SECOND AMENDMENT TO EMPLOYMENT AGREEMENT
SECOND AMENDMENT, made and entered into as of the 21st day of August,
1998, to the Employment Agreement (the "Agreement") made and entered into on May
24, 1995, and amended pursuant to that certain First Amendment to Employment
Agreement dated December 31, 1996, by and between ALL AMERICAN SEMICONDUCTOR,
INC., a Delaware corporation (the "Company"), and PAUL GOLDBERG (the
"Employee").
W I T N E S S E T H :
WHEREAS, the Company and the Employee mutually desire and each of them
is willing, in accordance with the terms and conditions specifically restated,
added, deleted or otherwise set forth below, to amend the Agreement; it being
understood by the Company and the Employee that all terms and conditions of the
Agreement not otherwise specifically modified by this Second Amendment thereto
shall remain effective and continue operating in full force throughout the
entire term of the Agreement.
NOW, THEREFORE, for and in consideration of the covenants and
agreements hereinafter set forth, the parties hereto mutually agree as follows:
1. EXPENSES OF EMPLOYEE. Section 4 of the Agreement is hereby
amended to be replaced in its entirety with the following:
(a) General Expenses. The Company shall pay or reimburse Employee
for reasonable expenses incurred by Employee in connection with the business of
the Company.
(b) Excise Tax Reimbursement and Tax Gross-up.
(i) The Company shall promptly pay or reimburse Employee
(collectively, the "Excise Tax Payments") for any federal income tax
liability imposed pursuant to Section 4999 or Section 280G (or any
successor provisions) of the Internal Revenue Code of 1986, as amended,
and any similar federal, state or local tax that may be imposed in lieu
thereof or in addition thereto (collectively, "Excise Tax"), in
connection with the receipt of any payments or other consideration by
or for the benefit of Employee with respect to this Agreement
(including any increases thereto pursuant to the Gross-Up Formula, as
defined below), including any imputed income to Employee relating to
the acceleration of any Company benefits including vesting of stock
options to purchase common stock of the Company. In addition, each
Excise Tax Payment, to the extent such payment constitutes income to
Employee subject to income and/or unemployment taxes, shall be
increased to and include the amount computed under the Gross-Up
Formula, as defined and provided below (each, as increased, a
"Grossed-Up Excise Tax Payment"; collectively, the "Grossed-Up Excise
Tax Payments"). Each Grossed-Up Excise Tax Payment shall be in the
amount computed under the following formula (the "Gross-Up Formula"):
Divide the gross taxable amount of each Excise Tax Payment (or other
compensation payment subject to tax gross up pursuant to
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this Agreement) by a number equal to one minus the sum of (i) the
highest combined marginal U.S. federal, state and local individual
income tax, social security tax and unemployment tax rate (or such
other combined tax rate that is similar to or replaces such combined
tax rate) applicable to Employee (taking into account the deductibility
of any such federal, state and local taxes) that is in effect at the
time each such Excise Tax Payment (or other compensation payment
subject to tax gross up pursuant to this Agreement) is made and (ii)
the Excise Tax rate applicable to Employee that is in effect at the
time each such Excise Tax Payment (or other compensation payment
subject to tax gross up pursuant to this Agreement) is made. For
example, if a $100 Excise Tax Payment is subject to the Gross-Up
Formula, and the highest combined marginal tax rate applicable to
Employee at such time is 45% and the Excise Tax rate is 20%, the Excise
Tax Payment shall be increased under the Gross-Up Formula to, and the
Grossed-Up Excise Tax Payment shall be, $285.71. In addition, any
interest or penalties imposed against Employee by any federal, state or
local taxing authority as a result of any misclassification by the
Company, not predicated upon Employee's direction or description, and
reclassification as taxable income of any amounts received by Employee
under this Agreement shall be paid or reimbursed by the Company and
increased by the Gross-Up Formula (as increased, the "Grossed-Up
Penalties and Interest").
