EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit
10.4
This
EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made and
entered into effective as of the 1st day of December
2018, by and between Exactus, Inc. a Nevada corporation
headquartered at 0000 Xxxxxx Xxxx, Xxxxx 000, Xxxx Xxxxx, XX 00000
(“Company”) and Xxxxxx X.
Xxxxx, an individual (“Executive”). As used
herein, the “Effective Date” of this
Agreement shall mean December 1, 2018.
W I T N
E S S E T H:
WHEREAS, on
February 29, 2016 the Company and Exactus BioSolutions Corporation,
a Delaware corporation (the “Predecessor Company”)
entered into a Share Exchange Agreement (the “Share Exchange”) pursuant
to which the Company acquired all of the issued and outstanding
capital stock of the Predecessor Company.
WHEREAS, Executive
was party to an Employment Agreement dated as of December 15, 2015
by and between and Executive and the Predecessor Company (the
“Predecessor
Employment Agreement”).
WHEREAS, the
Executive desires to be employed by the Company as its Chief
Executive Officer and the Company wishes to employ the Executive in
such capacity.
WHEREAS, in
consideration for entry into this Agreement and the employment of
Executive pursuant to the terms hereof, Executive and Company agree
to terminate the Predecessor Employment Agreement and Executive
agrees to release Company from any and all obligations under the
Agreement for payment of any amounts that could be due or owing,
including, without limitation, all compensation, bonus, benefits,
car allowances, equity awards, separation and other payments
thereunder, including any and all amount accrued or unpaid
thereunder or which could accrue or become payable thereunder,
other than: (i) all cash compensation and bonuses paid on or before
the Effective Date (but not any accrued and unpaid amounts existing
as of the Effective Date which shall be waived and released in all
respects); (ii) reimbursement of all reasonable and necessary
expenses incurred by Executive on or prior to the Effective date
which shall become obligations pursuant to this Agreement; and
(iii) 225,000 options issued pursuant to the Company’s 2018
Equity Incentive Plan at an exercise price of $0.089 per share,
which shall be fully-vested on the Effective Date (collectively,
the “Retained
Benefits”).
WHEREAS, this
Agreement is being entered into between the Company and the
Executive in connection with that certain Exchange Agreements
between the Company and certain other parties signatory thereto and
as a condition thereof (the “Exchange
Agreements”).
NOW,
THEREFORE, in consideration of the foregoing and their respective
covenants and agreements contained in this document, the Company
and the Executive hereby agree as follows:
1. Employment and Duties. The
Company agrees to employ and the Executive agrees to serve as the
Company’s Chief Executive Officer. The duties and
responsibilities of the Executive shall include the duties and
responsibilities as the Company’s Board of Directors
(“Board”) may from time to
time assign to the Executive.
The
Executive shall devote his full time efforts and services to the
business and affairs of the Company and its subsidiaries. Nothing
in this Section 1 shall prohibit the Executive from: (A) serving as
a director or member of any other board, committee thereof of any
other entity or organization; (B) delivering lectures, fulfilling
speaking engagements, and any writing or publication relating to
his area of expertise; (C) serving as a director or trustee of any
governmental, charitable or educational organization; (D) engaging
in additional activities in connection with personal investments
and community affairs, including, without limitation, professional
or charitable or similar organization committees, boards,
memberships or similar associations or affiliations or (E)
performing advisory activities, provided, however, such activities
are not in competition with the business and affairs of the Company
or would tend to cast executive of Company in a negative light in
the reasonable judgment of the Board.
2. Term. The term of this
Agreement shall commence on the Effective Date and shall continue
for a period of two (2) years following the Effective Date (such
initial two (2) year term, the “Initial Term”) and shall
be automatically renewed for successive one (1) year periods
thereafter unless either party provides the other party with
written notice of his or its intention not to renew this Agreement
at least three (3) months prior to the expiration of the initial
term or any renewal term of this Agreement. “Employment Period” shall
mean the initial two (2) year term plus renewals, if
any.
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3. Place of Employment. The
Executive’s services shall be performed at the address for
the Company set forth above and at such location or locations as
the Board of Directors shall determine, in its sole discretion.
Should the Company require services at a location greater than 25
miles from the Executive’s current residence the Company will
provide for and pay the usual and customary fees associated with
moving the Executive and his household to the required
location.
4. Base Salary. The Company agrees
to pay the Executive an initial base salary (“Base Salary”) of $150,000
per annum ($12,500 per month). Annual adjustments after the first
year of the Employment Period shall be determined by the Board. The
Base Salary shall be paid in periodic installments in accordance
with the Company’s regular payroll practices.
5. Bonuses.
(a) Annual
Bonus. The Executive shall be eligible to receive an annual bonus
the (“Annual
Bonus”) as determined by the Compensation Committee or
the Board of Directors of the Company (the “Compensation Committee”).
