EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this “Agreement”) dated as of February 9, 2015 (the “Effective Date”), by and between IPSA International Services, Inc., a Delaware corporation (the “Company”), the sole stockholder of which is root9B Technologies, Inc., a Delaware corporation (“root9B”), and Xxx Xxxxxxxx (“Xxxxxxxx”). Capitalized terms not defined when first used will have the meaning given those terms in Section 13.
Section 1. Employment. The Company hereby employs Xxxxxxxx and Xxxxxxxx hereby accepts such employment, subject to the terms and conditions set forth in this Agreement.
Section 2. Duties. Xxxxxxxx will serve as CEO and President of the Company with responsibility for all aspects of the business of the Company. Xxxxxxxx will report directly to the designee appointed by root9B, who shall be Xxxxxx X. Xxxxx, Xx., Xxxxx Xxxx or such other senior officer of root9B as approved by Xxxxxxxx, such approval not to be unreasonably withheld (the “Designee”). During the Term, Xxxxxxxx will devote substantially all of his business time to the performance of his duties to the Company.
Section 3. Board. Xxxxxxxx shall, at his option, serve as a member of the root9B Board of Directors (the “Board”) for the period of Xxxxxxxx’x employment, provided that if Xxxxxxxx’x employment ends, but Xxxxxxxx elects in writing to remain subject to all of the restrictions set forth in the Xxxxxxxx Non-Compete Agreement, Xxxxxxxx may remain on the Board for so long as he is subject to all such restrictions.
Section 4. Term and Place of Employment.
4.1 Term of Employment. Xxxxxxxx’x employment with the Company will be for the Term, subject to earlier termination pursuant to Sections 7 and 8.
4.2 Place of Employment. Xxxxxxxx will be based in the Phoenix metropolitan area office of the Company, but will spend such time at the New York City office of the Company as is necessary to discharge his duties. In addition, Xxxxxxxx will be required to travel as necessary to fulfill his duties.
Section 5. Compensation of Xxxxxxxx. During the Term, the Company will provide Xxxxxxxx with the following compensation, less such deductions as will be required to be withheld by applicable law and regulations:
5.1 Salary. The Company will pay to Xxxxxxxx an annual base salary of $450,000 per annum (the “Base Salary”) at such regular weekly, biweekly or semi-monthly time or times as root9B makes payment of its regular payroll in the regular course of business, but no less
frequently than monthly, provided, however, that such salary may be increased but not decreased at any time, and shall be increased by 5% per annum, at a minimum, for each annual period after the original Term.
5.2 Bonus. For each calendar year of the Term, in addition to his Base Salary, Xxxxxxxx shall be eligible to receive an annual bonus of up to 67% of his Base Salary for such year and grants of equity in root9B, each as determined by the Board in its discretion.
5.3 Expenses. The Company will either pay for or reimburse, at Xxxxxxxx’x option, Xxxxxxxx for the cost of an apartment in New York City or residential hotel accommodations, at his option, in an amount not to exceed $8,000 per month. The Company will provide Xxxxxxxx with reimbursement for all other reasonable and necessary business, entertainment, business travel expenses and other bona fide expenses, consistent with Company policy, incurred by Xxxxxxxx on behalf of the Company in connection with the performance of Xxxxxxxx’x duties, upon his accounting therefor.
5.4 Benefits. Xxxxxxxx will participate in all employee benefit plans, practices and programs maintained by root9B, as in effect from time to time, on a basis no less favorable than is provided to other similarly situated executives of root9B and its subsidiaries. Such benefit plans may include: medical, hospitalization, dental or vision plans, disability insurance plans, health programs and pension or retirement plans.
5.5 Fringe Benefits and Perquisites. During the Term, Xxxxxxxx shall be entitled to fringe benefits and perquisites consistent with the practices of root9B, and to the extent root9B provides similar benefits or perquisites (or both) to similarly situated executives of root9B and its subsidiaries, if any, that are not duplicative of the matters referred to in Section 5.4.
Section 6. Vacations/Sick Leave/Holidays. Xxxxxxxx will be entitled to paid vacation in the amount provided by root9B to its similarly situated executive personnel, which currently provides for 25 paid vacation days per year and increases based on tenure.
Section 7. Disability/Death. If Xxxxxxxx becomes Disabled, the Company may, at its option, terminate the employment of Xxxxxxxx under this Agreement immediately upon giving Xxxxxxxx notice to that effect. Xxxxxxxx’x employment will terminate upon his death.
Section 8. Termination of Employment.
