UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

  

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934

 

Date of Report (Date of earliest event reported):  February 24, 2016 (February 18, 2016)

 

SURGE COMPONENTS, INC.

 

(Exact name of registrant as specified in its charter)

 

Nevada   000-27688   11-2602030

(State or other jurisdiction

of incorporation)

 

(Commission File Number)

 

(I.R.S. Employer

Identification No.)

 

95 East Jefryn Blvd., Deer Park, New York   11729
(Address of principal executive offices)   (Zip Code)

 

Registrant’s telephone number, including area code:  (631) 595-1818

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

 

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
   
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
   
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
   
Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13a-4(c))

 

 

 

 
 

 

Item 5.02. Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements for Certain Officers.

 

On February 18, 2016, Surge Components, Inc. (the “ Company ”) entered into employment agreements with Ira Levy, the Chief Executive Officer and President of the Company (the “ Levy Employment Agreement ”), and Steven Lubman, the Vice President, Secretary, and Treasurer of the Company (the “ Lubman Employment Agreement ”).

 

Levy Employment Agreement

 

Pursuant to the terms of the Levy Employment Agreement, Mr. Levy will work for the Company on a full-time basis and receive an annual base salary of not less than $275,000. Mr. Levy shall receive an annual bonus as shall be determined by the Board of Directors of the Company (the “ Board ”) or the compensation committee of the Board (the “ Compensation Committee ”), as applicable, in its sole discretion, based upon criteria to be established in their sole discretion. Mr. Levy shall also be entitled to receive additional cash, equity or other compensation or benefits in consideration for his services provided to the Company, at such times and in such amounts as shall be determined in the sole discretion of the Board or Compensation Committee. In addition, Mr. Levy shall be entitled to receive grants of stock options, stock and/or any other equity incentive awards available to senior executives, under the Company’s equity incentive plans, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee.

 

The Levy Employment Agreement will remain in effect until terminated by either the Company or Mr. Levy. In the event Mr. Levy’s employment is terminated by the Company for Cause (as defined in the Levy Employment Agreement), or if Mr. Levy resigns other than for Good Reason (as defined in the Levy Employment Agreement), he shall be entitled to receive (i) any earned but unpaid salary, all vested equity, and any earned but unpaid bonus awards through the date of termination, and (ii) reimbursement for any unreimbursed business expenses incurred by him in accordance with the Company’s policy prior to the date of termination.

 

In the event Mr. Levy’s employment is terminated by the Company other than for Cause or if Mr. Levy resigns for Good Reason, including a Change of Control (as defined in the Levy Employment Agreement), he shall be entitled to any earned but unpaid salary, all vested equity, and any earned but unpaid bonus awards through the date of termination. He will also be paid an additional thirty-six months of annual compensation equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company’s regular payroll practice over a 52-week period. The Company shall also (i) accelerate the vesting on any of Mr. Levy’s unvested stock options, restricted stock grants or other equity incentive awards; and (ii) reimburse Mr. Levy for any unreimbursed business expenses incurred by him in accordance with the Company’s policy prior to the date of termination.

 

In the event Mr. Levy’s employment is terminated by the Company upon death or disability, Mr. Levy or his estate shall be entitled to receive his salary then in effect along with all other fringe benefits (including, without limitation, family medical benefits) for a period of one year following the date of such termination. In addition, Mr. Levy or his estate shall have the right to exercise any unexercised and vested options for a period of ninety days following the date of termination and to receive payment for any accrued but unpaid vacation time.

 

The Levy Employment Agreement contains customary non-competition and non-solicitation provisions that extend to one year after the date of termination of Mr. Levy’s employment with the Company.  Mr. Levy also agreed to customary terms regarding confidentiality and ownership of product ideas.

 

The foregoing description of the Levy Employment Agreement is qualified in its entirety by reference to the complete text of the Levy Employment Agreement which is filed as Exhibit 10.1 to this report and is incorporated herein by reference.

 

Lubman Employment Agreement

 

Pursuant to the terms of the Lubman Employment Agreement, Mr. Lubman will work for the Company on a full-time basis and receive an annual base salary of not less than $225,000. Mr. Lubman shall receive an annual bonus as shall be determined by the Board or the Compensation Committee, as applicable, in its sole discretion, based upon criteria to be established in their sole discretion. Mr. Lubman shall also be entitled to receive additional cash, equity or other compensation or benefits in consideration for his services provided to the Company, at such times and in such amounts as shall be determined in the sole discretion of the Board or Compensation Committee. In addition, Mr. Lubman shall be entitled to receive grants of stock options, stock and/or any other equity incentive awards available to senior executives, under the Company’s equity incentive plans, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee.

 

  2  
 

 

The Lubman Employment Agreement will remain in effect until terminated by either the Company or Mr. Lubman. In the event Mr. Lubman’s employment is terminated by the Company for Cause (as defined in the Lubman Employment Agreement), or if Mr. Lubman resigns other than for Good Reason (as defined in the Lubman Employment Agreement), he shall be entitled to receive (i) any earned but unpaid salary, all vested equity, and any earned but unpaid bonus awards through the date of termination, and (ii) reimbursement for any unreimbursed business expenses incurred by him in accordance with the Company’s policy prior to the date of termination.

 

In the event Mr. Lubman’s employment is terminated by the Company other than for Cause or if Mr. Lubman resigns for Good Reason, including a Change of Control (as defined in the Levy Employment Agreement), he shall be entitled to any earned but unpaid salary, all vested equity, and any earned but unpaid bonus awards through the date of termination. He will also be paid an additional thirty-six months of annual compensation following the date of termination equal to the average of his base salary and bonus for the three calendar years prior to the date of termination, payable in accordance with the Company’s regular payroll practice over a 52-week period. The Company shall also (i) accelerate the vesting on any of Mr. Lubman’s unvested stock options, restricted stock grants or other equity incentive awards; and (ii) reimburse Mr. Lubman for any unreimbursed business expenses incurred by him in accordance with the Company’s policy prior to the date of termination.

 

In the event Mr. Lubman’s employment is terminated by the Company upon death or disability, Mr. Lubman or his estate shall be entitled to receive his salary then in effect along with all other fringe benefits (including, without limitation, family medical benefits) for a period of one year following the date of such termination. In addition, Mr. Lubman or his estate shall have the right to exercise any unexercised and vested options for a period of ninety days following the date of termination and to receive payment for any accrued but unpaid vacation time.

 

The Lubman Employment Agreement contains customary non-competition and non-solicitation provisions that extend to one year after the date of termination of Mr. Lubman’s employment with the Company.  Mr. Lubman also agreed to customary terms regarding confidentiality and ownership of product ideas.

 

The foregoing description of the Lubman Employment Agreement is qualified in its entirety by reference to the complete text of the Lubman Employment Agreement which is filed as Exhibit 10.2 to this report and is incorporated herein by reference.

 

Item  5.03. Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.

 

On February 18, 2016, the Board approved an amendment and restatement of the Company’s by-laws (as amended, the “ Amended and Restated By-Laws ”). Pursuant to the amendment, which became effective upon the Board’s approval, the Amended and Restated By-Laws provide, among other things: (i) for advance notice of stockholder proposals and director nominations, (ii) that stockholders may not act by written consent in lieu of a meeting or call a special meeting of stockholders, (iii) that only the Board or the Chairman of the Board may adjourn a meeting of stockholders, and (iv) that the Company may advance funds to persons who are entitled to indemnification by the Company if it receives an undertaking by or on behalf of such person to repay all amounts so advanced if it is ultimately determined that such person is not entitled to be indemnified.

 

The foregoing summary of the Amended and Restated By-Laws is qualified by reference to the complete text of the Amended and Restated By-Laws which is filed as Exhibit 3.1 to this report and is incorporated herein by reference.

 

  3  
 

 

Item 9.01 Financial Statements and Exhibits.

 

(d)         Exhibits.

 

Exhibit No.   Description
  3.1   Amended and Restated By-Laws
10.1   Employment Agreement, dated February 18, 2016, by and between Surge Components, Inc. and Ira Levy
10.2   Employment Agreement, dated February 18, 2016, by and between Surge Components, Inc. and Steven Lubman

 

  4  
 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 

  SURGE COMPONENTS, INC.
     
Date: February 24, 2016 By: /s/ Ira Levy
  Name: Ira Levy
  Title:   Chief Executive Officer

 

 

 

5

 

 

Exhibit 3.1

 

AMENDED AND RESTATED

BY-LAWS OF

SURGE COMPONENTS, INC.

(hereinafter called the " Corporation ")

 

ARTICLE I

OFFICES

 

Section 1 . Registered Office. The registered office of the Corporation shall be maintained at such place as the Board of Directors shall determine from time to time.

 

Section 2 . Other Offices. The Corporation may also have offices at such other places both within and without the State of Nevada as the Board of Directors may from time to time determine.

 

ARTICLE II

MEETING OF STOCKHOLDERS

 

Section 1 . Place of Meetings. Meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, either within or without the State of Nevada as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting or in a duly executed waiver of notice thereof.

 

Section 2 . Annual Meetings. The Annual Meetings of Stockholders (“ Annual Meeting ”) shall be held on such date and at such time as shall be designated from time to time by the Board of Directors and stated in the notice of the meeting, at which meetings the stockholders shall elect by a plurality vote a Board of Directors, and transact such other business as may properly be brought before the meeting. Written notice of the Annual Meeting stating the place, date and hour of the meeting shall be given to each stockholder entitled to vote at such meeting not less than ten nor more than sixty days before the date of the meeting.

 

Section 3 . Special Meetings . Unless otherwise prescribed by law or by the Articles of Incorporation, Special Meetings of Stockholders (“ Special Meeting ”), for any purpose or purposes, may be called by either the Chairman or the President, and shall be called by any officer of the Corporation at the request in writing of a majority of the Board of Directors. Such request shall state the purpose or purposes of the proposed meeting. Written notice of a Special Meeting stating the place, date and hour of the meeting and the purpose or purposes for which the meeting is called shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting.

 

Section 4 . Advance Notice Procedures for Business Brought Before Meeting .

 

(a) Annual Meetings of Stockholders . No business may be transacted at an Annual Meeting, other than business that is either (i) specified in the Corporation’s notice of meeting (or any supplement thereto) given by or at the direction of the Board of Directors, (ii) otherwise properly brought before the Annual Meeting by or at the direction of the Board of Directors or (iii) otherwise properly brought before the Annual Meeting by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 4(a) and on the record date for the determination of stockholders entitled to vote at such Annual Meeting and (y) who complies with the notice procedures set forth in this Section 4(a) . Notwithstanding anything in this Section 4(a) to the contrary, only persons nominated for election as a director to fill any term of a directorship that expires on the date of the Annual Meeting pursuant to Section 5 or a vacancy in the Board of Directors will be considered for election at such meeting.

 

(i) In addition to any other applicable requirements, for business (other than nominations) to be properly brought before an Annual Meeting by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation and such business must otherwise be a proper matter for stockholder action. Subject to Section 4(a)(iii) , a stockholder’s notice to the Secretary with respect to such business, to be timely, must be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding Annual Meeting; provided, however, that in the event that the Annual Meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the Annual Meeting is first made by the Corporation. The public announcement of an adjournment of an Annual Meeting shall not commence a new time period for the giving of a stockholder’s notice as described in this Section 4(a).

 

 

 

 

(ii) To be in proper written form, a stockholder’s notice to the Secretary with respect to any business (other than nominations) must set forth as to each such matter such stockholder proposes to bring before the Annual Meeting (A) a brief description of the business desired to be brought before the Annual Meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and in the event such business includes a proposal to amend these By-Laws, the language of the proposed amendment) and the reasons for conducting such business at the Annual Meeting, (B) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the proposal is made, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, as well as a description of any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, the purpose or effect of which is to give such stockholder economic risk similar to ownership of shares of any class or series of the capital stock of the Corporation, (D) a description of all arrangements or understandings between such stockholder and the beneficial owner, if any, on whose behalf the proposal is made and any other person or persons (including their names) in connection with the proposal of such business by such stockholder, (E) any material interest of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made in such business and (F) a representation that such stockholder intends to appear in person or by proxy at the Annual Meeting to bring such business before the meeting.