The Annual Bonus shall be paid by the Company to the Executive
promptly after determination that the relevant targets, if any,
have been met, it being understood that the attainment of any
financial targets associated with any bonus shall not be determined
until following the completion of the Company’s annual audit
and public announcement of such results and shall be paid promptly
following the Company’s announcement of earnings. In the
event that the Compensation Committee is unable to act or if there
shall be no such Compensation Committee, then all references herein
to the Compensation Committee (except in the proviso to this
sentence) shall be deemed to be references to the Board. Upon his
termination from employment, the Executive shall be entitled to
receive a pro-rata portion of the Annual Bonus calculated based
upon his final day of employment, regardless of whether he is
employed by the Company through the conclusion of the fiscal
quarter or year, as the case may be, on which the Annual Bonus is
based.
(b) Equity
Awards. The Executive shall be eligible for such grants of
awards under a Company incentive plan (or any successor or
replacement plan adopted by the Board and approved by the
stockholders of the Company) (the “Plan”) or as the
Compensation Committee or Board may from time to time determine
(the “Share
Awards”). Share Awards shall be subject to
the applicable Plan terms and conditions, provided, however, that
Share Awards shall be subject to any additional terms and
conditions as are provided herein or in any award certificate(s),
which shall supersede any conflicting provisions governing Share
Awards provided under the Plan.
6. Severance
Compensation. Upon
termination of employment for any reason, the Executive shall be
entitled to: (A) all Base Salary earned through the date of
termination to be paid according to Section 4; (B) any and all
reasonable expenses paid or incurred by the Executive in connection
with and related to the performance of his duties and
responsibilities for the Company during the period ending on the
termination date to be paid according to Section 8; (C) any accrued
but unused vacation time through the termination date in accordance
with Company policy; and (D) any Annual Bonuses earned through the
date of termination to be paid according to Section 5(a); and (E)
all Share Awards earned and vested prior to
termination.
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Additionally, if
the Executive’s employment is terminated prior to expiration
of the Employment Period (including due to his death or Disability,
as defined in Section 12(b)) unless the Executive’s
employment is terminated for Cause (as defined in Section 12(c)) or
the Executive terminates his employment without Good Reason (as
defined in Section 12(d) and other than for a Change in Control as
provided in Section 12(d) and Section 12(f)), the Executive shall
be entitled to receive a cash amount equal to such amount as the
Executive would have been entitled to receive as an aggregate Base
Salary for the balance of the Initial Term (the “Initial Term Severance
Payment”) (provided that if this Agreement has been
renewed subsequent to the Initial Term and the Executive’s
employment is terminated prior to expiration of the Employment
Period (including due to his death or Disability) unless the
Executive’s employment is terminated for Cause or the
Executive terminates his employment without Good Reason and other
than for a Change in Control, the Executive shall be entitled to
receive a cash payment as determined by the Board (the
“Renewal Separation
Payment”) (the Initial Term Severance Payment or the
Renewal Separation Payment, as applicable herein shall may be
referred to as the “Separation Payment”),
provided,
however that the
Separation Payment shall in no event be less than 12 months of Base
Salary as then in effect, plus 50% of the prior year bonus, and if
no such bonus has been paid, 75% of the Base Salary as then in
effect; provided, that the Executive executes an agreement
releasing Company and its affiliates from any liability associated
with this Agreement and such release is irrevocable at the time the
Separation Payment is first payable under this Section 6 and the
Executive complies with his other obligations under Section 13 of
this Agreement. Subject to the terms hereof, one-half (1/2) of the
Separation Payment shall be paid within thirty (30) days of the
Executive’s termination of employment (“Initial Payment”),
provided that the Executive has executed a release; and the balance
of the Separation Payment shall be paid in substantially equal
installments on the Company’s regular payroll dates beginning
with the first payroll date coincident with or immediately
following the Initial Payment and ending with the last payroll date
that occurs in the third calendar year beginning after the
Executive’s termination of employment.
The
Executive may continue coverage with respect to the Company’s
group health plans as permitted by the Consolidated Omnibus Budget
Reconciliation Act of 1985 (“COBRA”) for himself and
each of his “Qualified Beneficiaries”
as defined by COBRA (“COBRA Coverage”). The
Company shall reimburse the amount of any COBRA premium paid for
COBRA Coverage timely elected by and for the Executive and any
Qualified Beneficiary of the Executive, and not otherwise
reimbursed, during the period that ends on the earliest of (x) the
date the Executive or the Qualified Beneficiary, as the case may
be, ceases to be eligible for COBRA Coverage, (y) the last day of
the consecutive eighteen (18) month period following the date of
the Executive’s termination of employment and (z) the date
the Executive or the Qualified Beneficiary, as the case may be, is
covered by another group health plan. To reimburse any COBRA
premium payment under this paragraph, the Company must receive
documentation of the COBRA premium payment within ninety (90) days
of its payment.
