Employment Agreement - RSA Security Inc. and Charles R. Stuckey Jr.
THIRD AMENDED AND RESTATED
EMPLOYMENT AGREEMENT
THIS THIRD AMENDED AND RESTATED EMPLOYMENT AGREEMENT (the "AGREEMENT") is
made as of the 27th day of December, 2001 (the "AGREEMENT DATE"), by and between
RSA Security Inc., a Delaware corporation (the "EMPLOYER"), and Charles R.
Stuckey, Jr. (the "EMPLOYEE").
WHEREAS, the Employer and the Employee are parties to a Second Amended
and Restated Employment Agreement, dated as of April 1, 2000 (the "2000
AGREEMENT");
WHEREAS, the Employer and the Employee desire to (a) have the Employee
continue in his role as Chairman of the Employer's Board of Directors (the
"BOARD OF DIRECTORS"), (b) provide the Employee with a period of Reduced
Employment Status (as defined in Section 10) as an employee of the Employer, and
(c) amend and restate the 2000 Agreement to reflect the Employee's role as
Chairman of the Board of Directors and his obligations as an employee while on
Reduced Employment Status, all for the periods, and on the terms and conditions,
set forth herein;
NOW, THEREFORE, in consideration of the foregoing and of the mutual
covenants and conditions herein contained, the parties hereby agree that the
2000 Agreement is amended and restated in its entirety to read as follows:
Section 1. EMPLOYMENT.
The Employer hereby agrees to continue to employ the Employee, and the
Employee accepts such continued employment, according to the terms and
conditions set forth in this Agreement.
Section 2. TERM.
The initial term of this Agreement shall be for a period commencing on
the Agreement Date and continuing through December 31, 2002 (the "INITIAL
Term"). Thereafter and unless previously so elected by the Employee pursuant to
Section 10, this Agreement shall be automatically renewed for a period of
Reduced Employment Status, commencing on January 1, 2003 and continuing through
June 30, 2005 (the "REDUCED EMPLOYMENT STATUS TERM"), on the terms and
conditions indicated below. Notwithstanding the foregoing, the Employment Period
(as defined below) may be terminated at any time upon the occurrence of any one
of the following events: (i) the Employee's decision to resign pursuant to
Section 9 of this Agreement, (ii) the Employer's decision to terminate the
Employee, either "for cause" or other than "for cause" pursuant to Section 9, or
(iii) the parties' agreement in writing to terminate the Agreement. The period
of time between the commencement and termination of the Employee's employment,
from the Agreement Date and continuing through June 30, 2005, shall be referred
to herein as the "EMPLOYMENT PERIOD."
<PAGE>
Section 3. POSITION AND SERVICES.
(a) CHAIRMAN OF THE BOARD. From the Agreement Date and continuing
through the Employer's 2002 Annual Meeting of Stockholders, the
Employee shall occupy the position of Chairman of the Board of
Directors, subject to the terms of the Employer's Third Restated
Certificate of Incorporation, as amended from time to time. Any
subsequent substantial diminution in the position, office or
duties of the Employee (other than any such diminution resulting
from either a Reduced Employment Status or a Change in Control (as
such term is defined in Section 13)) or a material breach by the
Employer of its obligations under this Agreement shall be deemed a
termination of this Agreement other than "for cause" as defined in
Section 9. The Employee will report directly to the Board of
Directors, and shall have such duties and responsibilities as are
set forth in the Employer's Amended and Restated By-Laws, as
amended from time to time, which duties and responsibilities shall
include, but not be limited to, performing such duties and
responsibilities as are assigned to him by the Board of Directors.