(ii) In the event that Employee's employment is terminated and
at any time prior to the receipt by Employee of any Company U.S. Form
W-2, including any amendments thereto ("Form W-2"), with respect to any
payments or other amounts under this Agreement, the Company undergoes a
change (i) in the ownership or effective control of the Company or (ii)
in the ownership of a substantial portion of the assets of the Company,
as clauses (i) and (ii) are interpreted under Section 280G of the Code
and the Treasury Regulations thereunder (such event, a "Potential
Excise Tax Situation"), then the Company, with the advice of its
accountants and/or attorneys, shall determine whether any amounts paid
or imputed to Employee under this Agreement are subject to Excise
Taxes. Such determination by the Company with respect to whether any
amounts received during
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the year constitute a "parachute payment" as defined under Section 280G
of the Code (a "Parachute Payment") subject to Excise Taxes shall be
reflected on Employee's U.S. Form W-2 with respect to such year. If the
Company determines that Excise Taxes are payable, then, unless the
Company has withheld the proper Excise Taxes from Employee's payments,
the Company shall provide Employee with the Grossed-Up Excise Tax
Payment, no later than ten days after the issuance of Employee's Form
W-2 (the "Excise Tax Due Date") with respect to the amounts paid under
the Agreement (which Form W-2 shall be issued in a timely manner on or
before January 31st following the year of payment of the amounts
subject to the Excise Tax). If the Company has withheld the proper
Excise Taxes from the amounts paid to Employee, then the Company shall
pay Employee, on the date Employee receives such payments from which
the Excise Tax has been deducted, the difference between the Grossed-Up
Excise Tax Payment and the Excise Tax withheld. If a Potential Excise
Tax Situation arises and the Company determines that no payments
received in connection with this Agreement are subject to Excise Taxes
by Employee, then the Company shall do all of the following set forth
in clauses (A) through (D) below:
(A) on or before the date of issuance of Employee's Form W-2,
at the Company's sole expense, a nationally-recognized CPA firm or law
firm reasonably acceptable to Employee shall render a written opinion
to Employee, reasonably acceptable to Employee in both substance and
form, that there is substantial authority for concluding that (i) no
payments received in connection with this Agreement including those
reflected in the Form W-2 constitute a Parachute Payment and (ii) no
Excise Taxes are due by
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Employee with respect to any payments received in connection with this
Agreement including any amounts reflected in the Form W-2;
(B) on or before the date of issuance of Employee's Form W-2,
Employer shall procure and deliver to Employee an irrevocable standby
letter of credit for the benefit of Employee (the "Letter of Credit"),
in form and content and issued by a financial institution all
reasonably acceptable to Employee, for an amount equal to the aggregate
of (i) the full amount of the Grossed-Up Excise Tax Payment, and (ii)
an amount equal to a reasonable estimate of the amount of any
Grossed-Up Penalties and Interest that would be due if Employee
ultimately were to be liable for the Excise Taxes. The amount of the
Letter of Credit shall be adjusted from time to time for any material
changes (more than ten percent) in the estimates of the Grossed-Up
Excise Tax Payment and/or the Grossed-Up Penalties and Interest). The
Letter of Credit shall be payable to Employee upon demand in the event
that the Company shall not have paid Employee all amounts due under
this Section 1(b) within three business days after the earliest to
occur of subclauses (1) and (2) below of this clause (B), if either is
applicable. The Letter of Credit shall remain outstanding until the
earliest of (1) the Company's agreement that the Excise Taxes are
payable (requiring immediate payment by the Company to Employee of the
Grossed-Up Excise Tax Payment and the Grossed-Up Penalties and
Interest, and upon receipt thereof Employee shall immediately deliver
the Letter of Credit to the Company), (2) a final, non-appealable
determination by a court of competent jurisdiction that the Excise
Taxes are payable (requiring immediate payment by the Company of the
Grossed-Up Excise Tax Payment and the Grossed-Up Penalties and