7. Clawback Rights. The Annual
Bonus, and any and all stock based compensation (such as options
and equity awards) (collectively, the “Clawback Benefits”) shall
be subject to “Clawback Rights” as
follows: during the period that the Executive is employed by the
Company and upon the termination of the Executive’s
employment and for a period of three (3) years thereafter, if there
is a restatement of any financial results directly attributable to
the Executive from which any Clawback Benefits to the Executive
shall have been determined, the Executive agrees to repay any
amounts which were determined by reference to any Company financial
results which were later restated (as defined below), to the extent
the Clawback Benefits amounts paid exceed the Clawback Benefits
amounts that would have been paid, based on the restatement of the
Company’s financial information. All Clawback Benefits
amounts resulting from such restated financial results shall be
retroactively adjusted by the Compensation Committee to take into
account the restated results, and any excess portion of the
Clawback Benefits resulting from such restated results shall be
immediately surrendered to the Company and if not so surrendered
within ninety (90) days of the revised calculation being provided
to the Executive by the Compensation Committee following a publicly
announced restatement, the Company shall have the right to take any
and all action to effectuate such adjustment. At the option of the
Executive, the excess portion of the Clawback Benefits resulting
from such restated results may be repaid by either: (i) cash
payment, or (ii) surrender of common stock to the Company, valued
at the closing market price for the Company’s common stock on
the date of surrender. The calculation of the revised Clawback
Benefits amount shall be determined by the Compensation Committee
in good faith and in accordance with applicable law, rules and
regulations. All determinations by the Compensation Committee with
respect to the Clawback Rights shall be final and binding on the
Company and the Executive. The Clawback Rights shall terminate
following a Change of Control as defined in Section 12(f), subject
to applicable law, rules and regulations. For purposes of this
Section 7, a restatement of financial results that requires a
repayment of a portion of the Clawback Benefits amounts shall mean
a restatement resulting from material non-compliance of the Company
with any financial reporting requirement under the federal
securities laws and shall not include a restatement of financial
results resulting from subsequent changes in accounting
pronouncements or requirements which were not in effect on the date
the financial statements were originally prepared
(“Restatements”). The
parties acknowledge it is their intention that the foregoing
Clawback Rights as relates to Restatements conform in all respects
to the provisions of the Xxxx-Xxxxx Xxxx Street Reform and Consumer
Protection Act of 2010 (“Xxxx-Xxxxx Act”) and
require recovery of all “incentive-based” compensation,
pursuant to the provisions of the Xxxx-Xxxxx Act and any and all
rules and regulations promulgated thereunder from time to time in
effect. Accordingly, the terms and provisions of this Agreement
shall be deemed automatically amended from time to time to assure
compliance with the Xxxx-Xxxxx Act and such rules and regulations
as hereafter may be adopted and in effect.
8. Expenses. The Executive shall
be entitled to prompt reimbursement by the Company for all
reasonable ordinary and necessary travel, entertainment, and other
expenses incurred by the Executive while employed (in accordance
with the policies and procedures established by the Company for its
senior executive officers) in the performance of his duties and
responsibilities under this Agreement; provided, that the Executive
shall properly account for such expenses in accordance with Company
policies and procedures.
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9. Other Benefits. During the term
of this Agreement, the Executive shall be eligible to participate
in incentive, stock purchase, savings, retirement (401(k)), and
welfare benefit plans, including, without limitation, health,
medical, dental, vision, life (including accidental death and
dismemberment) and disability insurance plans (collectively,
“Benefit
Plans”), in substantially the same manner and at
substantially the same levels as the Company makes such
opportunities available to the Company’s managerial or
salaried executive employees and/or its senior executive
officers.
10. Vacation. During the term of
this Agreement, the Executive shall be entitled to accrue, on a pro
rata basis, seven (7) weeks paid vacation per year. Vacation shall
be taken at such times as are mutually convenient to the Executive
and the Company and no more than seven (14) consecutive days shall
be taken at any one time without Company approval in
advance.
11. Intentionally
Omitted.
12. Termination of
Employment.
(a) Death.
If the Executive dies during the Employment Period, this Agreement
and the Executive’s employment with the Company shall
automatically terminate and the Company’s obligations to the
Executive’s estate and to the Executive’s Qualified
Beneficiaries shall be those set forth in Section 6 regarding
severance compensation.
(b) Disability.
