Contract
Exhibit
No. 10.2
Amendment
to Xxxxxxx Employment Agreement
AMENDMENT
NUMBER 1
TO
THE
GYRODYNE
COMPANY OF AMERICA, INC.
AMENDED
AND RESTATED EMPLOYMENT AGREEMENT
DATED JANUARY 23, 2003 FOR
XXXXXXX X. XXXXXXX
WHEREAS,
Xxxxxxx X. Xxxxxxx (the "Executive") executed an amended and restated Employment
Agreement (the "Agreement" or the "Employment Agreement") with Gyrodyne Company
of America, Inc. (the "Company") effective as of January 23, 2003;
and
WHEREAS,
Section 409A of the Internal Revenue Code (the "Code") was enacted as part of
the American Jobs Creation Act of 2004 ("AJCA"); and
WHEREAS,
Section 409A made several changes to nonqualified deferred compensation
arrangements, including employment agreements with severance provisions,
requiring amendments to be made to avoid adverse tax consequences to the
Executive; and
WHEREAS,
the Company is willing to make several changes to the Employment Agreement, as
addressed in this Amendment Number 1, to help the Executive avoid
immediate taxation, a 20% excise tax, and underpayment of interest penalties in
the event that any payments or provisions of the Employment Agreement do not
comply with Section 409A of the Code; and
WHEREAS,
the parties acknowledge that the intent of this Amendment is not to change the
provisions of the Employment Agreement, except to the extent necessary to avoid
adverse tax consequences and/or to delay certain payments, due to the potential
status of the Executive as a "Specified Employee" under Section
409A
NOW,
THEREFORE, in consideration of the mutual provisions contained herein, the
parties agree to amend the Employment Agreement as follows:
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1.
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Specified
Employee. The parties acknowledge that the Executive is currently a
"Specified Employee" as defined under Section 5(b)
below.
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2.
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Good
Reason Termination. Section 3.l(E) provides that the Executive may
terminate the Executive's employment for "Good Reason" at any time upon 10
days written notice to the Company. Good Reason is defined to include a
material change in
the Executive's duties, the relocation of the Company's office
outside of a 25 mile radius of its current offices, and the Company's
breach of any material terms of this Agreement, including the Company's
obligation to provide indemnification and advancement of
expenses.
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In order
to comply with the safe harbor "Good Reason" provisions contained in Final
Treasury Regulation Section 1.409A-l,
the
Executive's Separation from Service shall be "treated" as an involuntary
termination if the following "safe harbor" events occur to ensure that a Good
Reason termination exists:
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a.
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The
Executive must provide notice of the existence of the Good Reason
condition within a period not to exceed30 days of its initial
existence (in lieu of the prior 10 day
period).
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b.
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The
Company shall be provided a period of30 days during which it
may remedy the condition entitling the Executive to terminate employment
for Good Reason.
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c.
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The
Executive must Separate from Service within a limited period of time, not
to exceed60
days following the reason for the Good Reason
termination.
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d.
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The
amount, timeand
form of payment upon a voluntary separation from service for Good
Reason shall be identical to the amount, time and form of payment upon
an involuntary separation from
service.
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3.
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Change
in Control.
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a.
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Defined.
Section 3.1(F) provides that in the event of a Change in Control, the
Executive may terminate the Executive's employment upon 30 days prior written
notice of termination delivered not later than 3 months following a
Change in Control. The Change in Control window period is revised to 90
days within any Change in Control to comply with Section
409A.
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A Change
in Control shall continue to be defined as provided in Section 3.1(F). A Change
in Control shall also
include the first to occur of any event described as either a change in
ownership or effective control of the Company, or in the ownership of a
substantial portion of the assets of the Company, as defined under Section 409A
of the Code.
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b.
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Notice
Provisions. Similar to a termination for Good Reason, the Executive
must satisfy the provisions of Sections 2 and 3 of this Amendment in the
event the Executive wishes to terminate the Executive's employment
following a Change in
Control.
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4.
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Severance
Benefits. Section 3.2 provides that if the Executive's employment
is terminated without cause (except in the event of death or
Disability) or if the Executive's employment is terminated by the
Executive for Good Reason or following a Change in Control, certain
severance benefits are provided. Based upon Section 409A, the new
severance benefits shall be as
follows:
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a.
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The
original Employment Agreement provides the Company would pay the
Executive, on or before the date of termination, a lump sum payment equal
to the sum of:
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i.
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The
Executive's base salary and accrued vacation pay through the Termination
Date (i.e., a "Separation from Service");
and
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2
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ii.
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3
times the Executive's base
salary.
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In order
to comply with Section 409A, severance benefits shall be paid in a single lump
sum cash payment, to the extent the benefits do not exceed .the lesser of the
Executive's salary for the past2 years or two times the Section 401(a)(17)
limitations, which amounts can be
paid within the 6 month period during which benefits may generally not
be paid to Specified Employees. To the extent benefits exceed such
limitation (which is a maximum of $460,000 in 2008 and $490,000 in 2009), the
balance of any lump sum payments shall be paid after the expiration of the 6
month period following a Separation from Service, in a single lump sum payment
on the 15th day
of the
7th month
following a Separation from Service, with interest equal to prime plus 2% for
the delay in making payments on the date of termination.
