AMENDMENT TO EMPLOYMENT AGREEMENT
This Amendment ("Amendment") is made and entered into effective as of
November 13, 1997, by and between LifeRate Systems, Inc., a Minnesota
corporation (the "Company"), and Xxxxx X. Xxxxxxx (the "Employee").
RECITALS
A. The Company and the Employee entered into an Employment Agreement,
dated as of August 18, 1997, (the "Employment Agreement"), pursuant to which the
Company has agreed to employ the Employee as its Chief Executive Officer and
President.
B. The Company intends to issue and sell an aggregate of approximately
9,000,000 shares of common stock ("Common Stock") at prices ranging from $.50 to
$.56 per share and warrants to purchase approximately 9,000,000 shares of Common
Stock (the "Financing") to certain investors, including Special Situations
Private Equity Fund, L.P., Special Situations Fund III, L.P. and Special
Situations Cayman Fund, L.P. (the "Investors"), which would result in a "Change
in Control" as defined in Section 6 of the Employment Agreement.
C. The Company desires to amend the Employment Agreement such that the
Financing would not result in a Change of Control under the Employment Agreement
or any stock option agreements between the Company and the Employee issued
pursuant to the Employment Agreement.
D. In order to facilitate the completion of the Financing, the Employee
has agreed to waive his right with respect to a portion of additional options
that he would otherwise be entitled to receive under the Employment Agreement as
result of the Financing.
E. The Employee is willing to enter into this Amendment in exchange for
adjustment to the exercise price of options to purchase shares of Common Stock
granted, or to be granted, by the Company to the Employee pursuant to the
Employment Agreement and the grant of additional options.
Accordingly, the parties, each intending to be legally bound, hereby
agree as follows:
1. Amendment to Exercise Price of Stock Options. Section 5(b) of the
Employment Agreement is hereby amended to the extent necessary to provide that
the exercise price of the options referred to therein, including any options
that the Company may be obligated to issue pursuant to the second and third
paragraphs thereof, shall be $0.50 per share.
2. Amendment of Definition of Change in Control. Section 6(b) of the
Employment Agreement is hereby amended in its entirety as follows:
(b) For purposes of this Section 6, the Incumbent Directors will mean
any individuals who are members of the Board immediately following the
first closing of the Financing (relating to 2,500,000 shares and
warrants to purchase 2,500,000
shares), any individual who is elected to the Board pursuant to the
Securities Purchase Agreement pursuant to which the securities sold in
the Financing will be issued and any individual who subsequently
becomes a member of the Board whose election, or nomination for
election by the Company's shareholders, was approved by a vote of at
least a majority of the Incumbent Directors then in office (either by
specific vote or by approval of the Company's proxy statement in which
such individual is named as a nominee for director without objection to
such nomination).
Section 6 of the Employment Agreement is hereby amended by adding the
following subsection (d) at the end thereof:
(d) Notwithstanding any other provision of this Agreement, if Special
Situations Private Equity Fund, L.P., Special Situations Fund III, L.P.
or Special Situations Cayman Fund, L.P. (collectively, "Special
Situations Fund") shall become, individually or collectively, in one or
more transactions, the "beneficial owner", of any of the Company's
securities, such ownership, regardless of the percentage of the
Company's combined voting power owner or controlled, shall not
constitute a "Change in Control", whether or not the issuance of such
securities by the Company to Special Situations Fund would be required
to be reported pursuant to Section 13 or 15(d) of the Exchange Act.
Notwithstanding any other provision of the Employment Agreement or this
Agreement, the election of directors pursuant to the Securities Purchase
Agreement pursuant to which securities will be sold in the Financing shall not
constitute a "Change in Control" under the Employment Agreement.
3. Stock Options. The Company and the Employee acknowledge and agree
that the Employee will be entitled to options to purchase an aggregate of
650,000 shares of Common Stock at a price of $.50 per share pursuant to Section
5(b) of the Employment Agreement following completion of the Financing, and the
Employee hereby waives his right to receive any additional options under the
Employment Agreement as a result of the Financing. At or before the closing of
the Financing, the Company and the Employee shall enter into a stock option
agreement, in the form attached hereto as Exhibit A, covering 650,000 shares of
Common Stock at a purchase price of $.50 per share, representing the aggregate
number of options to which the Employee will be entitled pursuant to Section
5(b) of the Employment Agreement following completion of the Financing.
4. Bonus. Section 5(c) of the Employment Agreement is amended to the
extent necessary to provide that, at the option of the Company, any bonus that
becomes due and payable under Section 5(c) of the Employment Agreement may be
paid in cash or shares of Common Stock having a fair market value, at the time
such bonus becomes due and payable, equal to the amount of such bonus, or any
combination of cash and shares of Common Stock. The Company shall pay the
Employee the $108,000 bonus payable pursuant to Section 5(d) of the Employment
Agreement within fifteen (15) days of the first closing of the Financing
(relating to 2,500,000
shares and warrants to purchase 2,500,000 shares). Notwithstanding anything to
the contrary in this Section 4, the Employee acknowledges that if payment in
shares of Common Stock of any bonus payable under Section 5(c) of the Employment
Agreement would result in an adjustment in the exercise price or conversion
price of any option, warrant, convertible note or other security or right in
existence on the date of such payment, or would result in an adjustment in the
number of shares purchasable under such an option, warrant, convertible note or
other security or right, then such bonus shall be paid in cash.
5. No Other Amendment. Except as set forth herein, the Employment
Agreement shall remain in full force and effect in accordance with its original
terms.
IN WITNESS WHEREOF, the Company and the Employee have executed this
Amendment as of the date first written above.
LIFERATE SYSTEMS, INC.
By: /s/ Xxxxxxx X. Xxxxxxx
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Xxxxxxx X. Xxxxxxx
Chairman of the Board
/s/ Xxxxx X. Chinksy
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Xxxxx X. Xxxxxxx