In the event that, during the term of this Agreement the Executive
shall be prevented from performing his essential functions
hereunder to the full extent required by the Company by reason of
Disability (as defined below), this Agreement and the
Executive’s employment with the Company shall automatically
terminate. The Company’s obligation to the Executive under
such circumstances shall be those set forth in Section 6 regarding
severance compensation. For purposes of this Agreement,
“Disability” shall mean a
physical or mental disability that prevents the performance by the
Executive, with or without reasonable accommodation, of his
essential functions hereunder for an aggregate of ninety (90) days
or longer during any twelve (12) consecutive months. The
determination of the Executive’s Disability shall be made by
an independent physician who is reasonably acceptable to the
Company and the Executive (or his representative), be final and
binding on the parties hereto and be made taking into account such
competent medical evidence as shall be presented to such
independent physician by the Executive and/or the Company or by any
physician or group of physicians or other competent medical experts
employed by the Executive and/or the Company to advise such
independent physician.
(c) Cause.
(1) At
any time during the Employment Period, the Company may terminate
this Agreement and the Executive’s employment hereunder for
Cause. For purposes of this Agreement, “Cause” shall mean: (a)
the willful and continued failure of the Executive to perform
substantially his duties and responsibilities for the Company
(other than any such failure resulting from the Executive’s
death or Disability) after a written demand by the Board for
substantial performance is delivered to the Executive by the
Company, which specifically identifies the manner in which the
Board believes that the Executive has not substantially performed
his duties and responsibilities, which willful and continued
failure is not cured by the Executive within thirty (30) days
following his receipt of such written demand; (b) the conviction
of, or plea of guilty or nolo
contendere to, a felony, or (c) fraud, dishonesty or gross
misconduct which is materially and demonstratively injurious to the
Company. Termination under clauses (b) or (c) of this Section
12(c)(1) shall not be subject to cure.
(2)
For purposes of
this Section 12(c), no act, or failure to act, on the part of the
Executive shall be considered “willful” unless done, or
omitted to be done, by him in bad faith and without reasonable
belief that his action or omission was in, or not opposed to, the
best interest of the Company. Between the time the Executive
receives written demand regarding substantial performance, as set
forth in subparagraph (1) above, and prior to an actual termination
for Cause, the Executive will be entitled to appear (with counsel)
before the full Board to present information regarding his views on
the Cause event. After such hearing, termination for Cause must be
approved by a majority vote of the full Board (other than the
Executive). After providing the written demand regarding
substantial performance, the Board may suspend the Executive with
full pay and benefits until a final determination by the full Board
has been made.
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(3) Upon
termination of this Agreement for Cause, the Company shall have no
further obligations or liability to the Executive or his heirs,
administrators or executors with respect to compensation and
benefits thereafter, except for the obligation to pay the Executive
any Base Salary earned through the date of termination to be paid
according to Section 4; any unpaid Annual Bonus to be paid
according to Section 5; reimbursement of any and all reasonable
expenses paid or incurred by the Executive in connection with and
related to the performance of his duties and responsibilities for
the Company during the period ending on the termination date to be
paid according to Section 8; and any accrued but unused vacation
time through the termination date in accordance with Company
policy. The Company shall deduct, from all payments made hereunder,
all applicable taxes, including income tax, FICA and FUTA, and
other appropriate deductions.
(d) For
Good Reason or a Change of Control or Without
Cause.
(1) At
any time during the term of this Agreement and subject to the
conditions set forth in Section 12(d)(2) below the Executive may
terminate this Agreement and the Executive’s employment with
the Company for “Good Reason” or for a “Change of
Control” (as defined in Section 12(f)). For purposes of this
Agreement, “Good
Reason” shall mean the occurrence of any of the
following events without Executive’s consent: (A) the
assignment to the Executive of duties that are significantly
different from, and/or that result in a substantial diminution of,
the duties that he assumed on the Effective Date (including
reporting to anyone other than solely and directly to the Board);
(B) the assignment to the Executive of a title that is different
from and subordinate to the title Executive Vice President of Sales
and Marketing of the Company, provided, however, for the absence of
doubt following a Change of Control, should the Executive be
required to serve in a diminished capacity in a division or unit of
another entity (including the acquiring entity), such event shall
constitute Good Reason regardless of the title of the Executive in
such acquiring company, division or unit; or (C) material breach by
the Company of this Agreement.
(2) The
Executive shall not be entitled to terminate this Agreement for
Good Reason unless and until he shall have delivered written notice
to the Company within ninety (90) days of the date upon which the
facts giving rise to Good Reason occurred of his intention to
terminate this Agreement and his employment with the Company for
Good Reason, which notice specifies in reasonable detail the
circumstances claimed to provide the basis for such termination for
Good Reason, and the Company shall not have eliminated the
circumstances constituting Good Reason within thirty (30) days of
its receipt from the Executive of such written notice. In the event
the Executive elects to terminate this Agreement for Good Reason in
accordance with Section 12(d)(1), such election must be made within
the one-twenty (120) days following the initial existence of one or
more of the conditions constituting Good Reason as provided in
Section 12(d)(1). In the event the Executive elects to terminate
this Agreement for a Change in Control in accordance with Section
12(d)(1), such election must be made within one hundred eighty
(180) days of the occurrence of the Change of Control.
