EMPLOYMENT AGREEMENT
Exhibit 10.1
This Employment Agreement (hereinafter referred to as “Employment Agreement” or “Agreement”) is entered into by and between CLS Holdings USA, Inc., a Nevada corporation (hereinafter referred to as the “Company”), and Xxxxxx Xxxxxxx (hereinafter referred to as “Executive”) effective June 12, 2024.
WHEREAS, the Company and the Executive entered into the original Employment Agreement (“Original Employment Agreement”) effective March 1, 2019 with Executive serving in the roles of President and Chief Operating Officer. The Original Employment Agreement was set to expire on February 28, 2021.
WHEREAS, effective October 1, 2019, the Company and the Executive entered into an Amendment to the Original Employment Agreement (the “First Amendment”). Pursuant to the terms of the First Amendment, the amended employment agreement was set to expire on February 28, 2022.
WHEREAS, effective May 1, 2022, the Company and the Executive entered into a second amendment to the Employment Agreement (the “Second Amendment). Pursuant to the terms of the Second Amendment, the amended employment agreement was set to expire on April 30, 2024.
WHEREAS, effective August 16, 2022, the Company and the Executive entered into a third amendment to the Employment Agreement (the “Third Amendment”). Pursuant to the terms of the Third Amendment, the amended employment agreement was set to expire on April 30, 2025. Additionally, pursuant to the terms of the Third Amendment, Executive was hired for the positions of President and CEO, following the resignation of Xxxxxxx Xxxxxx as the CEO.
WHEREAS, the Company and the Executive entered into a fourth amendment to the Employment Agreement (the “Fourth Amendment”) pursuant to which: (1) Executive was hired to serve as the CEO and Chairman of the Board of the Company and would no longer serve as President; (2) the term of the Employment Agreement was extended to March 1, 2023 to February 28, 2026; (3) Executive’s Base Salary was increased to $325,000 annually; (4) Executive will to be paid a monthly amount of $1,500 for health insurance and health related expenses; (5) Executive was to be paid monthly for all home office expenses; and (6) Executive was to receive an automobile allowance of $1,200 monthly.
WHEREAS, the Company and the Executive entered into a fifth amendment to the Employment Agreement (the “Fifth Amendment”) pursuant to which: (1) the term of the Employment Agreement was extended from March 1, 2023 to February 28, 2027; (2) Executive was awarded 1 million shares of the Company’s Common restricted stock; and (3) the Executive was given the option to purchase 6 million shares of the Company’s Common Stock vesting 1/36th each month over a period of three years.
WHEREAS, it is the intention of the Company and the Executive that, effective June 12, 2024, this Employment Agreement shall supersede and negate any previous employment agreements or amendments thereto, and that this Employment Agreement shall contain the full terms of the employment relationship between the Executive and the Company.
NOW THEREFORE, in consideration of the forgoing, the mutual promises contained herein and for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Company and Executive agree as follows:
1. Term of Employment. The term of this Agreement shall be for four (4) years, beginning on June 12, 2024 (the “Effective Date”) and ending on May 30, 2028. Upon expiration of the term, this Agreement shall automatically renew for successive terms of one (1) year, unless, without limiting the application of Sections 5, 6 and 7 of this Agreement, either party, at least sixty (60) days prior to such renewal, gives the other party written notice of intent not to renew.
2. Duties and Responsibilities. The Company hereby employs Executive as Chief Executive Officer (“CEO”) and Chairman of the Board with such powers and duties in that capacity as may be established from time to time by the Board of Directors of the Company in its discretion. In addition, Executive will devote his entire time, attention and energies to the business of the Company, its parent and their affiliates in such capacity as may be requested by the Board of Directors of the Company from time to time in its discretion during the term of this Agreement. During his employment, Executive will not engage in any other business activities, regardless of whether such activity is pursued for profits, gains, or other pecuniary advantage. Executive shall use his best efforts and skill to best promote the business and the interests of the Company. Executive shall at all times use his best efforts to preserve and maintain the business relationships between the Company and its executives, employees, clients, suppliers and vendors.