 

(iii) The foregoing notice requirements of this Section 4(a) shall be deemed satisfied by a stockholder as to any proposal (other than nominations) if the stockholder has notified the Corporation of such stockholder’s intention to present such proposal at an Annual Meeting in compliance with Rule 14a-8 (or any successor thereof) of the Securities Exchange Act of 1934, as amended (the “ Exchange Act ”), and such stockholder has complied with the requirements of such rule for inclusion of such proposal in a proxy statement prepared by the Corporation to solicit proxies for such Annual Meeting. No business shall be conducted at the Annual Meeting except business brought before the Annual Meeting in accordance with the procedures set forth in this Section 4(a) ; provided, however, that once business has been properly brought before the Annual Meeting in accordance with such procedures, nothing in this Section 4(a) shall be deemed to preclude discussion by any stockholder of any such business. If the Board of Directors or the chairman of the Annual Meeting determines that any stockholder proposal was not made in accordance with the provisions of this Section 4(a) or that the information provided in a stockholder’s notice does not satisfy the information requirements of this Section 4(a), such proposal shall not be presented for action at the Annual Meeting. Notwithstanding the foregoing provisions of this Section 4(a), if the stockholder (or a qualified representative of the stockholder) does not appear at the Annual Meeting to present the proposed business, such proposed business shall not be transacted, notwithstanding that proxies in respect of such matter may have been received by the Corporation.

 

(iv) In addition to the provisions of this Section 4(a) , a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 4(a) shall be deemed to affect any rights of stockholders to request inclusion of proposals in the Corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

 

(b) Special Meetings of Stockholders . Only such business shall be conducted at a Special Meeting as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting. Nominations of persons for election to the Board of Directors may be made at a Special Meeting at which directors are to be elected pursuant to the Corporation’s notice of meeting only pursuant to Section 5 .

 

  2  

 

 

(c) Public Announcement . For purposes of these By-Laws, “ public announcement ” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the Corporation with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) of the Exchange Act.

 

Section 5 . Advance Notice Procedures For Nominations of Directors .

 

(a) Only persons who are nominated in accordance with the following procedures shall be eligible for election as directors of the Corporation, except as may be otherwise provided by the terms of one or more series of Preferred Stock with respect to the rights of holders of one or more series of Preferred Stock to elect directors. Nominations of persons for election to the Board of Directors at any Annual Meeting, or at any Special Meeting called for the purpose of electing directors as set forth in the Corporation’s notice of such Special Meeting, may be made (i) by or at the direction of the Board of Directors or (ii) by any stockholder of the Corporation (x) who is a stockholder of record on the date of the giving of the notice provided for in this Section 5 and on the record date for the determination of stockholders entitled to vote at such meeting and (y) who complies with the notice procedures set forth in this Section 5 .

 

(b) In addition to any other applicable requirements, for a nomination to be made by a stockholder, such stockholder must have given timely notice thereof in proper written form to the Secretary of the Corporation. To be timely, a stockholder’s notice to the Secretary must be received by the Secretary at the principal executive offices of the Corporation (i) in the case of an Annual Meeting, not later than the close of business on the 90th day nor earlier than the opening of business on the 120th day before the anniversary date of the immediately preceding Annual Meeting; provided, however, that in the event that the Annual Meeting is called for a date that is not within 45 days before or after such anniversary date, notice by the stockholder to be timely must be so received not earlier than the opening of business on the 120th day before the meeting and not later than the later of (x) the close of business on the 90th day before the meeting or (y) the close of business on the 10th day following the day on which public announcement of the date of the Annual Meeting was first made by the Corporation; and (ii) in the case of a Special Meeting called for the purpose of electing directors, not later than the close of business on the 10th day following the day on which public announcement of the date of the Special Meeting is first made by the Corporation. In no event shall the public announcement of an adjournment of an Annual Meeting or Special Meeting commence a new time period for the giving of a stockholder’s notice as described in this Section 5 .

 

(c) Notwithstanding anything in paragraph (b) to the contrary, in the event that the number of directors to be elected to the Board of Directors at an Annual Meeting is greater than the number of directors whose terms expire on the date of the Annual Meeting and there is no public announcement by the Corporation naming all of the nominees for the additional directors to be elected or specifying the size of the increased Board of Directors before the close of business on the 90th day prior to the anniversary date of the immediately preceding Annual Meeting, a stockholder’s notice required by this Section 5 shall also be considered timely, but only with respect to nominees for the additional directorships created by such increase that are to be filled by election at such Annual Meeting, if it shall be received by the Secretary at the principal executive offices of the Corporation not later than the close of business on the 10th day following the date on which such public announcement was first made by the Corporation.

 

(d) To be in proper written form, a stockholder’s notice to the Secretary must set forth (i) as to each person whom the stockholder proposes to nominate for election as a director (A) the name, age, business address and residence address of the person, (B) the principal occupation or employment of the person, (C) the class or series and number of shares of capital stock of the Corporation that are owned beneficially or of record by the person and (D) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder; and (ii) as to the stockholder giving the notice (A) the name and record address of such stockholder and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, (B) the class or series and number of shares of capital stock of the Corporation that are owned beneficially and of record by such stockholder and the beneficial owner, if any, on whose behalf the nomination is made as well as a description of any derivative, swap or other transaction or series of transactions engaged in, directly or indirectly, by such stockholder and by the beneficial owner, if any, on whose behalf the proposal is made, the purpose or effect of which is to give such stockholder economic risk similar to ownership of shares of any class or series of the capital stock of the Corporation, (C) a description of all arrangements or understandings relating to the nomination to be made by such stockholder among such stockholder, the beneficial owner, if any, on whose behalf the nomination is made, each proposed nominee and any other person or persons (including their names), (D) a representation that such stockholder intends to appear in person or by proxy at the meeting to nominate the persons named in its notice and (E) any other information relating to such stockholder and the beneficial owner, if any, on whose behalf the nomination is made that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of directors pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a director if elected.

 

  3  

 

 

(e) If the Board of Directors or the chairman of the meeting of stockholders determines that any nomination was not made in accordance with the provisions of this Section 5 , then such nomination shall not be considered at the meeting in question. Notwithstanding the foregoing provisions of this Section 5 , if the stockholder (or a qualified representative of the stockholder) does not appear at the meeting of stockholders of the Corporation to present the nomination, such nomination shall be disregarded, notwithstanding that proxies in respect of such nomination may have been received by the Corporation.

 

(f) In addition to the provisions of this Section 5 , a stockholder shall also comply with all of the applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth herein. Nothing in this Section 5 shall be deemed to affect any rights of the holders of Preferred Stock to elect directors pursuant to the Certificate of Incorporation.

 

Section 6 . Quorum . Except as otherwise provided by law or by the Articles of Incorporation, the holders of a majority of the capital stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the Chairman of the Board of Directors or a majority of the directors on the Board of Directors present at the meeting, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, of the time and place of the adjourned meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. If the adjournment is for more than thirty days, or if after the adjournment a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder entitled to vote at the meeting.

 

Section 7 . Voting. Unless otherwise required by law, the Articles of Incorporation or these By-Laws, any question brought before any meeting of stockholders shall be decided by the vote of the holders of a majority of the stock represented and entitled to vote thereat. Each stockholder represented at a meeting of shareholders shall be entitled to cast one vote for each share of the capital stock entitled to vote thereat held by such stockholder. Such votes may be cast in person or by proxy but no proxy shall be voted on or after three years from its date, unless such proxy provides for a longer period. The Board of Directors, in its discretion, or the officer of the Corporation presiding at a meeting of stockholders, in his discretion, may require that any votes cast at such meeting shall be cast by written ballot.

 

Section 8 . No Consent of Stockholders in Lieu of Meeting . Unless otherwise provided in the Articles of Incorporation, any action required or permitted to be taken at any Annual Meeting or Special Meeting must be effected at a duly called Annual Meeting or Special Meeting at which a quorum is present and may not be effected by the written consent of the stockholders in lieu of a meeting of the stockholders.

 

Section 9 . List of Stockholders Entitled to Vote. The officer of the Corporation who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of the meeting, or, if not so specified, at the place where the meeting is to be held. The list shall also be produced and kept at the time and place of the meeting during the whole time thereof, and may be inspected by any stockholder of the Corporation who is present.

 

  4  

 

 

Section 10 . Stock Ledger. The stock ledger of the Corporation shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by Section 9 of this Article II or the books of the Corporation, or to vote in person or by proxy at any meeting of stockholders.

 

ARTICLE III

DIRECTORS

 

Section 1 . Number and Election of Directors. The Board of Directors shall consist of one or more members, the exact number of which shall initially be fixed by the Incorporator and thereafter from time to time by the Board of Directors. Except as provided in Section 2 of this Article, directors shall be elected by a plurality of the votes cast at Annual Meetings of Stockholders. Any director may resign at any time upon written notice to the Corporation. Directors need not be stockholders.

 

Section 2 . Vacancies. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, or by a sole remaining director, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and qualified, or until their earlier resignation or removal.

 

Section 3 . Duties and Powers. The business of the Corporation shall be managed by or under the direction of the Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these By-Laws directed or required to be exercised or done by the stockholders.

 

Section 4 . Meetings. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Nevada. Regular meetings of the Board of Directors may be held without notice at such time and at such place as may from time to time be determined by the Board of Directors. Special meetings of the Board of Directors may be called by the Chairman, if there be one, the President, or any one (1) director. Notice thereof stating the place, date and hour of the meetings shall be given to each director either by mail not less than forty-eight (48) hours before the date of the meeting, or by telephone or written notice given by hand delivery or by means of a form of electronic transmission and delivery on twenty-four (24) hours' notice, or on such shorter notice as the person or persons calling such meeting may deem necessary or appropriate in the circumstances.

 

Section 5 . Quorum. Except as may be otherwise specifically provided by law, the Articles of Incorporation or these By-Laws, at all meetings of the Board of Directors, a majority of the entire Board of Directors shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors. If a quorum shall not be present at any meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present.

 

Section 6 . Actions of Board. Unless otherwise provided by the Articles of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if all the members of the Board of Directors or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or committee.

 

Section 7 . Meetings by Means of Conference Telephone . Unless otherwise provided by the Articles of Incorporation or these By-Laws, members of the Board of Directors of the Corporation, or any committee designated by the Board of Directors, may participate in a meeting of the Board of Directors or such committee by means of a conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section 7 shall constitute presence in person at such meeting.

 

  5  

 

 

Section 8 . Committees. The Board of Directors may, by resolution passed by a majority of the entire Board of Directors, designate one or more committees, each committee to consist of one or more of the directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of any such committee. In the absence or disqualification of a member of a committee, and in the absence of a designation by the Board of Directors of an alternate member to replace the absent or disqualified member, the member or members thereof present at any meeting and not disqualified from voting, whether or not he or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any absent or disqualified member. Any committee, to the extent allowed by law and provided in the resolution establishing such committee, shall have and may exercise all the powers and authority of the Board of Directors in the management of the business and affairs of the Corporation. Each committee shall keep regular minutes and report to the Board of Directors when required.

 

Section 9 . Compensation. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid for attendance at each meeting of the Board of Directors or a stated annual salary as director. Compensation may also consist of such options, warrants rights, shares of capital stock or any other form of remuneration approved by the Board of Directors. No such payment shall preclude any director from serving the Corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed like reimbursement of expenses for attending committee meetings.

 

Section 10 . Interested Directors. No contract or transaction between the Corporation and one or more of its directors or officers, or between the Corporation and any other corporation, partnership, association, or other organization in which one or more of its directors or officers are directors or officers, or have a financial interest, shall be void or voidable solely for this reason, or solely because the director or officer is present at or participates in the meeting of the Board of Directors or committee thereof which authorizes the contract or transaction, or solely because his or their votes are counted for such purpose if (i) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the Board of Directors or their committee, and the Board of Directors or committee in good faith authorizes the contract or transaction by the affirmative votes of a majority of the disinterested directors, even though the disinterested directors be less than a quorum; or (ii) the material facts as to his or their relationship or interest and as to the contract or transaction are disclosed or are known to the shareholders entitled to vote thereon, and the contract or transaction is specifically approved in good faith by vote of the shareholders; or (iii) the contract or transaction is fair as to the Corporation as of the time it is authorized, approved or ratified, by the Board of Directors, a committee thereof or the shareholders. Common or interested directors may be counted in determining the presence of a quorum at a meeting of the Board of Directors or of a committee which authorizes the contract or transaction.