(3) In
the event that the Executive terminates this Agreement and his
employment with the Company for Good Reason or for a Change of
Control or the Company terminates this Agreement and the
Executive’s employment with the Company without Cause, the
Company shall pay or provide to the Executive (or, following his
death, to the Executive’s heirs, administrators or executors)
the severance compensation set forth in Section 6 above. The
Company shall deduct, from all payments made hereunder, all
applicable taxes, including income tax, FICA and FUTA, and other
appropriate deductions.
(4) The
Executive shall not be required to mitigate the amount of any
payment provided for in this Section 12(d) by seeking other
employment or otherwise, nor shall the amount of any payment
provided for in this Section 12(d) be reduced by any compensation
earned by the Executive as the result of employment by another
employer or business or by profits earned by the Executive from any
other source at any time before and after the termination date. The
Company’s obligation to make any payment pursuant to, and
otherwise to perform its obligations under, this Agreement shall
not be affected by any offset, counterclaim or other right that the
Company may have against the Executive for any reason.
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(e) Without
“Good Reason” by the Executive. At any time
during the term of this Agreement, the Executive shall be entitled
to terminate this Agreement and the Executive’s employment
with the Company without Good Reason and other than for a Change of
Control by providing prior written notice of at least thirty (30)
days to the Company. Upon termination by the Executive of this
Agreement or the Executive’s employment with the Company
without Good Reason and other than for a Change of Control, the
Company shall have no further obligations or liability to the
Executive or his heirs, administrators or executors with respect to
compensation and benefits thereafter, except for the obligation to
pay the Executive any Base Salary earned through the date of
termination to be paid according to Section 4; any unpaid Annual
Bonus to be paid according to Section 5; reimbursement of any and
all reasonable expenses paid or incurred by the Executive in
connection with and related to the performance of his duties and
responsibilities for the Company during the period ending on the
termination date to be paid according to Section 8; and any accrued
but unused vacation time through the termination date in accordance
with Company policy. The Company shall deduct, from all payments
made hereunder, all applicable taxes, including income tax, FICA
and FUTA, and other appropriate deductions.
(f) Change
of Control. For purposes of this Agreement,
“Change of
Control” shall mean the occurrence of any one or more
of the following: (i) the accumulation (if over time, in any
consecutive twelve (12) month period), whether directly,
indirectly, beneficially or of record, by any individual, entity or
group (within the meaning of Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended) of more than fifty
percent (50%) or more of the shares of the outstanding Common Stock
of the Company, whether by merger, consolidation, sale or other
transfer of shares of Common Stock (other than a merger or
consolidation where the stockholders of the Company prior to the
merger or consolidation are the holders of a majority of the voting
securities of the entity that survives such merger or
consolidation), (ii) a sale of all or substantially all of the
assets of the Company or (iii) during any period of twelve (12)
consecutive months, the individuals who, at the beginning of such
period, constitute the Board, and any new director whose election
by the Board or nomination for election by the Company’s
stockholders was approved by a vote of at least two-thirds (2/3) of
the directors then still in office who either were directors at the
beginning of the twelve (12) month period or whose election or
nomination for election was previously so approved, cease for any
reason to constitute at least a majority of the Board; provided
that the following acquisitions shall not constitute a Change of
Control for the purposes of this Agreement: any acquisition of
Common Stock or securities convertible into Common Stock by any
employee benefit plan (or related trust) sponsored by or maintained
by the Company. Notwithstanding the foregoing, a Change of Control
shall exclude the initial event that causes the Company to become a
public reporting company with the Securities and Exchange
Commission and any event within twelve (12) months following the
Effective Date.
(g) Any
termination of the Executive’s employment by the Company or
by the Executive (other than termination by reason of the
Executive’s death) shall be communicated by written Notice of
Termination to the other party of this Agreement. For purposes of
this Agreement, a “Notice of Termination”
shall mean a written notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of the Executive’s employment
under the provision so indicated, provided, however, failure to
provide timely notification shall not affect the employment status
of the Executive.
13. Confidential
Information.
(a) Disclosure
of Confidential Information. The Executive recognizes,
acknowledges and agrees that he has had and will continue to have
access to secret and confidential information regarding the
Company, its subsidiaries and their respective businesses
(“Confidential
Information”), including but not limited to, its
products, methods, formulas, software code, patents, sources of
supply, customer dealings, data, know-how, trade secrets and
business plans, provided such information is not in or does not
hereafter become part of the public domain, or become known to
others through no fault of the Executive. The Executive
acknowledges that such information is of great value to the
Company, is the sole property of the Company, and has been and will
be acquired by him in confidence. In consideration of the
obligations undertaken by the Company herein, the Executive will
not, at any time, during or after his employment hereunder, reveal,
divulge or make known to any person, any information acquired by
the Executive during the course of his employment, which is treated
as confidential by the Company, and not otherwise in the public
domain. The provisions of this Section 13 shall survive the
termination of the Executive’s employment
hereunder.