(b) MEMBER OF THE BOARD. From the date of the Employer's 2002 Annual
Meeting of Stockholders and continuing through the Employer's 2004
Annual Meeting of Stockholders, the Employee shall serve as a
member of the Board of Directors, subject to the terms of the
Employer's Third Restated Certificate of Incorporation, as amended
from time to time. Any subsequent substantial diminution in the
position, office or duties of the Employee (other than any such
diminution resulting from either a Reduced Employment Status or a
Change in Control (as such term is defined in Section 13)) or a
material breach by the Employer of its obligations under this
Agreement shall be deemed a termination of this Agreement other
than "for cause" as defined in Section 9. The Employee will report
directly to the Board of Directors, and shall have such duties and
responsibilities as are set forth in the Employer's Amended and
Restated By-Laws, as amended from time to time, which duties shall
include, but not be limited to, performing such duties and
responsibilities as are assigned to him by the Board of Directors.
(c) FULL-TIME EMPLOYEE. Except as otherwise provided in Section 10 and
except as otherwise agreed between the Board of Directors and the
Employee, during the Initial Term the Employee is expected to be
available for full-time employment by the Employer, to exert his
best efforts to the performance of his duties hereunder, and to
serve the Employer diligently and to the best of his ability;
provided, that, except to the extent set forth in the Prior
Agreements (as such term is defined in Section 8), nothing set
forth herein shall prohibit the Employee from engaging in other
activities to the extent that such activities do not impair the
ability of the Employee to perform his duties and obligations
under this Agreement.
-2-
<PAGE>
(d) REDUCED-TIME EMPLOYEE. During any period of Reduced Employment
Status, the Employee will be a reduced-time employee pursuant to
the terms and conditions set forth in Section 10. While a
reduced-time employee, the Employee will be expected to exert his
best efforts in the performance of his duties and to serve the
Employer diligently and to the best of his ability. The Employee
may not serve as a full-time employee, as defined in the Internal
Revenue Code of 1986, as amended (the "CODE"), of any other person
or entity during any period of Reduced Employment Status.
Section 4. COMPENSATION.
The Employer shall pay the Employee the following compensation during
the Employment Period:
(a) INITIAL TERM. During the Initial Term, the Employer shall pay the
Employee a base salary at an annual rate of not less than
$286,200, subject to deductions for social security, state payroll
and unemployment and all other legally required or authorized
deductions and withholding (the "INITIAL TERM SALARY").
Notwithstanding the foregoing, if during the Initial Term the
Employer reinstates, in whole or in part, the executive salary
reductions made by the Employer in 2001, then the Initial Term
Salary shall be adjusted to give effect to such reinstatement at
the same time and on the same basis as the Employer provides such
reinstated salary to its other executive officers. The Employee's
Initial Term Salary shall be payable at the same time and basis as
the Employer pays its payroll in general. The Employee shall have
the right, by written notice to the Employer within ninety (90)
days following any decrease in the Employee's Initial Term Salary
at any time during the Initial Term, to treat such reduction as a
termination of this Agreement other than "for cause" as defined in
Section 9.
(b) REDUCED EMPLOYMENT STATUS TERM. During the Reduced Employment
Status Term, the Employer shall pay the Employee a Reduced
Employment Status salary at an annual rate of $75,000, subject to
deductions for social security, state payroll and unemployment and
all other legally required or authorized deductions and
withholding (the "REDUCED EMPLOYMENT STATUS SALARY"). The
Employee's Reduced Employment Status Salary shall be payable at
the same time and basis as the Employer pays its payroll in
general.
Section 5. [Intentionally Omitted.]
-3-
<PAGE>
Section 6. DEATH OR DISABILITY DURING EMPLOYMENT.
