EXHIBIT 10.7
EMPLOYMENT AGREEMENT
This Employment Agreement (hereinafter referred to as "Agreement") is
entered into by and between Pure Harvest Cannabis Group, Inc., a Colorado
corporation (hereinafter referred to as the "Company"), and Xxxxx Xxxxxxx
(hereinafter referred to as "Executive").
1. Term of Employment. The initial term of this Agreement shall be for two
(2) years, beginning on April 1, 2020 (the "Effective Date") and ending on April
1, 2022. Upon expiration of the initial 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
President 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 100% of his time, attention and energies to the
business of the Company and its subsidiaries 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. Executive shall also serve as a
Director of the Company. 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.
3. Compensation.
(a) Signing Bonus and Base Salary. As a signing bonus the Company will pay
the Executive $50,000, which amount can be deferred until the Company is
generating sufficient revenue. In addition, and during the term of this
Agreement, the Company will pay a base salary of $150,000 per year to the
Executive, payable in installments according to the Company's normal payroll
practices and less 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) Bonuses. Executive may receive such discretionary bonuses as the Board
of Directors, in its sole discretion and from time to time, deem appropriate. In
addition to Executive's base compensation and discretionary bonuses hereunder,
Executive shall be entitled to receive, on an annual basis, a performance-based
bonus (i) in cash equal to two percent (2%) of the Company's annual adjusted
earnings before interest, taxes, depreciation, and amortization ("EBITDA") and
(ii) in restricted shares of common stock, (the "Common Stock"), of the Company
equal to two (2%) of adjusted EBITDA. Price per share for calculation purposes
of the common stock shall be the volume weighted average price of the actual
closing market prices of the Company's common stock using for the last five (5)
trading days of the calendar year. The bonus shall be payable sixty (60) days
following the end of each calendar year during the term of this Agreement. In
the event the enterprise value of the Corporation were to exceed $1 billion at
any time in the future, Xx. Xxxxxxx will be entitled to a $1,000,000 cash bonus.
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As an express condition of Executive's receipt of the bonus, Executive must be
employed with the Company on the last day of the applicable calendar year.
Executive shall not be entitled to any partial or pro-rated bonus if Executive
is not employed at the end of any calendar year during the term of this
Agreement.
(d) Vacation. Executive shall be entitled to a vacation (without deduction
of salary or other compensation) for the period as is in conformity with the
Company's policy regarding vacation for management employees (but in no event
less than four weeks per year).
(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) Health, Life and Disability Insurance and Profit Sharing Plans.
Executive shall be entitled to participate on the same terms as afforded other
executive officers in any Company group health, life, medical, dental,
disability, stock option, retirement, or 401(k) plans or programs, now existing
or established hereafter to the extent that he is eligible under the general
provisions thereof.
(g) Restricted Stock. On the Effective Date the Company will issue
Executive 1,500,000 shares of the Company's restricted common stock which shares
will be fully vested. The Company will also issue Executive, on the Effective
Date, 400,000 shares of the Company's restricted common stock which shares will
become fully vested on April 1, 2021. These 1,900,000 shares will be valued
based upon a valuation dated March 30, 2020. If Executive is not employed on
such date, the restricted shares, subject to the provisions of Section 6(d),
will be cancelled. The Company will issue Executive, on April 1, 2021, 400,000
shares of the Company's restricted common stock which shares will become fully
vested on March 30, 2022. If Executive is not employed on such date, the
restricted shares, subject to the provisions of Section 6(d), will be cancelled.
The grant of such restricted shares shall be evidenced by a restricted stock
grant agreement that contains these terms and other provisions generally
applicable to the Company's restricted stock, including the restrictions that
the Executive may not sell, transfer, pledge or assign such restricted shares,
may not vote such restricted shares, and will not have the right to receive any
dividends on the restricted shares until time as the restricted shares shall be
fully vested. Certificates representing such restricted shares will bear a
notation that the restricted shares are subject to the forgoing. The restricted
shares will be granted pursuant to the Company's 2020 Stock Incentive Plan.