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(b) The
Executive affirms that he does not possess and will not rely upon
the protected trade secrets or confidential or proprietary
information of any prior employer(s) in providing services to the
Company or its subsidiaries.
(c) In
the event that the Executive’s employment with the Company
terminates for any reason, the Executive shall deliver forthwith to
the Company any and all originals and copies, including those in
electronic or digital formats, of Confidential Information;
provided, however, the Executive shall be entitled to retain (i)
papers and other materials of a personal nature, including, but not
limited to, photographs, correspondence, personal diaries,
calendars and rolodexes, personal files and phone books, (ii)
information showing his compensation or relating to reimbursement
of expenses, (iii) information that he reasonably believes may be
needed for tax purposes and (iv) copies of plans, programs and
agreements relating to his employment, or termination thereof, with
the Company.
(a) The
Executive agrees and acknowledges that the Confidential Information
that the Executive has already received and will receive is
valuable to the Company and that its protection and maintenance
constitutes a legitimate business interest of the Company, to be
protected by the non-competition restrictions set forth herein. The
Executive agrees and acknowledges that the non-competition
restrictions set forth herein are reasonable and necessary and do
not impose undue hardship or burdens on the Executive. The
Executive also acknowledges that the Company’s Business (as
defined in Section 14(b)(1) below) is conducted worldwide (the
“Territory”), and that the
Territory, scope of prohibited competition, and time duration set
forth in the non-competition restrictions set forth below are
reasonable and necessary to maintain the value of the Confidential
Information of, and to protect the goodwill and other legitimate
business interests of, the Company, its affiliates and/or its
clients or customers. The provisions of this Section 14 shall
survive the termination of the Executive’s employment
hereunder for the time periods specified below.
(b) The
Executive hereby agrees and covenants that he shall not without the
prior written consent of the Company, directly or indirectly, in
any capacity whatsoever, including, without limitation, as an
employee, employer, consultant, principal, partner, shareholder,
officer, director or any other individual or representative
capacity (other than (i) as a holder of less than two (2%) percent
of the outstanding securities of a company whose shares are traded
on any national securities exchange or (ii) as a limited partner,
passive minority interest holder in a venture capital fund, private
equity fund or similar investment entity which holds or may hold an
equity or debt position in portfolio companies that are competitive
with the Company; provided however, that the Executive shall be
precluded from serving as an operating partner, general partner,
manager or governing board designee with respect to such portfolio
companies), or whether on the Executive's own behalf or on behalf
of any other person or entity or otherwise howsoever, during the
Term and thereafter to the extent described below, within the
Territory:
(1) Engage,
own, manage, operate, control, be employed by, consult for,
participate in, or be connected in any manner with the ownership,
management, operation or control of any business in competition
with the Business of the Company, as defined in the next sentence.
For purposes hereof, the Company’s Business shall mean the
electronics distribution business as well as any future related or
unrelated industries or segments in which the Company may engage or
operate in the future.
(2) Recruit,
solicit or hire, or attempt to recruit, solicit or hire, any
employee, or independent contractor of the Company to leave the
employment (or independent contractor relationship) thereof,
whether or not any such employee or independent contractor is party
to an employment agreement, for the purpose of competing with the
Business of the Company;
(3) Attempt
in any manner to solicit or accept from any customer of the
Company, with whom Executive had significant contact during
Executive’s employment by the Company (whether under this
Agreement or otherwise), business of the kind or competitive with
the business done by the Company with such customer or to persuade
or attempt to persuade any such customer to cease to do business or
to reduce the amount of business which such customer has
customarily done or might do with the Company, or if any such
customer elects to move its business to a person other than the
Company, provide any services of the kind or competitive with the
business of the Company for such customer, or have any discussions
regarding any such service with such customer, on behalf of such
other person for the purpose of competing with the Business of the
Company; or
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(4) Interfere
with any relationship, contractual or otherwise, between the
Company and any other party, including, without limitation, any
supplier, distributor, co-venturer or joint venturer of the
Company, for the purpose of soliciting such other party to
discontinue or reduce its business with the Company for the purpose
of competing with the Business of the Company.
With
respect to the activities described in Paragraphs (1), (2), (3) and
(4) above, the restrictions of this Section 14(b) shall continue
during the Term and for a period of one (1) year
thereafter.
15. Section 409A.
The
provisions of this Agreement are intended to comply with or are
exempt from Section 409A of the Code (“Section 409A”) and the
related Treasury Regulations and shall be construed in a manner
consistent with the requirements for avoiding taxes or penalties
under Section 409A. The Company and the Executive agree to work
together in good faith to consider amendments to this Agreement and
to take such reasonable actions necessary, appropriate or desirable
to avoid imposition of any additional tax under Section 409A or
income recognition prior to actual payment to the Executive under
this Agreement.
