EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT
THIS EXECUTIVE EMPLOYMENT AGREEMENT (“Agreement”) is made effective as of January 1, 2021 (“Effective Date”), by and between CynergisTek, Inc., a Delaware corporation (“Company”) and Xxxx Xxxxxxx (“Executive”).
The parties agree as follows:
1.Employment. Company hereby employs Executive, and Executive hereby accepts such employment, upon the terms and conditions set forth herein.
2.Duties.
2.1Position. Executive shall serve as Executive Vice President, Chief Financial Officer and Corporate Secretary of Company, and shall have the duties and responsibilities as are commensurate with such positions, as reasonably and lawfully directed by Company’s Chief Executive Officer (CEO) and board of directors (the “Board of Directors”) from time to time. Executive shall perform faithfully and diligently all duties assigned to Executive. Company reserves the right to modify Executive’s duties at any time in its sole and absolute discretion. Executive shall also serve as the Chief Financial Officer of CTEK Security, Inc. and such additional subsidiaries and affiliates of Company as Executive, CEO and the Board of Directors mutually agree from time to time.
2.2 Best Efforts/Full-time. Executive will expend Executive’s best efforts on behalf of Company and its subsidiaries, and will abide by all policies and decisions made by Company, as well as all applicable federal, state and local laws, regulations or ordinances. Executive will act in the best interest of Company at all times. Executive shall devote Executive’s full business time and efforts to the performance of Executive’s assigned duties for Company, unless Executive notifies the CEO or Board of Directors in advance of Executive’s intent to engage in other paid work and receives the CEO or Board of Directors’ express written consent to do so.
3.Term.
3.2 Renewal. On completion of the Initial Term specified in Section 3.1 above, this Agreement will automatically renew for subsequent twelve (12) month terms unless either party provides at least 60 days’ advance written notice to the other that such party does not wish to renew the Agreement for a subsequent twelve (12) months. In the event either party gives notice of nonrenewal pursuant to this Section 3.2, this Agreement will expire at the end of the current term.
4.Compensation.
party, for any reason, Executive will be entitled to receive Executive’s Base Salary prorated to the date of termination.
5.Customary Fringe Benefits. Executive will be eligible for all customary and usual fringe benefits generally available to executives of Company, subject to the terms and conditions of Company’s benefit plan documents. Company reserves the right to change or eliminate the fringe benefits on a prospective basis, at any time, effective upon notice to Executive.
0.Xxxxxxxx Expenses. Executive will be reimbursed for all reasonable, out-of-pocket business expenses incurred in the performance of Executive’s duties on behalf of Company. To obtain reimbursement, expenses must be submitted promptly with appropriate supporting documentation in accordance with Company’s policies.
7.Termination of Executive’s Employment.
7.2Termination Without Cause by Company; Severance; Change of Control.
(a)Company may terminate Executive’s employment under this Agreement without Cause at any time on thirty (30) days’ advance written notice to Executive. In the event of (i) such termination without Cause, (ii) Executive’s inability to perform the essential functions of Executive’s position due to a mental or physical disability or Executive’s death, or (iii) in the event of the termination of Executive without Cause following a “Change of Control” (as defined in Section 7.2(b) below), Executive, or Executive’s estate, as applicable, will receive the Base Salary then in effect, prorated to the date of termination and the following “Severance Payments”: (w) full target annual bonus, prorated to the date of termination, , (x) payment of compensation for an additional twelve (12) months based on the Base Salary then in effect, payable in accordance with Company’s regular payroll cycle or as a lump sum at the discretion of the Executive, and (y) the acceleration of all unvested stock options, restricted stock units and warrants then held by Executive. All Severance Payments are conditioned on Executive: (i) complying with all surviving provisions of this Agreement as specified in Section 13.9 below; and (ii) executing a full general release, releasing all claims, known or unknown, that Executive may have against Company (and any subsidiaries and affiliates of Company) arising out of or any way related to Executive’s employment or termination of employment with Company (the “Release”). The Severance Payment will be made on the sixtieth (60th) day
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following Executive’s termination of employment provided that the Release has been executed by Executive and become irrevocable prior to such date. Company will provide the form of Release to Executive within five (5) business days following Executive’s termination.
