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):   September 27, 2017

 

Armeau Brands Inc.
(Exact name of registrant as specified in charter)

 

Nevada   333-191251     99-0375676

(State or other Jurisdiction

of Incorporation)

  (Commission File Number)  

(IRS Employer

Identification No.)

 

6610 North University Drive #220, Fort Lauderdale, FL   33321
(Address of Principal Executive Offices)   (Zip Code)

 

Registrant’s telephone number, including area code: ( 954) 722-1300

 

___________________________________________________

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of Company 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(b) under the Exchange Act (17 CFR 240.14a-12(b))

 

  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 240.13e-4(c))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).

Emerging growth company 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

 

 

 

As used in this Current Report on Form 8-K (this “Report ”) and unless otherwise indicated, the terms “ the Company ,” “ we ,” “ us ” and “ our ” refer to Armeau Brands Inc. and, unless the context otherwise requires, its newly-acquired subsidiary, 271 Lake Davis Holdings, LLC, a Delaware limited liability company d/b/a/ SanSal (“ SanSal ”).

 

Item 1.01 Entry into a Material Definitive Agreement.

 

The disclosure set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this item by reference .

 

Item 2.01 Completion of Acquisition or Disposition of Assets.

 

On September 27, 2017 (“ Closing ”), the Company entered into a Securities Exchange Agreement (the “ Exchange Agreement ”) with all the members of SanSal (the “ Members ”), pursuant to which SanSal became a wholly-owned subsidiary of the Company (the “ SanSal Acquisition ”).

 

Founded in 2015, SanSal is a Colorado-based producer of natural rich-hemp products, using strict natural protocols and materials yielding broad spectrum phytocannabinoid rich hemp oils, distillates and isolates. On the SanSal farm located in the high-altitude foothills of the Rocky Mountains in southwest Colorado, SanSal grows hemp plants rooted in purity. SanSal’s proprietary genetic plants are cultivated from tissue cultures and clones using sustainable farming practices that preserve soil integrity and conserve precious Rocky Mountain water. SanSal uses neither any pesticides nor any non-natural fertilizers. SanSal is committed to natural cultivation and protecting the soil. SanSal believes that it offers superior quality natural-grown whole plant broad spectrum phytocannabinoid hemp oils and extracts in various strengths and formulations, including oils formulated to customer specifications. SanSal is licensed by the Colorado Department of Agriculture to grow industrial hemp pursuant to Federal law on its farm.

 

Pursuant to the Exchange Agreement, we acquired all the outstanding limited liability company interests of SanSal in exchange for the issuance to SanSal’s members, pro rata , of 7,800,000 “ restricted ” shares of our common stock, whereupon the holder of the Company’s currently outstanding 7,5000,000 “ restricted ” shares of common stock contributed those shares to the capital of the Company for cancellation. As a result of completion of the SanSal Acquisition, a “ Change in Control ” of the Company has taken place.

 

At Closing, Alexander M. Salgado and Erduis Sanabria, the members of SanSal’s management team, were appointed to the Company’s board of directors and as the Company’s Chief Executive Officer and Executive Vice President, respectively. Jaitegh Singh, Armeau’s President, then stepped down from such office and as a director, but continues with the Company as Vice President and Secretary.

 

Alexander M. Salgado , 51, co-founded SanSal and his served as its Chief Executive Officer since its inception in January 2015.  From 2013 to 2015, Mr. Salgado was the Chief Operating Officer of IXE Agro USA LLC, a division of a multi-national conglomerate of firms involved in the agricultural industry focused on the growing, marketing, shipping and selling of fresh produce throughout the Americas. From 2006 to 2013, Mr. Salgado was the President of Protex Investment Group LLC from 2006 to 2013, a real estate acquisition and management consultation company. Since 2000, Mr. Salgado, a board licensed Certified Public Accountant has also served as President of Alexander M. Salgado, CPA, PA, an accounting, tax and consulting firm located in Miami, Florida. Mr. Salgado holds a Bachelor’s degree in Accounting from Florida International University.

 

Erduis Sanabria , 45, co-founded SanSal and has served as its Executive Vice President since its inception in January 2015.  From December 2012 to August 2014, Mr. Sanabria served as the Managing Member of Pam Exchange Recycling, LLC, a company he co-founded engaged in the business of recycling aluminum products in the Dominican Republic.  During that same period, Mr. Sanabria served as Manager of Pam Exchange, LLC, a South Florida based diamond and watch trading company he founded in May 2010.

 

At Closing, the Company entered into employment agreements with each of Messrs. Salgado and Sanabria. Each employment agreement provides for a three-year rolling term, base salary of $150,000, increasing to $250,000 on April 1, 2018 and a grant of 166,667 vested options under the Company’s 2017 Stock Incentive Plan (the “ Incentive Plan ”), which was also adopted at Closing. The options are exercisable at any time during the ten (10) year period commencing on the date of grant, at an exercise price of $0.50 per share and are otherwise subject to the terms of the Incentive Plan. The employment agreements also contain customary confidentiality, non-competition and change in control provisions.

 

 

 

 

At Closing, former SanSal Members, who now hold an aggregate of 4,445,750 shares of our common stock (or 44.1% of our outstanding common stock after giving effect to the consummation of the SanSal Acquisition and the other transactions described herein), including Messrs. Salgado and Erduis, entered into a five-year voting agreement (the “ Voting Agreement ”), pursuant to which Messrs. Salgado and Erduis will have the right to direct the voting of their shares on all matter presented to shareholders as a vote.

 

Contemporaneously with completion of the SanSal Acquisition, we sold 340,000 “ restricted ” shares of our common stock at a purchase price of $0.50 per share to four “ accredited investors ” in a private offering (the “ Private Offering ”). The proceeds from the sale of the shares in the Private Offering are being used for working capital and other general corporate purposes.

 

The shares of our common stock issued in the SanSal Acquisition and the Private Offering were issued and sold pursuant to the exemption from registration afforded by Section 4(a)(2) of the Securities Act of 1933, as amended and Regulation D thereunder .

 

As following completion of the SanSal Acquisition, we intend to focus our business efforts on SanSal’s business, we have applied to FINRA to (a) change our corporate name to “ SanSal Wellness Holdings, Inc. ” (with a comparable change in our trading symbol); (b) authorize a class of “ blank check ” preferred stock; and (c) implement a six-for-one forward stock split.

 

The above summary of the SanSal Acquisition and the related transactions described above is qualified in its entirety by reference to the copies of the Exchange Agreement, the employment agreements, the Incentive Plan and the Voting Agreement, filed as Exhibits 10.1, 10.2, 10.3, 10.4 and 10.5 to this report, respectively and incorporated herein by reference.

