EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 5.2
This
Employment Agreement ("Agreement") is effective on October 15,
2018 (the “Effective
Date”) between GROWLIFE, Inc., a Delaware corporation
("Company”) and
XXXX X. XXXXX ("Executive"). The Company and Executive
are sometimes referred to herein individually as a
“Party” and collectively as the
“Parties.
WITNESSETH:
WHEREAS, the Company and Executive
entered into any prior Agreement with the Company
(“Prior Agreement”);
WHEREAS, the Parties hereby revoke,
repeal, and replace the Prior Agreement in its entirety with this
Agreement, which the Parties intend to supersede all agreements
between the Parties entered into prior to the Effective Date;
and
WHEREAS, the Company desires that
Executive be employed by the Company, and render services to the
Company, and Executive is willing to be so employed and to render
such services to the Company, all upon the terms and subject to the
conditions contained herein in consideration for, among other
things, the Company’s agreement to provide Executive with
Confidential Information pursuant to the terms of this agreement,
and Executive’s receipt of Confidential Information pursuant
to a relationship of trust and confidence and under conditions of
confidentiality and non-use and non-disclosure.
AGREEMENT:
NOW, THEREFORE, in consideration of the
mutual covenants and agreements contained herein, and other good
and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. Subject
to and upon the terms and conditions contained in this agreement,
the Company hereby agrees to employ Executive and Executive agrees
to be employed by the Company, for the period set forth in
paragraph 2 hereof, to render to the Company, its affiliates and/or
subsidiaries the services described in paragraph 3
hereof.
2. TERM. Executive’s
employment under this Agreement shall commence as of the Effective
Date hereof and shall continue for a period of three (3) years
unless earlier terminated as set forth herein (the
“Employment
Term”).
3. DUTIES.
(a) Executive
shall serve as the Chief Financial Officer (“CFO”) of the Company, reporting
directly to the Chief Executive Officer of the Company
(“CEO”). Executive shall
be responsible for the management and running of the day-to-day
financial operations and merger and acquisition activities of the
Company. Executive agrees to devote Executive’s full-time
business time, attention, skills, and best efforts to the
performance of the duties.
(b) Executive
shall perform all duties incident to the positions held by him. The
Company retains the right, by decision of the CEO, to change
Executive's title and duties, as may be determined to be in the
best interests of the Company; provided, however, that any such
change in Executive's duties shall be consistent with Executive's
training, experience, and qualifications.
(c) Executive
agrees to abide by all bylaws and policies of the Company,
promulgated from time to time by the Company, as well as all state
and federal laws, statutes and regulations.
4. BEST
EFFORTS. Executive agrees to devote
his best efforts and attention in a timely manner, as well as his
energies and skill, to the performance of the duties and the
discharge of the duties and responsibilities attributable to his
position.
5. COMPENSATION.
The Company will pay Executive the following compensation for his
services under this Agreement:
(a) Base
Salary. For the duration of the Employment Term and as
compensation for his services and covenants hereunder, in this
position, you will earn a base salary of $165,000 on an annualized
basis. Your compensation will be payable pursuant to the
Company’s regular payroll schedule and policy. Each
subsequent year, the Executive’s performance will be
reviewed.
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(b) Equity
Compensation. Any previously vested stock options, shares,
or other equity compensation earned by Executive to date remains
outstanding and unaffected by this Agreement. The Company grants to
you an option to purchase twenty million (20,000,000) shares of the
Company’s Common Stock (“Shares”) under the
Company’s 2018 Stock Incentive Plan (“SIP”), with
an exercise price per share of $0.012, and subject to the terms and
conditions of the SIP. While engaged or employed, the Shares will
vest in the following manner:
The
Shares will vest quarterly over three years. All options will have
a five-year life and cashless exercise, provided that you do not
cease to be an employee of the Company prior to such date. The
stock option grant shall be subject to the terms and conditions of
the Company’s SIP, including vesting requirements. No right
to any stock is earned or accrued until such time that these Shares
have vested, nor does the xxxxx xxxxxx any right to continue
vesting or employment.
