, Change in Control Severance Payments shall be reduced to the
extent necessary.
The Employee will not be entitled to any benefits or other
entitlements under this section unless a Change of Control actually
occurs. Any amounts payable pursuant to this Section 10 shall not
duplicate amounts payable under Section 9 and vice versa."
5. New Section 21 is hereby added to the Agreement to read as follows:
"SECTION 21. INTERNAL REVENUE CODE SECTION 409A COMPLIANCE.
(a) The parties hereto recognize that certain provisions of
this Agreement may be affected by Section 409A of the Internal Revenue
Code and guidance issued thereunder, and agree to amend this Agreement,
or take such other action as may be necessary or advisable, to comply
with Section 409A. The parties hereto intend that the Agreement, as
amended, be consistent with IRS Notice 2007-78, IRS Notice 2007-86 and
other Internal Revenue Code Section 409A transition relief, and it
shall be interpreted accordingly.
(b) Notwithstanding anything herein to the contrary, it is
expressly understood that at any time the Company (or any successor or
related employer treated as the service recipient for purposes of
Internal Revenue Code Section 409A) is publicly traded on an
established securities market (as defined for purposes of Internal
Revenue Code Section 409A), if a payment or provision of an amount or
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benefit constituting a deferral of compensation is to be made pursuant
to the terms of this Agreement to the Employee on account of a
Separation from Service at a time when the Employee is a Specified
Employee (as defined for purposes of Internal Revenue Code Section
409A(a)(2)(B)(i)), such deferred compensation shall not be paid to the
Employee prior to the date that is six (6) months after the Separation
from Service or as otherwise permitted under Treasury Regulations
Section 1.409A-3(i)(2).
(c) For purposes of this Agreement, the following definitions
shall apply:
(i) "Separation from Service" means, generally, a termination
of employment with the Company (or any successor or related employer
treated as the service recipient for purposes of Internal Revenue Code
Section 409A), and shall have the same meaning as such term has for
purposes of Internal Revenue Code Section 409A (including Treasury
Regulation Section 1.409A-1(h)).
(ii) "Involuntary Separation from Service" means a Separation
from Service due to the independent exercise of the unilateral
authority of the Company (or any successor or related employer treated
as the service recipient for purposes of Internal Revenue Code Section
409A) to terminate the Employee's employment, other than due to the
Employee's implicit or explicit request, where the Employee was willing
and able to continue to employment with the Company. Notwithstanding
the foregoing, a termination for Good Reason may constitute an
Involuntary Separation from Service. Involuntary Separation from
Service shall have the same meaning as such term has for purposes of
Internal Revenue Code Section 409A (including Treasury Regulation
Section 1.409A-1(n))."
All of the other terms and conditions of the Employment Agreement shall remain
in full force and effect.
IN WITNESS WHEREOF, the parties have entered into this First Amendment
as of the date first above written.
CAS MEDICAL SYSTEMS, INC.
By: /s/ Xxxxx X. Xxxxxx
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Name: Xxxxx X. Xxxxxx
Title: Chairman of the Board
/s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
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