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b.
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The
Company previously agreed to continue to provide the Executive and his
eligible spouse and dependents, for a period of 3 years, with the medical,
hospitalization, dental and life insurance coverage in effect on the date
of a termination. To the extent the Executive could not be provided such
benefits, the Company is required to provide the economicequivalent of the benefits
the Executive or the Executive's family would otherwise have been entitled
to receive under such programs. However, such benefits were to be
terminated on the date or dates the Executive becomes "eligible" to receive
equivalent coverage or benefits under the plans and programs with a
subsequent employer at an equivalent cost to the Executive (such coverage
and benefits to be determined on a coverage-by-coverage, or
benefit-by-benefit, basis). Section 409A permits certain welfare benefits
to be paid following a Separation from Service, as long as such benefits
are generally paid by the end of the second calendar year following a
termination of employment Based upon Section 409A, the Company agrees to
provide medical, hospitalization and dental coverage as permitted under
COBRA or New York State continuation coverage until the expiration of the
period in
which such benefits may be continued. Thereafter, all benefits
shall be continued as required under the Employment Agreement, with any
payments being made as of the first day of each month which shall be
deemed to be the applicable "fixed payment date" to avoid any deferral of
compensation.
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c.
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The
Company was required to reimburse the Executive for business expenses
incurred but not paid prior to a termination of employment, which shall
remain unchanged.
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d.
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Until the3rd anniversary
of the Termination Date, the Company was required to continue to
provide the Executive with an automobile or travel allowance as an in
effect prior to a termination of employment. This is neither a de minimus
benefit nor a benefit anticipated to be extended following a Separation
from Service under Section 409A. Accordingly, in lieu of the original
promise, the Company agrees to provide the Executive with an amount equal
to the monthly average cost
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for
maintaining a car, which shall be a fixed amount determined at the time of
termination, which shall be paid as of the first day of the month following a
Separation from Service for a period of 3 years, as fixed payment dates,
subject to any delay in payments for Specified Employees, which delayed payment
shall be made as permitted under Section 4(a) above.
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e.
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The
Employment Agreement required the Company to provide or pay for the
cost of
office space and the salary for an administrative assistant,
consistent with the office and administrative assistant provided prior to
the termination for a period of 1 year. The payment for such benefits
shall be made in a single lump sum cash payment within 30
days after a Separation from Service to avoid any deferral of
compensation under Section 409A of the Code, subject to any delay in
payments for Specified Employees, which delayed payment shall be made as
permitted under Section 4(a) above.
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f.
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Notwithstanding
any provisions to the contrary, any benefits payable upon a voluntary or
involuntary termination of employment shall be payable at the same time,
'in the same manner, regardless of the reason, for termination, including
Good Reason termination.
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Notwithstanding
any provisions to the contrary, the Executive shall be entitled to any other
rights, compensation of benefits as may be due the Executive in accordance with
the terms and provisions of any other agreements, plans or programs of the
Company, other than any severance benefit programs, to the extent originally
required under the Employment Agreement.
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5.
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Definitions. Due to the changes
enacted under Section 409A of the Code, the following new definitions are
added
to the Employment
Agreement:
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a.
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"Separation
from Service" or Termination of
Employment means the Executive is no longer employed by Gyrodyne or any
Related Entities within or outside of the United States on account of a
termination of employment, retirement, Disability or death.
Consistent with Treasury Regulation Section 1.409A-l, or any subsequent
guidance under Section 409A of the Code, no Separation from Service shall
occur if the Executive continues to perform services as a consultant or an
employee in accordance with the following
rules:
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i.
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Leave
of Absence.
For purposes of Section 409A, the employment relationship is
treated as continuing in effect while the Executive is on military leave,
sick leave, or other bona fide leave of absence, as long as the period of
leave does not exceed 6 months, or if longer, as long as the Executive's
right to reemployment with the Employer provided either by statute or
contract. Otherwise, after a 6 month leave of absence, the employment
relationship if deemed
terminated.
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ii.
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Part-Time
Status. Whether or not a termination of employment occurs is
determined based upon all facts and circumstances. However, in the event
that services provided by the Executive are insignificant, a Separation
from Service shall be deemed to have occurred. For purposes of
Section 409A, if the
Executive is providing services to Gyrodyne or any Related Entities at a
rate that is at least equal to 20% of the services rendered, on average,
during the immediately preceding 3 full calendar years of employment
(or such lesser period), and the annual compensation for such services is
at least 20% of the average annual compensation earned during the
final 3 full calendar years of employment (or such lesser period), no
termination shall be deemed to have occurred since such services are not
insignificant.
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iii.