If the Employee is prevented from performing his duties hereunder by
reason of illness or injury for a period of (a) four or more consecutive months
or (b) six months during any 12-month period as determined by a recognized
physician chosen by the Employer and acceptable to the Employee (the applicable
date when either of such disabling events shall occur being hereinafter referred
to as the "EFFECTIVE DATE OF DISABILITY"), or if the Employee dies during the
Employment Period, the Employer shall pay to the Employee, if the Employee is
disabled, or to the Employee's spouse (the "SPOUSE"), the Executors under the
Employee's Last Will and Testament duly admitted to probate within one year of
his death or the Employee's heir at law, if the Employee dies, in addition to
such amounts, if any, as may be payable pursuant to any short- or long-term
disability or life insurance policies then in effect and maintained by the
Employer with respect to the Employee ("DISABILITY POLICIES"), the compensation
which would otherwise be payable to the Employee under this Agreement through
the end of the month in which the Employee's Effective Date of Disability or
death occurs, or, in the case of disability (and assuming any Disability
Policies are currently in effect) such later date as the Employee would, if
eligible, be entitled to receive benefits under such Disability Policies.
Section 7. BENEFITS; EXPENSES.
(a) The Employee shall be entitled to receive the same standard
employment benefits as other executives of the Employer receive.
The Employee shall be entitled to fully participate in all of the
Employer's future employee benefit programs in accordance with
their then-existing terms. The Employee shall be entitled to
reimbursement for all approved reasonable travel and other
business expenses incurred by the Employee in connection with his
services to the Employer pursuant to the terms of this Agreement.
All business expenses for which the Employee seeks reimbursement
from the Employer shall be adequately documented by the Employee
in accordance with the Employer's procedures covering expense
reimbursement and in compliance with the regulations of the U.S.
Internal Revenue Service.
(b) The Employee shall be entitled to five weeks of vacation during
each year of the Employment Period. The Employee may accrue and
carry forward vacation time to future years; provided, however,
that in no event may the Employee carry forward into any year in
excess of five weeks of accrued paid vacation time.
Section 8. CONFIDENTIALITY; NON-COMPETITION.
The parties acknowledge that the Employee has previously entered into a
Non-Competition Agreement and a Nondisclosure and Developments Agreement, each
initially dated as of February 13, 1987 and amended and restated as of November
1, 1997 (together, as amended and restated, the "PRIOR AGREEMENTS"), in
connection with the Employee's employment by the Employer. The Prior Agreements
are each incorporated herein by this reference and made a part hereof as if set
forth
-4-
<PAGE>
herein in their entirety. The parties hereby agree that the Non-Disclosure
and Non-Competition Covenant, dated as of February 13, 1987, by and between the
Employer and the Employee was terminated and of no further force and effect as
of November 1, 1997.
Section 9. TERMINATION.
This Agreement does not grant the Employee any right or entitlement to be
retained by the Employer, and shall not affect or prejudice the Employer's right
to discharge the Employee in accordance herewith. The Employee may terminate
this Agreement at any time during the Employment Period upon sixty (60) days
prior written notice to the Employer. The Employer may terminate this Agreement
"for cause" (as defined below) at any time upon thirty (30) days prior written
notice to the Employee. The Employee shall, during such 30-day period, be given
an opportunity to defend the basis or facts giving rise to the notice. The
Employer may terminate this Agreement other than "for cause" at any time during
the Employment Period upon ninety (90) days prior written notice to the
Employee.