 

Item 3.02 Unregistered Sales of Equity Securities.

 

The disclosure set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this item by reference .

 

Item 5.01 Changes in Control of the Registrant.

 

The disclosure set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this item by reference .

 

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

 

The disclosure set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this item by reference .

 

Item 8.01 Other Events.

 

The disclosure set forth in Item 2.01 of this Current Report on Form 8-K is incorporated into this item by reference .

 

Item 9.01 Financial Statements and Exhibits.

 

(a)        Financial statements of businesses acquired . The financial statements of SanSal for the periods specified in Rule 8-04 (b) of Regulation S-X will be filed by the registrant by amendment to this report within 75 days of the date of this report.

 

(b)        Pro forma financial information . The pro forma financial information required to be filed as specified in Rule 8-05 of Regulation S-X will be filed by the registrant by amendment to this report within 75 days of the date of this report.

 

 

 

 

(d)        Exhibits

     
Exhibit Number   Description
     
10.1   Securities Exchange Agreement
     
10.2   Employment Agreement with Alexander M. Salgado
     
10.3   Employment Agreement with Erduis Sanabria
     
10.4   2017 Stock Incentive Plan
     
10.5   Voting Agreement

 

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.

 

Dated:  October 2, 2017 ARMEAU BRANDS, INC.
     
  By: /s/ Alexander M. Salgado
    Alexander M. Salgado, Chief Executive Officer

 

 

Exhibit 10.1

 

SECURITIES EXCHANGE AGREEMENT

 

BY AND AMONG

 

ARMEAU BRANDS, INC.,

 

271 LAKE DAVIS HOLDINGS, LLC D/B/A/ SANSAL

 

and

 

THE MEMBERS OF 271 LAKE DAVIS HOLDINGS, LLC D/B/A SANSAL

 

Dated as of September 27, 2017

 

 

 

 

SECURITIES EXCHANGE AGREEMENT

 

This SECURITIES EXCHANGE AGREEMENT (the “ Agreement ”), dated as of the 27 th day of September, 2017, is made by and among ARMEAU BRANDS, INC. , a Nevada corporation (“ ARMEAU ”), 271 LAKE DAVIS HOLDINGS, LLC D/B/A SANSAL , a Delaware limited liability company (“ SANSAL ”) and the members of SANSAL listed on Exhibit A hereto (each a “ Member ,” and collectively, the “ Members ”). ARMEAU, SANSAL and the Members are referred to herein individually, as a “ Party ” and collectively, as the “ Parties .”

 

RECITALS

 

WHEREAS , the Members owns one hundred percent (100%) of the issued and outstanding limited liability company membership interests in SANSAL, in the amounts set forth beside their respective names on Exhibit A (the “ SANSAL Interests ”); and

 

WHEREAS , the Members have agreed to sell, transfer, assign, convey and deliver the SANSAL Interests to ARMEAU, and ARMEAU has agreed to acquire the SANSAL Interests from the Member in SANSAL in exchange for the issuance to the Members of an aggregate of 7,800,000 “ restricted ” shares of common stock of ARMEAU in the amounts set forth beside their respective names on Exhibit A (the “ ARMEAU Shares ”), which gives the Members eighty percent (80%) of the issued and outstanding common stock of ARMEAU after consummation of the transactions contemplated hereby, all on the terms and conditions set forth in this Agreement.

 

AGREEMENT

 

NOW, THEREFORE , in consideration of the foregoing premises, and the covenants, representations and warranties set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged and accepted, the Parties, intending to be legally bound, hereby agree as follows:

 

ARTICLE I

DEFINITIONS

 

The following capitalized terms, when used in this Agreement, shall have the following respective meanings:

 

Accredited Investor ” has the meaning set forth in Rule 501(a) under the Securities Act.

 

Action ” means any action, suit, inquiry, notice of violation, proceeding (including any partial proceeding such as a deposition) or investigation pending or threatened before or by any court, arbitrator, governmental or administrative agency, regulatory authority (federal, state, county, local or foreign), stock market, stock exchange or trading facility.

 

Affiliate ” has the meaning set forth in Rule 12b-2 of the regulations promulgated under the Exchange Act.

 

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Agreement ” has the meaning set forth in the preamble.

 

ARMEAU ” has the meaning set forth in the preamble.

 

ARMEAU Indemnified Parties ” means ARMEAU and its respective Affiliates and the officers, directors, employees, attorneys and agents of such Persons.

 

ARMEAU Most Recent Fiscal Year End ” means January 31, 2017.

 

ARMEAU Organizational Documents ” has the meaning set forth in Section 5.6 .

 

ARMEAU Shares ” has the meaning set forth in the recitals.

 

Business Day ” shall mean any day other than a Saturday, Sunday or a day on which commercial banks in Miami, Florida are generally closed for business.

 

Closing ” has the meaning set forth in Section 2.3 .

 

Closing Date ” has the meaning set forth in Section 2.3 .

 

Code ” means the Internal Revenue Code of 1986, as amended.

 

Contract ” means any written or oral contract, lease, license, indenture, note, bond, agreement, arrangement, understanding, permit, concession, franchise or other instrument.

 

Damages ” has the meaning set forth in Section 9.2 .

 

Environmental Laws ” has the meaning set forth in Section 4.18 .

 

ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

 

Exchange Act ” means the Securities Exchange Act of 1934, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same will then be in effect

 

GAAP ” means, with respect to any Person, generally accepted accounting principles in the U.S. applied on a consistent basis with such Person’s past practices.

 

Governmental Authority ” means any domestic or foreign, federal or national, state or provincial, municipal or local government, governmental authority, regulatory or administrative agency, governmental commission, department, board, bureau, agency or instrumentality, political subdivision, commission, court, tribunal, official, arbitrator or arbitral body.

 

Hazardous Materials ” has the meaning set forth in Section 4.18 .

 

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Indebtedness ” means without duplication, (a) all indebtedness or other obligation of the Person for borrowed money, whether current, short-term, or long-term, secured or unsecured; (b) all indebtedness of the Person for the deferred purchase price for purchases of property outside the Ordinary Course of Business; (c) all lease obligations of the Person under leases which are capital leases in accordance with GAAP; (d) any off-balance sheet financing of the Person including synthetic leases and project financing; (e) any payment obligations of the Person in respect of banker’s acceptances or letters of credit (other than stand-by letters of credit in support of ordinary course trade payables); (f) any liability of the Person with respect to interest rate swaps, collars, caps and similar hedging obligations; (g) any liability of the Person under deferred compensation plans, phantom stock plans, severance or bonus plans, or similar arrangements made payable as a result of the transactions contemplated herein; (h) any indebtedness referred to in clauses (a) through (g) above of any other Person which is either guaranteed by, or secured by a security interest upon any property owned by, the Person; and (i) accrued and unpaid interest of, and prepayment premiums, penalties or similar contractual charges arising as result of the discharge at Closing of, any such foregoing obligation.