(a) Base Salary. During the term of this Agreement, the Company will pay a base salary of: (1) Three-Hundred fifty-seven thousand five-hundred dollars ($357,500) per annum for the period of June 12, 2024 to February 28, 2025; (2) Three-Hundred ninety-three thousand two-hundred and fifty dollars ($393,250) per annum for the period of March 1, 2025 to February 28, 2026; and (3) Four-Hundred thirty-two thousand four-hundred seventy five dollars ($432,475) per annum for the period of March 1, 2026 to May 31, 2028, to Executive, payable in installments according to the Company’s normal payroll practices and minus any legal and applicable withholdings.
(b) Salary Increases. The Company may, in its sole discretion, increase Executive’s salary from time to time, depending on criteria such as Executive’s performance and the financial performance of the Company.
(c) Stock and Stock Option Awards.
(i) As of the February 1, 2024, the Company awarded Employee One Million shares of the Company’s Common Stock. These shares were fully vested upon grant and were issued as “Restricted Shares.”
(ii) The Company granted Employee an option to purchase Six Million (6,000,000) shares of the Company’s Common Stock, par value $0.001 (the “Option”) on February 1, 2024. The Option shall vest 1/36 (166,667 shares) each month over a three (3)-year period (commencing
February 1, 2024) and have an exercise price equal to the closing price of the Company’s Common Stock on the date of the Option grant. The Option will be documented in an Award Agreement (as defined in the Plan) pursuant to the Company’s 2024 Equity Incentive Plan (the “Plan”). The vesting of the Option shall accelerate and the Option shall be fully vested immediately prior to a Change in Control (as defined in the Plan) provided Employee is then-employed by the Company.
(d) Vacation. Executive shall be entitled to four-weeks’ vacation per year during the first year of this Agreement. Executive shall be entitled to five-weeks’ vacation during the second year of this Agreement. Executive shall be entitled to six-weeks’ vacation during the third and fourth years of this Agreement.
(e) Holidays, Sick Days and Personal Days. Executive shall be entitled to paid holidays and sick days in accordance with the Company’s policies applicable to all employees.
(f) Salary Continuation. If Executive is unable to work due to a physical or mental illness (of a nature that meets the definition of “total disability” for purposes of any Company disability insurance), the Company shall continue Executive’s base salary for up to 90 days after Executive first becomes disabled. This provision shall only apply once during the term of this Agreement.
(g) Health, Life and Disability Insurance and Profit-Sharing Plans. Executive shall be entitled to participate in Company’s group health, life, disability, stock option, retirement, or 401(k) plans or programs, if and when such plans or programs are offered by the Company, subject to the Executive having met any eligibility requirements for participation therein. Related to health insurance and health care, Executive shall receive a payment of $1,500 monthly for health care related expenses in the event that there is no Company group health insurance, or he elects not to participate in the Company group health insurance
(h) Expense Reimbursement. The Company shall reimburse Executive for his expenses incurred in providing services to the Company, including expenses for travel, entertainment and similar items, in accordance with the Company’s reimbursement policies as determined from time to time by the Board of the Company. In addition to the above, the Company shall: (1) pay Executive monthly for home or personal office expenses; and (2) pay to Executive an automobile allowance of $1,200 monthly.
4. Performance Review. The Company, through its Board of Directors, shall provide Executive with an interim review and evaluation of his performance on each anniversary of this Agreement. It is contemplated that this review will normally occur in August of each year but said review may be postponed or delayed in appropriate circumstances. Executive shall be responsible for taking action to initiate the performance review.
(a) In the event of Executive’s death, this Agreement and the Executive’s salary and compensation shall automatically end.