In
addition, notwithstanding the foregoing, in the event that your
continuous status as an employee of the Company is terminated by
the Company without Cause (as defined below) or you terminate your
employment with the Company for Good Reason (as defined below), in
either case upon or within twelve (12) months after a Change in
Control (“CoC”) as defined in the Company’s Stock
Plan then, subject to your execution of a standard release of
claims in favor of the Company or its successor, 100% of the total
number of Shares shall immediately become vested.
(c) Issuance
of Shares. Upon
receipt of written notice from Executive, the Company shall issue
to Executive the Equity Compensation to which the Executive is
entitled to in accordance with the schedule above.
(d)
Accrual of
Shares. In the event
Executive does not request in writing that the Equity Compensation
be issued during the period in which it is earned, the un-issued
shares shall accrue and the Executive may request the shares to be
issued at any time.
(e) Incentive
Compensation. Upon
employment you may be eligible to earn an annual incentive
bonus equal to 2% percentage of the company’s EBITDA
(earnings before interest, taxes, depreciation, and amortization)
pro rated for the period that you are
employed.
6. EXPENSES.
(a) Reimbursement.
Executive shall be reimbursed for all business expenses incurred by
him in connection with the performance of the duties under this
agreement. The reimbursement of any such expense that is
includible in gross income for federal income tax purposes shall be
paid no later than the end of the calendar month following the
calendar month in which the expense was incurred.
7. EXECUTIVE
BENEFITS.
(a) Benefits.
During the Employment Term, Executive shall be entitled to
participate in such group term
insurance, disability insurance, health and medical insurance
benefits, life insurance and retirement plans or programs as are
from time to time generally made available to executive employees
of the Company pursuant to the policies of the Company; provided
that Executive shall be required to comply with the conditions
attendant to coverage by such plans and shall comply with and be
entitled to benefits only to the extent former employees are
eligible to participate in such arrangements pursuant to the terms
of the arrangement, any insurance policy associated therewith and
applicable law, and, further, shall be entitled to benefits only in
accordance with the terms and conditions of such plans. The Company
may withhold from any benefits payable to Executive all federal,
state, local and other taxes and amounts as shall be permitted or
required to be withheld pursuant to any applicable law, rule or
regulation. As an officer of the Company, the Company will pay for
term life insurance with a value of $2 million and pay for up to
$1,000,000 in errors and omission insurance, if less than $2
million ($2,000,000) in Director & Officer insurance is not
provided while employed.
(b) Vacation.
Executive shall be entitled to 4 weeks paid vacation in accordance
with the Company’s
policies, as may be established from time to time by the Company
for its executive staff, which shall be taken at such time or times
as shall be mutually agreed upon by the Parties. Vacation time
shall not accrue if unused after the fiscal year.
8. DEATH
AND DISABILITY.
(a) Death.
The Employment Term shall terminate on the date of
Executive’s death, in which event the Company shall, within
30 days of the date of death, pay to his estate, Executive’s
Base Salary, any unpaid bonus awards (including any
bonus award for a plan year that has ended prior to the time
employment terminated where the award was scheduled to be paid
after the date employment terminated), reimbursable expenses and
benefits owing to Executive through the date of Executive’s
death together with any benefits payable under any life insurance
program in which Executive is a
participant.
(b) Disability.
The Employment Term shall terminate upon Executive’s
Disability. For purposes of this Agreement,
“Disability” shall mean that Executive is unable to
engage in any substantial gainful activity by reason of any
medically determinable physical or mental impairment which can be
expected to result in death or can be expected to last for a
continuous period of not less than 12 months. For
purposes of determining Executive’s Disability, the CEO may
rely on a determination by the Social Security Administration that
Executive is totally disabled or a determination by the
Company’s disability insurance carrier that Executive has
satisfied the above definition of Disability. In case of
such termination, Executive shall be entitled to receive his Base
Salary, any unpaid bonus awards (including any bonus award for a
plan year that has ended prior to the time employment terminated
where the award was scheduled to be paid after the date employment
terminated), reimbursable expenses and benefits owing to Executive
through the date of termination within 30 days of the date of the
Company’s determination of Executive’s Disability,
together with any benefits payable under any disability insurance
program in which Executive is a participant. Except as
otherwise contemplated by this Agreement, Executive will not be
entitled to any other compensation upon termination of his
employment pursuant to this subparagraph 8(b).