If the Employee is terminated either "for cause" or for reasons other
than "for cause" during the Employment Period, the Employee shall be entitled to
the following severance payments:
(a) OTHER THAN FOR CAUSE. If termination occurs by the Employer other
than "for cause" during the Employment Period, then the following
severance payments (less applicable deductions for social
security, payroll and other applicable taxes) and related
arrangements will be made:
(i) cash payments at the Employee's current monthly Initial
Term Salary at the time of termination (less applicable
deductions) for a period equal to the lesser of (x) 12
months, commencing with the month immediately succeeding
the month during which the 90-day period after the giving
of notice shall have ended (the "EFFECTIVE DATE OF
TERMINATION"), or (y) the remainder of the Initial Term;
provided, however, that no cash severance payments shall be
payable pursuant to this subparagraph (i) if the
termination occurs during the Reduced Employment Status
Term;
(ii) normal employee medical and insurance benefits will be
continued on an insured basis for the Employee and for the
Spouse at the Effective Date of Termination until the later
to occur of: (x) the Employee's death, or (y) the Spouse's
death, provided that medical benefits provided to the
Employee and the Spouse pursuant to this subparagraph (ii)
may be reduced from time to time to the extent that medical
benefits are provided through Medicare or through any other
employer following the Effective Date of Termination;
-5-
<PAGE>
(iii) to the extent that all or any stock options granted to the
Employee shall not have vested as of the Effective Date of
Termination, then all such stock options shall
automatically vest;
(iv) the Employer shall pay to the Employee, in a single lump
sum payment within 30 days following the Effective Date of
Termination, an amount equal to a pro rata portion of the
Employee's current monthly Initial Term Salary at the time
of termination (less applicable deductions) with respect to
the month in which the Effective Date of Termination occurs
based upon the number of days elapsed in such month prior
to the Effective Date of Termination; provided, however,
that no such lump sum payment pursuant to this subparagraph
(iv) shall be payable if the termination occurs during the
Reduced Employment Status Term;
(v) the Employer shall reimburse the Employee for any
reasonable legal expenses incurred by the Employee in
connection with the termination of the Agreement (excluding
any expenses incurred in contesting any such termination);
and
(vi) the Employer and the Employee may, but shall not be
obligated to, negotiate in good faith for the retention of
the Employee by the Employer as a consultant for the
one-year period following the Effective Date of Termination
pursuant to a Consulting Agreement to be entered into by
the Employer and the Employee.
(b) FOR CAUSE. If the Employee is terminated by the Employer "for
cause," the Employer shall provide the Employee with normal employee medical and
insurance benefits for a period of six months following the Effective Date of
Termination. In the event of a termination for cause, the Employee shall not be
entitled to any salary, severance or other payments or any benefits of any kind
beyond the Effective Date of Termination. Termination "for cause" as used
herein, and as determined by the Board of Directors, shall include only the
following behavior of the Employee: (1) any act committed by the Employee which
shall represent (x) a breach in any material respect of any of the terms hereof
or (y) a material breach of fiduciary duty to the Employer and/or all of its
stockholders under the laws of the State of Delaware; (2) willful failure to
carry out reasonable assigned duties; (3) gross negligence, consisting of wanton
and reckless acts or omissions in the performance of the Employee's duties to
the material detriment of the Employer; (4) addiction to drugs or chronic
alcoholism which impairs the Employee's ability to carry out his obligations
under this Agreement; or (5) any conviction of the Employee of a felony which is
subject to a jail sentence of at least three months; provided, that in the case
of a termination for cause pursuant to clause (1), (2) or (3) of this paragraph
(b), the Employee shall be provided with not less than 30 days written notice
thereof from the Board of Directors or the
-6-
<PAGE>
Compensation Committee of the Board of Directors and an
opportunity to cure such event to the reasonable satisfaction
of the Board of Directors.
(c) VOLUNTARY RESIGNATION. If the Employee voluntarily resigns
during the Employment Period, then the following severance
payments (less applicable deductions for social security,
payroll and other applicable taxes) and the related
arrangements will be made:
(i) normal employee medical and insurance benefits will
be continued on an insured basis for the Employee and
for the Spouse until the latter to occur of: (x) the
Employee's death, or (y) the Spouse's death, provided
that medical benefits provided to the Employee and
the Spouse pursuant to this subparagraph (i) may be
reduced from time to time to the extent that medical
benefits are provided through Medicare or through any
other employer following the Effective Date of
Termination;
(ii) the Employer shall pay to the Employee, in a single
lump sum payment within 30 days following the
Effective Date of Termination, an amount equal to a
pro rata portion of the Employee's current monthly
Initial Term Salary or Reduced Employment Status
Salary, as the case may be, at the time of
termination (less applicable deductions) with respect
to the month in which the Effective Date of
Termination occurs based upon the number of days
elapsed in such month prior to the Effective Date of
Termination; and
(iii) if the termination occurs during the Reduced
Employment Status Term pursuant to Section 10 while
the Employee is still serving as a member of the
Board of Directors, then the Employee shall
thereafter be entitled to such cash compensation, if
any, as the Employer generally provides to its
non-employee members of the Board of Directors until
the Employee ceases to serve as such a member.
