This Employment Agreement involves
Title: EMPLOYMENT AGREEMENT
Governing Law: Virginia Date: 8/22/2016
Industry: Constr. - Supplies and Fixtures Law Firm: Williams Mullen Sector: Capital Goods
THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into on December 15, 2015 by and between Exactus BioSolutions Corporation, a Delaware corporation, having an address of 4870 Sadler Rd Suite 300 Glen Allen VA 23238 (the “Company”), and Mr. Philip J. Young (the “Executive”).
WHEREAS the Company is engaged in the business of developing, manufacturing, and distributing point-of-care diagnostic products to customers throughout the United States and Europe (the “Business”) and
WHEREAS the Company desires to employ the Executive as its President and Chief Executive Officer to oversee the start-up of the Company and lead the operational efforts of the Company;
AND THEREFORE 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 with the Company.
2. Term . The Executive’s employment hereunder shall commence effective as of December 15, 2015 (the “Effective Date”) and shall continue until terminated on the terms and conditions set forth herein. The Term of this Agreement is hereafter referred to as “the term of this Agreement” or “the term hereof.”
3. Capacity and Performance; Location .
(a) During the term hereof, the Executive shall serve as the President and Chief Executive Officer of the Company. In addition, and without further compensation, the Executive shall be appointed to serve the Chairman of the Board of Directors of the Company (the “Board”). So long as Executive remains the Chief Executive Officer of the Company the Company will recommend to its members or stockholders, as applicable, that Executive be elected to the Board of Directors at each meeting of stockholders or in connection with each action by written consent pursuant to which Executive may be elected.
(b) During the term hereof, 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 business and would be material to the Company.
(c) During the term hereof, 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. Without the prior knowledge of the Board of Directors, The Executive shall not engage in any other business activity or serve in any industry, trade, professional, governmental or academic position during the term of this Agreement; provided, that the Executive shall be entitled to serve on the Board of Directors of no more than two other companies, provided that such service does not interfere with his performance of his duties hereunder.
(d) The Company’s principal executive office shall be located in the area of Richmond, Virginia. If it is determined that the principal office location of the Company shall be relocated, the Company shall provide the Executive with six months’ prior written notice and upon delivery of such notice, the Company and the Executive shall reasonably and in good faith negotiate a fair and equitable relocation package. Following such notice period and the determination of the location of the Company’s principal executive office, the Executive shall be based in and work primarily in and from the Company’s principal executive office. It is the expectation of the Company that the Company’s principal executive office will remain in the Richmond, Virginia area in the absence of a compelling business reason to locate it elsewhere.
(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 living 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 hereof, and subject to performance of the Executive’s duties and obligations pursuant to this Agreement:
(a) Base Salary . Except for the following Limited Salary Period and during the term hereof, the Company shall pay the Executive a base salary at an initial rate of Three Hundred NintyThousand Dollars ($390,000) per annum (the “Base Salary”). For an initial period from the Effective Date until such time as the Company has raised at least $5,000,000 through the sale of equity securities or otherwise (the “Limited Salary Period”), the Executive shall be paid a base salary at the rate of $325,000 per annum (the “Initial Salary”). The Initial Salary or Base Salary, as applicable, will be payable in accordance with the payroll practices of the Company for its executives, but no less then once per each month. The Base Salary will be paid subject to all applicable deductions and withholding permitted by law. The Initial Salary shall start on the earlier of Febuary 1, 2016 or the completion of an initial financing of at least $500,000.
(b) Bonus Compensation .
(i) Within thirty (30) days following the end of the Limited Salary Period, the Company shall pay executive a lump sum bonus equal to the difference between the amount that Executive would have been paid during the Limited Salary Period had Executive’s salary been the Base Salary, and the amount that Executive was paid during the Limited Salary Period at the Initial Salary. At its discretion, the company may issue stock in lieu of a cash payout and assume liability for gross up payment of taxes incurred by the stock payment. If paid in cash the bonus shall be subject to applicable withholding.
(ii) During the term hereof, the Executive shall have the opportunity to earn an annual performance bonus equal to up to 75% of the Executive’s 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. In order to receive the annual performance bonus, the Executive must continue to be employed by the Company through the end of the period with respect to which the annual performance bonus has been earned. The annual performance bonus 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 the annual performance bonus be paid later than February 28 of the following calendar year. Except as otherwise provided herein, bonuses shall be paid at such time as bonuses for the applicable period are regularly paid to senior executives of the Company.
(c) Stock Options . As soon as practicable following Executive’s commencement of employment as described in 4(a) the Executive shall receive stock options to purchase shares of common stock of the Company at an exercise price per share equal to the fair market value of such shares on the date of grant as reasonably determined by the Board in good faith (the “Initial Stock Option”). The Initial Stock Option will vest and become exercisable with respect to half (50%) of the total number of shares on December 31, 2016. The other half (50%) (the “Remaining Shares”) shall vest monthly on the first day of each subsequent month, commencing on January 1, 2017, 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.
(d) Vacations . During the term hereof, the Executive shall be entitled to six (6) weeks of 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. Vacation time shall not cumulate from year to year. Accrued and unused vacation time may be carried over to subsequent years, provided that vacation time will be capped at 15 weeks of accrued but unused vacation time. Any accrued but unused vacation will be payable to Executive at time of termination, regardless of the reason for termination.