(h) Options. The Company shall grant Executive, on the Effective Date,
options to purchase 1,750,000 shares of the Company's common stock in accordance
with the following:
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Shares issuable Upon Exercise Vesting Expiration
Exersise of Option Price Date(1) Date
-------------------- -------- ------- ----------
300,000 $ 0.50 December 31, 2020 June 1, 2025
150,000 $ 1.00 December 31, 2020 June 1, 2025
300,000 $ 3.00 December 31, 2020 June 1, 2025
500,000 $ 5.00 May 1, 2021 June 1, 2025
500,000 $ 7.50 May 1, 2021 June 1, 2025
(1) Date options are first exercisable. If Executive is not employed on the
Vesting Date any options which have not vested, subject to the provisions
of Section 6(d), will be cancelled.
The options will be granted pursuant to the Company's 2020 Stock Incentive
Plan.
(i) Expense Reimbursement. The Company shall reimburse Executive for his
expenses incurred in providing services to the Company upon presentation by
Executive of the details of, and vouchers for, such expenses, including for
travel, entertainment and similar items, and Executive shall be furnished
reasonable office space, computing and telecommunication resources, assistance
and facilities.
(j) Location. Executive shall primarily work from a principal office of the
Company located in the Denver, Colorado metropolitan area.
(k) Indemnification. The Company shall provide indemnification of any legal
proceedings brought against Executive as employee, officer, or director of
Company, provided such action is not caused by Executive's criminal or willful
misconduct. The Executive shall be entitled to liability insurance coverage on
the same basis as other directors and officers of the Company, if and when such
coverage is obtained by the Company.
The Company shall, from time to time, make the good faith determination
whether or not it is practicable for the Company to obtain and maintain a policy
or policies of insurance with reputable insurance companies providing the
officers and directors of the Company with coverage for losses from wrongful
acts, or to ensure the Company's performance of its indemnification obligations
under this Agreement (D&O Insurance). Among other considerations, the Company
will weigh the costs of obtaining such insurance coverage against the protection
afforded by such coverage. In all policies of D&O Insurance, the Executive shall
be named as an insured in such a manner as to provide the Executive the same
rights and benefits as are accorded to the most favorably insured of the
Company's directors and officers.
Notwithstanding the foregoing, the Company shall have no obligation to
obtain or maintain D&O Insurance coverage if D&O Insurance is not reasonably
available, if, in the reasonable business judgment of a majority of the members
of the Board, the premium costs for D&O Insurance are substantially
disproportionate to the amount of coverage provided, if the coverage provided by
D&O Insurance is limited by exclusions so as to provide an insufficient benefit,
or if the Executive is covered by similar insurance maintained by a parent or
subsidiary of the Company. All decisions as to whether and to what extent the
Company maintains D&O Insurance shall be made by the Board in its sole and
absolute discretion.
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4. Performance Review. The Company 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 second quarter 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.
5. Termination
5.1 a Termination of Agreement Due to Death or Disability. Executive's
employment and this Agreement shall terminate upon Executive's death. In the
event that Executive's employment ends due to his death, the Company's
obligations under this Agreement shall immediately cease, except that the
Executive's legal representatives shall be entitled to receive all compensation
otherwise payable to Executive through the last day of the month in which the
Executive's death occurred. If Executive dies while employed by the Company, any
options or stock of the Company then owned by Executive shall automatically
accelerate and become fully vested. This provision shall not otherwise limit any
benefits available under the Company's benefit plans. The exercise period of any
stock options held by Executive at his death will be extended to a date which is
four years after the effective date of the Executive's death, unless the
expiration date is after such four-year period, in which case the original
expiration date will control.
b. If Executive becomes mentally or physically incapacitated or disabled so
as to be unable to perform Executive's duties under this agreement, the
Agreement shall terminate as well. Executive's inability to adequately perform
services under this Agreement for a period of ninety (90) consecutive days will
be conclusive evidence of such mental or physical incapacity or disability,
unless such inability to adequately perform such services under this Agreement
is pursuant to a mental or physical incapacity or disability covered by the
Family Medical Leave Act ("FMLA"). If Executive becomes incapacitated or
disabled while employed by the Company, any options or stock of the Company then
owned by Executive shall automatically accelerate and become fully vested. This
provision shall not otherwise limit any benefits available under the Company's
benefit plans. The Company shall also extend the period of exercisability of
those stock options to four years, or the natural expiration of the stock
options, whichever is later.
