EMPLOYMENT AGREEMENT
Exhibit 10.1
THIS
AGREEMENT is made and entered into effective as of December 1, 2016
by and between Exactus, Inc., a Nevada corporation, having an
address of 0000 Xxxxxx Xx. Xxxxx 000 Xxxx Xxxxx XX 00000
("Exactus"), and all of its subsidiaries, affiliates, and related
entities, and their successors and assigns (collectively, the
“Company”), and Xxxxx X. Xxxxxxxx (the
“Executive”).
In
consideration of the mutual promises, terms, provisions and
conditions set forth in this Agreement, the parties hereby agree as
follows:
1.
Employment. Subject
to the terms and conditions set forth in this Agreement, the
Company hereby offers and the Executive hereby accepts employment
in the position of Chief Business Officer.
2.
Term. The
Executive’s employment hereunder shall commence effective as
of December 5, 2016 (the “Effective Date”) and shall
continue until terminated on the terms and conditions set forth
herein (the “Term”). 3. Capacity and Performance;
Location.
(a)
During the Term, the Executive shall serve as the Chief Business
Officer of the Company.
(b)
During the Term, the Executive shall be employed by the Company on
a full-time basis, shall have all powers and duties consistent with
his position, subject to the direction and control of the Board and
shall perform such other duties and responsibilities on behalf of
the Company as may reasonably be designated from time to time by
the Board. The Executive shall require the approval of the Board to
pursue or enter into any transaction or group of related
transactions that are not in the ordinary course of
Executive’s employment and would be material to the
Company.
(c)
During the Term, the Executive shall devote sufficient time and his
best efforts, business judgment, skill and knowledge to the
advancement of the business and interests of the Company and to the
discharge of his duties and responsibilities hereunder. The
Executive shall comply with all written policies of the Company in
effect from time to time and shall observe and implement those
resolutions and directives of the Board as made or issued from time
to time. The Executive shall not engage in any other business
activity or serve in any industry, trade, professional,
governmental or academic position during the Term without the prior
approval of the Board of Directors.
d) The
Company’s principal business office is currently located in
Richmond, Virginia. The parties agree that the Executive may
provisionally work , for a period of nine (9) months, from an
office at his current location in Long Beach, California and that
during this initial period, Executive shall travel to the
Company’s Virginia headquarters and other locations as is
reasonably necessary for the management of the Company’s
business. At any time following this provisional period, the Board
may require Executive to move his residence to a location no
greater than thirty (30) miles from its principal business office
provided (a) the Board give no fewer than three (3) months advance
written notice of such requirement and (b) the Company shall
compensate Executive for Executive’s moving or relocation
expenses to the extent the Board, at its sole discretion, deems
reasonable.
(e)
Upon reasonable notice, the Executive shall be available to
participate in all meetings of the Board. The Company will
reimburse the Executive for all reasonable and customary travel and
lodging expenses (e.g., hotel and meals), if any, incurred in
connection with such meetings and the Executive shall provide the
Company with reasonable documentation of such
expenses.
4.
Compensation and
Benefits. As compensation for all services performed by the
Executive hereunder during the Term, Executive shall receive the
following:
(a)
Base Salary. During
the Term, except during the Limited Salary Period, as defined
below, the Company shall pay the Executive a base salary at an
initial rate of Two Hundred Fifty Thousand and No/100 Dollars
($250,000.00) per annum, payable in accordance with the payroll
practices of the Company for its executives,
but in no event less than once per month. Such base salary, as from
time to time increased, is hereafter referred to as the “Base
Salary.”
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(i) For
an initial time from the date of this contract, the Executive shall
be paid an annual salary of One Hundred Twenty Five Thousand and
No/100 Dollars ($125,000.00) (the “Limited Salary”).
The Executive shall be paid the Limited Salary beginning on the
Effective Date and continuing until the Company has brought in an
aggregate of $5 million in financing, whether through the sale of
securities or otherwise (the “Limited Salary Period”).
At the conclusion of the Limited Salary Period, the
Executive’s salary rate will change to the Base Salary as
defined in Section 4(a). The Limited Salary will be paid in
accordance with the payroll policies noted in Section
4(a).
(b)
Bonus Compensation.