 

ARTICLE IV

OFFICERS

 

Section 1 . General. The officers of the Corporation shall be chosen by the Board of Directors and shall be a President, a Secretary and a Treasurer. The Board of Directors, in its discretion, may also choose a Chairman of the Board of Directors (who must be a director) and one or more Vice Presidents, Assistant Secretaries, Assistant Treasurers and other officers. Any number of offices may be held by the same person, unless otherwise prohibited by law, the Articles of Incorporation or these By-Laws. The officers of the Corporation need not be stockholders of the Corporation nor, except in the case of the Chairman of the Board of Directors, need such officers be directors of the Corporation.

 

Section 2 . Election. The Board of Directors shall elect the officers of the Corporation who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors; and all officers of the Corporation shall hold office until their successors are chosen and qualified, or until their earlier resignation or removal. Any officer elected by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. The salaries of all officers of the Corporation shall be fixed by the Board of Directors.

 

Section 3 . Voting Securities Owned by the Corporation. Powers of attorney, proxies, waivers of notice of meeting, consents and other instruments relating to securities owned by the Corporation may be executed in the name of and on behalf of the Corporation by the President or any Vice President and any such officer may, in the name of and on behalf of the Corporation, take all such action as any such officer may deem advisable to vote in person or by proxy at any meeting of security holders of any corporation in which the Corporation may own securities and at any such meeting shall possess and may exercise any and all rights and power incident to the ownership of such securities and which, as the owner thereof, the Corporation might have exercised and possessed if present. The Board of Directors may, by resolution, from time to time confer like powers upon an-other person or persons.

 

  6  

 

 

Section 4 . Chairman of the Board of Directors. The Chairman of the Board of Directors, if there be one, shall preside at all meetings of the stockholders and of the Board of Directors. He shall be the Chief Executive Officer of the Corporation, and except where by law the signature of the President is required, the Chairman of the Board of Directors shall possess the same power as the President to sign all contracts, certificates and other instruments of the Corporation which may be authorized by the Board of Directors. During the absence or disability of the President, the Chairman of the Board of Directors shall exercise all the powers and discharge all the duties of the President. The Chairman of the Board of Directors shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors.

 

Section 5 . President. The President shall, subject to the control of the Board of Directors and, if there be one, the Chairman of the Board of Directors, have general supervision of the business of the Corporation and shall see that all orders and resolutions of the Board of Directors are carried into effect. He shall execute all bonds, mortgages, contracts and other instruments of the Corporation requiring a seal, under the seal of the Corporation, except where required or permitted by law to be otherwise signed and executed and except that the other officers of the Corporation may sign and execute documents when so authorized by these By-Laws, the Board of Directors or the President. In the absence or disability of the Chairman of the Board of Directors, or if there be none, the President shall preside at all meetings of the stockholders and the Board of Directors. If there be no Chairman of the Board of Directors, the President shall be the Chief Executive Officer of the Corporation. The President shall also perform such other duties and may exercise such other powers as from time to time may be assigned to him by these By-Laws or by the Board of Directors.

 

Section 6 . Vice-Presidents. At the request of the President or in his absence or in the event of his inability or refusal to act (and if there be no Chairman of the Board of Directors), the Vice-President or the Vice-Presidents if there is more than one (in the order designated by the Board of Directors) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Each Vice-President shall perform such other-duties and have such other powers as the Board of Directors from time to time may prescribe. If there be no Chairman of the Board of Directors and no Vice-President, the Board of Directors shall designate the officer of the Corporation who, in the absence of the President or in the event of the inability or refusal of the President to act, shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President.

 

Section 7 . Secretary. The Secretary shall attend all meetings of the Board of Directors and all meetings of stockholders and record all the proceedings thereat in a book or books to be kept for that purpose; the Secretary shall also perform like duties for the standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, under whose supervision he shall be. If the Secretary shall be unable or shall refuse to cause to be given notice of all meetings of the stockholders and special meetings of the Board of Directors, and if there be no Assistant Secretary, then either the Board of Directors or the President may choose another officer to cause such notice to be given. The Secretary shall have custody of the seal of the Corporation and the Secretary or any Assistant Secretary, if there be one, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by the signature of the Secretary or by the signature of any such Assistant Secretary. The Board of Directors may give general authority to any' other officer to affix the seal of the Corporation and to attest the affixing by his signature. The Secretary shall see that all books, reports, statements, certificates and other documents and records required by Law to be kept or filed are properly kept or filed, as the case may be.

 

Section 8 . Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render unto the President and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

 

  7  

 

 

Section 9 . Assistant Secretaries. Except as may be otherwise provided in these By-Laws, Assistant Secretaries, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice-President, if there be one, or the Secretary, and in the absence of the Secretary or in the event of his disability or refusal to act, shall perform the duties of the Secretary, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Secretary.

 

Section 10 . Assistant Treasurers. Assistant Treasurers, if there be any, shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors, the President, any Vice-President, if there be one, or the Treasurer, and in the absence of the Treasurer or in the event of his disability or refusal to act, shall perform the duties of the Treasurer, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Treasurer. If required by the Board of Directors, an Assistant Treasurer shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.

 

Section 11 . Other Officers. Such other officers as the Board of Directors may choose shall perform such duties and have such powers as from time to time may be assigned to them by the Board of Directors. The Board of Directors may delegate to any other officer of the Corporation the power to choose such other officers and to prescribe their respective duties and powers.

 

ARTICLE V

STOCK

 

Section 1 . Certificated and Uncertificated Shares. The shares of the Corporation may be certificated or uncertificated, subject to the sole discretion of the Board of Directors.

 

Section 2 . Signatures. Any or all of the signatures on the certificate may be by facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if he were such officer, transfer agent or registrar at the date of issue.

 

Section 3 . Lost Certificates. The Board of Directors may direct a new certificate to be issued in place of any certificate theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate, or his legal representative, to advertise the same in such manner as the Board of Directors shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed.

 

Section 4 . Transfers. Stock of the Corporation shall be transferable in the manner prescribed by law and in these By-Laws. Transfers of stock shall be made on the books of the Corporation only by the person named in the certificate or by his attorney lawfully constituted in writing and upon the surrender of the certificate therefor, which shall be canceled before a new certificate shall be issued.

 

Section 5 . Record Date. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock, or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.

 

  8  

 

 

Section 6 . Beneficial Owners. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares of the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by law.

 

ARTICLE VI

NOTICES

 

Section 1 . Notices. Whenever written notice is required by law, the Articles of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, such notice may be given by mail, addressed to such director, member of a committee or stockholder, at his address as it appears on the records of the Corporation, with postage thereon prepaid, and such notice shall be deemed to be given at the time when the same shall be deposited in the United States mail. Written notice may also be given personally or by means of facsimile telecommunication or other form of electronic transmission.

 

Section 2 . Waivers of Notice. Whenever any notice is required by law, the Articles of Incorporation or these By-Laws, to be given to any director, member of a committee or stockholder, a waiver thereof in writing, signed, by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto.

 

Section 3 . Electronic Transmission. “Electronic transmission” means any form of communication, not directly involving the physical transmission of paper, that creates a record that may be retained, retrieved and reviewed by a recipient thereof, and that may be directly reproduced in paper form by such a recipient through an automated process, including but not limited to transmission by telex, facsimile telecommunication, electronic mail, telegram and cablegram.

 

ARTICLE VII

GENERAL PROVISIONS

 

Section 1 . Dividends. Dividends upon the capital stock of the Corporation, subject to the provisions of the Articles of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, and may be paid in cash, in property, or in shares of the capital stock. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the Board of Directors from time to time, in its absolute discretion, deems proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for any proper purpose, and the Board of Directors may modify or abolish any such reserve.

 

Section 2 . Disbursements. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate.

 

Section 3 . Fiscal Year. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors.

 

Section 4 . Corporate Seal. The corporate seal shall have inscribed thereon the name of the Corporation, the year of its organization and the words “Corporate Seal, Nevada”. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or reproduced or otherwise.

 

  9  

 

 

ARTICLE VIII

INDEMNIFICATION AND DIRECTORS' LIABILITY

 

Section 1 . Indemnification of Directors and Officers. The Corporation shall be required, to the fullest extent authorized by the Nevada Revised Statutes, as the same may be amended and supplemented, to indemnify any and all directors and officers of the Corporation.

 

Section 2 . Right to Advancement of Expenses . In addition to the right to indemnification conferred in this Article VIII, an indemnitee shall also have the right to be paid by the Corporation, to the fullest extent not prohibited by applicable law, the expenses (including, without limitation, attorneys’ fees) incurred in defending or otherwise participating in any such proceeding in advance of its final disposition; provided, however, that an advancement of expenses incurred by an indemnitee in his or her capacity as a director or officer of the Corporation shall be made only upon the Corporation’s receipt of an undertaking by or on behalf of such indemnitee to repay all amounts so advanced if it shall ultimately be determined that such indemnitee is not entitled to be indemnified under this Article VIII or otherwise.

 

ARTICLE IX

AMENDMENTS

 

Section 1. These By-Laws may be altered, amended or repealed, in whole or in part, or new By-Laws may be adopted by the stockholders or by the Board of Directors, provided, however, that notice of such alteration, amendment, repeal or adoption of new By-Laws be contained in the notice' of such meeting of stockholders or Board of Directors, as the case may be. All such amendments must be approved by either the holders of a majority of the outstanding capital stock entitled to vote thereon or by a majority of the entire Board of Directors then in office.

 

Section 2 . Entire Board of Directors. As used in this Article IX and in these By-Laws generally, the term “entire Board of Directors” means the total number of directors which the Corporation would have if there were no vacancies.

 

 

10

Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “ Agreement ”) is dated and is effective as of February 18, 2016 (the “Effective Date”) by and between Surge Components, Inc., a company organized under the laws of the State of Nevada (the “ Company ”), and Ira Levy, an individual residing at 1299 Corporate Drive, Apt. 802, Westbury, NY 11590 (the “ Executive ”).

WHEREAS , the Company and the Executive are parties to an employment agreement dated February 1, 1996 which specifies certain terms and conditions pursuant to which Executive shall serve the Company as its President;

 

WHEREAS , the Company, in order to benefit from the continuity and predictability of Executive’s services, wishes to supersede the previous employment agreement and enter into this new employment agreement pursuant to which the Executive will continue to be employed as President of the Company;

 

WHEREAS , the Executive is desirous of continuing employment with the Company and is willing to accept such employment for the inducements and upon the terms and conditions contained herein; and

 

WHEREAS , the Company has bargained for a covenant by the Employee not to compete with the Company’s business.

 

NOW, THEREFORE , in consideration of the foregoing premises and mutual covenants and agreements herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.     Term of Employment. The Executive shall be employed by the Company for a period commencing on the Effective Date and ending upon termination of this Agreement in accordance and subject to the provisions of Section 5 of this Agreement (the “Term”).

 

2.     Duties .

 

(a)                    During the Term, the principal duties of the Executive shall be to serve in the position of President and CEO of the Company. The Executive shall serve the Company in an executive capacity and shall perform such duties as are determined from time to time by the Board of Directors of the Company (the “Board”). Unless prevented by death or disability, the Executive shall devote his full business time, allowing for vacations, national holidays, and illnesses, exclusively to the business and affairs of the Company, and shall uses his best efforts, skill and abilities to promote its interests. Nothing herein contained shall be construed as preventing the Executive from purchasing securities in any publicly held entity, if such purchases shall not result in his owning beneficially 2% or more of the equity securities of such company, provided such investment is not made in a company in competition with the Company.

 

(b)                 It is hereby acknowledged that the Board has elected the Executive to serve as President and CEO, and hereby agrees to use its best efforts to have the Executive continue to serve as President and/or CEO during the Term.

 

3.     Compensation.

 

(a)                 Base Salary . As of the Effective Date, the Executive shall be paid a base salary of not less than $275,000 (the “Base Salary”) which Base Salary shall be earned and shall be payable at such intervals not less frequently than monthly, in equal installments, and otherwise in such a manner as is consistent with the Company’s normal practice for remuneration of executives. The Board shall review the Executive’s base salary on each of the anniversary dates of the execution of this agreement in order to determine whether the Executive’s salary should receive an upward adjustment.