(e) Insurance Coverage . During the term hereof, 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 health, dental and vision coverage for Executive and his immediate family, (ii) provide, at its cost, disability insurance with an annual benefit equal to 100% of the Executive’s Base Salary, and (iii) provide, at its cost, life insurance on the life of the Executive with a death benefit equal to an aggregate of $2,000,000, payable to such beneficiaries as may be designated by the Executive in writing from time to time. 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. Notwithstanding the foregoing, (i) in lieu of the foregoing, if Executive elects to retain existing insurance policies consistent with the foregoing, the Company shall reimburse Executive for the cost of such policies and (ii) Executive shall be solely responsible for the premiums related to his existing life insurance and disability policies until April 1, 2016.
(f) Other Benefits . During the term hereof 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.
(g) Automobile Allowance . The Company will provide Executive with an automobile allowance for his automobile expenses in the gross amount of $1,500.00 per month. In the event the Executive’s employment terminates, the Executive may retain possession of the automobile and will assume the monthly payments, and all other obligations related to the automobile, effective on the effective date of the termination.
(h) Business 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 transportation tickets in advance or otherwise take advantage of low-cost fares.
5. Termination of Employment . Executive’s employment hereunder may terminate as set forth below.
(a) Death . In the event of the Executive’s death during the term hereof, 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 Base Salary and Bonus. In no event shall the Company pay the estate or designated beneficiary less then 6 months salary and bonus. 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 that the Executive becomes disabled during his employment hereunder through any illness, injury, accident or condition of either a physical or psychological nature and, as a result, is unable to perform the essential functions of his position hereunder, with or without reasonable accommodation, for eighty (80) days during any period of one-hundred eighty (180) consecutive calendar days.
(ii) The Board may designate another employee to act in the Executive’s place during any period in which the Executive is unable to perform the essential functions of his position as a result of any illness, injury, accident or condition of either a physical or psychological nature. Notwithstanding any such designation, the Executive shall continue to receive the Base Salary in accordance with Section 4(a) and his other benefits pursuant to Sections 4(e), 4(f) and 4(g) hereof, to the extent permitted by the then-current terms of the applicable benefit plans, until the Executive becomes eligible for disability income benefits under any disability income plan provided by the Company or until the termination of his employment, whichever shall first occur.
(iii) If any question shall arise as to whether during any period the Executive is disabled through any illness, injury, accident or condition of either a physical or psychological nature so as to be unable to perform the essential functions of his position hereunder, 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 is so disabled, 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.
(c) By the Company for Cause . The Company may terminate the Executive’s employment hereunder for Cause (as defined below) at any time upon 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 material provisions of this Agreement or of any other material agreement between the Executive and the Company or any of its Affiliates, which breach 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 his duties under this Agreement or breach of his duty of loyalty to the Company or any of its Affiliates 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 Base Salary earned and unpaid through the date of termination. Any unvested Stock Options shall be forfeited and vested Stock Options not exercised prior to termination shall expire and no longer be exercisable.
(d) By the Company without Cause . The Company may terminate the Executive’s employment hereunder without Cause at any time upon six (6) months months’ advance written notice.
(e) By the Executive . The Executive may terminate his employment, with or without cause, at any time upon at least fourteen (14) days’ advance written notice to the Company.
(f) By the Executive for Changed Circumstances . The Executive may terminate his employment hereunder upon the occurrence of Changed Circumstances (as defined below) upon written notice to the Company. “Changed Circumstances” shall mean (i) breach hereof by the Company of its obligations under this Agreement not remedied within thirty (30) days’ written notice by the Executive to the Company; (ii) subject to the Company’s right to terminate the Executive’s employment pursuant to subsections (c) and (d) above, a material diminution in the Executive’s authority or title within the Company by reason of actions taken by or under the authority of the Board, (iii) a “Change in Control” as defined in Section 6 hereof or (iv) relocation of Executive’s principal place of employment by more than forty (40) miles following the establishment of the Company’s principal executive office as set forth in Section 3(d)’.
(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 Changed Circumstances (as defined above), subject to the terms and conditions of this Section 5(g), (A) the Company will pay severance on a monthly basis to the Executive and will provide the continuation of the benefits set forth in Section 4(e) and 4(f) for a period of months (the “Severance Period”) following Executive’s termination equal to the greater of (x) six (6) months or (y) the number of full months between the Effective Date and Executive’s termination, provided that the Severance Period shall not exceed twelve (12) months; (B) any options or other equity awards 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); and (C) a pro rate portion of any eligible bonus compensation as of the termination date.
(ii) The severance amount and benefits continuation set forth above are referred to herein as the “Severance Benefits.” 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. The Executive’s right to receive Severance Benefits under Subsection 5(g)(i) is conditioned on 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.
(iii) In order to receive the Severance Benefits under Subsection 5(g)(i), the Executive must execute and deliver to the Company a general release 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 (“Severance Release”), in a form that is the same as or substantially similar to the form attached hereto as Exhibit A, which will be signed by Executive no later than the forty-fifth (45th) day after the date of such termination, and such release must become effective no later than fifty-ninth (59th) day after such termination. 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, with payments commencing on the 8 th day following Executive’s execution of the Severance Release.
6. Change in Control . If the Executive’s employment is terminated by the Company, with or without Cause, or by the Executive for Changed Circumstances in connection with or following a Change in Control, the Executive shall receive those Severance Benefits provided in Section 5(g)(i) as if his employment were terminated more than twelve months after the Effective Date plus the pro rata portion of any eligible bonus compensation the date of termination, 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