 

Indemnified Party ” has the meaning set forth in Section 11.3 .

 

Indemnifying Party ” has the meaning set forth in Section 11.3 .

 

Intellectual Property ” means all industrial and intellectual property, including, without limitation, all U.S. and non-U.S. patents, patent applications, patent rights, trademarks, trademark applications, common law trademarks, Internet domain names, trade names, service marks, service mark applications, common law service marks, and the goodwill associated therewith, copyrights, in both published and unpublished works, whether registered or unregistered, copyright applications, franchises, licenses, know-how, trade secrets, technical data, designs, customer lists, confidential and proprietary information, processes and formulae, all computer software programs or applications, layouts, inventions, development tools and all documentation and media constituting, describing or relating to the above, including manuals, memoranda, and records, whether such intellectual property has been created, applied for or obtained anywhere throughout the world.

 

Knowledge ” shall mean, except as otherwise explicitly provided herein, actual knowledge after reasonable investigation. ARMEAU and SANSAL shall be deemed to have “ Knowledge ” of a matter if any of their respective, directors, managers, officers or employees has Knowledge of such matter.

 

Laws ” means, with respect to any Person, any U.S. or non-U.S., federal, national, state, provincial, local, municipal, international, multinational or other Law (including common law), constitution, statute, code, ordinance, rule, regulation or treaty applicable to such Person.

 

Liability ” means any liability (whether known or unknown, whether asserted or unasserted, whether absolute or contingent, whether accrued or unaccrued, whether liquidated or unliquidated, and whether due or to become due), including any liability for Taxes.

 

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License ” means any security clearance, permit, license, variance, franchise, Order, approval, consent, certificate, registration or other authorization of any Governmental Authority or regulatory body, and other similar rights.

 

Lien ” means any mortgage, pledge, security interest, encumbrance, lien or charge of any kind, including, without limitation, any conditional sale or other title retention agreement, any lease in the nature thereof and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction and including any lien or charge arising by Law.

 

Material Adverse Effect ” means, with respect to any Person, a material adverse effect on the business, financial condition, operations, results of operations, assets, customer, supplier or employee relations or future prospects of such Person.

 

Member ” or “ Members ” has the meaning set forth in the preamble.

 

Order ” means any order, judgment, ruling, injunction, assessment, award, decree or writ of any Governmental Authority or regulatory body.

 

Operating Agreement ” has the meaning set forth in Section 4.6 .

 

Ordinary Course of Business ” means the ordinary course of business consistent with past custom and practice (including with respect to quantity and frequency).

 

Party ” and “ Parties ” have the respective meanings set forth in the preamble.

 

Person ” means all natural persons, corporations, business trusts, associations, companies, partnerships, limited liability companies, joint ventures and other entities, governments, agencies and political subdivisions.

 

Principal Market ” means the OTCPink tier of the over-the-counter market operated by OTC Markets Group, Inc.

 

SANSAL ” has the meaning set forth in the preamble.

 

SANSAL Disclosure Schedule ” has the meaning set forth in Article IV .

 

SANSAL Indemnified Parties ” means SANSAL and the Members and their respective Affiliates and the managers,officers. employees, attorneys and agents of such Persons.

 

SANSAL Interests ” has the meaning set forth in the Recitals.

 

SANSAL Most Recent Fiscal Year End ” means December 31, 2016.

 

SANSAL Organizational Documents ” has the meaning set forth in Section 4.6 .

 

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SEC ” means the U.S. Securities and Exchange Commission, or any successor agency thereto.

 

SEC Reports ” has the meaning set forth in Section 5.18 .

 

Securities Act ” means the Securities Act of 1933, as amended, or any similar federal statute, and the rules and regulations of the SEC thereunder, all as the same will be in effect at the time.

 

Tax Return ” means all returns, declarations, reports, estimates, statements, forms and other documents filed with or supplied to or required to be provided to a Governmental Authority with respect to Taxes, including any schedule or attachment thereto and any amendment thereof.

 

Tax ” or “ Taxes ” means all taxes, assessments, duties, levies or other charge imposed by any Governmental Authority of any kind whatsoever together with any interest, penalties, fines or additions thereto and any liability for payment of taxes whether as a result of (i) being a member of an affiliated, consolidated, combined, unitary or similar group for any period, (ii) any tax sharing, tax indemnity or tax allocation agreement or any other express or implied agreement to indemnify any Person, (iii) being liable for another Person’s taxes as a transferee or successor otherwise for any period, or (iv) operation of Law.

 

Third Party ” has the meaning set forth in Section 11.4(a) .

 

Transaction Documents ” means, collectively, this Agreement and all agreements, certificates, instruments and other documents to be executed and delivered in connection with the transactions contemplated by this Agreement.

 

Treasury Regulations ” means the income tax regulations, including temporary regulations, promulgated under the Code, as such regulations may be amended from time to time (including corresponding provisions of succeeding regulations).

 

U.S. ” means the United States of America.

 

ARTICLE II

SECURITIES EXCHANGE; CLOSING

 

Section 2.1     Securities Exchange . At Closing, the Members shall sell, transfer, convey, assign and deliver the SANSAL Interests, representing one hundred percent (100%) all of the issued and outstanding limited liability company membership interests in SANSAL, to ARMEAU, and in consideration therefor, subject to Section 2.2 , ARMEAU shall issue the ARMEAU Shares to the Members, in the names and denominations set forth on Exhibit A .

 

Section 2.2      Contribution of Shares . At Closing, Jaitegh Singh(“ JT ”), the holder of all 7,500,000 “restricted” shares of ARMEAU common stock outstanding as of the date of this Agreement, shall contribute such shares to the capital of the Company.

 

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Section 2.3 Closing . Upon the terms and subject to the conditions of this Agreement, the transactions contemplated by this Agreement shall take place at a closing (“ Closing ”) to be held by electronic or overnight courier exchange of documents contemporaneously with the execution of this Agreement by the Parties. The date Closing occurs is referred to herein as the “ Closing Date.