 

1  

 

 

(b)                Additional Compensation . The Executive shall have an annual bonus for each calendar year during the Term (the “ Annual Bonus ”). The Annual Bonus shall be determined by consideration of the Board or Compensation Committee, as applicable, in its sole discretion, based upon criteria to be established in their sole discretion. The Annual Bonus shall be paid to the Executive on or prior to the March 15 following the end of the year for which such Annual Bonus was earned. The Executive also shall be entitled to receive additional cash, equity or other compensation or benefits in consideration for his services provided to the Company, at such times and in such amounts as shall be determined in the sole discretion of the Board or Compensation Committee, as applicable, which determines such compensation. The Board and/or the Compensation Committee, as applicable, shall conduct a review not less than once each year in the month of December, and such additional compensation, if any, shall be based on, among other things, the Executive’s and the Company’s performance; provided, that any such additional compensation shall be structured and/or paid in a manner that avoids or complies with the requirements of Section 409A (“ Section 409A ”) of the Internal Revenue Code of 1986, as amended (“ Code ”).

 

(c)                Equity Awards, etc. In addition to the other compensation payable to the Executive hereunder, the Executive shall be entitled to receive grants of stock options, stock and/or any other equity incentive awards available to senior executives of the Company, under the Company’s equity incentive plans, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee of the Board, as applicable, which determines such equity grants.

 

(d)               Tax Gross-Up Payment . Upon the occurrence of a Change of Control (as defined below) of the Company, if all or any portion of the payments provided under this Agreement, and/or any other payments and benefits that the Executive receives or is entitled to receive from the Company or an affiliate thereof, constitute an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code (each such payment, a “ Parachute Payment ”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code (“ Excise Tax ”), then in addition to any other benefits to which the Executive is entitled under this Agreement, the Company shall pay the Executive an additional amount in cash (the “ Gross-Up Payment ”) such that the net amount received by the Executive in connection with the Change of Control, after payment of (i) any Excise Tax and (ii) any Federal, state and local income and employment taxes on the Gross-Up Payment by Executive, shall be equal to the aggregate Parachute Payments payable to the Executive. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income tax at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state or locality of the Executive’s residence in the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. Any Gross-Up Payment due to the Executive under this Section 3(d) shall be paid to the Executive no later than the end of the year following the year in which the Executive paid the related taxes.

 

2  

 

 

(e)                Withholding . All salaries, bonuses and other benefits payable to the Executive shall be subject to payroll and withholding taxes as may be required by law.

 

4.     Employee Benefits; Business Expenses.

 

(a)                  Employee Benefits . During the Term, the Executive and his dependents shall be entitled to participate in the Company’s healthcare plans, welfare benefit plans, fringe benefit plans, profit sharing plans, and any qualified or non-qualified retirement plans as in effect from time to time (collectively, the “ Employee Benefits ”), on the same basis as those benefits are made available to the other senior executives of the Company, in accordance with the Company policy as in effect from time to time and in accordance with the terms of the applicable plan documents (if any).

 

(b)                 Health Care Supplement . During the Term, Executive will be paid $1,000 net per month for any month in which elects Employee Only/Single Coverage (the “Healthcare Supplement”). Should Executive elect Family Coverage at any time, he will not be entitled to Healthcare Supplement in any month that the Company pays for Family Coverage.

 

(c)                 Directors and Officers Liability Insurance/Indemnity . During the Term and for a period of six years thereafter, the Company, or any successor to the Company resulting from a change in control, shall maintain a directors and officers liability insurance policy (or policies) in a minimum amount of $3,000,000 which shall provide comprehensive coverage to Executive. The Company hereby indemnifies and hold Executive harmless from any and all expenses (including legal fees) or loses incurred by him in connection with the performance of his duties under this Agreement.

 

(d)                Vacation . During the Term, Executive shall be entitled to a minimum of four (4) weeks of paid vacation per calendar year, in accordance with the Company’s policy from time to time in effect as determined by the Board.

 

(e)                 Corporate Credit Card . The Company shall issue to the Executive a corporate credit card to be utilized by the Executive during the Term in connection with any out-of-pocket expenses which he may incur in connection with the performance of his duties. During the Term, the Company shall, upon the presentation of proper vouchers, also reimburse the Executive for all reasonable expenses incurred by him directly in connection with his performance of services as an officer and executive of the Company.

 

3  

 

 

(f)                 Key Man Life Insurance . During the Term, The Company shall maintain on behalf of the Executive, a five hundred thousand dollar ($500,000) key man life insurance policy, which shall name the Company as beneficiary.

 

(g)                Long Term Care Disability Insurance . During the Term, if requested by the Executive, the Company shall pay the premiums, or a portion thereof, in an amount not to exceed $6,000 annually, on a long-term care insurance policy with a monthly benefit of $7,500.

 

(h)                Holidays . The Executive shall receive as paid days off all national holidays that the Company, pursuant to established policy, recognizes and observes.

 

(i)                  Perquisites . The Executive shall be entitled to receive such perquisites as are made available to other senior executives of the Company in accordance with Company policies as in effect from time to time.

 

(j)                   Expenses . The Executive shall be entitled to reimbursement for reasonable and necessary business expenses incurred by him in the performance of his duties and responsibilities hereunder, in accordance with the Company’s reimbursement and expenses policies, as in effect from time to time.

 

5.     Termination.

 

(a)                Definitions . For purposes of this Agreement:

 

Cause means Executive’s (i) willful and reckless disregard to perform his duties, (ii) willful misfeasance for which the Company is directly and adversely affected, or (iii) any act of dishonesty by the Executive bearing directly upon the Company. In event of Cause, the Board shall deliver to the Executive written notice which shall contain sworn affidavits from at least two non-interested members of the Board each of which must set forth with specificity the exact nature of the Cause of which the Executive is accused (“Notice of Cause”). The Board may serve a Notice of Termination upon the Executive between the 30 th and 60 th day following the delivery of the Notice of Cause, provided that the Executive did not cure the alleged Cause in the 30 day period following his receipt of the Notice of Cause.

Change of Control means the occurrence of any one or more of the following events (it being agreed that, with respect to paragraphs (i) and (iii) of this definition below, a “Change of Control” shall not be deemed to have occurred if the applicable third party acquiring party is an “affiliate” of the Company within the meaning of Rule 405 promulgated under the Securities Act of 1933, as amended (an “ Affiliate ”)):

(i) An acquisition (whether directly from the Company or otherwise) of any voting securities of the Company (the “ Voting Securities ”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as amended (the “ 1934 Act ”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of forty percent (40%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, that for purposes of this subsection, the term “Person” excludes the Executive and all Affiliates and immediate family members of the Executive; or

 

4  

 

 

(ii) the consummation, in one or a series of related transactions, of:

 

(A) a merger, consolidation or reorganization involving the Company, where either or both of the events described in clauses (i) or (ii) above would be the result; or

(B) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a subsidiary of the Company).

 

Date of Termination shall mean the date the Notice of Termination is given to the respective party; provided, however, that with respect to a termination for Cause or Good Reason, the Date of Termination shall not occur prior to the expiration of any applicable cure period.

Disability shall mean the Executive has become physically or mentally incapacitated and is therefore unable for a period of four (4) consecutive months or more to perform any of the material elements of his duties hereunder. Any question as to whether the Executive has a Disability as to which he (or his legal representative) and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive (or his legal representative) and the Company. If the Executive (or his legal representative) and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of whether the Executive has a Disability, as made in writing to the Company and the Executive by such physician(s), shall be final and conclusive for all purposes of this Agreement.

Good Reason shall mean one of the following circumstances or conditions, in each case without the consent of the Executive, after which the Executive resigns within six months following the initial existence of the circumstance or condition: (i) any action or inaction that constitutes a material breach by the Company of this Agreement; (ii) a material reduction of the duties, responsibilities or authority of the Executive; (iii) the Executive is not elected to be the Chief Executive Officer or the President of the Company; (iv) a material diminution in the budget over which the Executive retains authority; (v) a material change in the geographic location at which the Executive must perform his services; or (vi) a Change of Control, but only if the Executive's resignation occurs within twelve (12) months after the occurrence of such Change of Control; provided, that with respect to (i) – (v), above, the Company shall have a thirty (30) day cure period following notice thereof from Executive to the Company provided within ninety (90) days of the initial existence of the circumstance or condition.

Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated, and shall be communicated, in writing, to the other party hereto in accordance with the provisions of Section 10(f) hereof.

5  

 

(b)               By the Company for Cause or by the Executive Without Good Reason .

(i) The Term and the Executive’s employment hereunder may be terminated by the Company for Cause, immediately upon the delivery of a Notice of Termination by the Company to the Executive and shall terminate automatically upon the Executive’s resignation (other than for Good Reason or due to the Executive’s death or Disability).

(ii) If the Executive’s employment is terminated by the Company for Cause, or if the Executive resigns other than for Good Reason, the Executive shall be entitled to receive from the Company:

(A)             any earned but unpaid Base Salary and/or accrued but unused vacation, all vested equity, and any earned but unpaid bonus awards through the Date of Termination (with any unpaid Base Salary and/or accrued but unused vacation, and any earned but unpaid bonus awards being paid on the Date of Termination); and

(B)              reimbursement for any unreimbursed business expenses incurred by the Executive in accordance with the Company’s policy prior to the Date of Termination (with such reimbursements to be paid promptly after the Executive provides the Company with the necessary documentation of such expenses to the extent required by such policy but in no event later than the end of the second calendar month following the Date of Termination).

Following the Executive’s termination of employment by the Company for Cause or if he resigns other than for Good Reason, except as set forth above or as required by applicable law or the terms of the Plan, the Executive shall have no further rights to any compensation or any other benefits or perquisites under this Agreement and all unvested options or restricted stock grant awards or any other equity awards shall immediately be cancelled without the need for any action by the Company.

(c)                By the Company Other Than for Cause or by the Executive for Good Reason .

(i) The Term and the Executive’s employment hereunder may be terminated by the Company other than for Cause, immediately upon the delivery of a Notice of Termination by the Company to the Executive, and shall terminate automatically and immediately upon the Executive’s resignation for Good Reason at the end of any applicable cure period if the circumstances giving rise to Good Reason are not cured.

(ii) If the Executive’s employment is terminated by the Company other than for Cause or if the Executive resigns for Good Reason, the Executive shall be entitled to receive from the Company:

(A)              any earned but unpaid Base Salary and/or accrued but unused vacation, all vested equity, and any earned but unpaid bonus awards through the Date of Termination (with any unpaid Base Salary and/or accrued but unused vacation, and any earned but unpaid bonus awards being paid on the Date of Termination);

(B)              thirty-six (36) months of Annual Compensation (the “Severance Payment”). For the purposes of determining the Severance Payment, Annual Compensation shall be the average of the Base Salary plus the Annual Bonus over the last three calendar years prior to the Date of Termination. The Severance Payment will be paid to the Executive ratably in accordance with the Company’s regular payroll practice over a 52-week period;

6  

 

(C)              acceleration of any then unvested stock options, restricted stock grants or other equity incentive awards; and,

(D)             reimbursement for any unreimbursed business expenses incurred by the Executive in accordance with the Company’s policy prior to the Date of Termination (with such reimbursements to be paid promptly after the Executive provides the Company with the necessary documentation of such expenses to the extent required by such policy but in no event later than the end of the second calendar month following the Date of Termination).

Notwithstanding anything herein to the contrary , Executive shall not be entitled to the Severance Payment or earned but unpaid cash bonuses in the event such termination or resignation is due solely to the Company’s inability to pay its debts as they generally come due. Following the Executive’s termination of employment by the Company other than for Cause or if he resigns for Good Reason, except as set forth above or as required by applicable law, the Executive shall have no further rights to any compensation or any other benefits under this Agreement. Notwithstanding anything contained herein to the contrary, in order to be eligible to receive the Severance Payment and other benefits under this Section 5(c), the Executive must execute and deliver to the Company a general release in a form reasonably satisfactory to the Board. Any of the payments to be made under this Section 5(c) that are subject to Section 409A shall be made, or commence to be made, on the first pay period following the date that is thirty (30) days after the Date of Termination. Any of the payments not subject to Section 409A shall be made, or commence to be made, on the first business day after the release becomes effective. The initial payment shall include any unpaid amounts from the Date of Termination, subject to the Executive’s executing and delivering the release on the terms as set forth above.