8.1 Termination For Cause. The Company may terminate the employment of Xxxxxxxx at any time for Incurable Cause by giving Xxxxxxxx notice of termination, with reasonable specificity of the basis for the Incurable Cause and, if for a Curable Cause, a notice of termination that sets forth the steps that Xxxxxxxx must take to cure the Curable Cause.
Xxxxxxxx’x employment will terminate immediately upon notice that includes an Incurable Cause. Xxxxxxxx’x termination for a Curable Cause will take effect 30 days after the giving of the notice unless Xxxxxxxx substantially cures the Curable Cause within such 30 day period.
8.2 Termination Without Cause. The Company may terminate the employment of Xxxxxxxx without Cause by giving Xxxxxxxx 15 days’ notice.
8.3 Resignation for Good Reason. Xxxxxxxx may resign his employment for Good Reason by giving the Company 30 days’ notice, which shall set forth the steps that the Company must take to cure the same, which notice shall take effect 30 days after the giving of such notice unless the basis for the Good Reason is cured by the Company within such 30 day period.
8.4 Resignation for Material Change in Management. Xxxxxxxx may resign his employment following the occurrence of an MCISM, by giving 30 days’ notice to the Company, which notice shall be given, if at all, within 120 days following the occurrence of the MCISM.
Section 9. Effect of Termination of Employment; Non-Compete Agreement.
9.1 Termination for Disability, Death, Cause or Resignation without Good Reason. Upon termination of Xxxxxxxx’x employment due to Xxxxxxxx’x Disability, Death, the Company’s termination of Xxxxxxxx’x employment for Cause, or Xxxxxxxx’x resignation without Good Reason, Xxxxxxxx will not have any further rights under this Agreement except the right to receive: (i) the accrued but unpaid portion of his Base Salary prorated as necessary in order to account for any partial year, and (ii) reimbursement for any accrued expenses for which he has not been reimbursed, (iii) payment of any accrued but unpaid bonus for the prior year, and (iv) if such termination occurs within 18 months of the Effective Date, Xxxxxxxx’x Base Salary for the period beginning on the date of such termination and ending on the date that is 18 months from the Effective Date, if any. Upon a termination hereunder within 18 months of the Effective Date, the provisions of Sections 3, 4 and 5 of the Xxxxxxxx Non-Compete Agreement shall continue for the balance of the 18 month period; if such termination occurs thereafter, Xxxxxxxx shall remain bound by the provisions of Sections 3 and 5, but not 4, of the Xxxxxxxx Non-Compete Agreement for a period of one year after termination.
9.2 Termination without Cause or Resignation for Good Reason. Upon the termination of Xxxxxxxx’x employment by the Company without Cause or by Xxxxxxxx for Good Reason, the Company will: (a) pay Xxxxxxxx the amounts set forth in Section 9.1(i), (ii), (iii) and (iv), (b) pay Xxxxxxxx compensation equal to the Base Salary for the remainder of the Term unless Xxxxxxxx elects a shorter period for the purpose of reducing the time periods under the non-compete and non-solicitation provisions set forth in the Xxxxxxxx Non-Compete Agreement, and (iii) continue to provide all benefits provided in Section 5.4 for so long as Xxxxxxxx elects to receive his Base Salary. If Xxxxxxxx provides the notice referenced above, electing to terminate
his severance benefits after the period of 18 months, the Xxxxxxxx Non-Compete Agreement shall terminate at the time specified in such notice. If such notice is not provided, severance payments and the Xxxxxxxx Non-Compete Agreement shall continue until the end of the Term. For clarity and notwithstanding anything to the contrary contained herein, in no event shall the non-compete and non-solicitation provisions set forth in the Xxxxxxxx Non-Compete Agreement terminate less than 18 months from the Effective Date.
9.3 Termination upon MCISM. Upon the termination of Xxxxxxxx’x employment by Xxxxxxxx due to an MCISM, the Company will: (a) pay Xxxxxxxx the amounts set forth in Section 9.1(i), (ii), (iii) and (iv), and (b) pay Xxxxxxxx compensation equal to the Base Salary for the remainder of the Term unless Xxxxxxxx elects a shorter period for the purpose of reducing the time periods under the non-compete and non-solicitation provisions set forth in the Xxxxxxxx Non-Compete Agreement. If Xxxxxxxx provides the notice referenced above, electing to terminate his severance benefits after the period of 18 months, the Xxxxxxxx Non-Compete Agreement shall terminate at the time specified in such notice. If notice is not so provided, severance payments shall continue until the end of the Term. For clarity and notwithstanding anything to the contrary contained herein, in no event shall the non-compete and non-solicitation provisions set forth in the Xxxxxxxx Non-Compete Agreement terminate less than 18 months from the Effective Date.