During the Term, the Executive shall have the opportunity to earn
an annual performance bonus equal to up to 55% of the
Executive’s Limited Salary or Base Salary, based upon
performance criteria set by the Board in its sole discretion on an
annual basis. The Board shall conduct a performance review of the
Executive at least once a year on or prior to February 1 of each
year, commencing in 2017. The Company may, from time to time, pay
such other bonus or bonuses to the Executive as the Board or a
compensation committee of the Board, in its sole discretion, deems
appropriate. Any performance or other discretionary bonus for which
the Executive is eligible under this Section shall not be earned by
the Executive unless the Executive is employed in good standing by
the Company on the last date of the period with respect to which
the annual performance bonus has been awarded. Any bonus earned by
the Executive in accordance with the terms of this provision will
be paid to the Executive at such time as bonuses for the applicable
period are regularly paid to senior Executives of the Company;
provided, however, in no event will any annual performance bonus be
paid later than February 28 of the applicable calendar
year.
(c)
Stock Option. As
soon as practicable following the Effective Date, the Executive
shall receive stock options to purchase 1,000,000 (one million)
shares of common stock of the Company, as applicable, at an
exercise price per share equal to the fair market value of such
shares on the date of grant (the “Stock Option”). The
Stock Option will vest and become exercisable with respect to half
(50%) of the total number of shares for which options are awarded
on December 31, 2017, or immediately upon the establishment of a
stock option plan in 2017. The other half (50%) of the shares (the
“Remaining Shares”) shall vest monthly on the first day
of each subsequent month, commencing on January 1, 2018, at a rate
of 1/36 of the total number of Remaining Shares per month. Vesting
will be subject to acceleration as set forth in Sections 5 and 6
below.
The
Stock Option shall be granted under the Company’s 2016 Stock
Incentive Plan (the “2016 Plan”) and pursuant to the
terms of the Company’s standard form stock option agreement
approved by the Board.
(d)
Vacations.
During the Term, the Executive shall
be entitled to five (5) weeks of paid vacation per annum, to be
taken at such times and intervals as shall be determined by the
Executive, subject to the reasonable business needs of the
Company. Up to four (4) weeks of accrued and unused vacation
time may be carried over to the subsequent calendar year, subject
to a maximum accrual cap of ten (10) weeks.
(e)
Insurance Coverage.
During the Term, the Company shall provide Executive with medical,
dental, vision, life and disability insurance as follows: the
Company shall (i) pay premiums in accordance with the
Company’s usual practices, for all medical insurance,
including heath, dental and vision coverage for Executive and his
immediate family, and (ii) provide, at its cost, disability
insurance with an annual benefit equal to 75% of the
Executive’s Base Salary. The Executive’s benefits
contemplated by this Section 4(e) shall be subject to the terms and
conditions of each applicable policy, as may be in effect from time
to time at the discretion of the Board, and to the extent the terms
of each applicable policy contradict any provision hereof, the
terms of the policy shall control.
(f)
Other Benefits.
During the Term and subject to any contribution therefor generally
required of employees of the Company, the Executive shall be
entitled to participate in any and all other employee benefit plans
from time to time in effect for employees of the Company generally,
except to the extent such plans are in a category of benefit
(including, without limitation, bonus compensation) otherwise
provided to the Executive. Such participation shall be subject to
(i) the terms of the applicable plan documents, (ii) generally
applicable Company policies and (iii) the discretion of the Board
or any administrative or other committee provided
for in or contemplated by such plan. The Company may alter, modify,
add to or delete such “other employee benefit plans” at
any time as it, in its sole judgment, determines to be appropriate,
without recourse by the Executive.
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(g)
Executive Expenses.
The Company shall pay or reimburse the Executive for all reasonable
and necessary business expenses incurred or paid by the Executive
in the performance of his duties and responsibilities hereunder,
subject to any maximum annual limit and other restrictions on such
expenses set by the Board for senior executives of the Company, and
to such reasonable substantiation and documentation as may be
specified by the Company from time to time. The Executive shall use
reasonable efforts to purchase airline tickets in advance or
otherwise take advantage of low-cost fares.
5.
Termination of
Employment. Executive’s employment hereunder may be
terminated as set forth below.
(a)
Death. In the event
of the Executive’s death during the Term, the
Executive’s employment hereunder shall immediately and
automatically terminate. In that event, the Company shall pay to
the Executive’s designated beneficiary or, if no beneficiary
has been designated by the Executive, to his estate, any earned and
unpaid Initial Salary or Base Salary and/or bonus amount. The
Company shall have no further obligation or liability to the
Executive or his estate. Upon the Executive’s death all
vested stock options will remain property of the estate or
designated beneficiary.