(d)               Death or Disability . The Executive’s employment hereunder shall terminate upon the Executive’s death and may be terminated by the Company, within ten (10) days after the delivery of a Notice of Termination by the Company to the Executive (or his legal representative) in the event of the Executive’s Disability. Upon termination of the Executive’s employment hereunder for either Disability or death, the Company shall pay to the Executive or his estate the Executive’s Salary then in effect along with all other fringe benefits (including, without limitation, family medical benefits) for a period of one (1) year following the date of such termination. The Company shall purchase temporary and permanent disability insurance on the Executive to offset said costs. Payments made hereunder shall not affect any other payments made to the Executive. Moreover, Executive (in case of Disability) or the estate (in the event of death) shall have the right to exercise any unexercised and vested options for a period of 90 days, and, in addition, to receive payment for accrued but unpaid vacation time, if any. Following the Executive’s termination of employment due to death or Disability, except as set forth herein or as required by applicable law, the Executive (nor his estate) shall have no further rights to any compensation or any other benefits under this Agreement.

7  

 

(e)                Payment of Amounts Owed upon Termination of Employment . Unless otherwise provided herein, any amounts payable to the Executive for earned but unpaid Base Salary and cash, equity or other bonus awards through the Date of Termination shall be paid within ten (10) business days after the Date of Termination.

6.    Restrictive Covenants.

(a) Definitions . For purposes of this Agreement:

 

(i) “ Competitive Activity ” means any business activity which competes, directly or indirectly, with the Company Business, or any business activity which, other than for the benefit of the Company, carries on the Company Business, or any business activity substantially similar to the Company Business, in each case as the Company Business is constituted from time to time.

 

(ii) “ Confidential Information ” means all confidential and/or proprietary information of, about, or relating to the Company and the Company Business, including, without limitation, any and all documents received or generated by Executive, existing and potential customer lists, trade secrets (as defined under applicable state law), pricing, financial, corporate, and personnel information, customer data, methods of operation, business plans, techniques, prototypes, sketches, drawings, models, inventions, know-how, processes, apparatus, software programs, computer codes, source codes, equipment, algorithms, source documents, formulae, methods, data, descriptions relating to current, future, and proposed products and services, information concerning research, experimental work, development, specifications, engineering, procurement requirements, purchasing, agents and suppliers, business forecasts, marketing plans and information received from third parties (including customers) that is subject to a duty on Executive’s part to maintain its confidentiality. Confidential Information does not include information that is generally known to the public, provided it is generally known to the public other than as a result of disclosure of such information by Executive in violation of this Agreement.

 

(iii) “ Commercial Partner ” means each third party person or entity with whom Executive interacts on behalf of the Company during the term of his employment with the Company, whether pursuant to this Agreement or otherwise, including, without limitation, licensors, licensees, contract research organizations, contract manufacturing organizations, contract sales organizations, contract distribution organizations and joint venture partners; provided that, on the date of the termination of Executive’s employment with the Company, Commercial Partner shall mean those third party persons and entities with whom Executive interacted on behalf of the Company during the Lookback Period.

 

(iv) “ Company Business ” means the business(es) engaged in by the Company, from time to time during the term of Executive’s employment with the Company, whether pursuant to this Agreement or otherwise; provided that, on the date of the termination of Executive’s employment with the Company, the Company Business shall be the business(es) engaged in by the Company during the Lookback Period. 

 

8  

 

 

(v) “ Former Employee ” means any person who has been employed or engaged as an independent contractor by the Company during the Lookback Period.

 

(vi) “ Former Commercial Partner ” means each third party person or entity who is not currently a Commercial Partner but was a Commercial Partner during the Lookback Period.

 

(vii) “ Lookback Period ” means the one (1) year period immediately preceding the earlier of: (1) the date on which the definition in question is being determined; or (2) the date when Executive is no longer employed by the Company, whether pursuant to this Agreement or otherwise.

 

(viii) “ Prospect ” means each person or entity who is not a Commercial Partner, and for whom, at any time during the Lookback Period, the Company, whether through its employees, contractors or vendors, expended directed marketing efforts or undertook other business development efforts which resulted in at least an indication of interest from such person or entity of becoming a Commercial Partner.

(b)  Non-Competition, Non-Solicitation and Non-Piracy .  For the term of Executive’s employment, whether under this Agreement or otherwise, and for a period of one (1) year after the termination of Executive’s employment with the Company (the “ Restriction Period ”), by whatever means and for whatever reason, Executive shall not, directly or indirectly, individually, or jointly with others, for the benefit of Executive or any third party:

 

(i) engage in any Competitive Activity;

(ii) have any equity or other ownership interest in, or become a director or manager of, or be otherwise associated with, or engaged or employed by, any Commercial Partner, Prospect or Former Commercial Partner or their subsidiary or parent entities or affiliates in any job or career that relates to or concerns any activity substantially similar, in whole or in part, to the Company Business;

 

(iii) solicit, render services to, or accept business from any Commercial Partner, Prospect or Former Commercial Partner or any of their subsidiary or parent entities or affiliates for any business activity that relates to or concerns any activity substantially similar, in whole or in part, to the Company Business; provided, however, if this Agreement is terminated pursuant to Section 5(c), the restrictive covenant contained in this subsection shall only apply if Employee had ever received the Base Salary and then only provided Employee receives payments under Section 5(c) in a timely manner; and

 

(iv) solicit, hire, compensate or engage as an employee, agent, contractor, shareholder, member, joint venturer or consultant, whether or not for consideration, any of the Company’s employees or otherwise induce any of the Company’s employees, subcontractors or vendors to change their relationship with the Company. 

(c) Confidentiality .  Executive shall never: (i) disclose any Confidential Information; or (ii) directly or indirectly give or permit any person or entity to have access to any Confidential Information; or (iii) make any use, commercial or otherwise, of any Confidential Information, except, solely as reasonably required to perform Executive’s employment duties with the Company and solely for the benefit of the Company. 

9  

 

(d) Restrictive Covenants Scope . The parties acknowledge that the provisions of this section are necessary and reasonable to protect the legitimate business interest of the Company and any violation of the provisions of this section will result in irreparable injury to the Company, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to the Company for such violation.  Accordingly, Executive agrees that if the provisions of this section are violated, in addition to any other remedy which may be available in equity or at law, the Company shall be entitled to specific performance and injunctive relief, without the necessity of proving actual damages, and without being required to post a bond

 (e) Tolling of Restriction Period . In the event of Executive’s breach of one or more of the provisions of this section, the running of the Restriction Period shall be tolled during the continuation of such breach(es) and recommence only upon Executive’s full and complete compliance with the provisions of this Section 6.

(f) Judicial Modification .  In the event a court of competent jurisdiction holds one or more of the provisions of the restrictive covenants invalid as to length of time or geographic scope, then this Section 6 shall be amended to reflect a reasonable length of time and/or reasonable geographic scope. 

7.       Works for Hire and Intellectual Property . Executive acknowledges and agrees that: (a) all Work Product (as defined below) shall be deemed a work for hire; and (b) he hereby assigns all of his intellectual property and other rights in all Work Product to the Company.  All right, title and interest in and to, and the right to pursue protection for, Work Product shall vest solely with the Company.  Upon request by the Company, Executive shall use reasonable efforts, at no additional expense, to assist the Company in securing any intellectual property protection for Work Product and shall execute all documents reasonably necessary to effect an assignment as contemplated herein.  No license is granted to Executive in, to or under any Work Product or other intellectual property (including, but not limited to, patents, trade secrets, copyrighted materials and trademarks) owned, licensed or otherwise assertable by Executive by express or implied grant, estoppel or otherwise, except for a limited right to use any such intellectual property solely in the performance of Executive’s employment duties and solely for the benefit of the Company.  All benefits from the use of any such intellectual property, including Work Product, shall inure solely to the Company.  “ Work Product ” means all tangible or intangible works: (X) (1) created, produced or modified during or in connection with Executive’s employment by the Company; or (2) which are related to, or that can be utilized in, the Company Business; and (Y) that could qualify as the subject matter of a copyright, patent, trade secret or any other form of intellectual property; and shall include, without limitation, all work produced by or for the benefit of the Company, any Company Affiliate, Commercial Partners, Former Commercial Partners and Prospects.

8.       Company Property .  Executive agrees that all Company Property (as defined below) is the property solely of the Company, and Executive waives and relinquishes any and all interests or property rights he or she may have therein in favor of the Company.  Executive shall immediately return all of the Company Property to the Company at the Company’s address for notices or such other location as may be directed by the Company upon: (A) the Company’s request at any time; and (B) upon the termination of Executive’s employment.  “ Company Property ” includes, but is not limited to: (X) records relating to Commercial Partners, Former Commercial Partners, Prospects and Confidential Information in whatever form they exist, and by whomever prepared, including, but not limited to, notes of Executive; (Y) tangible embodiments of or containing Work Product or Confidential Information; and (Z) tangible and intangible property pertaining to the Company Business or arising out of or used by Executive in the performance of his duties for the Company.

 

10  

 

9.       Independent Covenant .  Executive acknowledges and agrees that the provisions of sections 6, 7 and 8 hereof are independent covenants and no actual or alleged breach by the Company of any provision of this Agreement or the employment relationship shall be grounds for relieving Executive from his or her obligations thereunder.

10.      Miscellaneous .

 

(a)                  Arbitration of Claims . In the event of any dispute, claim, question or disagreement arising from or relating to this Agreement or the breach thereof, the Company and Executive agree to settle the dispute, claim, question or disagreement by arbitration before a single arbitrator in New York, New York under the auspices of the American Arbitration Association (“ AAA ”) in accordance with its rules for arbitration of employment disputes, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Each of the Company and Executive hereby agrees and acknowledges that all disputes between or among them are subject to the alternative dispute resolution procedures of this Section 10(a). Each of the Company and Executive agrees that any aspect of alternative dispute resolution not specifically covered in this Agreement shall be covered, without limitation, by the applicable AAA rules and procedures. Each of the Company and Executive further agree that any determination by the arbitrator regarding any dispute, claim, question or disagreement arising from or relating to this Agreement shall be final and binding upon the parties hereto and shall not be subject to further appeal. Each of the Company and Executive shall bear its own costs and expenses and an equal share of the arbitrator’s fees and administrative fees of arbitration.

(b)                 Entire Agreement; Amendments . This Agreement sets forth the entire understanding of the parties concerning the subject matter of this Agreement and incorporates all prior negotiations and understandings.  There are no covenants, promises, agreements, conditions or understandings, either oral or written, between them relating to the subject matter of this Agreement other than those set forth herein.  The publication, amendment, supplementation or replacement of an employee handbook by the Company shall not be deemed to alter, amend or modify the terms and conditions of this Agreement. No alteration, amendment, change or addition to this Agreement shall be binding upon any party unless in writing and signed by the party to be charged.  No purported waiver by any party of any default by another party of any term or provision contained herein shall be deemed to be a waiver of such term or provision unless the waiver is in writing and signed by the waiving party. No such waiver shall in any event be deemed a waiver of any subsequent default under the same or any other term or provision contained herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

11  

 

(c)                  No Waiver . No waiver of any of the provisions of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed or be construed as a further, continuing or subsequent waiver of any such provision or as a waiver of any other provision of this Agreement. No failure to exercise and no delay in exercising any right, remedy or power hereunder will preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.

(d)                 Severability . If any term or provisions of this Agreement, or the application thereof to any person or circumstance, shall be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances, other than those as to which it is held invalid, shall both be unaffected thereby and each term or provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

(e)                  Assignment . This Agreement, and all of the Executive’s rights and duties hereunder, shall not be assignable or delegable by the Executive; provided , however , that if the Executive shall die, all amounts then payable to the Executive hereunder shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there be no such devisee, legatee or designee, to his estate. The Company and its successors and assigns may, at any time and from time to time, assign its rights and obligations under this Agreement, including, without limitation, the rights arising pursuant to sections 6, 7 and 8, without Executive’s consent to a buyer of all or substantially all of the assets, or a majority of the voting stock, of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such assignee or successor person or entity.

(f)                  Notices . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or nationally recognized courier service addressed to the respective addresses set forth below in this Agreement or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

If to the Company:

Surge Components, Inc.

E. Jefryn Blvd.

Deer Park, NY 11729

 

If to the Executive:

 

Ira Levy

1299 Corporate Drive

Apt. 802

Westbury, NY 11590

 

(g)                Prior Agreements . This Agreement supersedes all prior agreements and understandings (including oral agreements) between the Executive and the Company regarding the terms and conditions of the Executive’s employment with the Company.

 

12  

 

 

(h)                Cooperation . The Executive shall provide his reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during the Executive’s employment hereunder, but only to the extent the Company requests such cooperation with reasonable advance notice to the Executive and in respect of such periods of time as shall not unreasonably interfere with the Executive’s ability to perform his duties with any subsequent employer; provided, however, the Company shall pay any reasonable travel, lodging and related expenses that the Executive may incur in connection with providing all such cooperation, to the extent approved by the Company prior to incurring such expenses.