It is
intended that any expense reimbursement made under this Agreement
shall be exempt from Section 409A. Notwithstanding the foregoing,
if any expense reimbursement made under this Agreement shall be
determined to be “deferred compensation” subject to
Section 409A (“Deferred Compensation”),
then (a) the right to reimbursement or in-kind benefits is not
subject to liquidation or exchange for another benefit, (b) the
amount of expenses eligible for reimbursement, or in-kind benefits,
provided during any taxable year shall not affect the expenses
eligible for reimbursement, or in-kind benefits to be provided, in
any other taxable year (provided that this clause (b) shall not be
violated with regard to expenses reimbursed under any arrangement
covered by Section 105(b) of the Code solely because such expenses
are subject to a limit related to the period the arrangement is in
effect) and (c) such payments shall be made on or before the last
day of the taxable year following the taxable year in which the
expense was incurred.
With
respect to the time of payments of any amount under this Agreement
that is Deferred Compensation, references in the Agreement to
“termination of employment” and substantially similar
phrases, including a termination of employment due to the
Executive’s Disability, shall mean “Separation from Service”
from the Company within the meaning of Section 409A (determined
after applying the presumptions set forth in Treasury Regulation
Section 1.409A-1(h)(1)). Each installment payable hereunder shall
constitute a separate payment for purposes of Treasury Regulation
Section 1.409A-2(b), including Treasury Regulation Section
1.409A-2(b)(2)(iii). Each payment that is made within the terms of
the “short-term deferral” rule set forth in Treasury
Regulation Section 1.409A-1(b)(4) is intended to meet the
“short-term deferral” rule. Each other payment is
intended to be a payment upon an involuntary termination from
service and payable pursuant to Treasury Regulation Section
1.409A-1(b)(9)(iii), et. seq., to the maximum extent permitted by
that regulation, with any amount that is not exempt from Code
Section 409A being subject to Code Section 409A.
Notwithstanding
anything to the contrary in this Agreement, if the Executive is a
“specified employee” within the meaning of Section 409A
at the time of the Executive’s termination, then only that
portion of the severance and benefits payable to the Executive
pursuant to this Agreement, if any, and any other severance
payments or separation benefits which may be considered Deferred
Compensation (together, the “Deferred Separation
Benefits”), which (when considered together) do not
exceed the Section 409A Limit (as defined herein) may be made
within the first six (6) months following the Executive’s
termination of employment in accordance with the payment schedule
applicable to each payment or benefit. Any portion of the Deferred
Separation Benefits in excess of the Section 409A Limit otherwise
due to the Executive on or within the six (6) month period
following the Executive’s termination will accrue during such
six (6) month period and will become payable in one lump sum cash
payment on the date six (6) months and one (1) day following the
date of the Executive’s termination of employment. All
subsequent Deferred Separation Benefits, if any, will be payable in
accordance with the payment schedule applicable to each payment or
benefit. Notwithstanding anything herein to the contrary, if the
Executive dies following termination but prior to the six (6) month
anniversary of the Executive’s termination date, then any
payments delayed in accordance with this paragraph will be payable
in a lump sum as soon as administratively practicable after the
date of the Executive’s death and all other Deferred
Separation Benefits will be payable in accordance with the payment
schedule applicable to each payment or benefit.
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For
purposes of this Agreement, “Section 409A Limit” shall
mean a sum equal to (x) the amounts payable within the terms of the
“short-term deferral” rule under Treasury Regulation
Section 1.409A-1(b)(4) plus (y) the amount payable as
“separation pay due to involuntary separation from
service” under Treasury Regulation Section
1.409A-1(b)(9)(iii) equal to the lesser of two (2) times: (i) the
Executive’s annualized compensation from the Company based
upon his annual rate of pay during the Executive’s taxable
year preceding his taxable year when his employment terminated, as
determined under Treasury Regulation 1.409A-1(b)(9)(iii)(A)(1); and
(ii) the maximum amount that may be taken into account under a
qualified plan pursuant to Section 401(a)(17) of the Code for the
year in which the Executive’s employment is terminated.
16. Miscellaneous.
(a) Neither
the Executive nor the Company may assign or delegate any of their
rights or duties under this Agreement without the express written
consent of the other; provided, however, that the Company shall
have the right to delegate its obligation of payment of all sums
due to the Executive hereunder, provided that such delegation shall
not relieve the Company of any of its obligations
hereunder.
(b) During
the term of this Agreement, the Company (i) shall indemnify and
hold harmless the Executive and his heirs and representatives to
the maximum extent provided by the laws of the State of Nevada and
by Company’s bylaws and (ii) shall cover the Executive under
the Company’s directors’ and officers’ liability
insurance on the same basis as it covers other senior executive
officers and directors of the Company.