(b)
Disability.
(i) The
Company may terminate the Executive’s employment hereunder,
upon thirty (30) days’ notice to the Executive, in the event
of the Executive’s Disability. For the purpose of this
Agreement, “Disability” shall mean any illness, injury,
accident or condition of either a physical or psychological nature
that causes Executive to be unable to perform the essential
functions of his position hereunder, with or without reasonable
accommodation, for eighty (80) consecutive days during any period
of one-hundred eighty (180) calendar days.
(ii)
The Board may designate another employee to act in the
Executive’s place during any period of
Disability.
(iii)
If any question shall arise as to whether during any period the
Executive has a Disability, the Executive may, and at the request
of the Company shall, submit to a medical examination by a
physician selected by the Company to whom the Executive or his duly
appointed guardian, if any, has no reasonable objection, to
determine whether the Executive has a Disability, and such
determination shall for the purposes of this Agreement be
conclusive of the issue. If such question shall arise and the
Executive shall fail to submit to such medical examination, the
Company’s determination of the issue shall be binding on the
Executive. Nothing in this Section 5(b) shall be interpreted
contrary to any applicable and non-waivable legal requirements, if
any, under the Americans with Disabilities Act.
(c)
Termination by the Company
for Cause. The Company may immediately terminate the
Executive’s employment hereunder for Cause (as defined below)
at any time upon written notice to the Executive setting forth in
reasonable detail the nature of such Cause. The following, as
determined by the Board in its reasonable and good faith judgment,
shall constitute Cause for termination: (i) conviction or plea of
nolo contendere in a court of law of (x) any felony or (y) any
misdemeanor involving dishonesty, breach of trust, misappropriation
or illegal narcotics; (ii) commission of any act involving theft,
embezzlement, fraud, intentional dishonesty or moral turpitude or
that otherwise impairs the reputation, goodwill or business of the
Company; (iii) material breach of any of the provisions of this
Agreement or of any other agreement between the Executive and the
Company, or failure to perform the duties of the position in the
determination of the Board, which breach or failure is not cured
within thirty (30) days of notice to Executive or
(iv) demonstration of gross negligence, willful misconduct or
dereliction of duty in the execution of Executive’s duties
under this Agreement or breach of his duty of loyalty to the
Company that is materially injurious to the Company. Upon the
giving of notice of termination of the Executive’s employment
hereunder for Cause, the Company shall not have any further
obligation or liability to the Executive, other than for Initial
Salary or Base Salary or bonus earned and unpaid through the date
of termination.
(d)
By the Company without
Cause. The Company may terminate the Executive’s
employment hereunder without Cause at any time upon three (3)
months’ advance written notice.
(e)
By the Executive without
Good Reason. The Executive may terminate his employment at
any time upon at least three (3) months advance written notice to
the Company.
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(f)
By the Executive for Good
Reason. The Executive may immediately terminate his
employment hereunder for Good Reason (as defined below) upon
written notice to the Company. “Good Reason” shall mean
(i) material breach hereof by the Company of its obligations under
this Agreement not remedied by the Company within thirty (30)
days’ following written notice by the Executive to the
Company of such breach; (ii) diminution and material reduction in
the Executive’s authority or title within the Company by
reason of actions taken by or under the authority of the Board and
without consent of the Executive (iii) a “Change in
Control” as defined in Section 6 hereof.
(g)
Severance
Benefits.
(i) In
the event that the Company terminates the Executive’s
employment without Cause (as defined above) or the Executive
terminates his employment for Good Reason (as defined above),
subject to the terms and conditions of this Section 5(g), then: (A)
the Company will pay the Executive the Executive’s Initial
Salary or Base Salary (whichever is applicable) on a monthly basis
(the “Severance Payments”) , and will provide the
continuation of the benefits set forth in Section 4(e) and 4(f)
(collectively with the Severance Payments, the “Severance
Benefits”), for a period of months following
Executive’s termination equal to the greater of (1) six (6)
months or (2) the number of full months between the Effective Date
and Executive’s termination up to a maximum of twelve (12)
months (the “Severance Period”); and (B) any Stock
Options that are subject to vesting shall have vesting accelerated
with respect to the number of shares that would have vested during
the Severance Period if Executive had remained employed by the
Company during such period (and any shares of capital stock of the
Company that are subject to a right of repurchase shall have such
right of repurchase lapse with respect to the number of shares that
would have lapsed during the Severance Period if Executive had
remained employed by the Company during such period).