 

Section 2.4 Closing Deliveries by ARMEAU . At Closing, ARMEAU shall deliver, or cause to be delivered to the Members, as applicable, (a) certificates evidencing the ARMEAU Shares registered in the name of the Members; (b) the resignation of JT as the sole director and executive officer of ARMEAU; (c) the appointment of designees of the Members as members of the board of directors of ARMEAU; (d) certificates evidencing the “restricted” shares of ARMEAU being contributed to the capital of ARMEAU pursuant to Section 2.2 , duly endorsed for transfer, with signature medallion guaranteed; and (e) such other customary closing documents and certificates as SANSAL and the Members or their counsel may reasonably request

 

Section 2.5 Closing Deliveries by SANSAL and Members . At Closing, SANSAL and the Members, as applicable, shall deliver, or cause to be delivered to ARMEAU, (a) executed transfer powers in the form attached as Exhibit B hereto, selling, transferring, assigning, conveying and delivering title to the SANSAL Interests hereto to ARMEAU; and (b) such other customary closing documents and certificates as ARMEAU or its counsel may reasonably request.

 

ARTICLE III 

REPRESENTATIONS AND WARRANTIES OF THE MEMBERS

 

Each Member, as to himself, herself or itself only, hereby represents and warrants to ARMEAU as follows:

 

Section 3.1     Authority . The Member has all requisite authority and power to enter into and deliver this Agreement and any of the other Transaction Documents to which the Member is a party, and any other certificate, agreement, document or instrument to be executed and delivered by the Member in connection with the transactions contemplated hereby and thereby and to perform his, hers or its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. This Agreement has been, and each of the Transaction Documents to which such Member is a party will be, duly and validly authorized and approved, executed and delivered by the Member.

 

Section 3.2     Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than the Member, this Agreement and each of the Transaction Documents to which the Member is a party are duly authorized, executed and delivered by the Member, and constitutes the legal, valid and binding obligations of the Member, enforceable against the Member in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

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Section 3.3     No Conflicts . Neither the execution or delivery by the Member of this Agreement or any Transaction Document to which the Member is a party, nor the consummation or performance by the Member of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, constitute a default (or an event or condition which, with notice or lapse of time or both, would constitute a default) under, or result in the termination or acceleration of, any agreement or instrument to which the Member is a party or by which the properties or assets of the Member are bound; or (b) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of the Member under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of SANSAL under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which the Member is a party or any of the Member’s assets and properties are bound or affected, except for any such contraventions, conflicts, violations, or other occurrences as could not reasonably be expected to have a Material Adverse Effect on the Member or the Member’s SANSAL Interests.

 

Section 3.4     Ownership of SANSAL Interests . The Member owns, of record and beneficially, and has good, valid and indefeasible title to and the right to transfer to ARMEAU pursuant to this Agreement, the Member’s SANSAL Interests, free and clear of any and all Liens. There are no options, rights, voting trusts or any other Contracts or understandings to which the Member is a party or by which the Member or the Member’s SANSAL Interests are bound with respect to the issuance, sale, transfer, voting or registration of the Member’s SANSAL Interests. At the Closing Date, ARMEAU will acquire good, valid and marketable title to the Member’s SANSAL Interests free and clear of any and all Liens.

 

Section 3.5    Certain Proceedings . There is no Action pending against, or to the Knowledge of the Member, threatened against or affecting, the Member by any Governmental Authority or other Person with respect to the Member that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement.

 

Section 3.6     No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against the Member for any SEC, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of the Member and the Member will indemnify and hold ARMEAU harmless against any liability or expense arising out of, or in connection with, any such claim.

 

Section 3.7      Investment Representations .

 

(a)           Purchase Entirely for Own Account . The Member is acquiring the Member’s ARMEAU Shares proposed to be acquired hereunder for investment for the Member’s own account and not with a view to the resale or distribution of any part thereof, and the Member has no present intention of selling or otherwise distributing such ARMEAU Shares, except in compliance with applicable securities Laws.

 

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(b)       Restricted Securities . The Member understands that the ARMEAU Shares are characterized as “ restricted securities ” under the Securities Act inasmuch as this Agreement contemplates that, when acquired by the Member pursuant hereto, the ARMEAU Shares would be acquired in a transaction not involving a public offering. The issuance of the ARMEAU Shares hereunder is being effected in reliance upon an exemption from registration afforded under Section 4(a)(2) of the Securities Act. The Member further acknowledges that if the ARMEAU Shares are issued to the Member in accordance with the provisions of this Agreement, the Member’s ARMEAU Shares may not be resold without registration under the Securities Act or the existence of an exemption therefrom. The Member represents that he, she or it is familiar with Rule 144 promulgated under the Securities Act, as presently in effect, and understands the resale limitations imposed thereby, and specifically those in subparagraph (i) thereof, and by the Securities Act.

 

(c)       Acknowledgment of Non-Registration . The Member understands and agrees that the ARMEAU Shares to be issued pursuant to this Agreement have not been registered under the Securities Act or the securities Laws of any state of the U.S.

 

(d)       Status . By executing of this Agreement, the Member represents and warrants to ARMEAU that the Member is an Accredited Investor. The Member understands that the ARMEAU Shares are being offered and sold to the Member in reliance upon the truth and accuracy of the representations, warranties, agreements, acknowledgments and understandings of the Members set forth in this Agreement, in order that ARMEAU may determine the applicability and availability of the exemptions from registration of the ARMEAU Shares on which ARMEAU is relying.

 

(e)       Additional Representations, Warranties and Covenants . The Member (i) consents to the placement of a legend on any certificate or other document evidencing the Member’s ARMEAU Shares substantially in the form set forth in Section 3.8(a) ; (ii) has sufficient knowledge and experience in finance, securities, investments and other business matters to be able to protect his interests in connection with the transactions contemplated by this Agreement; (iii) has consulted, to the extent that he has deemed necessary, with his tax, legal, accounting and financial advisors concerning the Member’s acquisition of the ARMEAU Shares and can afford to bear such risks for an indefinite period of time, including, without limitation, the risk of losing its entire investment in the ARMEAU Shares; (iv) has had access to the SEC Reports; (vi) has been furnished during the course of the transactions contemplated by this Agreement with all other public information regarding ARMEAU that such the Member has requested and all such public information is sufficient for the Member to evaluate the risks of acquiring the ARMEAU Shares; (vii) has been afforded the opportunity to ask questions of and receive answers concerning ARMEAU and the terms and conditions of the issuance of the ARMEAU Shares; (viii) is not relying on any representations and warranties concerning ARMEAU made by ARMEAU or any officer, employee or agent of ARMEAU, other than those contained in this Agreement or the SEC Reports; (ix) will not sell or otherwise transfer the ARMEAU Shares, unless either (A) the transfer of the ARMEAU Shares is registered under the Securities Act; or (B) an exemption from registration of the ARMEAU Shares is available; (x) understands and acknowledges that ARMEAU is under no obligation to register the ARMEAU Shares for sale under the Securities Act; (xi) represents and warrants that the address furnished to ARMEAU is the principal residence of the Member; (xii) understands and acknowledges that the ARMEAU Shares have not been recommended by any federal or state securities commission or regulatory authority, that the foregoing authorities have not confirmed the accuracy or determined the adequacy of any information concerning ARMEAU that has been supplied to the Member and that any representation to the contrary is a criminal offense; and (xiii) acknowledges that the representations, warranties and agreements made by the Member herein shall survive the execution and delivery of this Agreement and the acquisition of the ARMEAU Shares.