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9. TERMINATION
OF EMPLOYMENT.
(a) Termination With
Cause By Company. The Company may terminate this agreement
at any time during the Employment Period for “Cause”
upon written notice to Executive, upon which termination shall be
effective immediately. For purposes of this agreement,
“Cause” means any of the following:
i. Conviction of
felony, theft or embezzlement from the Company;
ii. You have engaged in
fraud, embezzlement, theft, or willful deception, or have engaged
in other dishonest acts during the Term, which are detrimental to
the business of the Company;
iii. You
have breached the non-solicitation or non-competition covenants of
this agreement, have willfully engaged in the diversion of any
corporate opportunity or other similar, serious conflict of
interest or self-dealing inuring to your benefit and to the
Company's detriment;
iv. You have
excessively used alcohol or have used illegal drugs, which
substantially and materially interferes with the performance of
your duties under this agreement after receipt of written notice
from the Company demanding substantial performance, setting forth
the nature of the failure, and your failure to remedy within a
reasonable time thereafter, not to exceed thirty (30)
days;
v. You have violated
state, federal or local laws and ordinances requiring equal
employment opportunity and prohibiting discrimination and
harassment based on race, creed, color, national origin, sex,
honorably discharged veteran or military status, sexual
orientation, or the presence of any sensory, mental, or physical
disability, or any other category protected by law.
(b) Termination Without
Cause By Company. The Company’s current CEO, Xxxxx
Xxxxx, may terminate this Agreement at any time during the
Employment Period without “Cause” upon thirty (30) days
written notice to Executive. In the event Xxxxx Xxxxx is no longer
CEO of the Company, this Agreement may not be terminated at any
time during the Employment Period without
“Cause.”
(c) Termination
By Executive. Executive may terminate this Agreement at any
time by providing the Company thirty (30) days’ written
notice, with or without “Good Reason,” which means any
one or more of the following:
i. a material breach
by the Company of any provision of this Agreement, including
without limitation, the Company’s failure to pay Executive
any Base salary, Equity Compensation, Incentive Compensation, or
benefits, which breach is not cured within fifteen (15) days after
receipt of written notice from you to the CEO specifying the breach
or, if notice and cure have previously taken place regarding the
same or a substantially similar breach, if the breach
recurs;
ii. a requirement by
the Company that you change your primary work locations from
Kirkland, Washington, without your consent to such
change;
iii. the
creation and continuation of a hostile work environment which
continues without corrective action being taken by the Company for
a period of more than fifteen (15) days following written notice by
you to the Company identifying the nature and cause of such hostile
work environment; or
iv. the Company,
without your consent (A) changes your title or position,
(B) makes any material change or reduction in your duties or
responsibilities, (C) reduces your salary and/or benefits, or
(D) assigns duties or responsibilities to you that are
inconsistent with your position as CFO of the Company.
(d) Compensation upon
Termination. In the event that the Company terminates the
Executive’s employment hereunder due to a Termination
“for cause,” the Executive shall be entitled to any
Base Salary, unpaid bonus, reimbursable expenses and benefits owing
to Executive then all of the Company’s obligations hereunder
shall cease immediately, and you will not be entitled to any
further compensation beyond any pro-rated base salary due and bonus
amounts earned through the effective date of termination. Except as
otherwise contemplated by this agreement, Executive will not be
entitled to any other compensation upon termination “for
cause” of this agreement. If Executive is terminated
“without cause” or if this agreement is terminated by
Executive, Executive is entitled any Base Salary, unpaid bonus,
reimbursable expenses and benefits owing to Executive through the
day on which Executive is terminated plus 90 days.