9.4 Renewal. This Agreement shall automatically renew for additional 2-year increments, unless either party provides at least 6 months’ written notice of such party’s intent not to renew the Agreement. In such event, Xxxxxxxx shall remain bound by the provisions of Sections 3, 4, and 5 of the Xxxxxxxx Non-Compete Agreement during any renewal; provided, further that Xxxxxxxx shall remain bound by the provisions of Sections 3 and 5, but not 4, of the Xxxxxxxx Non-Compete Agreement for a period of one year after termination, in consideration for the payment by the Company of amounts equivalent to his then-Base Salary, provided, however, that Xxxxxxxx may, during such 6-month period, notify the Company in writing of his decision not to receive any severance benefits, in which case the Xxxxxxxx Non-Compete Agreement shall terminate upon expiration of the applicable Term.
Section 10. Indemnification and D&O Insurance.
10.1 In the event that Xxxxxxxx is made a party or threatened to be made a party to any action, suit, or proceeding, whether civil, criminal, administrative or investigative (a “Proceeding”), other than any Proceeding initiated by Xxxxxxxx, the Company or root9B related to any contest or dispute between Xxxxxxxx and the Company or root9B (or any of their affiliates) with respect to this Agreement or Xxxxxxxx’x employment hereunder, by reason of the fact that Xxxxxxxx is or was a director, officer, employee or agent of the Company or root9B, or any affiliate of the Company or root9B, or is or was serving at the request of the Company or root9B as a director, officer, member, employee or agent of another corporation or a partnership, joint
venture, trust or other enterprise, the Company and root9B will, jointly and severally, indemnify, defend, release and hold harmless Xxxxxxxx, to the maximum extent permitted under applicable law and the Company’s or root9B’s bylaws, as applicable, from and against any liabilities, costs, claims and expenses, including all costs and expenses incurred in defense of any Proceeding (including reasonable attorneys’ fees); provided that such indemnification, defense, release and hold harmless shall not apply in the event of bad faith, gross negligence or willful misconduct on the part of Xxxxxxxx. The termination of any action, suit or proceeding by judgment, order, settlement or its equivalent shall not, of itself, create a presumption of bad faith, gross negligence or willful misconduct on the part of Xxxxxxxx. Costs and expenses incurred by Xxxxxxxx in defense of such Proceeding (including reasonable attorneys’ fees) shall be paid by the Company or root9B in advance of the final disposition of such litigation on a monthly basis upon receipt by the Company or root9B, as applicable, of: (i) a written request for payment; (ii) appropriate documentation evidencing the incurrence, amount and nature of the costs and expenses for which payment is being sought and (iii) an undertaking, reasonably satisfactory to root9B and the Company, by or on behalf of Xxxxxxxx to repay such amount if it shall ultimately be determined by a court of competent jurisdiction that Xxxxxxxx is not entitled to be indemnified by the Company and root9B under applicable law.
10.2 root9B or any successor shall purchase and maintain, at its own expense, directors’ and officers’ liability insurance providing coverage to Xxxxxxxx on terms that are no less favorable than the coverage provided to other directors and similarly situated executives of root9B and its subsidiaries.
Section 11. Section 409A. This Agreement is intended to comply with or be exempt from Section 409A of the Internal Revenue Code of 1986 as amended (the “Code”) and will be interpreted, administered and operated in a manner consistent with that intent. Notwithstanding anything herein to the contrary, if at the time of Xxxxxxxx’x separation from service with the Company he is a “specified employee” as defined in Section 409A of the Code (and the regulations thereunder) and any payments or benefits otherwise payable hereunder as a result of such separation from service are subject to Section 409A of the Code, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in such payments or benefits ultimately paid or provided to Xxxxxxxx) until the date that is six months following Xxxxxxxx’x separation from service with the Company (or the earliest date as is permitted under Section 409A of the Code), and the Company will pay any such delayed amounts in a lump sum at such time. If any other payments of money or other benefits due to Xxxxxxxx hereunder could cause the application of an accelerated or additional tax under Section 409A of the Code, such payments or other benefits shall be deferred if deferral will make such payment or other benefits compliant under Section 409A of the Code, or otherwise such payment or other benefits shall be restructured, to the extent possible, in a manner, reasonably determined by the Company, that does not cause such an accelerated or additional tax. To the extent any reimbursements or in-kind benefits due to Xxxxxxxx under this
Agreement constitute “deferred compensation” under Section 409A of the Code, any such reimbursements or in-kind benefits shall be paid to Xxxxxxxx in a manner consistent with Treas. Reg. Section 1.409A-3(i)(1)(iv). Each payment made under this Agreement shall be designated as a “separate payment” within the meaning of Section 409A of the Code. References to “termination of employment” and similar terms used in this Agreement are intended to refer to “separation from service” within the meaning of Section 409A of the Code to the extent necessary to comply with Section 409A of the Code. Whenever a payment under this Agreement may be paid within a specified period, the actual date of payment within the specified period shall be within the sole discretion of the Company. In no event may Xxxxxxxx, directly or indirectly, designate the calendar year of any payment to be made under this Agreement. Any provision in this Agreement providing for any right of offset or set-off by the Company shall not permit any offset or set-off against payments of “non-qualified deferred compensation” for purposes of Section 409A of the Code or other amounts or payments to the extent that such offset or set-off would result in any violation of Section 409A or adverse tax consequences to Xxxxxxxx under Section 409A.