 

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(f)          Consent . The Member understands and acknowledges that ARMEAU may refuse to transfer the ARMEAU Shares, unless the Member complies with Section 3.7 and any other restrictions on transferability set forth herein. The Member consents to ARMEAU making a notation on its records or giving instructions to any transfer agent of ARMEAU Shares in order to implement the restrictions on transfer of the ARMEAU Shares.

 

Section 3.8      Stock Legends .          The Member hereby agrees with ARMEAU as follows:

 

(a)         The certificates evidencing the Member’s ARMEAU Shares and each certificate issued in transfer thereof, will bear the following or similar legend:

 

THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE “ SECURITIES ACT ”), OR ANY STATE SECURITIES LAWS AND NEITHER SUCH SECURITIES NOR ANY INTEREST THEREIN MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED EXCEPT (1) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS OR (2) PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, IN WHICH CASE THE HOLDER MUST, PRIOR TO SUCH TRANSFER, FURNISH TO THE COMPANY AN OPINION OF COUNSEL, WHICH COUNSEL AND OPINION ARE REASONABLY SATISFACTORY TO THE COMPANY, THAT SUCH SECURITIES MAY BE OFFERED, SOLD, PLEDGED, ASSIGNED OR OTHERWISE TRANSFERRED IN THE MANNER CONTEMPLATED PURSUANT TO AN AVAILABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS.

 

(b)         The certificates representing the ARMEAU Shares, and each certificate issued in transfer thereof, will also bear any other legend required under any applicable Law, including, without limitation, any state corporate and state securities Law, or Contract.

 

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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF SANSAL

 

SANSAL hereby represents and warrants to ARMEAU, subject to the exceptions and qualifications specifically set forth or disclosed in writing in the disclosure schedule delivered by SANSAL simultaneously herewith (the “ SANSAL Disclosure Schedule ”), as follows:

 

Section 4.1     Organization and Qualification . SANSAL is a limited liability company duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation or organization, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on SANSAL.

 

Section 4.2     Authority . SANSAL has have all requisite authority and power (as a limited liability company and otherwise), Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which SANSAL is a party and any other certificate, agreement, document or instrument to be executed and delivered by SANSAL in connection with the transactions contemplated hereby and thereby and to perform its obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents by SANSAL and the performance by SANSAL of its obligations hereunder and thereunder and the consummation by SANSAL of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of SANSAL. SANSAL does not need to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby. This Agreement has been, and each of the Transaction Documents to which SANSAL is a party will be, duly and validly authorized and approved, executed and delivered by SANSAL.

 

Section 4.3     Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than SANSAL, this Agreement and each of the Transaction Documents to which SANSAL is a party are duly authorized, executed and delivered by SANSAL and constitutes the legal, valid and binding obligations of SANSAL enforceable against SANSAL in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

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Section 4.4     No Conflicts . Neither the execution nor the delivery by SANSAL of this Agreement or any Transaction Document to which SANSAL is a party, nor the consummation or performance by SANSAL of the transactions contemplated hereby or thereby will, directly or indirectly, (a) contravene, conflict with, or result in a violation of any provision of the SANSAL Organizational Documents; (b) contravene, conflict with or result in a violation of any Law, Order, charge or other restriction or decree applicable to SANSAL, or by which SANSAL or any of its respective assets and properties are bound or affected, including without limitation, applicable rules and regulations of the TTB relating to reporting requirements, product and label registrations and other distillery operations; (c) contravene, conflict with, result in any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of SANSAL under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of SANSAL under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which SANSAL is a party or by which SANSAL or any of its respective assets and properties are bound or affected; or (d) contravene, conflict with, or result in a violation of, the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any licenses, permits, authorizations, approvals, franchises or other rights held by SANSAL or that otherwise relate to the business of, or any of the properties or assets owned or used by, SANSAL, except, in the case of clauses (b), (c) or (d), for any such contraventions, conflicts, violations, or other occurrences as would not have a Material Adverse Effect on SANSAL.

 

Section 4.5     Subsidiaries . SANSAL does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. There are no Contracts or other obligations (contingent or otherwise) of SANSAL to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

 

Section 4.6     Organizational Documents . SANSAL has delivered or made available to ARMEAU true and correct copies of the Articles of Organization and limited liability company operating agreement of SANSAL (the “ Operating Agreement ”) and any other organizational documents of SANSAL, each as amended, and each such instrument is in full force and effect (the “ SANSAL Organizational Documents ”). SANSAL is not in violation of any of the provisions of the SANSAL Organizational Documents.

 

Section 4.7     Capitalization . Except for the SANSAL Interests, no limited liability company membership interests or other securities of SANSAL were issued, reserved for issuance or outstanding. Except as set forth in the Operating Agreement or as contemplated by this Agreement, there are no options, warrants, rights, convertible or exchangeable securities, commitments, Contracts, arrangements or undertakings of any kind to which SANSAL or any of its members is a party or by which it or they are bound (a) obligating SANSAL to issue, deliver or sell, or cause to be issued, delivered or sold, equity or profit interests in, or any security convertible or exercisable for or exchangeable into an equity or profit interest in, SANSAL; (b) obligating SANSAL to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking; or (c) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of SANSAL. There are no (x) outstanding purchase options, call options, rights of first refusal, preemptive rights, subscription right or any similar rights relating to securities of SANSAL; or (y) Contracts or other obligations of SANSAL to repurchase, redeem or otherwise acquire any securities of SANSAL.

 

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Section 4.8     No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against SANSAL for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of SANSAL, and SANSAL will indemnify and hold ARMEAU harmless against any liability or expense arising out of, or in connection with, any such claim.