(ii)
The continuation of any group health plan benefits shall be to the
extent authorized by and consistent with 29 U.S.C. § 1161 et
seq. (commonly known as “COBRA”), with the cost of the
regular employer portion of the premium for such benefits paid by
the Company.
(iii)
The Executive’s right to receive Severance Benefits under
Subsection 5(g)(i) is conditioned upon (x) the Executive’s
prior execution and delivery to the Company of a general release,
in a form acceptable to and approved by the Board at its sole
discretion, of any and all claims and causes of action of the
Executive against the Company and its officers and directors,
excepting only the right to any compensation, benefits and/or
reimbursable expenses due and unpaid under Sections 4 and/or
5(g)(i) of this Agreement, and (y) the Executive’s continued
performance of those obligations hereunder that continue by their
express terms after the termination of his employment, including
without limitation those set forth in Sections 8, 9 and
10. Any Severance
Benefits to be paid hereunder shall be payable in accordance with
the payroll practices of the Company for its executives generally
as in effect from time to time, and subject to all required
withholding of taxes.
6.
Change in Control.
If the Executive’s employment is terminated by the Company
without Cause, or by the Executive for Good Reason, in either event
within six (6) months following a Change in Control (as defined
below), the Executive shall receive those Severance Benefits
provided in Section 5(g)(i) as if he were terminated more than
twelve months after the Effective Date, as well as any pro-rated
bonus portions which the Board, at its sole discretion, determines
had been earned by Executive, which Severance Benefits shall be
subject to the terms set forth in Section 5(g)(ii) and shall be in
lieu of any benefits to which the Executive is otherwise entitled
pursuant to Section 5(g). “Change in Control” means an
event or occurrence set forth in any one or more of subsections (a)
through (c) below (including an event or occurrence that
constitutes a Change in Control under one of such subsections but
is specifically exempted from another such
subsection):
(a) the
acquisition by an 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 (the “Exchange Act”)) (an
“Acquiring Person”) of beneficial ownership of any
capital stock of the Company if, after such acquisition, such
Acquiring Person beneficially owns (within the meaning of Rule
13d-3 promulgated under the Exchange Act) 50% or more of
either (i) the then-outstanding shares of common stock of the
Company (the "Outstanding Company Common Stock") or (ii) the
combined voting power of the then-outstanding securities of the
Company entitled to vote generally in the election of directors
(the "Outstanding Company Voting Securities"); provided, however,
that for purposes of this subsection (a), the following
acquisitions shall not constitute a Change in Control: (i) any
acquisition by the Company or (ii) any acquisition by any employee
benefit plan (or related trust) sponsored or maintained by the
Company or any corporation controlled by the Company;
or
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(b) any
change in Company governance such that the Continuing Directors (as
defined below) do not constitute a majority of the Board (or, if
applicable, the Board of Directors of a successor corporation to
the Company), where the term “Continuing Director”
means at any date a member of the Board (i) who was a member of the
Board on the date of the execution of this Agreement or (ii) who
was nominated or elected subsequent to such date by at least a
majority of the directors who were Continuing Directors at the time
of such nomination or election or whose election to the Board was
recommended or endorsed by at least a majority of the directors who
were Continuing Directors at the time of such nomination or
election; or
(c) the
consummation of a merger, consolidation, reorganization,
recapitalization or statutory share exchange involving the Company
or a sale or other disposition of all or substantially all of the
assets of the Company (a “Business Combination”),
unless, immediately following such Business Combination, all or
substantially all of the individuals and entities who were the
beneficial owners of the Outstanding Company Common Stock and
Outstanding Company Voting Securities immediately prior to such
Business Combination beneficially own, directly or indirectly, more
than 50% of the then-outstanding shares of common stock and the
combined voting power of the then-outstanding securities entitled
to vote generally in the election of directors, respectively, of
the resulting or acquiring corporation in such Business Combination
in substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the Outstanding
Company Common Stock and Outstanding Company Voting Securities,
respectively.
7.
Effect of
Termination. Upon termination of this Agreement and
Executive’s employment hereunder, all obligations and
provisions of this Agreement shall terminate except those which
contemplate performance following termination, including but not
necessarily limited to all obligations and provisions in Sections
8-11, and all obligations and provisions with respect to any
accrued and unpaid monetary obligations and vesting acceleration
provisions and the provisions of Section 8 through (and inclusive
of) 23 hereof.