Section 10. REDUCED EMPLOYMENT STATUS.
Commencing on January 1, 2003 and continuing through June 30, 2005, the
Employee shall, and at any time during the Initial Term and upon ninety (90)
days prior written notice to the Employer, the Employee may in his sole
discretion elect to, continue his employment with the Employer in a reduced
employment status with, among other factors, reduced time commitment and
compensation (the "REDUCED EMPLOYMENT STATUS"), to continue until June 30, 2005.
Under Reduced Employment Status, the Employee shall be employed by the
Employer as (a) a member of the Board of Directors until the Employer's 2004
Annual Meeting of Stockholders, and (b) as an Executive Advisor and, in that
capacity, shall be available at the Employer's request to advise management and
perform such similar services as may be reasonably requested by the
-7-
<PAGE>
Employer, for a minimum of five hours per month, at the Employer's premises and
under the Employer's supervision and control; provided, however, that if the
Employee is not reelected to serve as a member of the Board of Directors at any
time during the Employee's Reduced Employment Status, then the Employee shall
retain such title and provide such services as mutually agreed upon by the
Employer and the Employee; it being further understood that the Employee's
employment during any period of Reduced Employment Status shall not, (i) without
the Employee's consent, require more than 20 hours per month and (ii) without
the Employer's consent, be less than five hours per month. For any required
hours beyond this stated range, the Employee's compensation shall be at a rate
to be agreed upon by the Employee and the Employer.
During any period of Reduced Employment Status, the Employee shall be
paid the Reduced Employment Status Salary pursuant to Section 4(b) and shall
continue to receive the medical and insurance benefits contemplated by Section
9(c)(i). In addition, any and all unvested options granted to the Employee shall
continue to vest as provided under their original terms and any and all vested
options shall continue to be exercisable as provided under their original terms.
If the Employee continues to serve as a member of the Board of Directors, then
the Employee shall be eligible during any period of Reduced Employment Status
for such stock option grants, if any, as the Employer generally provides to its
members of the Board of Directors pursuant to the Employer's 1994 Director Stock
Option Plan, as amended, until the Employee ceases to serve as such a member. If
the Employee is terminated during any period of Reduced Employment Status while
he serves as a member of the Board of Directors, then the Employee shall
thereafter be entitled to such cash compensation, if any, as the Employer
generally provides to its non-employee members of the Board of Directors until
the Employee ceases to serve as such a member.
Section 11. BREACH OR VIOLATION OF AGREEMENT.
Any controversy or claim arising out of, or relating to, this Agreement,
or the breach thereof, shall be settled by arbitration in accordance with the
Commercial Arbitration Rules of the American Arbitration Association, and
judgment upon the award rendered may be entered in any court having jurisdiction
thereof. Notwithstanding the foregoing, the parties agree that a breach or
violation of this Agreement will result in immediate and irreparable injury and
harm to the other party, who shall have the right of an injunction, specific
performance or other equitable relief to prevent the violation of the
obligations hereunder. In addition, the prevailing party in any arbitration or
litigation relating to the interpretation or enforcement of this Agreement shall
be entitled to reimbursement of all reasonable costs and expenses (including
without limitation fees and expenses of counsel) incurred in connection
therewith.
-8-
<PAGE>
Section 12. NOTICES.
Any notice required to be given pursuant to the provisions of this
Agreement shall be in writing and, if mailed, sent by registered or certified
mail, postage prepaid, with a copy delivered by an overnight courier service of
recognized standing, to the party named at the address set forth below, or at
such other address as each party may hereafter designate in writing to the other
party:
Employer: RSA Security Inc.