5.2 "Termination for Cause". Notwithstanding anything to the contrary
herein, Executive's employment and this Agreement may be terminated by the
Company upon written notification upon the occurrence of any of the following:
a. Willful misconduct that has a material adverse effect on the Company's
operations, prospects, and business;
b. Acts of fraud against the Company; and
c. Executive breaches any of the terms set forth in this Agreement and
Executive fails to cure such breach within 30 days after Executive's receipt
from the Company of written notice of such breach, which notice shall describe
in reasonable detail the Company's belief that Executive is in breach hereof
(notwithstanding the following, no cure period shall be applicable to breaches
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by Executive of paragraph 9 or to the extent the Company has provided Executive
more than 2 notices of substantially the same breach within any 12 month
period).
In the event that Executive's employment is terminated with cause by the
Company pursuant to this paragraph 5.2 of this Agreement, the Company
obligations under this Agreement shall immediately cease.
Termination of Executive pursuant to this section 5.2 shall be in addition
to and without prejudice to any other right or remedy to which the Company may
be entitled at law, in equity, or under this Agreement.
5.3 Constructive Termination.
If (i) during the period ending on the date that is 24 months following a
Change in Control the Executive terminates his employment with the Company; (ii)
the Company terminates Executive's employment, other than pursuant to Sections
5.1 or 5.2 of this Agreement; or (iii) the Executive terminates his employment
for Good Reason (all of the above a "Constructive Termination"), then:
o all stock options which Executive holds at the time of such
Constructive Termination shall become fully vested;
o the Company will extend the expiration date of the stock options
referred to above to a date which is four years after the effective
date of the Executive's resignation or termination, unless the
expiration date is after such four-year period, in which case the
original expiration date will control; and
o all shares of restricted stock then held by the Executive shall
immediately vest and all restrictions pertaining to any such shares of
restricted stock will lapse and have no further force or effect.
For purposes of the above:
"Change of Control" shall mean a change in ownership or control of the
Company affected through any of the following transactions:
a. a merger, consolidation or reorganization approved by the Company's
stockholders, unless securities representing more than 50% of the total combined
voting power of the voting securities of the successor corporation are
immediately thereafter beneficially owned, directly or indirectly, and in
substantially the same proportion, by the persons who beneficially owned the
company's outstanding voting securities immediately prior to such transaction;
or
b. any stockholder-approved transfer or other disposition of all or
substantially all of the Company's assets; or
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c. The acquisition by any individual, entity or group of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the Securities
Exchange Act of 1934, as amended) of 20% or more of the Company's either (1) the
then outstanding shares of common stock of the Company or (2) the combined
voting power of the then outstanding voting securities of the Company entitled
to vote in the election of directors; or
d. a change in the composition of the Board over a period of thirty-six
(36) months or less such that a majority of the Board members ceases, by reason
of one or more contested elections for Board membership, to be comprised of
individuals who either (A) have been Board members continuously since the
beginning of such period or (B) have been elected or nominated for election as
Board members during such period by at least a majority of Board members
described in clause (A) who were still in office at the time the Board approved
such election or nomination.
Good Reason means: (a) a breach of any provisions of this Agreement by the
Company; a reduction in the Executive's benefits; or (b) the Executive being
assigned any duties which are materially inconsistent with the duties of the
Executive immediately prior to the date of such new assignment; or (c) the
office at which the Executive is required to perform his duties is more than 10
miles from the office at which the Executive was then performing his duties.