(b)As used herein, “Change of Control” means: (i) a sale of all or substantially all of the assets of Company; (ii) a merger or consolidation in which Company is not the surviving entity and in which the holders of Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of the entity surviving such transaction or, where the surviving entity is a wholly-owned subsidiary of another entity, the surviving entity’s parent; or (iii) a reverse merger in which Company is the surviving entity but the shares of common stock outstanding immediately preceding the merger are converted by virtue of the merger into other property, whether in the form of securities of the surviving entity’s parent, cash or otherwise, and in which the holders of Company’s outstanding voting stock immediately prior to such transaction own, immediately after such transaction, securities representing less than fifty percent (50%) of the voting power of Company or, where Company is a wholly-owned subsidiary of another entity.
(c)In the event that the benefits provided to Executive under this Agreement, and any other agreements, plans or arrangements to which Executive may be a party with Company, cause Executive to incur an excise tax under Section 4999 of the Internal Revenue Code of 1986 (the “Code”) or any corresponding provisions of applicable state tax law in connection with a Change of Control, then Company will pay Executive an additional amount sufficient to reimburse Executive for (i) the excise tax imposed on such benefits, and (ii) the federal and state income, employment and excise taxes, determined on a fully “grossed-up” basis, imposed on the benefits payments provided. Company shall be entitled to withhold from the payment required hereunder such taxes as it may be required to withhold under applicable tax law, and any such withheld taxes shall be treated as paid to Executive hereunder. The tax gross-up payments provided for in this Section 7.2(c) shall be paid to Executive as soon as administratively practicable following the date the amount is determined by Executive, but in no event will the payment be made later than the sixtieth (60th) day following the end of the taxable year in which the related taxes are remitted to the taxing authority.
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(30) days from the receipt of Executive’s notice to cure the condition described as the basis for Executive’s termination for Good Reason.
0.Xx Conflict of Interest. Executive represents and warrants that (a) Executive is not subject to any contract, arrangement, policy or understanding, or to any statute, governmental rule or regulation, that in any way limits Executive’s ability to enter into and fully perform Executive’s obligations under this Agreement and (b) Executive is not otherwise unable to enter into and fully perform Executive’s obligations under this Agreement. In the event of a breach of any representation in this Section 8, Company may terminate this Agreement for Cause and Executive’s employment with Company without any liability to Executive and Executive shall indemnify the Company for any liability it may incur as a result of any such breach.
9.Confidentiality and Proprietary Rights. Executive agrees to read, sign and abide by Company’s Confidentiality, Non-Solicitation and Inventions Agreement, which is provided with this Agreement and incorporated herein by reference.
10.2Non-Solicitation. Executive agrees that, during the term of this Agreement, and for a period of one (1) year after the termination of this Agreement, Executive shall not, directly
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or indirectly, on Executive’s own behalf or on behalf of any other third party not affiliated with Company: (A) solicit any Customer of the Business for purposes of providing Services; (B) accept as a customer any Customer for purposes of providing Services; (C) induce or attempt to induce any employee, consultant or independent contractor of Company or its subsidiaries to terminate his or her employment or relationship with Company or its subsidiaries; (D) employ, or engage as an independent contractor, any employee, consultant or independent contractor of Company or its subsidiaries; (E) interfere with the business relationship between a Customer or employee and Company or its subsidiaries; or (F) encourage any person to engage in any of the foregoing activities, including but not limited to providing financing, directly or indirectly, for any of the foregoing activities; provided, however, that the foregoing will not restrict the ability of Executive to purchase or otherwise acquire up to two percent of any class of securities of any enterprise (but without otherwise participating in the activities of such enterprise) if such securities have been registered under Section 12(b) or 12(g) of the Securities Exchange Act of 1934.
11.Injunctive Relief. Executive acknowledges that Executive’s breach of the covenants contained in this Agreement would cause irreparable injury to Company and agrees that in the event of any such breach, Company shall be entitled to seek temporary, preliminary and permanent injunctive relief without the necessity of proving actual damages or posting any bond or other security.