(“Full
Compensation”) shall mean all total executive
compensation accruable under this Agreement, which shall include
payment of all accruable Base Salary, Equity Compensation and
Performance Bonuses that is payable to Executive under this
agreement as if earned in full.
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10. DISCLOSURE
OF TRADE SECRETS AND OTHER PROPRIETARY
INFORMATION.
(a) Executive acknowledges that he is
prohibited from disclosing any confidential information about the
Company, including but not limited trade secrets, formulas, and
financial information, to any party who is not a director, officer
or authorized agent of the Company or its subsidiaries and
affiliates. The Company will provide Executive with
valuable confidential information belonging to the Company or its
subsidiaries or its affiliates above and beyond any confidential
information previously received by Executive and will associate
Executive with the goodwill of the Company or its subsidiaries or
its affiliates above and beyond any prior association of Executive
with that goodwill. In return, Executive promises never
to disclose or misuse such confidential information and never to
misuse such goodwill.
(b) Executive will not, during the
Employment Term, directly or indirectly, as an Executive, employer,
agent, manager or engage in or participate in any other business
that is directly competitive with the Company’s business
without written consent from the Board of Directors.
(c) Executive will not, during the
Employment Term and for a period of twelve (12) months thereafter,
directly or indirectly, work in the United States as an employee,
employer, consultant, agent, manager, officer, or in any other
individual or representative capacity for any person or entity that
is competitive with the business of the
Company.
(d) Executive will not, during the
Employment Term and for a period of twelve (12) months thereafter,
on his behalf or on behalf of any other business enterprise,
directly or indirectly, under any circumstance other than at the
direction and for the benefit of the Company, (i) solicit for
employment or hire any person employed by the Company or any of its
subsidiaries, or (ii) call on, solicit, or take away any person or
entity who was a customer of the Company or any of its subsidiaries
or affiliates during Executive’s employment with the Company,
in either case for a business that is competitive with the business
of the Company.
(g) If
Executive breaches any provision of Section 10 of this Agreement,
the Company shall provide Notice to Executive, in accordance with
Section 13, herein, and shall provide Executive with 60 days to
cure (the “Cure Period”) any breach before proceeding
with any and all remedies available at law or in
equity.
(f) It
is expressly agreed by Executive that the nature and scope of each
of the provisions set forth above are reasonable and necessary. If,
for any reason, any aspect of the above provisions as it applies to
Executive is determined by a court of competent jurisdiction to be
unreasonable or unenforceable under applicable law, the provisions
shall be modified to the extent required to make the provisions
enforceable. Executive acknowledges and agrees that his
services are of unique character and expressly grants to the
Company or any subsidiary or affiliate of the Company or any
successor of any of them, the right to enforce the above provisions
through the use of all remedies available at law or in equity,
including, but not limited to, injunctive relief.
11. COMPANY
PROPERTY.
(a) Any patents, inventions, discoveries,
applications, processes, models or financial statements designed,
devised, planned, applied, created, discovered or invented by
Executive during the Employment Term, regardless of when reduced to
writing or practice, which pertain to any aspect of the
Company’s or its subsidiaries’ or affiliates’
business as described above shall be the sole and absolute property
of the Company, and Executive shall promptly report the same to the
Company and promptly execute any and all documents that may from
time to time reasonably be requested by the Company to assure the
Company the full and complete ownership thereof.
(b) All records, files, lists, including
computer generated lists, drawings, documents, equipment and
similar items relating to the Company’s business which
Executive shall prepare or receive from the Company shall remain
the Company’s sole and exclusive property. Upon termination
of this Agreement, Executive shall promptly return to the Company
all property of the Company in his possession. Executive further
represents that he will not copy or cause to be copied, print out
or cause to be printed out any software, documents or other
materials originating with or belonging to the Company. Executive
additionally represents that, upon termination of his employment
with the Company, he will not retain in his possession any such
software, documents or other materials.