In the event a Constructive Termination has occurred (other than the
Executive's employment being terminated by the Company), Executive may, in his
sole discretion, provide Company with his written notice of resignation to be
effective not less than 30 days after receipt by Company, whereupon Executive
shall cease to be employed by the Company and both parties shall be relieved of
further responsibility or liability to the other under this Agreement, other
than as provided in this Agreement. Upon receipt of such notice of resignation,
or in the event the Company terminates the employment of Executive other than
pursuant to Section 5.1 or 5.2 of this Agreement, Company shall promptly pay to
Executive by certified check, wire transfer funds, or other form of payment
reasonably acceptable to Executive, a lump sum amount equal to 300% of the then
annual salary of the Executive at such compensation rate as is then in effect
under the terms of this Agreement and any extension or renewal thereof (the
"Payment"), or the value of the remaining employment contract, whichever is
greater. The Payment shall not have deducted from it any charges, expenses,
debts, set-offs or other deductions of any kind whatsoever except for required
taxes.
6 In the event of a Constructive Termination, the Company shall also
provide the following benefits to Executive:
a. The Executive's existing coverage under the Company's group health plan
(and, if applicable, the existing group health coverage for eligible dependents)
will end on the last day of the month in which the eligible Executive's
employment terminates. The eligible Executive and his eligible dependents may
then be eligible to elect temporary continuation coverage under the Company's
group health plan in accordance with the Consolidated Omnibus Budget
Reconciliation Act of 1985, as amended ("COBRA"). The eligible Executive (and,
if applicable, his eligible dependents) will be provided with a COBRA election
form and notice which describe his rights to continuation coverage under COBRA.
If an eligible Executive elects COBRA continuation coverage, then the
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Company will pay for COBRA coverage (such payments shall not include COBRA
coverage with respect to the Company's Section 125 health care reimbursement
plan) for (i) eighteen (18) months, or (ii) the maximum period permitted under
COBRA. If Executive does exhaust the applicable COBRA period, the Company will
reimburse Executive for the cost of an individual health insurance policy in an
amount not to exceed the amount of the monthly COBRA premium previously paid by
the Company pursuant to this paragraph for the remainder of the two year period
following Executive's termination of employment. After such period of
Company-paid coverage, the eligible Executive (and, if applicable, his eligible
dependents) may continue coverage at his own expense in accordance with COBRA or
other applicable laws. No provision of this agreement will affect the
continuation coverage rules under COBRA. Therefore, the period during which the
eligible Executive must elect to continue the Company's health plan coverage
under COBRA, the length of time during which COBRA coverage will be made
available to the eligible Executive, and all the eligible Executive's other
rights and obligation under COBRA will be applied in the same manner that such
rules would apply in the absence of the Plan. In the event, however, an
Executive becomes eligible for benefits under another plan prior to the
expiration of the period in which the Company is paying benefit premiums, the
Company shall no longer be obligated to pay such benefit premiums. The Executive
is required to notify the Company of eligibility for benefits under another plan
and is expected to enroll in the new group plan at the first eligible
opportunity unless Executive chooses, at Executive's sole expense, to continue
COBRA benefits through the Company. If Executive fails to notify the Company of
Executive's eligibility for alterative benefits, the Company shall have the
right to discontinue payment of COBRA premiums upon thirty (30) days' notice to
Executive. In no event shall a cash payment be made to Executive in lieu of the
payment of COBRA premiums. The payment of COBRA premiums by the Company shall
not extend the maximum eligible COBRA coverage period.
b. The Company will make available to Executive, upon his request,
outplacement services provided by a reputable outplacement counselor selected by
the Company for a period of nine months following termination. The Company will
assume the cost of all such outplacement services. In no event will a cash
payment be made in lieu of outplacement benefits.
7. Effect on Restricted Stock and Stock Options in Event of Termination.
Upon termination of this Agreement by the Company for "justifiable cause", any
stock options granted, or to be granted, pursuant to Section 3(h) hereof that
have not been earned or vested as of the date of termination shall be cancelled.