(b) Subject to Section 3(f), if Executive becomes unable to perform his employment duties on a full-time basis during the term of this Agreement, his compensation under this Agreement shall automatically be suspended after any accrued paid-time-off has been exhausted and shall continue to be suspended until such time as Executive becomes able to resume his
duties for the Company. In the event that Executive becomes unable to perform his employment duties for a cumulative period of six months within any span of twelve months during the term of this Agreement, this Agreement and Executive’s employment will be automatically terminated.
6. Termination by Company for Cause or Termination due to Change in Control.
(a) The Company may terminate this Agreement, and Executive’s employment, “for cause” at any time. As used herein, “for cause” shall mean any one of the following:
A. The willful breach or habitual neglect by Executive of his job duties and responsibilities after notice by the Company; or
B. Conviction of any felony that should cause Executive to be unfit for continued employment by the Company or prevent Executive from performing his duties hereunder; or
C. Commission of an act of “dishonesty,” which act directly or indirectly involves the Company (an act of Executive shall not be deemed to be “dishonest” if Executive took such action in Executive’s good faith belief that it was honest and in the best interest of the Company); or
D. Any act or omission deemed as grounds for termination of employees as set forth in the Company’s personnel policies in existence at the time; or
E. A material breach of this Agreement, after notice and reasonable opportunity to cure.
In the event the Company terminates Executive’s employment for cause, the Company shall pay Executive’s salary through the date of termination, and any additional cash or equity compensation that would otherwise be payable for that calendar year and prior years and subsequent years, shall automatically terminate and be forfeited.
(b) Termination due to Change in Control. The Company recognizes that, as is the case with many publicly held corporations, the possibility of a Change in Control (as defined in Exhibit B attached hereto and incorporated by reference herein) may exist and that such possibility, and the uncertainty and questions which it may raise among management, could result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders. The Company has determined that appropriate steps should be taken to reinforce and encourage the continued efforts and dedication of Employee as a key member of the Company’s management, without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. Therefore, in order to induce Employee to remain in the employ of the Company and in consideration of Employee’s agreement set forth in Exhibit B hereto, the Company agrees that Employee shall receive the severance benefits set forth in the attached Golden Parachute Agreement in the event employment with the Company is terminated subsequent to a Change in Control.
If a Change in Control should occur and the Executive either resigns for Good Reason (as defined in Exhibit B) or is terminated pursuant to the provisions of Exhibit B, the Company shall pay Executive all base salary, bonuses and other benefits that accrued prior to the effective date of the Change in Control, and the following shall occur:
For purposes of this Section 6(b), “Change in Control” shall mean the occurrence of any of the following events: (i) a merger, consolidation, reorganization, or similar transaction with or into CLS Holdings USA, Inc. or in which securities of CLS Holdings USA, Inc. are issued, as a result of which the holders of Voting Securities immediately before such event own, directly or indirectly, immediately after such event less than fifty percent (50%) of the combined voting power of the outstanding voting securities of the parent corporation resulting from, or issuing its voting securities as part of, such event; (ii) a complete liquidation or dissolution of CLS Holdings USA, Inc.; or (iii) the sale or other disposition of more than fifty percent (50%) of the assets of CLS Holdings USA, Inc. (on a consolidated basis) to any Person.
If to the Company: CLS Holdings USA, Inc.
000 X. 0xx Xxxxxx
Las Vegas, Nevada, 33156
Attn: Ross Silver
With a copy to: Xxxxxx & Associates
0000 X. Xxxxxxxx Xxxx xxxx 00,
Phoenix, Arizona 85016
Attn: Xxxxxxx Xxxxxx
If to Executive: Xxxxxx Xxxxxxx
000 Xxxx Xxxxxx
Middletown, RI 02842
IN WITNESS WHEREOF, the parties have executed this Employment Agreement on June 12, 2024.
By: Xxxx Xxxxxx, Board Member |
CLS HOLDINGS USA INC.
By: Xxxxx Xxxxxxxx, Board Member |
EXECUTIVE
By: Xxxxxx Xxxxxxx |
EXHIBIT A
CONFIDENTIALITY, INVENTION AND NON-COMPETITION AGREEMENT