8.
Confidential Information;
Assignment of Inventions.
(a) The Executive
acknowledges that the Company and its Affiliates will continually
develop Confidential Information and Proprietary Information (as
defined below), that the Executive may develop Confidential
Information and Proprietary Information for the Company or its
Affiliates, and that the Executive may learn of Confidential
Information and Proprietary Information during the course of his
employment with the Company. The Executive agrees that, except as
required for the proper performance of his duties for the Company,
he will not, directly or indirectly, use or disclose to any third
party any Confidential Information or Proprietary Information. The
Executive understands and agrees that this restriction will
continue to apply after his employment terminates, regardless of
the reason for termination.
(b) The
Executive agrees that all Confidential Information and Proprietary
Information, including, without limitation all work products,
inventions methods, processes, designs, software, apparatuses,
compositions of matter, procedures, improvements, property, data
documentation, information or materials that the business, jointly
or separately prepared, conceived, discovered, reduced to practice,
developed or created during, in connection with, for the purpose
of, related to, or as a result of his employment with the Company,
and/or to which he has access as a result of his employment with
the Company (collectively, the “Inventions”) is and
shall remain the sole and exclusive property of the
Company.
(c) The
Executive by his signature on this Agreement unconditionally and
irrevocably transfers and assigns to the Company all rights, title
and interest in the Inventions (as defined above, including all
patent, copyright, trade secret and any other intellectual property
rights therein) and will take any steps and execute any further
documentation from time to time reasonably necessary to effect such
assignment free of charge to the Company. The Executive shall
further execute, upon request, whether during, or after the
termination of, his employment with the Company, any and all
applications for patents, assignments and other papers, which the
Company may deem necessary or appropriate for securing such
Inventions for the Company.
(d)
Except as required for the proper performance of his duties, the
Executive shall not copy or duplicate any papers, documents,
drawings, systems, data bases, memoranda, notes, plans, records,
reports files, data (including original data), disks, electronic
media etc. containing Confidential Information or Proprietary
Information (“Documents”) or remove any Documents, or
copies thereof, from Company premises. The Executive shall return
to the Company immediately after his employment terminates, and at
such other times as may be specified by the Company, all Documents
and copies thereof and all other property of the Company then in
his possession or control.
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9.
Non-Competition
Covenants. During the Term and for a period of one (1) year
from the date the Executive’s employment with the Company
terminates (the “Restricted Period”), and within the
Restricted Territory (as defined below), the Executive shall not,
directly or indirectly through any other individual or entity,
whether as an owner, employee, director, partner, consultant,
through stock ownership, investment of capital, lending of money or
property, render the same or substantially similar management
services to any individual, business or enterprise that during the
Restricted Period manufactures, develops or sells diagnostic
technologies that compete with the business or enterprises of the
Company , or any new business or enterprise which the Company
during such Restricted Period plans in good faith in the near
future to commence which is related to the Company’s
then-existing businesses or enterprises and about which the
Executive became aware and/or gained Confidential Information or
Proprietary Information by way of his employment with the Company,
including, without limitation, the research and development of drug
delivery technology for diseases in which the Company has active
research and development programs. Notwithstanding the foregoing,
nothing herein shall prohibit the Executive from being a passive
owner of shares in a publicly-traded corporation or publicly-traded
mutual fund or publicly-traded limited partnership in which the
Executive does not materially participate and in which the
Executive’s ownership interest is one percent (1%) or less.
The Executive acknowledges and agrees that the entire business of
the Company is based upon technology and Proprietary Information
that has world-wide application, but that the Company primarily
conducts its business within the United States. Therefore,
Executive acknowledges and agrees that for the purposes of this
Agreement, the “Restricted Territory” shall mean
anywhere within the United States.
10.