8. Cooperation. Upon the termination of this Agreement for any reason,
Executive agrees to cooperate with the Company in effecting a smooth transition
of the management of the Company with respect to the duties and
responsibilities, which Executive performed for the Company. Further, after
termination of this Agreement, Executive will upon reasonable notice, furnish
such information and proper assistance to the Company as it may reasonably
require in connection with any litigation to which the Company is or may become
party.
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9. Confidentiality, Non-Compete Intellectual Property Rights,
Non-Solicitation.
(a) In view of the fact that Executive's work for the Company will bring
him into close contact with many confidential affairs of the Company not readily
available to the public, the Executive agrees:
(i) to keep secret and retain in the strictest confidence all confidential
and proprietary information of the Company and its affiliates, and not
to disclose such confidential and proprietary information to anyone
outside the Company, or to ever use such confidential and proprietary
information for the personal gain or benefit of the Executive, or any
other person, except in the course of performing his duties hereunder
or with the Company's express written consent. Notwithstanding the
above, confidential information does not include information which is
known, or becomes known, to the Executive through means other than his
employment with the Company.
(ii) that all records of the Company, are and shall remain the property of
the Company at all times and to furnish on demand, all books, records,
letters, vouchers, drawings, notes or any other information that is
written, photographed, or stored in any manner pertaining to the
Company and all records of the Company whether in original,
duplicated, copied, transcribed, or any other form.
(b) Executive agrees that he will not, during the term of this Agreement
and for a period of three (3) years from and after the date of termination of
this Agreement, directly or indirectly, (i) compete with the Company or its
subsidiaries or affiliates in markets where the Company has conducted business
or where the Company has written a reasonable plan to conduct business in the
next 6 months (ii) knowingly acquire or own in any manner any interest in any
entity which directly competes with the Company or any of its subsidiaries or
affiliates, (iii) be employed by or serve as an employee, agent, officer, or
director of, or as a consultant to, any entity which directly competes with the
Company or its subsidiaries or affiliates in markets where the Company has
conducted business or where the Company has written a reasonable plan to conduct
business in the next 6 months, or (iv) acquire directly, or through an entity
affiliated with the Executive, an interest in any cultivation facility,
production facility or dispensary which is located within 60 miles of any
licensed facility owned by the Company or which is under consideration for
potential acquisition by the Company. The foregoing provisions of this Section 9
shall not prevent the Executive from acquiring and owning not more than 5% of
the equity securities of any entity whose securities are listed for trading on a
national securities exchange or are regularly traded in the over-the-counter
securities market. Notwithstanding anything herein to the contrary this section
9(b) shall not be effective in the event Executive's employment has been
terminated for any reason other than for "justifiable cause" or Executive
voluntarily leaves the employment of the Company with the consent of the
Company.
(c) All inventions made by the Executive during the employment term, which
inventions apply to the Company's business, including any improvements to any
invention in existence as of the date of this Agreement, will be assigned to the
Company. In the event any of such inventions are of a patentable nature,
Executive agrees to apply for a patent on the invention and assign any patent
rights relating to the invention to the Company. The Company will bear the costs
of any such patent applications.
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(d) Executive understands that his duties may involve writing or drafting
various documents, for the Company. Executive hereby assigns any and all rights
to such documents, to the Company, together with the right to secure copyright
therefore and all extensions and renewals of copyright throughout the entire
world. The Company shall have the right to make any and all versions, omissions,
additions, changes, specifications and adoptions, in whole or in part, with
respect to such documents, brochures or publications.
(e) Executive agrees not to directly or indirectly, (i) employ, solicit for
employment or otherwise contract for the services of any individual who is or
was an employee of the Company at any time; (ii) otherwise induce or attempt to
induce any employee of the Company to leave the employ of the Company, or in any
way knowingly interfere with the relationship between the Company and any
employee of the Company; or (iii) induce or attempt to induce any customer,
supplier, licensee or other business relation of the Company to cease doing
business with the Company, or interfere in any way with the relationship between
any such customer, supplier, licensee or business relation and the Company.