Section 12. root9B Guarantee.
12.1 To induce Xxxxxxxx to enter into this Agreement, root9B hereby absolutely, unconditionally and irrevocably guarantees (the “Guarantee”) to Xxxxxxxx, on the terms and conditions set forth herein, the due and punctual payment, observance, performance and discharge of any and all (i) Company obligations hereunder; and (ii) costs and expenses (including reasonable attorneys’ fees and expenses) incurred by Xxxxxxxx in connection with the enforcement of his rights hereunder (collectively, the “Guaranteed Obligations”).
12.2 root9B agrees that the Guaranteed Obligations hereunder shall not be released or discharged, in whole or in part, or otherwise affected by: (i) the failure or delay of Xxxxxxxx, to assert any claim or demand or to enforce any right or remedy; (ii) any change in the time, place or manner of payment of the Guaranteed Obligations; (iii) the addition, substitution or release of any person or entity now or hereafter liable with respect to the Guaranteed Obligations; (iv) any change in the corporate existence, structure or ownership of the Company or root9B or any other person or entity now or hereafter liable with respect to the Guaranteed Obligations; (v) any insolvency, bankruptcy, reorganization or other similar proceeding affecting the Company or root9B or any other person or entity now or hereafter liable with respect to the Guaranteed Obligations; (vi) the existence of any claim, set-off or other right which the Guarantor may have at any time against the Company or Xxxxxxxx; or (vii) the adequacy of any other means Xxxxxxxx may have of obtaining payment of the Guaranteed Obligations.
12.3 The Guarantee may not be revoked or terminated and shall remain in full force and effect and binding on root9B, its successors and permitted assigns until the complete, irrevocable and indefeasible payment and satisfaction in full of the Guaranteed Obligations.
12.4 Anything in this Section 12 to the contrary notwithstanding, upon the occurrence of a transaction pursuant to which root9B owns less than 50% of the interest in the Company, the Guarantee shall become null and void provided that: (a) the person or persons owning more than 50% of the Company have assumed the Guarantee, and (b) such person or persons collectively are of financial strength at least equal to that of root9B at such time.
Section 13. Definitions. The following words will have the following meaning:
“Cause” means a Curable Cause or an Incurable Cause.
“Change in Control” shall mean the occurrence of any of the following after the Effective Date: (i) one person (or more than one person acting as a group) acquires ownership of stock of the Company or root9B that, together with the stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of such corporation, provided that a Change in Control shall not occur if any person (or more than one person acting as a group) that currently owns more than 50% of the total fair market value or total voting power of the Company’s or root9B’s stock acquires additional stock in such corporation; (ii) the Company or root9B are party to a merger, consolidation or similar transaction or series of transaction in which the holders of root9B stock do not, directly or in the case of the Company, indirectly: (x) hold more than 50% of the total fair market value or total voting power of the stock of the resulting entity, and (y) control the board of directors of the resulting entity; (iii) a majority of the members of the Board are replaced during any twelve-month period by directors whose appointment or election is not endorsed by a majority of the Board before the date of appointment or election; or (iv) the sale of all or substantially all of the Company’s or root9B’s assets.
“Curable Cause” means the determination by the Board that: (i) Xxxxxxxx has engaged in misconduct that could reasonably be expected to have a material adverse effect on the business or assets of the Company, or (ii) Xxxxxxxx’x disregard of any valid and legal directive of the Board or the Designee that is consistent with this Agreement or Xxxxxxxx’x failure to perform his duties (other than such failure resulting from incapacity due to Disability), which, in each case, could reasonably be expected to have a material adverse effect on the business or assets of the Company, or (iii) Xxxxxxxx is in material breach of any other provision of this Agreement. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the written advice of counsel for root9B shall not be the subject of a Curable Cause.