Non-Solicitation
Covenants. During the Restricted Period, the Executive shall
not, directly or indirectly through any other individual or entity,
whether on behalf of himself or anyone else: (a) solicit or accept
orders from any Customer of the Company for a product or service
offered or sold by, or competitive with a product or service
offered or sold by, the Company within the last twelve (12) months
of the Term; (b) induce or attempt to induce any Customer, or any
current supplier, licensee, licensor or other individual or entity
in a business relationship with the Company to cease doing business
with the Company or in any way interfere with the relationship
between that Customer, supplier, licensee, licensor or other
business relation and the Company; (c) use for his benefit or
disclose the name and/or preferences of any Customer, or current
supplier, licensee, licensor, or other business relation to any
other person; (d) solicit any of the Company’s employees to
leave the employ of the Company Group or hire anyone who is an
employee of the Company or was such an employee during the twelve
(12) months preceding the proposed date of hire, provided in either
event that the Executive had contact with or gained information
regarding the employee by way of Executive’s employment with
the Company; or (e) induce or attempt to induce any employee of the
Company to work for, render services or provide advice to or supply
Confidential Information or Proprietary Information to any other
person. During the Restricted Period, the Executive shall not
directly or indirectly assist or encourage any other person, in
carrying out any activity that would be prohibited by this
Agreement were it to be carried out by the Executive
himself.
11.
Enforcement of
Covenants. The Executive acknowledges that he has carefully
read and considered all the terms and conditions of this Agreement,
including the restraints imposed upon him pursuant to Sections 8, 9
and 10 hereof. The Executive acknowledges that the covenants
contained in Sections 8, 9 and 10 are reasonably necessary to
protect the goodwill of the Company and its exclusive property. The
Executive further acknowledges and agrees that, were he to breach
any of the covenants contained in Sections 8, 9 or 10 hereof, the
damage would be irreparable. The Executive therefore agrees that
the Company, in addition to any other remedies available to it,
shall be entitled to preliminary and permanent injunctive relief
against any breach or threatened breach by the Executive of any of
said covenants, without having to post bond.
12.
Conflicting
Agreements. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of his
obligations hereunder will not breach or be in conflict with any
other agreement to which the Executive is a party or is bound and
that the Executive is not subject to any covenants against
competition or similar covenants that would affect the performance
of his obligations hereunder. The Executive will not disclose to or
use any confidential or proprietary information of a third party
without such party’s consent.
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13.
Definitions. Words
or phrases which are initially capitalized or are within quotation
marks shall have the meanings provided in this Section 13 and
as provided elsewhere herein. For purposes of this Agreement, the
following definitions apply:
(a)
“Affiliates”
means all persons and entities directly or indirectly controlling,
controlled by or under common control with the Company, where
control may be by either management authority or equity
interest.
(b)
“Confidential
Information” means any and all information,
inventions, discoveries, ideas, writings, communications, research,
engineering methods, developments in chemistry, manufacturing
information, practices, processes, systems, technical and
scientific information, formulae, designs, concepts, products,
trade secrets, projects, improvements and developments that relate
to the business of the Company or any Affiliate and are not
generally known by others, including but not limited to (i)
products and services, technical data, methods and processes, (ii)
marketing activities and strategic plans, (iii) financial
information, costs and sources of supply, (iv) the identity and
special needs of customers and prospective customers and vendors
and prospective vendors, and (v) the people and organizations with
whom the Company or any Affiliate has or plans to have business
relationships and those relationships. Confidential Information
also includes such information that the Company or any Affiliate
may receive or has received belonging to customers or others who do
business with the Company or any Affiliate and any publication or
literary creation of the business, developed in whole or in part
while the Executive is employed by the Company, in whatever form
published the content of which, in whole or in part, relates to the
business of the Company or any Affiliate. Confidential Information
shall not include any information or materials that Executive can
prove by written evidence (i) is or becomes publicly known
through lawful means and without breach of this Agreement by
Executive; (ii) was rightfully in Executive’s possession
or part of Executive’s general knowledge prior to the
Effective Date; or (iii) is disclosed to Executive without
confidential or proprietary restrictions by a third party who
rightfully possesses the information or materials without
confidential or proprietary restrictions.
(c)
“Customer”
means any person or entity that paid or engaged the Company for
products or services of any type within the two (2) years preceding
the Executive’s last date of employment with the Company, and
with whom Executive had contact or whose identity was learned in
either case as a result of Executive’s Employment with the
Company.
(d)
“Person” means
an individual, a corporation, an association, a partnership, an
estate, a trust and any other entity or organization.
(e)
“Proprietary
Information” means any and all intellectual property
subject to protection under applicable copyright, trademark, trade
secret or patent laws if such property is similar in any material
respect with the products and services offered by the Company or
any Affiliate.
14.
Withholding. All
payments made under this Agreement shall be reduced by any tax or
other amounts required to be withheld under applicable
law.