 

Section 4.9     Compliance with Laws . The business and operations of SANSAL have been and are being conducted in accordance with all applicable Laws and Orders. SANSAL is not conflict with, or in default or violation of and, to the Knowledge of SANSAL, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of or default under, any (a) Law, rule, regulation, judgment or Order; or (b) note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which SANSAL is a party or by which SANSAL or any of its assets and properties are bound or affected and which could reasonably expected to have a Material Adverse Effect on SANSAL. There is no agreement, judgment or Order binding upon SANSAL which has, or could reasonably be expected to have, the effect of prohibiting or materially impairing any business practice of SANSAL or the conduct of business by SANSAL as currently conducted. SANSAL has filed all forms, reports and documents required to be filed with any Governmental Authority and SANSAL has made available such forms, reports and documents to ARMEAU. As of their respective dates, such forms, reports and documents complied in all material respects with the applicable requirements pertaining thereto and none of such forms, reports and documents contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

Section 4.10  Certain Proceedings . There is no material Action pending against, or to the Knowledge of SANSAL, threatened against or affecting, SANSAL by any Governmental Authority or other Person with respect to SANSAL or its business or that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. SANSAL, or to the Knowledge of SANSAL, has not been a party to any material litigation or, within the past two (2) years, the subject of any threat of material litigation (litigation shall be deemed “ material ” if the amount at issue exceeds the lesser of $50,000 per matter or $250,000 in the aggregate). SANSAL is not in violation of and, to the Knowledge of SANSAL, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any applicable Law, rule, regulation, judgment or Order. Neither SANSAL nor any past or present manager or officer (in his or her capacity as such) or Affiliate, is or has been the subject of any civil, criminal, or administrative Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Neither SANSAL nor any past or present manager or officer (in his or her capacity as such) or Affiliate, have any reason to believe that they will be the subject of any civil, criminal, or administrative Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Neither SANSAL nor any past or present manager or officer (in his or her capacity as such) or Affiliate, has any reason to believe that they will be the subject of any civil, criminal, or administrative Action brought by any federal or state agency.

 

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Section 4.11  Contracts . Except as set forth in Section 4.11 of the SANSAL Disclosure Schedule, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of SANSAL. SANSAL is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect on SANSAL.

 

Section 4.12   Financial Statements and Tax Matters .

 

(a)      Financial Statements; Books and Records; Accounts Receivable .

 

(i)     SANSAL has delivered to ARMEAU the financial statements attached as Section 4.12 of the SANSAL Disclosure Schedules Section 4.12 of the SANSAL Disclosure Schedule (the “ SANSAL Financial Statements ”). The SANSAL Financial Statements have been prepared in accordance with GAAP and fairly present in all material respects the financial position of SANSAL as of and for the dates thereof and the results of operations for the periods then ended.

 

(ii)     The books and records of SANSAL are complete and correct in all material respects and have been maintained in accordance with sound business practices consistent with industry standards.

 

(iii)    The accounts receivable of SANSAL are reflected on the books and records of SANSAL and represent valid obligations arising from the sale of products or performance of services in the Ordinary Course o f Business. To the Knowledge of SANSAL, the accounts receivable are current and collectible net of the respective reserves established on SANSAL’s books and records in accordance with past practices consistently applied. To the Knowledge of SANSAL, there is no contest, claim or right of set -off under any Contract relating to accounts receivable with respect to the amount or validity of such accounts receivable.

 

(b)      Absence of Certain Changes . Since the date of the latest balance sheet included in the SANSAL Financial Statements, SANSAL has been operated, in the ordinary course and consistent with past practice and, in any event, there has not been: (i) any adverse change in the business, condition (financial or otherwise), operations, results of operations or prospects of SANSAL, which could reasonably be expected to have a Material Adverse Effect on SANSAL; (ii) any loss or, to the Knowledge of SANSAL, threatened or contemplated loss, of business of any customers or suppliers of SANSAL which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect on SANSAL; (iii) any loss, damage, condemnation or destruction to any of the properties of SANSAL (whether or not covered by insurance); (iv) any borrowings by SANSAL other than trade payables arising in the ordinary course of the business and consistent with past practice; or (v) any sale, transfer or other disposition of any of the assets other than in the ordinary course of the business and consistent with past practice.

 

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(c)       Tax Returns . SANSAL has filed all Tax Returns required to be filed (if any) by or on behalf of SANSAL and has paid all Taxes of SANSAL required to have been paid (whether or not reflected on any Tax Return). No Governmental Authority in any jurisdiction has made a claim, assertion or threat to SANSAL that SANSAL is or may be subject to taxation by such jurisdiction; there are no Liens with respect to Taxes on SANSAL’s property or assets; and there are no Tax rulings, requests for rulings, or closing agreements relating to SANSAL for any period (or portion of a period) that would affect any period after the date hereof.

 

(d)      No Adjustments, Changes . Neither SANSAL nor any other Person on behalf of SANSAL (a) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law; or (b) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law.

 

(e)      No Disputes . There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes of SANSAL, nor is any such claim or dispute pending or contemplated. SANSAL has delivered to ARMEAU true, correct and complete copies of all Tax Returns and examination reports and statements of deficiencies assessed or asserted against or agreed to by SANSAL, if any, since its inception and any and all correspondence with respect to the foregoing.

 

Section 4.13   Internal Accounting Controls . SANSAL maintains a system of internal accounting controls sufficient to provide reasonable assurance that (a) transactions are executed in accordance with management’s general or specific authorizations; (b) transactions are recorded as necessary to permit preparation of financial statements in conformity with generally accepted accounting principles and to maintain asset accountability; (c) access to assets is permitted only in accordance with management’s general or specific authorization; and (d) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences. SANSAL has established disclosure controls and procedures for SANSAL and designed such disclosure controls and procedures to ensure that material information relating to SANSAL is made known to the officers by others within SANSAL. SANSAL’s officers have evaluated the effectiveness of the SANSAL’s controls and procedures. Since SANSAL’s Most Recent Fiscal Year End, there have been no significant changes in SANSAL’s internal controls or, to the Knowledge of SANSAL, in other factors that could significantly affect SANSAL’s internal controls.

 

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Section 4.14   Labor Matters .

 

(a)     There are no collective bargaining or other labor union agreements to which SANSAL is a party or by which it is bound. No material labor dispute exists or, to the Knowledge of SANSAL and the Members, is imminent with respect to any of the employees of SANSAL.