12.Agreement to Arbitrate. To the fullest extent permitted by law, Executive and Company agree to arbitrate any controversy, claim or dispute between them arising out of or in any way related to this Agreement, the employment relationship between Company and Executive and any disputes upon termination of employment, including but not limited to breach of contract, tort, discrimination, harassment, wrongful termination, demotion, discipline, failure to accommodate, family and medical leave, compensation or benefits claims, constitutional claims; and any claims for violation of any local, state or federal law, statute, regulation or ordinance or common law. Claims for workers’ compensation, unemployment insurance benefits and Company’s right to obtain injunctive relief pursuant to Section 11 above are excluded. For the purpose of this agreement to arbitrate, references to “Company” include all parent, subsidiary or related entities and their employees, supervisors, officers, directors, agents, pension or benefit plans, pension or benefit plan sponsors, fiduciaries, administrators, affiliates and all successors and assigns of any of them, and this agreement to arbitrate shall apply to them to the extent Executive’s claims arise out of or relate to their actions on behalf of Company.
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12.2Initiation of Arbitration. Either party may exercise the right to arbitrate by providing the other party with written notice of any and all claims forming the basis of such right in sufficient detail to inform the other party of the substance of such claims. In no event shall the request for arbitration be made after the date when institution of legal or equitable proceedings based on such claims would be barred by the applicable statute of limitations.
12.3Arbitration Procedure. The arbitration will be conducted in Austin, Texas by a single neutral arbitrator and in accordance with the then current rules for resolution of employment disputes of the American Arbitration Association. The parties are entitled to representation by an attorney or other representative of their choosing. The arbitrator shall have the power to enter any award that could be entered by a judge of the trial court of the State of Texas, and only such power, and shall follow the law. In the event the arbitrator does not follow the law, the arbitrator will have exceeded the scope of his or her authority and the parties may, at their option, file a motion to vacate the award in court. The parties agree to abide by and perform any award rendered by the arbitrator. Judgment on the award may be entered in any court having jurisdiction thereof.
12.4Costs of Arbitration. Each party shall bear one half the cost of the arbitration filing and hearing fees, and the cost of the arbitrator.
This agreement to arbitrate specifically includes any class-action cases and Executive specifically waives Executive’s right to participate in any class-action against Company.
13.General Provisions.
13.1Successors and Assigns. The rights and obligations of Company under this Agreement shall inure to the benefit of and shall be binding upon the successors and assigns of Company. Executive shall not be entitled to assign any of Executive’s rights or obligations under this Agreement.
13.2Waiver. Either party’s failure to enforce any provision of this Agreement shall not in any way be construed as a waiver of any such provision, or prevent that party thereafter from enforcing each and every other provision of this Agreement.
13.3Attorneys’ Fees. Each side will bear its own attorneys’ fees in any dispute unless a statutory section at issue, if any, authorizes the award of attorneys’ fees to the prevailing party.
13.4Severability. In the event any provision of this Agreement is found to be unenforceable by an arbitrator or court of competent jurisdiction, such provision shall be deemed modified to the extent necessary to allow enforceability of the provision as so limited, it being intended that the parties shall receive the benefit contemplated herein to the fullest extent permitted by law. If a deemed modification is not satisfactory in the judgment of such arbitrator or court, the unenforceable provision shall be deemed deleted, and the validity and enforceability of the remaining provisions shall not be affected thereby.
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13.6Governing Law. This Agreement will be governed by and construed in accordance with the laws of the United States and the State of Texas. Subjection to Section 12, each party consents to the jurisdiction and venue of the state or federal courts in Xxxxxx County, Texas, if applicable, in any action, suit, or proceeding arising out of or relating to this Agreement.
13.7Notices. Any notice required or permitted by this Agreement shall be in writing and shall be delivered as follows with notice deemed given as indicated (a) by personal delivery when delivered personally; (b) by overnight courier upon written verification of receipt; (c) by telecopy or facsimile transmission upon acknowledgment of receipt of electronic transmission; or (d) by certified or registered mail, return receipt requested, upon verification of receipt. Notice shall be sent to the addresses set forth below, or such other address as either party may specify in writing.