15.
Assignment. Neither
the Company nor the Executive may make any assignment of this
Agreement or any interest herein, by operation of law or otherwise,
without the prior written consent of the other; provided, however, that the Company may
assign its rights and shall assign its obligations under this
Agreement without the consent of the Executive in the event that
the Company shall hereafter effect a reorganization, or consolidate
with or merge into any other Person, or transfer all or
substantially all of its properties or assets to any other Person.
This Agreement shall inure to the benefit of and be binding upon
the Company and the Executive, and their respective successors,
executors, administrators, heirs and permitted
assigns.
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16.
Severability. If
any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a court of competent
jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other
than those as to which it is so declared illegal or unenforceable,
shall not be affected thereby, and each portion and provision of
this Agreement shall remain valid and enforceable to the fullest
extent permitted by law.
17.
Waiver. No waiver
of any provision hereof shall be effective unless made in writing
and signed by the waiving party. The failure of either party to
require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this
Agreement, shall not prevent any subsequent enforcement of such
term or obligation or be deemed a waiver of any subsequent
breach.
18.
Notices. Any and
all notices, requests, demands and other communications provided
for by this Agreement shall be in writing and shall be effective
when delivered in person or by overnight courier or delivery
service, or 3 business days after being deposited in the States
mail, postage prepaid, registered or certified, and addressed to
the business at his last known address on the books of the Company
or, in the case of the Company, at the Company’s principal
place of business, to the attention of the Chairman of the Board,
or to such other address as either party may specify by notice to
the other actually received.
19.
Entire Agreement.
This Agreement constitutes the entire agreement between the parties
and supersedes all prior communications, agreements and
understandings, written or oral, with respect to the terms and
conditions of the Executive’s employment.
20.
Amendment. This
Agreement may be amended or modified only by a written instrument
signed by the Executive and an expressly authorized representative
of the Company.
21.
Headings. The
headings and captions in this Agreement are for convenience only
and in no way define or describe the scope or content of any
provision of this Agreement.
22.
Counterparts. This
Agreement may be executed in two or more counterparts, each of
which shall be an original and all of which together shall
constitute one and the same instrument.
23.
Governing Law. This
Agreement shall be construed and enforced under and be governed in
all respects by the laws of the Commonwealth of Virginia, without
regard to the conflict of laws principles thereof.
24.
Tax
Matters.
(a) In
the event of an event constituting a change in the ownership or
effective control of Company or ownership of a substantial portion
of the assets of Company described in Code Section 280G(b)(2)(A)(i)
(a “ 280G Transaction "), Company shall cause its independent
auditors or another person or entity approved by the Company and
Executive promptly to review all payments, accelerations,
distributions and benefits that have been made to or provided to,
and are to be made, or may be made, to or provided to, Executive
under this Agreement, the 2011 Plan and any other arrangements
providing for payments or benefits contingent on the occurrence of
a 280G Transaction (irrespective of whether such payments or
benefits are then payable to Executive at that time), and any other
agreement or plan under which Executive may individually or
collectively benefit (collectively the “Original Payments"),
to determine the applicability of Code Section 4999 to Executive in
connection with such event. Company’s independent auditors or
such other approved party will perform this analysis in conformity
with the foregoing provisions and will provide Executive with a
copy of their analysis and determination. Notwithstanding anything
contained in this Agreement to the contrary, to the extent that the
Original Payments would be subject to the excise tax imposed under
Code Section 4999 (the “Excise Tax"), the Original Payments
shall be reduced (but not below zero) to the extent necessary so
that no Original Payment shall be subject to the Excise Tax, but
only if, by reason of such reduction, the net after-tax benefit
received by Executive shall exceed the net after-tax benefit
received by him if no such reduction was made. For purposes of this
Agreement, “net after-tax benefit" shall mean (a) the
Original Payments which Executive receives or is then entitled to
receive from Company that would constitute
“parachute payments" within the meaning of Code Section 280G,
less (b) the amount of all federal, state and local income taxes
payable with respect to the foregoing calculated at the maximum
marginal income tax rate for each year in which the foregoing shall
be paid to Executive (based on the rate in effect for such year as
set forth in the Code as in effect at the time of the first payment
of the foregoing), less (c) the amount of the Excise Tax imposed
with respect to the payments and benefits described in (a) above.