 

(b)     SANSAL is in full compliance with all Laws regarding employment, wages, hours, benefits, equal opportunity, collective bargaining, the payment of Social Security and other taxes, and occupational safety and health. SANSAL is not liable for the payment of any compensation, damages, taxes, fines, penalties or other amounts, however designated, for failure to comply with any of the foregoing Laws.

 

(c)     No manager, officer or employee of SANSAL is a party to, or is otherwise bound by, any Contract (including any confidentiality, non-competition or proprietary rights agreement) with any other Person that in any way adversely affects or will materially affect (i) the performance of his or her duties as a manager, officer or employee of SANSAL; or (ii) the ability of SANSAL to conduct its business. Each employee of SANSAL is employed on an at-will basis and the SANSAL does not have any Contract with any of its employees which would interfere with its ability to discharge its employees.

 

Section 4.15   Employee Benefits .

 

(a)    SANSAL does not, and since its inception never has, maintained or contributed to any bonus, pension, profit sharing, deferred compensation, incentive compensation, stock ownership, stock purchase, stock option, phantom stock, retirement, vacation, severance, disability, death benefit, hospitalization, medical or other plan, arrangement or understanding (whether or not legally binding) providing benefits to any current or former employee, officer or director of SANSAL. There are not any employment, consulting, indemnification, severance or termination agreements or arrangements between SANSAL and any current or former employee, officer or director of SANSAL, nor does SANSAL have any general severance plan or policy.

 

(b)     SANSAL does not, and since its inception never has, maintained or contributed to any “ employee pension benefit plans ” (as defined in Section 3(2) of ERISA), “ employee welfare benefit plans ” (as defined in Section 3(1) of ERISA) or any other benefit plan for the benefit of any current or former employees, consultants, officers or directors of SANSAL.

 

(c)     Neither the consummation of the transactions contemplated hereby alone, nor in combination with another event, with respect to each manager, officer, employee and consultant of SANSAL, will result in (i) any payment (including, without limitation, severance, unemployment compensation or bonus payments) becoming due from SANSAL; (ii) any increase in the amount of compensation or benefits payable to any such individual; or (iii) any acceleration of the vesting or timing of payment of compensation payable to any such individual. No arrangement or other Contract of SANSAL provides benefits or payments contingent upon, triggered by, or increased as a result of a change in the ownership or effective control of SANSAL.

 

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Section 4.16   Title to Assets . SANSAL has sufficient title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which SANSAL has leasehold interests, are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of SANSAL to conduct business as currently conducted.

 

Section 4.17   Intellectual Property . Section 4.17 of the SANSAL Disclosure Schedule sets forth a true and correct list of Intellectual Property used by SANSAL in its business as presently conducted, which constitutes all of the Intellectual Property needed by SANSAL to operate its business as presently conducted. SANSAL is the sole and exclusive owner of or has a license or other right to sue the Intellectual Property, free and clear of any Liens and, to the Knowledge of SANSAL, any infringing or diluting uses thereof by third parties. SANSAL has neither abandoned nor granted any license, permit or other consent or authorization to any third party to use any of the Intellectual Property None of the Intellectual Property is subject to any outstanding order, decree, judgment, stipulation, injunction or restriction or agreement restricting the scope or use thereof. To the Knowledge of SANSAL, none of the Intellectual Property infringes on any trademarks, Internet domain names, copyrights or any other intellectual property rights of any kind of any third party.

 

Section 4.18   Environmental Laws . SANSAL (a) is in compliance in all material respects with all Environmental Laws; (b) has received all Licenses or other approvals required of it under applicable Environmental Laws to conduct its business; and (c) is in compliance with all terms and conditions of any such License or approval where, in each of the foregoing clauses (a), (b) and (c), the failure to so comply could be reasonably expected to have, individually or in the aggregate, a Material Adverse Effect on SANSAL. The term “ Environmental Laws ” means all federal, state, local or foreign laws relating to pollution or protection of human health or the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata), including, without limitation, laws relating to emissions, discharges, releases or threatened releases of chemicals, pollutants, contaminants, or toxic or hazardous substances or wastes (collectively, “ Hazardous Materials ”) into the environment, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport or handling of Hazardous Materials, as well as all authorizations, codes, decrees, demands or demand letters, injunctions, judgments, Licenses, notices or notice letters, Orders, permits, plans or regulations issued, entered, promulgated or approved thereunder.

 

Section 4.19   Transactions with Affiliates and Employees . Except as set forth in the SANSAL Financial Statements, no member, manager, officer or employee of SANSAL or any Affiliate of any such Person, has or has had, either directly or indirectly, an interest in any transaction with SANSAL (other than for services as managers, directors, officers and employees), including any Contract or other arrangement providing for the furnishing of services to or by, providing for rental of real or personal property to or from, or otherwise requiring payments to or from any such Person or, to the Knowledge of SANSAL, any entity in which any such Person has an interest or is a director, manager, officer, trustee or partner.

 

Section 4.20   Liabilities . SANSAL has no Liability (and there is no Action pending, or to the Knowledge of SANSAL, threatened against SANSAL that could reasonably be expected to give rise to any Liability). SANSAL is not a guarantor nor is it otherwise liable for any Liability or obligation (including Indebtedness) of any other Person.

 

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Section 4.21  Absence of Certain Changes or Events . Since the SANSAL Most Recent Fiscal Year End (a) SANSAL has conducted its business only in Ordinary Course of Business; and (b) there has not been any change in the assets, Liabilities, financial condition or operating results of SANSAL since, except changes in the Ordinary Course of Business that have not caused, in the aggregate, a Material Adverse Effect on SANSAL. SANSAL has not taken any steps to seek protection pursuant to any Law or statute relating to bankruptcy, insolvency, reorganization, receivership, liquidation or winding up, nor does SANSAL have any Knowledge or reason to believe that any of SANSAL’s creditors intend to initiate involuntary bankruptcy proceedings or any actual knowledge of any fact which would reasonably lead a creditor to do so.

 

ARTICLE V

REPRESENTATIONS AND WARRANTIES OF ARMEAU

 

ARMEAU hereby represents and warrant to SANSAL and the Members, subject to the exceptions and qualifications specifically set forth or disclosed in writing in the SEC Reports, as follows:

 

Section 5.1    Organization and Qualification . ARMEAU is a corporation duly organized, validly existing and in good standing under the Laws of the jurisdiction of its incorporation, has all requisite corporate authority and power, Licenses, authorizations, consents and approvals to carry on its business as presently conducted and to own, hold and operate its properties and assets as now owned, held and operated by it, and is duly qualified to do business and in good standing in each jurisdiction in which the failure to be so qualified would not reasonably be expected, individually or in the aggregate, to have a Material Adverse Effect on ARMEAU. The ARMEAU Shares are presently quoted on the Principal Market. and ARMEAU is not subject to any notice that it no longer qualified for such quotation or that it has received any notice from the SEC that it has or will commence, institute or bring a proceeding pursuant to Section 12(j) of the Exchange Act.