Interest, and upon receipt thereof Employee shall immediately deliver
the
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Letter of Credit to the Company), (3) a final, non-appealable
determination by a court of competent jurisdiction that the Excise
Taxes are not payable (requiring Employee to immediately deliver the
Letter of Credit to the Company), and (4) the expiration of the longest
statute of limitations applicable to Employee with respect to the
payment of the Excise Taxes, as such statute may be extended by
Employee (requiring Employee to immediately deliver the Letter of
Credit to the Company). In the event that the Company and Employee
dispute the amount for which the Letter of Credit shall be obtained or
adjusted pursuant to clause (B) above, the Company shall procure a
Letter of Credit for the greatest amount not in dispute, the amount in
dispute shall be determined through litigation, if the parties cannot
otherwise agree, and the amount of the Letter of Credit shall be
adjusted accordingly thereafter. In the event that Employee draws down
the Letter of Credit under the conditions provided above, the Company
shall immediately pay to Employee any deficiency in the proceeds of the
Letter of Credit compared with the final amount to be received as
Grossed Up Excise Tax Payments and Grossed-Up Penalties and Interest,
and Employee shall immediately reimburse the Company for any excess
proceeds from the Letter of Credit compared with such final amounts;
(C) the Company shall indemnify, and hold harmless Employee
from and against any and all liability, damage, loss, costs, expense,
penalties, interest, claims or demands (including attorneys' fees
through all appeals if for any reason the Company fails to defend
Employee pursuant to clause (D) below), other than consequential
damages, arising out of or in any manner connected with Employee's
failure to pay the Excise Taxes, and such amount of indemnification
shall not be limited in amount; and
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(D) the Company shall, at its sole cost and expense, defend
Employee before all applicable governmental agencies and, if the
Company or the government determines to appeal such decision, through
any and all appeals. Notwithstanding the foregoing, in the event that
at any time, including after the receipt of Form W-2 by Employee, any
governmental agency asserts that any Excise Taxes are payable by
Employee with respect to any amounts received by Employee in connection
with this Agreement, then the Company shall pay to Employee a
Grossed-Up Excise Tax Payment and any Grossed-Up Penalties and Interest
required, each based on all Excise Taxes asserted by the government,
within thirty days after written notice thereof by Employee to the
Company (including a copy of any governmental notice with respect
thereto), unless, not later than the end of such thirty-day period, the
Company shall have met the conditions set forth in clauses (A) and (B)
above of this Section 1(b) and has agreed to the conditions set forth
in clauses (C) and (D) above.
2. SURVIVABILITY. Section 15 of the Agreement is hereby
amended to replace the words "Sections 3 and 5" with the words
"Sections 3, 4 and 5" in the last sentence of the Section 15.
3. EFFECT. This Second Amendment shall not apply with respect
to a Change in Control resulting from any merger between the Company
and a wholly-owned subsidiary of Reptron Electronics, Inc. Except as
otherwise specifically modified by this Second Amendment, all terms,
conditions and provisions of the Agreement shall remain effective and
continue operating in full force and without change.
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IN WITNESS WHEREOF, the Employee has hereunto set his hand and the
Company has caused this Second Amendment to be executed by its duly authorized
officer effective as of the day and year first above written.
ALL AMERICAN SEMICONDUCTOR, INC.
By: /s/ BRUCE M. GOLDBERG
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Bruce M. Goldberg,
President
EMPLOYEE:
/s/ PAUL GOLDBERG
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PAUL GOLDBERG
The undersigned, Lola Goldberg, as a third party beneficiary of certain
of the provisions of the Agreement being modified by this Second Amendment,
hereby consents to and approves the amendments to the Agreement set forth in
this Second Amendment.
/s/ LOLA GOLDBERG
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LOLA GOLDBERG
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