If a reduction is to occur pursuant to this Section 24(a), the
payments and benefits shall be reduced in the following order: any
cash severance to which Executive becomes entitled (starting with
the last payment due), then other cash amounts that are parachute
payments (starting with the last payment due), then any stock
option awards that have exercise prices higher than the then-fair
market value price of the stock (based on the latest vesting
tranches), then restricted stock and restricted stock units based
on the latest awards scheduled to be distributed, and then other
stock options based on the latest vesting tranches. The fees and
expenses of Company’s auditor or any other party for services
in connection with the determinations and calculations contemplated
by this provision will be borne by Company.
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(b) The
intent of the parties is that payments and benefits under this
Agreement comply with or be exempt from Section 409A of the
Internal Revenue Code of 1986, as amended (“ Code Section
409A ") and, accordingly, to the maximum extent permitted, this
Agreement shall be interpreted to be in compliance therewith. If
the Executive notifies the Company (with specificity as to the
reason therefor) that he believes that any provision of this
Agreement (or of any award of any compensation or benefits) would
cause him to incur any additional tax or interest under Code
Section 409A and the Company concurs with such belief or the
Company independently makes such determination, the Company shall,
after consultation with the Executive, to the extent legally
permitted and to the extent it is possible to timely reform the
provision to avoid taxation under Code Section 409A, reform such
provision to attempt to comply with Code Section 409A through good
faith modifications to the minimum extent reasonably appropriate to
conform with Code Section 409A. To the extent that any provision
hereof is modified in order to comply with or be exempt from Code
Section 409A, such modification shall be made in good faith and
shall, to the maximum extent reasonably possible, maintain the
original intent and economic benefit to both the Executive and the
Company of the applicable provision without violating the
provisions of Code Section 409A.
For
purposes of the application of Treasury Regulation §
1.409A-1(b)(4) (or any successor provision), each payment in a
series of payments will be deemed a separate payment.
If the
termination of employment giving rise to the severance benefits
described in Sections 5 or 6 is not a “separation from
service" within the meaning of Treasury Regulation §
1.409A-1(h)(1), then to the extent necessary to avoid the
imposition of any accelerated or additional tax under Code Section
409A, such benefits will be deferred without interest until
Executive’ experiences a separation from
service.
If at
the time of Executive’s separation from service, (i) he is a
specified employee (within the meaning of Code Section 409A and
using the identification methodology selected by the Company from
time to time), and (ii) the Company makes a good faith
determination that an amount payable to Executive constitutes
deferred compensation (within the meaning of Code Section 409A) the
payment of which is required to be delayed pursuant to the
six-month delay rule set forth in Code Section 409A in order to
avoid taxes or penalties under Code Section 409A (the “ Delay
Period "), then the Company will not pay such amount on the
otherwise scheduled payment date but will instead pay it in a lump
sum on the first Executive day after such six-month period. To the
extent that any benefits to be provided during the Delay Period is
considered deferred compensation under Code Section 409A provided
on account of a “separation from service," and such benefits
are not otherwise exempt from Code Section 409A, Executive shall
pay the cost of such benefits during the Delay Period, and the
Company shall reimburse Executive, to the extent that such costs
would otherwise have been paid by the Company or to the extent that
such benefits would otherwise have been provided by the Company at
no cost to Executive, the Company’s share of the cost of such
benefits upon expiration of the Delay Period, and any remaining
benefits shall be reimbursed or provided by the Company in
accordance with the procedures specified herein.
To the
extent an expense or in-kind benefit provided pursuant to this
Agreement constitutes a “deferral of compensation" within the
meaning of Code Section 409A (1) the expenses will be reimbursed to
Executive as promptly as practical and in any event not later than
the last day of the calendar year after the calendar year in which
the expenses are incurred, (2) the amount of expenses eligible for
reimbursement or in-kind benefits provided during any calendar year
will not affect the amount of expenses eligible for reimbursement
or in-kind benefits provided in any other calendar year, (3) the
right to payment or reimbursement or in-kind benefits hereunder may
not be liquidated or exchanged for any other benefit.
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IN WITNESS WHEREOF, this Agreement has
been executed as a sealed instrument by the Executive and the
Company, by its duly authorized representative, as of the date
first above written.
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Executive:
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/s/ Xxxxx X.
Xxxxxxxx
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By: /s/ Xxxxxx Xxxxx
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Xxxxx X.
Xxxxxxxx
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Xxxxxx Xxxxx
Chairman and Chief Executive
Officer
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