36 Crosby Drive
Bedford, MA 01730
Attn: Secretary
cc: Hale and Dorr LLP
60 State Street
Boston, MA 02109
Attn: Hal J. Leibowitz, Esq.
Employee: Charles R. Stuckey, Jr.
121 Woodbine Road
Carlisle, MA 01741
Any such notices shall be deemed to have been delivered when served
personally, or 48 hours after being mailed in the manner specified above.
Section 13. CHANGE IN CONTROL EVENT.
(a) If a Change in Control (as such term is defined below) shall have
occurred, the successor entity or party of such Change in Control
shall immediately assume all of the Employer's obligations under
this Agreement.
(b) In addition, all of the stock options granted to the Employee
which shall not have vested or which shall still remain
exercisable as of the effective date of the Change in Control
shall immediately thereupon automatically vest and be free from
repurchase.
(c) For purposes of this Agreement, a "CHANGE IN CONTROL" shall be
deemed to have taken place if:
(i) there shall be consummated any consolidation or merger of
the Employer in which the Employer is not the continuing or
surviving corporation or pursuant to which shares of the
Employer's capital stock are converted into cash,
securities or other property, other than a consolidation or
merger of the Employer in which each holder of the
Employer's capital stock immediately prior to the
consolidation or merger has upon consummation of the
-9-
<PAGE>
consolidation or merger the same proportionate ownership of
each class or series of capital stock of the surviving
corporation as such holder had of each class or series of
the Employer's capital stock immediately prior to the
consolidation or merger, or any sale, lease, exchange or
other transfer (in one transaction or a series of
transactions contemplated or arranged by any party as a
single plan) of all or substantially all of the assets of
the Employer; or
(ii) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended
(the "EXCHANGE ACT")) shall after the Agreement Date become
the beneficial owner (as defined in Rules 13(d)(3) and
13(d)(5) under the Exchange Act), directly or indirectly,
of securities of the Employer representing more than 50% of
the voting power of all then outstanding securities of the
Employer having the right under ordinary circumstances to
vote in an election of the Board of Directors (for purposes
of this clause (ii), any securities of the Employer that
any such person has the right to acquire pursuant to any
agreement, or upon exercise of conversion rights, warrants
or options, or otherwise, shall be deemed beneficially
owned by such person).
Section 14. EXERCISE OF STOCK OPTIONS.
(a) Subject to the provisions of Section 13, upon the termination of
the Employment Period, the Employee shall have the following
periods during which to exercise all then vested stock options
having a grant date on or before November 1, 1997:
(i) if the Employee voluntarily resigns, the Employee shall
have 60 days from the date of resignation during which to
exercise such vested options; and
(ii) if there is a termination other than "for cause" and other
than due to the occurrence of any of the events referred to
in Section 6, then the Employee shall have six months from
such date during which to exercise such vested options.
(b) Subject to the provisions of Section 13, upon the termination of
the Employment Period, the Employee shall have the following
periods during which to exercise all then vested stock options
having a grant date after November 1, 1997:
(i) if the Employee voluntarily resigns, the Employee shall
have 12 months from the date of resignation during which to
exercise such vested options; and
(ii) if there is a termination other than "for cause" and other
than due to the occurrence of any of the events referred to
in Section 6, then the Employee
-10-
<PAGE>
shall have 12 months from the date of such termination
during which to exercise such vested options.
(c) Upon a termination of the Employment Period "for cause," all stock
options held by the Employee shall terminate automatically upon
the Effective Date of Termination.
(d) Upon a termination of the Employment Period as a result of any of
the events referred to in Section 6, the period of exercise of all
or any portion of the Employee's then vested stock options shall
be 12 months from the Effective Date of Disability or death.