12. CONSENT TO
JURISDICTION AND VENUE. The Executive hereby
consents and agrees that federal and state courts located in King
County, Washington shall have personal jurisdiction and proper
venue with respect to any dispute between the Executive and the
Company. In any dispute with the Company, the Executive will not
raise, and hereby expressly waives, any objection or defense to any
such jurisdiction as an inconvenient forum.
13. NOTICE. Except
as otherwise expressly provided, any notice, request, demand or
other communication permitted or required to be given under this
Agreement shall be in writing, shall be deemed conclusively to have
been given: (a) on the first business day following the day timely
deposited with Federal Express (or other equivalent national
overnight courier) or United States Express Mail, with the cost of
delivery prepaid or for the account of the sender; (b) on the fifth
business day following the day duly sent by certified or registered
United States mail, postage prepaid and return receipt requested;
or (c) when otherwise actually received by the addressee on a
business day (or on the next business day if received after the
close of normal business hours or on any non-business
day).
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14. INTERPRETATION;
HEADINGS. The parties acknowledge and
agree that the terms and provisions of this Agreement have been
negotiated, shall be construed fairly as to all parties hereto, and
shall not be construed in favor of or against any party. The
paragraph headings contained in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of
this Agreement.
15. SUCCESSORS AND
ASSIGNS; ASSIGNMENT; INTENDED BENEFICIARIES. Executive’s rights,
powers, duties or obligations hereunder may be assigned by
Executive in Executive’s sole discretion. This Agreement
shall be binding upon and inure to the benefit of Executive and his
heirs and legal representatives and the Company and its successors.
Successors of the Company shall include, without limitation, any
corporation or corporations acquiring, directly or indirectly, all
or substantially all of the assets of the Company, whether by
merger, consolidation, purchase, lease or otherwise, and such
successor shall thereafter be deemed “the Company” for
the purpose hereof.
16. NO WAIVER BY
ACTION. Any waiver or consent from
the Company respecting any term or provision of this Agreement or
any other aspect of the Executive’s conduct or employment
shall be effective only in the specific instance and for the
specific purpose for which given and shall not be deemed,
regardless of frequency given, to be a further or continuing waiver
or consent. The failure or delay of the Company at any time or
times to require performance of, or to exercise any of its powers,
rights or remedies with respect to, any term or provision of this
Agreement or any other aspect of the Executive’s conduct or
employment in no manner (except as otherwise expressly provided
herein) shall affect the Company’s right at a later time to
enforce any such term or provision.
17. COUNTERPARTS;
GOVERNING LAW; AMENDMENTS; ENTIRE AGREEMENT; SURVIVAL OF
TERMS. This Agreement may be
executed in two counterpart copies, each of which may be executed
by one of the parties hereto, but all of which, when taken
together, shall constitute a single agreement binding upon all of
the parties hereto. This Agreement and all other aspects of the
Executive’s employment shall be governed by and construed in
accordance with the applicable laws pertaining in the State of
Washington (other than those that would defer to the substantive
laws of another jurisdiction). Each and every modification and
amendment of this Agreement shall be in writing and signed by the
parties hereto, and any waiver of, or consent to any departure
from, any term or provision of this Agreement shall be in writing
and signed by each affected party hereto.
18. ENTIRE
AGREEMENT. The entire understanding
and agreement between the Parties has been incorporated into this
Agreement, and this Agreement supersedes all other agreements and
understandings between Executive and the Company with respect to
the relationship of Executive with the Company or its affiliates or
subsidiaries.
[Signature
page follows.]
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IN WITNESS WHEREOF, the Parties
hereto have executed this Agreement as of the date set forth
above.
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(“COMPANY”)
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(“EXECUTIVE”)
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/s/ Xxxxx Xxxxx
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/s/ Xxxx
X. Xxxxx
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By: Xxxxx Xxxxx
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By:
Xxxx X. Xxxxx
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Its:
Chief Executive Officer
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