 

(i)                   Execution and Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(j)                  Survival . Sections 6, 7, 8 and 10 shall survive the termination, cancellation or expiration of this Agreement by whatever means for whatever reason.

 

(k)                Fees and Expenses . In the event the Company shall fail or refuse to make or authorize any payment of any amount otherwise due to the Executive hereunder within the appropriate period of time, then the Company shall reimburse the Executive for all reasonable expenses (including reasonable counsel fees and expenses) incurred by him in enforcing the terms hereof, within five (5) business days after demand accompanied by evidence of fees and expenses incurred. With regard to any dispute pursuant to this Agreement, the Company and Executive agree that the non-prevailing party shall promptly reimburse any and all reasonable attorneys’ fees to the prevailing party in connection therewith. Any reimbursement hereunder shall be paid promptly and in no event later than the end of the Executive’s taxable year next following the taxable year in which the expense was incurred.

 

13  

 

 

(l)                  Section 409A .

 

(i) The parties intend that the payments and benefits provided for in this Agreement either be exempt from Section 409A, or be provided in a manner that complies with Section 409A and any ambiguity herein shall be interpreted so as to be consistent with the intent of this paragraph. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Section 409A or damages for failing to comply with Section 409A. Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a “separation from service” from the Company within the meaning of Section 409A (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)). Further, if the Executive is a “specified employee” as such term is defined under Section 409A at the time of a termination of employment and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated recognition of income or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to the Executive) until the date that is at least six (6) months following the Executive’s termination of employment with the Company (or the earliest date permitted under Section 409A, e.g., immediately upon the Executive’s death), whereupon the Company will promptly pay the Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to the Executive under this Agreement during the period in which such payments or benefits were deferred. Thereafter, payments will resume in accordance with this Agreement.

(ii) Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided hereunder during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be promptly made to the Executive following such submission, but in no event later than December 31 st of the calendar year following the calendar year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after December 31 st of the calendar year following the calendar year in which the expense was incurred. This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.

(iii) Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A.

 

 

[Signature Page Follows]

 

14  

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Agreement to be effective as of the day and year first above written.

 

  SURGE COMPONENTS, INC.
     
  By: /s/ Steven Lubman
     Name: Steven Lubman
  Title: Vice President
     
  Date: February 18, 2016
     
  EXECUTIVE
     
  /s/ Ira Levy
  Ira Levy
     
  Date: February 18, 2016

 

 

15

 

 

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 

This EMPLOYMENT AGREEMENT (the “ Agreement ”) is dated and is effective as of February 18, 2016 (the “Effective Date”) by and between Surge Components, Inc., a company organized under the laws of the State of Nevada (the “ Company ”), and Steven Lubman, an individual residing at 24 Wagon Wheel Lane, Dix Hills New York 11746 (the “ Executive ”).

WHEREAS , the Company and the Executive are parties to an employment agreement dated February 1, 1996 which specifies certain terms and conditions pursuant to which Executive shall serve the Company as its Vice President, Secretary and Treasurer;

 

WHEREAS , the Company, in order to benefit from the continuity and predictability of Executive’s services, wishes to supersede the previous employment agreement and enter into this new employment agreement pursuant to which the Executive will continue to be employed as Vice President, Secretary and Treasurer of the Company;

 

WHEREAS , the Executive is desirous of continuing employment with the Company and is willing to accept such employment for the inducements and upon the terms and conditions contained herein; and

 

WHEREAS , the Company has bargained for a covenant by the Employee not to compete with the Company’s business.

 

NOW, THEREFORE , in consideration of the foregoing premises and mutual covenants and agreements herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree as follows:

 

1.       Term of Employment. The Executive shall be employed by the Company for a period commencing on the Effective Date and ending upon termination of this Agreement in accordance and subject to the provisions of Section 5 of this Agreement (the “Term”).

 

2.      Duties .

 

(a)                    During the Term, the principal duties of the Executive shall be to serve in the position of Vice President, Secretary and Treasurer. The Executive shall serve the Company in an executive capacity and shall perform such duties as are determined from time to time by the President, CEO and the Board of Directors of the Company (the “Board”). Unless prevented by death or disability, the Executive shall devote his full business time, allowing for vacations, national holidays, and illnesses, exclusively to the business and affairs of the Company, and shall uses his best efforts, skill and abilities to promote its interests. Nothing herein contained shall be construed as preventing the Executive from purchasing securities in any publicly held entity, if such purchases shall not result in his owning beneficially 2% or more of the equity securities of such company, provided such investment is not made in a company in competition with the Company.

 

1  

 

 

(b)                 It is hereby acknowledged that the Board has elected the Executive to serve as Vice President, Secretary and Treasurer, and hereby agrees to use its best efforts to have the Executive continue to serve as Vice President, Secretary and Treasurer during the Term.

 

3.      Compensation.

 

(a)                 Base Salary . As of the Effective Date, the Executive shall be paid a base salary of not less than $225,000 (the “Base Salary”) which Base Salary shall be earned and shall be payable at such intervals not less frequently than monthly, in equal installments, and otherwise in such a manner as is consistent with the Company’s normal practice for remuneration of executives. The Board shall review the Executive’s base salary on each of the anniversary dates of the execution of this agreement in order to determine whether the Executive’s salary should receive an upward adjustment.

 

(b)                Additional Compensation . The Executive shall have an annual bonus for each calendar year during the Term (the “ Annual Bonus ”). The Annual Bonus shall be determined by consideration of the Board or Compensation Committee, as applicable, in its sole discretion, based upon criteria to be established in their sole discretion. The Annual Bonus shall be paid to the Executive on or prior to the March 15 following the end of the year for which such Annual Bonus was earned. The Executive also shall be entitled to receive additional cash, equity or other compensation or benefits in consideration for his services provided to the Company, at such times and in such amounts as shall be determined in the sole discretion of the Board or Compensation Committee, as applicable, which determines such compensation. The Board and/or the Compensation Committee, as applicable, shall conduct a review not less than once each year in the month of December, and such additional compensation, if any, shall be based on, among other things, the Executive’s and the Company’s performance; provided, that any such additional compensation shall be structured and/or paid in a manner that avoids or complies with the requirements of Section 409A (“ Section 409A ”) of the Internal Revenue Code of 1986, as amended (“ Code ”).

 

(c)                Equity Awards, etc. In addition to the other compensation payable to the Executive hereunder, the Executive shall be entitled to receive grants of stock options, stock and/or any other equity incentive awards available to senior executives of the Company, under the Company’s equity incentive plans, at such times and in such amounts as shall be determined in the sole discretion of the Board or the Compensation Committee of the Board, as applicable, which determines such equity grants.

 

(d) Tax Gross-Up Payment . Upon the occurrence of a Change of Control (as defined below) of the Company, if all or any portion of the payments provided under this Agreement, and/or any other payments and benefits that the Executive receives or is entitled to receive from the Company or an affiliate thereof, constitute an “excess parachute payment” within the meaning of Section 280G(b)(1) of the Code (each such payment, a “ Parachute Payment ”), and would result in the imposition on the Executive of an excise tax under Section 4999 of the Code (“ Excise Tax ”), then in addition to any other benefits to which the Executive is entitled under this Agreement, the Company shall pay the Executive an additional amount in cash (the “ Gross-Up Payment ”) such that the net amount received by the Executive in connection with the Change of Control, after payment of (i) any Excise Tax and (ii) any Federal, state and local income and employment taxes on the Gross-Up Payment by Executive, shall be equal to the aggregate Parachute Payments payable to the Executive. For purposes of determining the amount of the Gross-Up Payment, the Executive shall be deemed to pay Federal income tax at the highest marginal rate of Federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state or locality of the Executive’s residence in the calendar year in which the Gross-Up Payment is to be made, net of the maximum reduction in Federal income taxes which could be obtained from deduction of such state and local taxes. Any Gross-Up Payment due to the Executive under this Section 3(d) shall be paid to the Executive no later than the end of the year following the year in which the Executive paid the related taxes.

 

2  

 

 

(e) Withholding . All salaries, bonuses and other benefits payable to the Executive shall be subject to payroll and withholding taxes as may be required by law.

 

4.      Employee Benefits; Business Expenses .

 

(a)                  Employee Benefits . During the Term, the Executive and his dependents shall be entitled to participate in the Company’s healthcare plans, welfare benefit plans, fringe benefit plans, profit sharing plans, and any qualified or non-qualified retirement plans as in effect from time to time (collectively, the “ Employee Benefits ”), on the same basis as those benefits are made available to the other senior executives of the Company, in accordance with the Company policy as in effect from time to time and in accordance with the terms of the applicable plan documents (if any).

 

(b)                Directors and Officers Liability Insurance/Indemnity . During the Term and for a period of six years thereafter, the Company, or any successor to the Company resulting from a change in control, shall maintain a directors and officers liability insurance policy (or policies) in a minimum amount of $3,000,000 which shall provide comprehensive coverage to Executive. The Company hereby indemnifies and hold Executive harmless from any and all expenses (including legal fees) or loses incurred by him in connection with the performance of his duties under this Agreement.

 

(c)                 Vacation . During the Term, Executive shall be entitled to a minimum of four (4) weeks of paid vacation per calendar year, in accordance with the Company’s policy from time to time in effect as determined by the Board.

 

(d)                Corporate Credit Card . The Company shall issue to the Executive a corporate credit card to be utilized by the Executive during the Term in connection with any out-of-pocket expenses which he may incur in connection with the performance of his duties. During the Term, the Company shall, upon the presentation of proper vouchers, also reimburse the Executive for all reasonable expenses incurred by him directly in connection with his performance of services as an officer and executive of the Company.

 

(e)                 Key Man Life Insurance . During the Term, The Company shall maintain on behalf of the Executive, a five hundred thousand dollar ($500,000) key man life insurance policy, which shall name the Company as beneficiary.

 

3  

 

 

(f)                 Long Term Care Disability Insurance . During the Term, if requested by the Executive, the Company shall pay the premiums, or a portion thereof, in an amount not to exceed $6,000 annually, on a long-term care insurance policy with a monthly benefit of $7,500.

 

(g)                Holidays . The Executive shall receive as paid days off all national holidays that the Company, pursuant to established policy, recognizes and observes.

 

(h)                Perquisites . The Executive shall be entitled to receive such perquisites as are made available to other senior executives of the Company in accordance with Company policies as in effect from time to time.

 

(i)                   Expenses . The Executive shall be entitled to reimbursement for reasonable and necessary business expenses incurred by him in the performance of his duties and responsibilities hereunder, in accordance with the Company’s reimbursement and expenses policies, as in effect from time to time.

 

5.     Termination .

 

(a)                Definitions . For purposes of this Agreement:

Cause means Executive’s (i) willful and reckless disregard to perform his duties, (ii) willful misfeasance for which the Company is directly and adversely affected, or (iii) any act of dishonesty by the Executive bearing directly upon the Company. In event of Cause, the Board or the CEO shall deliver to the Executive written notice which shall contain sworn affidavits from at least two non-interested members of the Board each of which must set forth with specificity the exact nature of the Cause of which the Executive is accused (“Notice of Cause”). The Board may serve a Notice of Termination upon the Executive between the 30 th and 60 th day following the delivery of the Notice of Cause, provided that the Executive did not cure the alleged Cause in the 30 day period following his receipt of the Notice of Cause.

Change of Control means the occurrence of any one or more of the following events (it being agreed that, with respect to paragraphs (i) and (iii) of this definition below, a “Change of Control” shall not be deemed to have occurred if the applicable third party acquiring party is an “affiliate” of the Company within the meaning of Rule 405 promulgated under the Securities Act of 1933, as amended (an “ Affiliate ”)):

(i) An acquisition (whether directly from the Company or otherwise) of any voting securities of the Company (the “ Voting Securities ”) by any “Person” (as the term person is used for purposes of Section 13(d) or 14(d) of the Securities and Exchange Act of 1934, as amended (the “ 1934 Act ”)), immediately after which such Person has “Beneficial Ownership” (within the meaning of Rule 13d-3 promulgated under the 1934 Act) of forty percent (40%) or more of the combined voting power of the Company’s then outstanding Voting Securities; provided, that for purposes of this subsection, the term “Person” excludes the Executive and all Affiliates and immediate family members of the Executive; or

 

(ii) the consummation, in one or a series of related transactions, of:

 

4  

 

 

(A) a merger, consolidation or reorganization involving the Company, where either or both of the events described in clauses (i) or (ii) above would be the result; or

(B) an agreement for the sale or other disposition of all or substantially all of the assets of the Company to any Person (other than a transfer to a subsidiary of the Company).