Section 15. LIMITATIONS ON PARACHUTE PAYMENTS.
(a) In the event that the Employer undergoes a "Change in Ownership or
Control" (as defined below), a portion of any "Contingent
Compensation Payments" (as defined below) that the Employee would
otherwise be entitled to receive shall be eliminated to the extent
necessary to eliminate any "excess parachute payments" (as defined
in Section 280G(b)(1) of the Code) for the Employee. For purposes
of this Section 15, the Contingent Compensation Payments so
eliminated shall be referred to as the "ELIMINATED PAYMENTS" and
the aggregate amount (determined in accordance with Proposed
Treasury Regulation Section 1.280G-1, Q/A-30 or successor
provision) of the Contingent Compensation Payments so eliminated
shall be referred to as the "ELIMINATED AMOUNT." Notwithstanding
the foregoing, no such reduction in payments shall occur if the
excess of (A) 110% of the Eliminated Amount (computed without
regard to this sentence) over (B) the aggregate present value
(determined in accordance with Proposed Treasury Regulation
Section 1.280G-1, Q/A-31, and Q/A-32 or successor provisions) of
the amount of any additional taxes that would be incurred by the
Employee if the Eliminated Payments (determined without regard to
this sentence) were paid to him (including, state and federal
income taxes on the Eliminated Payments, the excise tax imposed by
Section 4999 of the Code payable with respect to all of the
Contingent Compensation Payments, and any withholding taxes) is
greater than zero. For purpose of the preceding sentence, any
federal or state income tax that would be attributable to the
receipt of the Eliminated Payments shall be computed by
multiplying the amount of the Eliminated Payment by the maximum
combined federal and state income tax rate provided by law;
provided, however, that if the Employee so notifies the Employer
within 90 days following the timely filing of all relevant tax
returns for the Employee for the year or other taxable period in
which the Eliminated Payments would have been made, the Eliminated
Payments shall be recomputed based upon all of the Employee's
actual tax circumstances. If, as a result of such recomputation,
there are no Eliminated Payments, the Employee shall become
entitled to receive Contingent Compensation Payments previously
treated as Eliminated Payments within ten days of the delivery of
the aforementioned notice together with interest thereon computed
at the prime rate announced from time
-11-
<PAGE>
to time by the Wall Street Journal compounded monthly from the
date that such payments originally would have been made.
(b) For purposes of this Section 15, the following terms shall have
the meaning given them in this subsection (b):
(i) "CHANGE IN OWNERSHIP OR CONTROL" shall mean a change in the
ownership or effective control of the Employer or in the
ownership of a substantial portion of the assets of the
Employer determined in accordance with Section 280G(b)(2)
of the Code.
(ii) "CONTINGENT COMPENSATION PAYMENT" shall mean any payment
(or benefit) in the nature of compensation that is made or
supplied to a "disqualified individual" (as defined in
Section 280G(c) of the Code) and that is contingent (within
the meaning of Section 280G(b)(2)(A)(i) of the Code) on a
Change in Ownership or Control of the Employer.
(c) The amount of any payments or other benefits otherwise due to the
Employee following a Change in Ownership or Control that could
reasonably be characterized as Contingent Compensation Payments
(as determined by the Employer) shall not be made until 30 days
after the date on which they would otherwise have been due (the
"EXTENDED DUE DATE"). Within 15 days of the date on which such
payments or benefits would have originally been due, the Employer
shall determine and notify the Employee (with reasonable detail
regarding the basis for its conclusions) (i) whether some or all
of such payments and benefits constitute Contingent Compensation
Payments and (ii) the amount of any Eliminated Amount. On or prior
to the Extended Due Date, the Employee shall notify the Employer
either (A) that he agrees with the Employer's determination
pursuant to the preceding sentence, in which case he shall
indicate, if applicable, the Contingent Compensation Payments that
will be treated as Eliminated Payments or (B) that he disagrees
with such determination, in which case he shall indicate those
payments that should be characterized as Contingent Compensation
Payments, the amount of any Eliminated Amount and, if applicable,
the Contingent Compensation Payments that will be treated as
Eliminated Payments. The amount and characterization of any item
in the notice from the Employee shall be final; provided, however,
that in the event that the Employee fails to notify the Employer
pursuant to the preceding sentence on or before the Extended Due
Date, the Employer's initial determination shall be final and the
Contingent Compensation Payments that will be treated as
Eliminated Payments shall be determined by the Employer in its
absolute discretion. In no event shall the Employer be liable to
the Employee as a result of any factual or legal determination
made by it pursuant to this subsection (c) or for any information
supplied by it to the Employee or his advisors.