(f) If the Executive commits a breach, or threatens to commit a breach, of
any of the provisions of this Section 9, the Company shall have the following
rights and remedies:
o The right to have the provisions of this Agreement specifically
enforced by any court of competent jurisdiction, it being acknowledged
that any such breach or threatened breach shall cause irreparable
injury to the Company and that money damages shall not provide an
adequate remedy to the Company; and
o The right to recover from the Executive all money damages, direct,
consequential, or incidental, suffered by the Company as a result of
any acts constituting a breach of any of the provisions of this
Section 9.
Each of the rights and remedies enumerated above shall be independent
of the other and shall be severally enforceable, and all of such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity.
10. Resolution of Disputes by Arbitration. Any claim or controversy that
arises out of or relates to this Agreement, or the breach of it, will be
resolved by arbitration in accordance with the rules then existing of the
American Arbitration Association in Denver, Colorado. Judgment upon the award
rendered may be entered in any court possessing jurisdiction over arbitration
awards. The prevailing party shall be entitled to payment for all costs and
reasonable attorneys' fees (both trial and appellate) incurred by the prevailing
party in regard to the proceedings.
11. Adequate Consideration. Executive expressly agrees that the Company has
provided adequate, reasonable consideration for the obligations imposed upon him
in this Agreement.
12. Effect of Prior Agreements. This Agreement supersedes any prior
agreement or understanding between the Company and Executive. 13. Limited Effect
of Waiver by Company. If the Company waives a breach of any provision of this
Agreement by Executive, that waiver will not operate or be construed as a waiver
of later breaches by Executive.
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14. Notices. All notices and other communications that are required or may
be given under this Agreement shall be in writing and shall be delivered
personally, by overnight courier or by certified mail, with postage prepaid and
with a return receipt requested, addressed to the party concerned at the
following addresses:
If to the Company: Pure Harvest Cannabis Group, Inc.
0000 X. 0xx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxxxxx
(000) 000-0000
If to Executive: Xxxxx Xxxxxxx
(to be supplied by Executive)
15. Severability. If any provision of this Agreement is held invalid for
any reason, such invalid provision shall be reformed, to the extent possible, to
best reflect the intention of the parties, and the other provisions of this
Agreement will remain in effect, insofar as they are consistent with law.
16. Assumption of Agreement by Company's Successors and Assigns. At the
Company's sole option, the Company's rights and obligations under this Agreement
will inure to the benefit and be binding upon the Company's successors and
assigns. Executive may not assign his rights and obligations under this
Agreement.
17. Applicable Law. This Agreement in its interpretation and application
and enforcement shall be governed by the law of the State of Colorado without
application of its conflict of laws provisions, and any legal action commenced
by either party seeking interpretation, application and/or enforcement of this
Agreement shall be brought only in the State of Colorado.
18. Section Headings The section and subsection headings in this Agreement
are used solely for convenience of reference, do not constitute a part of this
Agreement, and shall not affect its interpretation.
19. Entire Agreement; Oral Modifications Not Binding. This instrument is
the entire Agreement between the Company and Executive with respect to the
subject matter hereof. Executive agrees that no other promises or commitments
have been made to Executive. This Agreement may be altered by the parties only
by a written Agreement signed by the party against whom enforcement of any
waiver, change, modification, extension, or discharge is sought.
[SIGNATURES ON FOLLOWING PAGE]
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IN WITNESS WHEREOF, the parties have executed this Employment Agreement on
May 14, 2020.
PURE HARVEST CANNABIS GROUP, INC. EXECUTIVE
By: /s/ Xxxxxxx Xxxxxxxx /s/ Xxxxx Xxxxxxx
------------------------------- ------------------------------
Xxxxxxx Xxxxxxxx, Chairman Xxxxx Xxxxxxx
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