 

Date of Termination shall mean the date the Notice of Termination is given to the respective party; provided, however, that with respect to a termination for Cause or Good Reason, the Date of Termination shall not occur prior to the expiration of any applicable cure period.

Disability shall mean the Executive has become physically or mentally incapacitated and is therefore unable for a period of four (4) consecutive months or more to perform any of the material elements of his duties hereunder. Any question as to whether the Executive has a Disability as to which he (or his legal representative) and the Company cannot agree shall be determined in writing by a qualified independent physician mutually acceptable to the Executive (or his legal representative) and the Company. If the Executive (or his legal representative) and the Company cannot agree as to a qualified independent physician, each shall appoint such a physician and those two physicians shall select a third who shall make such determination in writing. The determination of whether the Executive has a Disability, as made in writing to the Company and the Executive by such physician(s), shall be final and conclusive for all purposes of this Agreement.

Good Reason shall mean one of the following circumstances or conditions, in each case without the consent of the Executive, after which the Executive resigns within six months following the initial existence of the circumstance or condition: (i) any action or inaction that constitutes a material breach by the Company of this Agreement; (ii) a material reduction of the duties, responsibilities or authority of the Executive; (iii) the Executive is not elected to be the Vice President, Secretary and Treasurer; (iv) a material diminution in the budget over which the Executive retains authority; (v) a material change in the geographic location at which the Executive must perform his services; or (vi) a Change of Control, but only if the Executive's resignation occurs within twelve (12) months after the occurrence of such Change of Control; provided, that with respect to (i) – (v), above, the Company shall have a thirty (30) day cure period following notice thereof from Executive to the Company provided within ninety (90) days of the initial existence of the circumstance or condition.

Notice of Termination shall mean a notice which shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of employment under the provision so indicated, and shall be communicated, in writing, to the other party hereto in accordance with the provisions of Section 10(f) hereof.

(b)               By the Company for Cause or by the Executive Without Good Reason .

(i) The Term and the Executive’s employment hereunder may be terminated by the Company for Cause, immediately upon the delivery of a Notice of Termination by the Company to the Executive and shall terminate automatically upon the Executive’s resignation (other than for Good Reason or due to the Executive’s death or Disability).

5  

 

(ii) If the Executive’s employment is terminated by the Company for Cause, or if the Executive resigns other than for Good Reason, the Executive shall be entitled to receive from the Company:

(A)             any earned but unpaid Base Salary and/or accrued but unused vacation, all vested equity, and any earned but unpaid bonus awards through the Date of Termination (with any unpaid Base Salary and/or accrued but unused vacation, and any earned but unpaid bonus awards being paid on the Date of Termination); and

(B)              reimbursement for any unreimbursed business expenses incurred by the Executive in accordance with the Company’s policy prior to the Date of Termination (with such reimbursements to be paid promptly after the Executive provides the Company with the necessary documentation of such expenses to the extent required by such policy but in no event later than the end of the second calendar month following the Date of Termination).

Following the Executive’s termination of employment by the Company for Cause or if he resigns other than for Good Reason, except as set forth above or as required by applicable law or the terms of the Plan, the Executive shall have no further rights to any compensation or any other benefits or perquisites under this Agreement and all unvested options or restricted stock grant awards or any other equity awards shall immediately be cancelled without the need for any action by the Company.

(c)                By the Company Other Than for Cause or by the Executive for Good Reason .

(i) The Term and the Executive’s employment hereunder may be terminated by the Company other than for Cause, immediately upon the delivery of a Notice of Termination by the Company to the Executive, and shall terminate automatically and immediately upon the Executive’s resignation for Good Reason at the end of any applicable cure period if the circumstances giving rise to Good Reason are not cured.

(ii) If the Executive’s employment is terminated by the Company other than for Cause or if the Executive resigns for Good Reason, the Executive shall be entitled to receive from the Company:

(A)             any earned but unpaid Base Salary and/or accrued but unused vacation, all vested equity, and any earned but unpaid bonus awards through the Date of Termination (with any unpaid Base Salary and/or accrued but unused vacation, and any earned but unpaid bonus awards being paid on the Date of Termination);

(B)              thirty-six (36) months of Annual Compensation (the “Severance Payment”). For the purposes of determining the Severance Payment, Annual Compensation shall be the average of the Base Salary plus the Annual Bonus over the last three calendar years prior to the Date of Termination. The Severance Payment will be paid to the Executive ratably in accordance with the Company’s regular payroll practice over a 52-week period;

6  

 

(C)              acceleration of any then unvested stock options, restricted stock grants or other equity incentive awards; and,

(D)             reimbursement for any unreimbursed business expenses incurred by the Executive in accordance with the Company’s policy prior to the Date of Termination (with such reimbursements to be paid promptly after the Executive provides the Company with the necessary documentation of such expenses to the extent required by such policy but in no event later than the end of the second calendar month following the Date of Termination).

Notwithstanding anything herein to the contrary , Executive shall not be entitled to the Severance Payment or earned but unpaid cash bonuses in the event such termination or resignation is due solely to the Company’s inability to pay its debts as they generally come due. Following the Executive’s termination of employment by the Company other than for Cause or if he resigns for Good Reason, except as set forth above or as required by applicable law, the Executive shall have no further rights to any compensation or any other benefits under this Agreement. Notwithstanding anything contained herein to the contrary, in order to be eligible to receive the Severance Payment and other benefits under this Section 5(c), the Executive must execute and deliver to the Company a general release in a form reasonably satisfactory to the Board. Any of the payments to be made under this Section 5(c) that are subject to Section 409A shall be made, or commence to be made, on the first pay period following the date that is thirty (30) days after the Date of Termination. Any of the payments not subject to Section 409A shall be made, or commence to be made, on the first business day after the release becomes effective. The initial payment shall include any unpaid amounts from the Date of Termination, subject to the Executive’s executing and delivering the release on the terms as set forth above.

(d)               Death or Disability . The Executive’s employment hereunder shall terminate upon the Executive’s death and may be terminated by the Company, within ten (10) days after the delivery of a Notice of Termination by the Company to the Executive (or his legal representative) in the event of the Executive’s Disability. Upon termination of the Executive’s employment hereunder for either Disability or death, the Company shall pay to the Executive or his estate the Executive’s Salary then in effect along with all other fringe benefits (including, without limitation, family medical benefits) for a period of one (1) year following the date of such termination. The Company shall purchase temporary and permanent disability insurance on the Executive to offset said costs. Payments made hereunder shall not affect any other payments made to the Executive. Moreover, Executive (in case of Disability) or the estate (in the event of death) shall have the right to exercise any unexercised and vested options for a period of 90 days, and, in addition, to receive payment for accrued but unpaid vacation time, if any. Following the Executive’s termination of employment due to death or Disability, except as set forth herein or as required by applicable law, the Executive (nor his estate) shall have no further rights to any compensation or any other benefits under this Agreement.

(e)                Payment of Amounts Owed upon Termination of Employment . Unless otherwise provided herein, any amounts payable to the Executive for earned but unpaid Base Salary and cash, equity or other bonus awards through the Date of Termination shall be paid within ten (10) business days after the Date of Termination.

7  

 

6.     Restrictive Covenants.

(a) Definitions . For purposes of this Agreement:

 

(i) “ Competitive Activity ” means any business activity which competes, directly or indirectly, with the Company Business, or any business activity which, other than for the benefit of the Company, carries on the Company Business, or any business activity substantially similar to the Company Business, in each case as the Company Business is constituted from time to time.

 

(ii) “ Confidential Information ” means all confidential and/or proprietary information of, about, or relating to the Company and the Company Business, including, without limitation, any and all documents received or generated by Executive, existing and potential customer lists, trade secrets (as defined under applicable state law), pricing, financial, corporate, and personnel information, customer data, methods of operation, business plans, techniques, prototypes, sketches, drawings, models, inventions, know-how, processes, apparatus, software programs, computer codes, source codes, equipment, algorithms, source documents, formulae, methods, data, descriptions relating to current, future, and proposed products and services, information concerning research, experimental work, development, specifications, engineering, procurement requirements, purchasing, agents and suppliers, business forecasts, marketing plans and information received from third parties (including customers) that is subject to a duty on Executive’s part to maintain its confidentiality. Confidential Information does not include information that is generally known to the public, provided it is generally known to the public other than as a result of disclosure of such information by Executive in violation of this Agreement.

 

(iii) “ Commercial Partner ” means each third party person or entity with whom Executive interacts on behalf of the Company during the term of his employment with the Company, whether pursuant to this Agreement or otherwise, including, without limitation, licensors, licensees, contract research organizations, contract manufacturing organizations, contract sales organizations, contract distribution organizations and joint venture partners; provided that, on the date of the termination of Executive’s employment with the Company, Commercial Partner shall mean those third party persons and entities with whom Executive interacted on behalf of the Company during the Lookback Period.

 

(iv) “ Company Business ” means the business(es) engaged in by the Company, from time to time during the term of Executive’s employment with the Company, whether pursuant to this Agreement or otherwise; provided that, on the date of the termination of Executive’s employment with the Company, the Company Business shall be the business(es) engaged in by the Company during the Lookback Period. 

 

(v) “ Former Employee ” means any person who has been employed or engaged as an independent contractor by the Company during the Lookback Period.

 

8  

 

 

(vi) “ Former Commercial Partner ” means each third party person or entity who is not currently a Commercial Partner but was a Commercial Partner during the Lookback Period.

 

(vii) “ Lookback Period ” means the one (1) year period immediately preceding the earlier of: (1) the date on which the definition in question is being determined; or (2) the date when Executive is no longer employed by the Company, whether pursuant to this Agreement or otherwise.

 

(viii) “ Prospect ” means each person or entity who is not a Commercial Partner, and for whom, at any time during the Lookback Period, the Company, whether through its employees, contractors or vendors, expended directed marketing efforts or undertook other business development efforts which resulted in at least an indication of interest from such person or entity of becoming a Commercial Partner.

(b) Non-Competition, Non-Solicitation and Non-Piracy .  For the term of Executive’s employment, whether under this Agreement or otherwise, and for a period of one (1) year after the termination of Executive’s employment with the Company (the “ Restriction Period ”), by whatever means and for whatever reason, Executive shall not, directly or indirectly, individually, or jointly with others, for the benefit of Executive or any third party:

 

(i) engage in any Competitive Activity;

(ii) have any equity or other ownership interest in, or become a director or manager of, or be otherwise associated with, or engaged or employed by, any Commercial Partner, Prospect or Former Commercial Partner or their subsidiary or parent entities or affiliates in any job or career that relates to or concerns any activity substantially similar, in whole or in part, to the Company Business;

 

(iii) solicit, render services to, or accept business from any Commercial Partner, Prospect or Former Commercial Partner or any of their subsidiary or parent entities or affiliates for any business activity that relates to or concerns any activity substantially similar, in whole or in part, to the Company Business; provided, however, if this Agreement is terminated pursuant to Section 5(c), the restrictive covenant contained in this subsection shall only apply if Employee had ever received the Base Salary and then only provided Employee receives payments under Section 5(c) in a timely manner; and

 

(iv) solicit, hire, compensate or engage as an employee, agent, contractor, shareholder, member, joint venturer or consultant, whether or not for consideration, any of the Company’s employees or otherwise induce any of the Company’s employees, subcontractors or vendors to change their relationship with the Company. 

(c)               Confidentiality .  Executive shall never: (i) disclose any Confidential Information; or (ii) directly or indirectly give or permit any person or entity to have access to any Confidential Information; or (iii) make any use, commercial or otherwise, of any Confidential Information, except, solely as reasonably required to perform Executive’s employment duties with the Company and solely for the benefit of the Company. 

9  

 

(d)               Restrictive Covenants Scope . The parties acknowledge that the provisions of this section are necessary and reasonable to protect the legitimate business interest of the Company and any violation of the provisions of this section will result in irreparable injury to the Company, the exact amount of which will be difficult to ascertain, and that the remedies at law for any such violation would not be reasonable or adequate compensation to the Company for such violation.  Accordingly, Executive agrees that if the provisions of this section are violated, in addition to any other remedy which may be available in equity or at law, the Company shall be entitled to specific performance and injunctive relief, without the necessity of proving actual damages, and without being required to post a bond.