-12-
<PAGE>
(d) The provisions of this Section 15 are intended to apply to any and
all payments or benefits available to the Employee under this
Agreement.
Section 16. LEGAL EXPENSES.
The Employer shall reimburse the Employee for any reasonable legal
expenses incurred by the Employee in connection with the preparation and
negotiation of this Agreement and any amendments hereto.
Section 17. ENTIRE AGREEMENT.
(a) CHANGE, MODIFICATION, WAIVER. No change or modification of this
Agreement shall be valid unless it is in writing and signed by
each of the parties hereto. No waiver of any provision of this
Agreement shall be valid unless it is in writing and signed by the
party against whom the waiver is sought to be enforced. The
failure of a party to insist upon strict performance of any
provision of this Agreement in any one or more instances shall not
be construed as a waiver or relinquishment of the right to insist
upon strict compliance with such provision in the future.
(b) INTEGRATION OF ALL AGREEMENTS. This Agreement, together with the
Prior Agreements, constitutes the entire Agreement between the
parties and is intended to be an integration of all agreements
between the parties with respect to the Employee's service with
the Employer. Subject to Section 13(b), any and all prior
agreements between the Employee and the Employer with respect to
the subject matter hereof (other than the Prior Agreements) are
hereby revoked.
(c) SEVERABILITY OF PROVISIONS. If for any reason any provision of
this Agreement should be declared void or invalid, such
declaration shall not affect the validity of the rest of this
Agreement, which shall remain in force as if executed with the
void or invalid provision eliminated. Each of the Prior Agreements
shall survive any termination of this Agreement in accordance with
its terms.
Section 18. BINDING EFFECT.
This Agreement shall be binding upon all parties hereto and their heirs,
successors and assigns. This Agreement shall be binding upon any successor
entity to the Employer, including without limitation any successor by merger,
consolidation or sale of assets, and shall be assignable by the Employer to any
entity controlled by or under common control with the Employer.
Section 19. GOVERNING LAW.
This Agreement shall be governed by and construed in accordance with the
internal laws of The Commonwealth of Massachusetts, without regard to conflicts
of laws principles.
-13-
<PAGE>
Section 20. MISCELLANEOUS.
(a) FORM. As employed in this Agreement, the singular form shall
include, if appropriate, the plural.
(b) HEADINGS. The headings employed in this Agreement are solely for
the convenience and reference of the parties and are not intended
to be descriptive of the entire contents of any paragraph and
shall not limit or otherwise affect any of terms, provisions or
construction thereof.
(c) COUNTERPARTS. This Agreement may be executed in counterparts, each
of which shall be deemed an original, but all of which together
shall constitute one and the same instrument.
[The remainder of this page is intentionally left blank.]
-14-
<PAGE>
IN WITNESS WHEREOF, this Agreement is executed as of the date first above
written.
EMPLOYER:
RSA SECURITY INC.
/s/ Joseph B. Lassiter, III
--------------------------------
Joseph B. Lassiter, III
Director and Chairman of the
Compensation Committee of the
Board of Directors
EMPLOYEE:
/s/ Charles R. Stuckey, Jr.
--------------------------------
Charles R. Stuckey, Jr.
-15-