(a)This Agreement is intended to comply with Code Section 409A (“Section 409A”) or an exemption thereunder and shall be construed and administered in accordance with such intent. Notwithstanding any other provision of this Agreement, payments provided under this Agreement may only be made upon an event and in a manner that complies with Section 409A or an applicable exemption. Any nonqualified deferred compensation payments under this Agreement that may be excluded from Section 409A either as separation pay due to an involuntary separation from service or as a short-term deferral shall be excluded from Section 409A to the maximum extent possible. For purposes of Section 409A, each installment payment provided under this Agreement shall be treated as a separate payment. Any payments to be made under this Agreement upon a termination of employment shall only be made upon a “separation from service” under Section 409A. Notwithstanding the foregoing, Company makes no representations that the payments and benefits provided under this Agreement comply with Section 409A, and in no event shall Company be liable for all or any portion of any taxes, penalties, interest, or other expenses that may be incurred by Executive on account of non-compliance with Section 409A.
(b)Notwithstanding any other provision of this Agreement, if any payment or benefit provided to Executive in connection with his termination of employment is determined to constitute “nonqualified deferred compensation” within the meaning of Section 409A and Executive is determined to be a “specified employee” under Section 409A, then such payment or benefit shall not be paid until the first payroll date to occur following the six-month anniversary of the date of Executive’s termination or, if earlier, on Executive’s death (the “Specified Employee Payment Date”). The aggregate of any payments that would otherwise have been paid before the Specified Employee Payment Date shall be paid to Executive in a lump sum on the Specified Employee Payment Date and thereafter, any remaining payments shall be paid without delay in accordance with their original schedule.
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(c)To the extent required by Section 409A, each reimbursement or in-kind benefit provided under this Agreement shall be provided in accordance with the following: (i) the amount of expenses eligible for reimbursement, or in-kind benefits provided, during each calendar year cannot affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other calendar year; (ii) any reimbursement of an eligible expense shall be paid to Executive on or before the last day of the calendar year following the calendar year in which the expense was incurred; and (iii) any right to reimbursements or in-kind benefits under this Agreement shall not be subject to liquidation or exchange for another benefit.
13.9Survival. Sections 8, 9, 10, 11, 12, 13 and 14 of this Agreement shall survive Executive’s employment by Company.
14.Entire Agreement. This Agreement, including the Confidentiality, Non-Solicitation and Inventions Agreement incorporated herein by reference, constitutes the entire agreement between the parties relating to this subject matter and supersedes all prior or simultaneous representations, discussions, negotiations, and agreements, whether written or oral. This Agreement may be amended or modified only with the written consent of Executive and the Board of Directors of Company. No oral waiver, amendment or modification will be effective under any circumstances whatsoever.
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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES HAVE EXECUTED THIS AGREEMENT ON THE EFFECTIVE DATE.
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| Xxxx X. Xxxxxxx |
| 00 Xxx Xxxxxxx |
| Xxx Xxxxxxxx, XX 00000 |
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By: |
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| Xxxxx Xxxxxx |
| Chief Executive Officer |
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| 00000 Xxxxxxxxxx Xxxx, Xxxxx 000X |
| Xxxxxx, XX 00000 |
Signature Page to Xxxx
Xxxxxxx Employment Agreement
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EXHIBIT A
COMPENSATION PLAN
Base Salary:
Executive will be entitled to an annual Base Salary as follows:
·$309,700 for the 2021 calendar year.
·Minimum Base Salary percentage increase for calendar year 2022 will equate to 2 times the average salary percentage increase of the Company’s active employee base for 2021 that were employed by the Company for the entire 2021 calendar year.
·Base Salary for subsequent calendar years will be determined by the Company’s Board of Directors at the end of the 2022 calendar year.
Executive will be eligible to participate in CynergisTek’s incentive-based bonus plan that offers the potential to receive a discretionary bonus up to 67.5% of base salary. The incentive bonus plan is based on a number of factors established by the CEO and Board.
Equity Incentive:
From time to time, Executive may be granted certain equity incentive awards as determined by the Company’s Board of Directors.
RSU Issuance Tax Reimbursement:
Executive will be paid a one-time, lump-sum amount equal to the employee tax portion required to be paid by Executive plus the amount necessary to put the Executive in the same after-tax position (taking into account any and all applicable federal, state, and local income, employment and excise taxes, including any income and employment taxes imposed on the payment itself) that he would have been in if the Executive had not incurred any tax liability on settlement of the RSUs, as a result of the settlement of the 90,000 RSUs that were granted to Executive on each of October 8th, 2018 and November 13th, 2019. Each such payment shall be paid within 30 days of settlement of the applicable RSUs.
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