(c) This
Agreement constitutes and embodies the full and complete
understanding and agreement of the parties with respect to the
Executive’s employment by the Company, supersedes all prior
understandings and agreements, whether oral or written, between the
Executive and the Company, and shall not be amended, modified or
changed except by an instrument in writing executed by the party to
be charged. If any provision of this Agreement, or the application
thereof, shall for any reason and to any extent be invalid or
unenforceable, then the remainder of this Agreement and the
application of such provision to other persons or circumstances
shall be interpreted so as reasonably to effect the intent of the
parties hereto. The parties further agree to replace such
void or unenforceable provision of this Agreement with a valid and
enforceable provision that shall achieve, to the extent possible,
the economic, business and other purposes of the void or
unenforceable provision. No waiver by either party of any provision
or condition to be performed shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same time or any prior
or subsequent time. The Predecessor Employment Agreement is
terminated in all respects effective as of the Effective Date. All
rights and benefits of Executive under the Predecessor Employment
Agreement are hereby released and of no further force and effect
other than the Retained Benefits. Executive hereby
knowingly and voluntarily releases and forever discharges the
Company, any related companies, and the former and current
employees, officers, agents, directors, shareholders, investors,
attorneys, affiliates, successors and assigns of any of them (the
“Released
Parties”) from all
liabilities, claims, demands, rights of action or causes of action
Executive had, has or may have against any of the Released Parties
through the Effective Date of this Agreement, including but not
limited to any claims or demands based upon or relating to
Executive’s employment with the Company or the cessation of
that employment. This includes, but is not limited to, a
release of any rights or claims Employee may have under Title VII
of the Civil Rights Act of 1964, as amended; the Equal Pay Act; the
Age Discrimination in Employment Act of 1967; the Employee
Retirement Income Security Act, except as provided herein; the
Americans with Disabilities Act; the Family and Medical Leave Act
of 1993; or any other federal, state or local laws or regulations
applicable to the employment relationship. This also
includes, but is not limited to, a release by Executive of any
claims for wrongful discharge, breach of contract, or any other
statutory, common law, tort, contract, or negligence claim that
Executive had, has or may have against any of the Released Parties
through the date of this Agreement. This release covers
both claims that Executive knows about and those claims Executive
may not know about. Notwithstanding anything herein to the
contrary, the release shall not discharge any obligation of the
Company for indemnification of Executive under the Predecessor
Agreement, this Agreement, the Company’s Articles of
Incorporation or Bylaws, or pursuant to applicable law, other than
such indemnification as may be contrary to public policy as
determined by the Securities and Exchange Commission.
(d) This
Agreement shall inure to the benefit of, be binding upon and
enforceable against, the parties hereto and their respective
successors, heirs, beneficiaries and permitted
assigns.
(e) The
headings contained in this Agreement are for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) All
notices, requests, demands and other communications required or
permitted to be given hereunder shall be in writing and shall be
deemed to have been duly given when personally delivered, sent by
registered or certified mail, return receipt requested, postage
prepaid, or by reputable national overnight delivery service (e.g.,
Federal Express) for overnight delivery to the party at the address
set forth in the preamble to this Agreement, or to such other
address as either party may hereafter give the other party notice
of in accordance with the provisions hereof. Notices shall be
deemed given on the sooner of the date actually received or the
third business day after deposited in the mail or one business day
after deposited with an overnight delivery service for overnight
delivery.
(g) This
Agreement shall be governed by and construed in accordance with the
internal laws of the State of New York, and each of the parties
hereto irrevocably consents to the jurisdiction and venue of the
federal and state courts located in the State of New York, County
of New York, for any disputes arising out of this Agreement, or the
Executive’s employment with the Company. The prevailing party
in any dispute arising out of this Agreement shall be entitled to
his or its reasonable attorney’s fees and costs.
(h) This
Agreement may be executed simultaneously in two or more
counterparts, each of which shall be deemed an original, but all of
which together shall constitute one of the same instrument. The
parties hereto have executed this Agreement as of the date set
forth above.
(i) The
Executive represents and warrants to the Company, that he has the
full power and authority to enter into this Agreement and to
perform his obligations hereunder and that the execution and
delivery of this Agreement and the performance of his obligations
hereunder will not conflict with any agreement to which the
Executive is a party.
(j) The
Company represents and warrants to the Executive that it has the
full power and authority to enter into this Agreement and to
perform its obligations hereunder and that the execution and
delivery of this Agreement and the performance of its obligations
hereunder will not conflict with any agreement to which the Company
is a party.
[Signature page follows immediately]
-9-
IN
WITNESS WHEREOF, the Executive and the Company have caused this
Executive Employment Agreement to be executed as of the date first
above written.
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EXCACTUS, INC.
By:
Name:
_____________________________
Title: _____________________________
Date
Signed: ________________________
|
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XXXXXX X. XXXXX
Executive
___________________________________________
Date
Signed: _________________________
|
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