“Disability” or other forms of that word mean incapacitation or disability by accident, sickness or otherwise so as to render Xxxxxxxx mentally or physically incapable of performing the services required to be performed under this Agreement for a period of 90 consecutive days or for any 180 days in any period of 365 consecutive days.
“Good Reason” means the occurrence of any of the following events or conditions:
(i) the assignment to Xxxxxxxx of any duties materially inconsistent with the duties set forth in Section 2; or
(ii) the appointment of any officer of the Company senior to Xxxxxxxx;
(iii) any Change in Control (other than an MCISM), unless the acquirer agrees to assume and perform this Agreement in the same manner and to the same extent that the Company or root9B, as applicable, would be required to perform if no succession had taken place, except where such acquirer assumption is not necessary because such assumption occurs by operation of law;
(iv) any other action by the Company or root9B which results in a material diminution in Xxxxxxxx’x position, authority, duties, compensation, or responsibilities; or
(v) any material failure by the Company or root9B to comply with this Agreement.
An MCISM shall not, by itself, be deemed Good Reason.
“Incurable Cause” means: (i) the reasonable determination by the Board that Xxxxxxxx has committed an act constituting fraud, or a felony, or criminal act; or (ii) Xxxxxxxx’x conviction of a crime involving moral turpitude, in either event if such act or crime, materially impairs Xxxxxxxx’x ability to perform services for the Company or results in material reputational or financial harm to the Company or its affiliates.
“MCISM” means a material change in the senior management of root9B which includes, but is not limited to, the removal of either Xxxxxx X. Xxxxx, Xx. as the current Chief Executive Officer or Xxxxx Xxxx as the Chief Operating Officer of root9B.
“Term” means a three (3) year period starting on the Effective Date and ending on the third anniversary of the Effective Date, unless the Term is renewed pursuant to Section 9.4.
“Xxxxxxxx Non-Compete Agreement” means that certain Confidentiality, Non-Compete and Non-Solicitation Agreement of even date herewith by and between root9B and Xxxxxxxx.
Section 14. Miscellaneous.
14.1 Assignments. Neither Xxxxxxxx nor the Company or root9B may assign or delegate any of their rights or duties under this Agreement without the express written consent of
the other parties, except that the Company may assign this Agreement in connection with the sale or other disposition of all or substantially all of its assets and business (subject to applicable provisions that may result in Xxxxxxxx’x termination of the Term)..
14.2 Entire Agreement. This Agreement and the Xxxxxxxx Non-Compete Agreement constitute and embody the full and complete understanding and agreement of the parties, and supersedes all prior understandings and agreements, with respect to Xxxxxxxx’x employment by the Company. This Agreement may be amended, modified or changed only by an instrument in writing executed by the Company, Xxxxxxxx and root9B. The invalidity or partial invalidity of one or more provisions of this Agreement will not invalidate any other provision of this Agreement. No waiver by either party of any provision or condition to be performed will be deemed a waiver of similar or dissimilar provisions or conditions at the same time or any prior or subsequent time.
14.3 Headings. The headings contained in this Agreement are for convenience of reference only and will not affect in any way the meaning or interpretation of this Agreement.
14.4 Notices. All notices, requests, demands and other communications required or permitted to be given under this Agreement will be in writing and will be deemed to have been given when delivered personally or by private overnight delivery service to the party at the address on the signature page or to such other address as either party may give notice of in accordance with the provisions of this section.
14.5 Governing Law. This Agreement will be governed by and construed in accordance with the laws of the State of Delaware without giving effect to such state’s conflicts of laws provisions. Each of the parties irrevocably consents to the jurisdiction of the federal and state courts located in County of New Castle and State of Delaware. The party prevailing shall be entitled to recover its reasonable legal fees and expenses from the party not prevailing.
15.6 Binding Effect. This Agreement shall inure to the benefit of and be binding upon and enforceable against the parties hereto and their respective successors, heirs, beneficiaries and permitted assigns.
14.7 Counterparts. This Agreement may be executed in two or more counterparts, including those signed and delivered by electronic means, each of which will be deemed an original, but all of which together will constitute one of the same instrument.
[signature page follows]
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
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IPSA International Services, Inc.
By: /s/ Xxxxx Xxxx
Xxxxx Xxxx, Acting President
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
root9B Technologies, Inc.
By: /s/ Xxxxx Xxxx
Xxxxx Xxxx COO
0000 Xxxxxx Xxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
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/s/ Xxx Xxxxxxxx
Xxx Xxxxxxxx
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