(e)                Tolling of Restriction Period . In the event of Executive’s breach of one or more of the provisions of this section, the running of the Restriction Period shall be tolled during the continuation of such breach(es) and recommence only upon Executive’s full and complete compliance with the provisions of this Section 6.

(f)                Judicial Modification .  In the event a court of competent jurisdiction holds one or more of the provisions of the restrictive covenants invalid as to length of time or geographic scope, then this Section 6 shall be amended to reflect a reasonable length of time and/or reasonable geographic scope. 

7.     Works for Hire and Intellectual Property . Executive acknowledges and agrees that: (a) all Work Product (as defined below) shall be deemed a work for hire; and (b) he hereby assigns all of his intellectual property and other rights in all Work Product to the Company.  All right, title and interest in and to, and the right to pursue protection for, Work Product shall vest solely with the Company.  Upon request by the Company, Executive shall use reasonable efforts, at no additional expense, to assist the Company in securing any intellectual property protection for Work Product and shall execute all documents reasonably necessary to effect an assignment as contemplated herein.  No license is granted to Executive in, to or under any Work Product or other intellectual property (including, but not limited to, patents, trade secrets, copyrighted materials and trademarks) owned, licensed or otherwise assertable by Executive by express or implied grant, estoppel or otherwise, except for a limited right to use any such intellectual property solely in the performance of Executive’s employment duties and solely for the benefit of the Company.  All benefits from the use of any such intellectual property, including Work Product, shall inure solely to the Company.  “ Work Product ” means all tangible or intangible works: (X) (1) created, produced or modified during or in connection with Executive’s employment by the Company; or (2) which are related to, or that can be utilized in, the Company Business; and (Y) that could qualify as the subject matter of a copyright, patent, trade secret or any other form of intellectual property; and shall include, without limitation, all work produced by or for the benefit of the Company, any Company Affiliate, Commercial Partners, Former Commercial Partners and Prospects.

8.     Company Property .  Executive agrees that all Company Property (as defined below) is the property solely of the Company, and Executive waives and relinquishes any and all interests or property rights he or she may have therein in favor of the Company.  Executive shall immediately return all of the Company Property to the Company at the Company’s address for notices or such other location as may be directed by the Company upon: (A) the Company’s request at any time; and (B) upon the termination of Executive’s employment.  “ Company Property ” includes, but is not limited to: (X) records relating to Commercial Partners, Former Commercial Partners, Prospects and Confidential Information in whatever form they exist, and by whomever prepared, including, but not limited to, notes of Executive; (Y) tangible embodiments of or containing Work Product or Confidential Information; and (Z) tangible and intangible property pertaining to the Company Business or arising out of or used by Executive in the performance of his duties for the Company.

10  

 

9.     Independent Covenant .  Executive acknowledges and agrees that the provisions of sections 6, 7 and 8 hereof are independent covenants and no actual or alleged breach by the Company of any provision of this Agreement or the employment relationship shall be grounds for relieving Executive from his or her obligations thereunder.

10.   Miscellaneous .

 

(a)                  Arbitration of Claims . In the event of any dispute, claim, question or disagreement arising from or relating to this Agreement or the breach thereof, the Company and Executive agree to settle the dispute, claim, question or disagreement by arbitration before a single arbitrator in New York, New York under the auspices of the American Arbitration Association (“ AAA ”) in accordance with its rules for arbitration of employment disputes, and judgment on the award rendered by the arbitrator may be entered in any court having jurisdiction thereof. Each of the Company and Executive hereby agrees and acknowledges that all disputes between or among them are subject to the alternative dispute resolution procedures of this Section 10(a). Each of the Company and Executive agrees that any aspect of alternative dispute resolution not specifically covered in this Agreement shall be covered, without limitation, by the applicable AAA rules and procedures. Each of the Company and Executive further agree that any determination by the arbitrator regarding any dispute, claim, question or disagreement arising from or relating to this Agreement shall be final and binding upon the parties hereto and shall not be subject to further appeal. Each of the Company and Executive shall bear its own costs and expenses and an equal share of the arbitrator’s fees and administrative fees of arbitration.

(b)                 Entire Agreement; Amendments . This Agreement sets forth the entire understanding of the parties concerning the subject matter of this Agreement and incorporates all prior negotiations and understandings.  There are no covenants, promises, agreements, conditions or understandings, either oral or written, between them relating to the subject matter of this Agreement other than those set forth herein.  The publication, amendment, supplementation or replacement of an employee handbook by the Company shall not be deemed to alter, amend or modify the terms and conditions of this Agreement. No alteration, amendment, change or addition to this Agreement shall be binding upon any party unless in writing and signed by the party to be charged.  No purported waiver by any party of any default by another party of any term or provision contained herein shall be deemed to be a waiver of such term or provision unless the waiver is in writing and signed by the waiving party. No such waiver shall in any event be deemed a waiver of any subsequent default under the same or any other term or provision contained herein. This Agreement may not be altered, modified, or amended except by written instrument signed by the parties hereto.

11  

 

(c)                  No Waiver . No waiver of any of the provisions of this Agreement, whether by conduct or otherwise, in any one or more instances, shall be deemed or be construed as a further, continuing or subsequent waiver of any such provision or as a waiver of any other provision of this Agreement. No failure to exercise and no delay in exercising any right, remedy or power hereunder will preclude any other or further exercise of any other right, remedy or power provided herein or by law or in equity.

(d)                 Severability . If any term or provisions of this Agreement, or the application thereof to any person or circumstance, shall be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances, other than those as to which it is held invalid, shall both be unaffected thereby and each term or provision of this Agreement shall be valid and be enforced to the fullest extent permitted by law.

(e)                  Assignment . This Agreement, and all of the Executive’s rights and duties hereunder, shall not be assignable or delegable by the Executive; provided , however , that if the Executive shall die, all amounts then payable to the Executive hereunder shall be paid in accordance with the terms of this Agreement to the Executive’s devisee, legatee or other designee or, if there be no such devisee, legatee or designee, to his estate. The Company and its successors and assigns may, at any time and from time to time, assign its rights and obligations under this Agreement, including, without limitation, the rights arising pursuant to sections 6, 7 and 8, without Executive’s consent to a buyer of all or substantially all of the assets, or a majority of the voting stock, of the Company. Upon such assignment, the rights and obligations of the Company hereunder shall become the rights and obligations of such assignee or successor person or entity.

(f)                  Notices . For the purpose of this Agreement, notices and all other communications provided for in the Agreement shall be in writing and shall be deemed to have been duly given when delivered by hand or nationally recognized courier service addressed to the respective addresses set forth below in this Agreement or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt.

If to the Company:

Surge Components, Inc.

E. Jefryn Blvd.

Deer Park, NY 11729

 

If to the Executive:

 

Steven Lubman

24 Wagon Wheel Lane

Dix Hills, New York 11746

 

(g)               Prior Agreements . This Agreement supersedes all prior agreements and understandings (including oral agreements) between the Executive and the Company regarding the terms and conditions of the Executive’s employment with the Company.

 

12  

 

 

(h)                Cooperation . The Executive shall provide his reasonable cooperation in connection with any action or proceeding (or any appeal from any action or proceeding) which relates to events occurring during the Executive’s employment hereunder, but only to the extent the Company requests such cooperation with reasonable advance notice to the Executive and in respect of such periods of time as shall not unreasonably interfere with the Executive’s ability to perform his duties with any subsequent employer; provided, however, the Company shall pay any reasonable travel, lodging and related expenses that the Executive may incur in connection with providing all such cooperation, to the extent approved by the Company prior to incurring such expenses.

 

(i)                   Execution and Counterparts . This Agreement may be executed in two or more counterparts, all of which when taken together shall be considered one and the same agreement and shall become effective when counterparts have been signed by each party and delivered to the other party, it being understood that the parties need not sign the same counterpart. In the event that any signature is delivered by facsimile transmission or by e-mail delivery of a “.pdf” format data file, such signature shall create a valid and binding obligation of the party executing (or on whose behalf such signature is executed) with the same force and effect as if such facsimile or “.pdf” signature page were an original thereof.

 

(j)                  Survival . Sections 6, 7, 8 and 10 shall survive the termination, cancellation or expiration of this Agreement by whatever means for whatever reason.

 

(k)                Fees and Expenses . In the event the Company shall fail or refuse to make or authorize any payment of any amount otherwise due to the Executive hereunder within the appropriate period of time, then the Company shall reimburse the Executive for all reasonable expenses (including reasonable counsel fees and expenses) incurred by him in enforcing the terms hereof, within five (5) business days after demand accompanied by evidence of fees and expenses incurred. With regard to any dispute pursuant to this Agreement, the Company and Executive agree that the non-prevailing party shall promptly reimburse any and all reasonable attorneys’ fees to the prevailing party in connection therewith. Any reimbursement hereunder shall be paid promptly and in no event later than the end of the Executive’s taxable year next following the taxable year in which the expense was incurred.

 

(l)                  Section 409A .

 

(i) The parties intend that the payments and benefits provided for in this Agreement either be exempt from Section 409A, or be provided in a manner that complies with Section 409A and any ambiguity herein shall be interpreted so as to be consistent with the intent of this paragraph. In no event whatsoever shall the Company be liable for any additional tax, interest or penalty that may be imposed on the Executive by Section 409A or damages for failing to comply with Section 409A. Notwithstanding anything contained herein to the contrary, all payments and benefits which are payable upon a termination of employment hereunder shall be paid or provided only upon those terminations of employment that constitute a “separation from service” from the Company within the meaning of Section 409A (determined after applying the presumptions set forth in Treas. Reg. Section 1.409A-1(h)(1)). Further, if the Executive is a “specified employee” as such term is defined under Section 409A at the time of a termination of employment and the deferral of the commencement of any payments or benefits otherwise payable hereunder as a result of such termination of employment is necessary in order to prevent any accelerated recognition of income or additional tax under Section 409A, then the Company will defer the commencement of the payment of any such payments or benefits hereunder (without any reduction in payments or benefits ultimately paid or provided to the Executive) until the date that is at least six (6) months following the Executive’s termination of employment with the Company (or the earliest date permitted under Section 409A, e.g., immediately upon the Executive’s death), whereupon the Company will promptly pay the Executive a lump-sum amount equal to the cumulative amounts that would have otherwise been previously paid to the Executive under this Agreement during the period in which such payments or benefits were deferred. Thereafter, payments will resume in accordance with this Agreement.

13  

 

(ii) Notwithstanding anything to the contrary in this Agreement, in-kind benefits and reimbursements provided hereunder during any calendar year shall not affect in-kind benefits or reimbursements to be provided in any other calendar year, other than an arrangement providing for the reimbursement of medical expenses referred to in Section 105(b) of the Code, and are not subject to liquidation or exchange for another benefit. Notwithstanding anything to the contrary in this Agreement, reimbursement requests must be timely submitted by the Executive and, if timely submitted, reimbursement payments shall be promptly made to the Executive following such submission, but in no event later than December 31 st of the calendar year following the calendar year in which the expense was incurred. In no event shall the Executive be entitled to any reimbursement payments after December 31 st of the calendar year following the calendar year in which the expense was incurred. This paragraph shall only apply to in-kind benefits and reimbursements that would result in taxable compensation income to the Executive.

(iii) Additionally, in the event that following the date hereof the Company or the Executive reasonably determines that any compensation or benefits payable under this Agreement may be subject to Section 409A, the Company and the Executive shall work together to adopt such amendments to this Agreement or adopt other policies or procedures (including amendments, policies and procedures with retroactive effect), or take any other commercially reasonable actions necessary or appropriate to (x) exempt the compensation and benefits payable under this Agreement from Section 409A and/or preserve the intended tax treatment of the compensation and benefits provided with respect to this Agreement or (y) comply with the requirements of Section 409A.

 

[Signature Page Follows]

 

  14  

 

 

IN WITNESS WHEREOF , the parties hereto have duly executed this Agreement to be effective as of the day and year first above written.

 

  SURGE COMPONENTS, INC.
     
  By: /s/ Ira Levy
  Name:  

Ira Levy

  Title: President
     
  Date: February 18, 2016
     
  EXECUTIVE
     
  /s/ Steven Lubman
 

Steven Lubman

     
  Date: February 18, 2016

 

 

15