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Consulting
Services. Where the Executive continues to provide services to
Gyrodyne or any Related Entities in a capacity other than as an employee,
a Separation from Service shall not be deemed to have occurred if the
Executive is
providing services at an annual rate that is 50% or more of the
services rendered, on average, during the immediately preceding 3 full
calendar years
of employment. (or such lesser period) and the annual remuneration
for such services is 50% or more of the annual remuneration earned during
the final 3 full calendar years of employment (or such lesser
period).
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b.
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"Specified
Employee” means
a Key Employee, as defined under Section 416 of the Code, who
is employed by
Gyrodyne or any Related Entities which has its stock publicly
traded on an established securities market. The stock of Gyrodyne
Company of America, Inc., is traded on the NASDAQ Exchange. For purposes
of the Agreement, the "Specified Employee Identification Date" shall be
each December 31, and the "Specified Employee Effective Date" shall also
be December 31. Specified Employees shall be determined by the
Compensation Committee on an annual basis for purposes of all nonqualified
deferred compensation plans and any other programs in accordance with the
provisions of Section 409A of the
Code.
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6.
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Indemnification.
Section 8 of the Employment Agreement provides that the Company shall
provide certain indemnification to the Executive in the event of a threat,
suit or proceeding, whether civil, criminal, administrative or
investigative (a "Proceeding"). Section 409A specifically permits the
indemnification of executives, either directly or through the provision
of
insurance, without triggering any adverse tax consequences.
Accordingly, this provision shall continue, to the extent not otherwise
determined to result in adverse tax consequences on the Section
409A.
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7.
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Advancement
of Expenses. Section 8(E) provides that the Company shall pay
certain expenses to the Executive, in advance, if requested by the
Executive in connection with any proceedings. The Executive shall be
entitled to advancement for expenses, subject
to
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any delay
in payments for Specified Employees, which delayed payment shall be made as
permitted under Section 4(a) above.
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8.
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Counsel
Fees. Section 8(G) provides that the Company shall pay any fees or
expenses incurred by the Executive for any attorney, incurred in
connection with any proceedings. Similar to the indemnification provisions
above, the Company agrees to reimburse, consistent with provisions of the
Employment Agreement, subject to any delay in payments
for Specified Employees, which delayed payment shall be made as permitted
under Section 4(a) above.
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9.
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Legal
Fees and Expenses. In addition to the legal fees and expenses
incurred in connection with any proceedings, in the event of any disputes
between the Company and the Executive, the Company agrees to reimburse the
Executive for all legal fees and expenses reasonably incurred by the
Executive, but only if the Executive is successful with respect to
substantially all of the Executive's claims. The Company shall reimburse
the Executive for such expenses, subject to any delay in payments for
Specified Employees, which delayed payment shall be made as permitted
under Section 4(a) above.
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10.
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Section
409A Compliance. It is
intended that the Employment Agreement shall comply with Section 409A of
the Code (and any regulations and guidelines issued thereunder) to the
extent the Agreement is subject thereto, and the Agreement shall be
interpreted on a basis consistent with such intent. If any additional
amendments are necessary for the Agreement to comply with Section 409A,
the parties hereto shall negotiate in good faith to amend the Agreement in
a manner that preserves the original intent of the parties to the
extent reasonably possible. No action or failure to act, pursuant to
this Section 10 shall subject the Company to any claim, liability, or
expense, and the Company shall not have any obligation to indemnify or
otherwise protect the Executive from the obligation to pay any taxes
pursuant to Section 409A of the
Code.
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With
regard to any provision herein the provides for reimbursement of costs and
expenses or in-kind benefits, except as permitted by Section 409A of the
Code: (i) the right to reimbursement or in-kind benefits shall not be subject to
liquidation or exchange for another benefit; (ii) the amount of expenses
eligible for reimbursement, or in-kind benefits, provided during any taxable
year shall not affect the expenses eligible for reimbursement, or in-kind
benefits to be provided, in any other taxable year, provided that the foregoing
clause: (ii) shall not be violated without regard to expenses reimbursed under
any arrangement covered by Section 1 05(b) of the Code solely because such
expenses are subject to a limit related to the period the
arrangement is in effect; and (iii) such payments shall be made on or
before the last day of the Executive's taxable year following the taxable year
in which the expense was incurred.
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11.
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Specified
Payment Date. To the extent that any payments are required
hereinunder, such payments shall be deemed
to be properly made as long as they are made within a period
of 30 days following the date specified in this Agreement for
payment.
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12.
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Effective
Date. This Amendment Number 1 shall be effective as of the last
date it is executed by either party, as indicated
below.
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IN
WITNESS WHEREOF, the Company and the Executive have caused this Amendment Number
1 to be executed as reflected below.
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GYRODYNE
COMPANY OF AMERICA, INC.
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Date:
12-31-08
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BY:
/s/ Xxxxxx
Xxxxxxx
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Xxxxxx
Xxxxxxx
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Chairman,
Compensation Committee
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Date:
12-31-08
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/s/
Xxxxxxx X.
Xxxxxxx
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Xxxxxxx
X. Xxxxxxx
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