 

Section 5.2     Authority . ARMEAU has all requisite authority and power, Licenses, authorizations, consents and approvals to enter into and deliver this Agreement and any of the other Transaction Documents to which ARMEAU is a party and any other certificate, agreement, document or instrument to be executed and delivered by ARMEAU in connection with the transactions contemplated hereby and thereby and to perform their respective obligations hereunder and thereunder and to consummate the transactions contemplated hereby and thereby. The execution and delivery of this Agreement and the other Transaction Documents by ARMEAU and the performance by ARMEAU of its respective obligations hereunder and thereunder and the consummation by ARMEAU of the transactions contemplated hereby and thereby have been duly authorized by all necessary action on the part of ARMEAU. ARMEAU is not required to give any notice to, make any filing with, or obtain any authorization, consent or approval of any Person or Governmental Authority in order for the Parties to execute, deliver or perform this Agreement or the transactions contemplated hereby. This Agreement has been, and each of the Transaction Documents to which ARMEAU is a party will be, duly and validly authorized and approved, executed and delivered by ARMEAU.

 

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Section 5.3     Binding Obligations . Assuming this Agreement and the Transaction Documents have been duly and validly authorized, executed and delivered by the parties hereto and thereto other than ARMEAU, this Agreement and each of the Transaction Documents to which ARMEAU is a party are duly authorized, executed and delivered by ARMEAU and constitutes the legal, valid and binding obligations of ARMEAU enforceable against ARMEAU in accordance with their respective terms, except as such enforcement is limited by general equitable principles, or by bankruptcy, insolvency and other similar Laws affecting the enforcement of creditors rights generally.

 

Section 5.4    No Conflicts . Neither the execution nor the delivery by ARMEAU of this Agreement or any Transaction Document to which ARMEAU is a party, nor the consummation or performance by ARMEAU of the transactions contemplated hereby or thereby will, directly or indirectly, contravene, conflict with, or result in (a) a violation of any provision of ARMEAU Organizational Documents; (b) a violation of any Law, Order, charge or other restriction or decree of any Governmental Authority or any rule or regulation of the Principal Market applicable to ARMEAU, or by which ARMEAU or any of its respective assets and properties are bound or affected; (c) a violation of, any breach of, or constitute a default (or an event that with notice or lapse of time or both would become a default) under, impair the rights of ARMEAU under, or alter the obligations of any Person under, or create in any Person the right to terminate, amend, accelerate or cancel, or require any notice, report or other filing (whether with a Governmental Authority or any other Person) pursuant to, or result in the creation of a Lien on any of the assets or properties of ARMEAU under, any note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which ARMEAU is a party or by which ARMEAU or any of its respective assets and properties are bound or affected; or (d) a violation of, the terms or requirements of, or give any Governmental Authority the right to revoke, withdraw, suspend, cancel, terminate or modify, any Licenses, permits, authorizations, approvals, franchises or other rights held by ARMEAU or that otherwise relate to the business of, or any of the properties or assets owned or used by, ARMEAU, except, in the case of clauses (b), (c) or (d), for any such contraventions, conflicts, violations, or other occurrences as could not reasonably be expected to have a Material Adverse Effect on ARMEAU.

 

Section 5.5     Subsidiaries . Except as set forth in the SEC Reports, ARMEAU does not own, directly or indirectly, any equity or other ownership interest in any corporation, partnership, joint venture or other entity or enterprise. There are no Contracts or other obligations (contingent or otherwise) of ARMEAU to retire, repurchase, redeem or otherwise acquire any outstanding shares of capital stock of, or other ownership interests in, any other Person or to provide funds to or make any investment (in the form of a loan, capital contribution or otherwise) in any other Person.

 

Section 5.6    Organizational Documents . ARMEAU has delivered or made available to SANSAL and the Members a true and correct copy of its Articles of Incorporation, Bylaws and any other organizational documents, each as amended, and each such instrument is in full force and effect (the “ ARMEAU Organizational Documents ”). ARMEAU is not in violation of any of the provisions of the ARMEAU Organizational Documents. The minute books (containing the records or meetings of the shareholders, the board of directors and any committees of the board of directors), the stock certificate books, and the stock record books of ARMEAU, each as provided or made available to the SANSAL, are correct and complete.

 

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Section 5.7     Capitalization .

 

(a)      The authorized and outstanding capitalization of ARMEAU is as set forth in the SEC Reports. Except as set forth in the SEC Reports, no shares of capital stock or other voting securities of ARMEAU were issued, reserved for issuance or outstanding. All outstanding shares of the capital stock of ARMEAU are, and all such shares that may be issued prior to the Closing Date will be when issued, duly authorized, validly issued, fully paid and nonassessable, have been issued in accordance with all applicable Laws, including, but not limited to, the Securities Act, and not subject to or issued in violation of any purchase option, call option, right of first refusal, preemptive right, subscription right or any similar right under any provision of the Laws of the jurisdiction of ARMEAU’s organization, the ARMEAU Organizational Documents or any Contract to which ARMEAU is a party or otherwise bound. Except as set forth in the ARMEAU Reports, there are no any bonds, debentures, notes or other Indebtedness of ARMEAU having the right to vote (or convertible into, or exchangeable for, securities having the right to vote) on any matters on which holders of shares of common stock of may vote. Except as set forth in the SEC Reports, there are no options, warrants, rights, convertible or exchangeable securities, “phantom” stock rights, stock appreciation rights, stock-based performance units, commitments, Contracts, arrangements or undertakings of any kind to which ARMEAU is a party or by which it is bound (i) obligating ARMEAU to issue, deliver or sell, or cause to be issued, delivered or sold, additional shares of capital stock or other equity interests in, or any security convertible or exercisable for or exchangeable into any capital stock of or other equity interest in, ARMEAU; (ii) obligating ARMEAU to issue, grant, extend or enter into any such option, warrant, call, right, security, commitment, Contract, arrangement or undertaking; or (iii) that give any Person the right to receive any economic benefit or right similar to or derived from the economic benefits and rights occurring to holders of the capital stock of ARMEAU. Except as set forth in the SEC Reports, there are no outstanding Contracts or obligations of ARMEAU to repurchase, redeem or otherwise acquire any shares of capital stock of ARMEAU. Except as set forth in the SEC Reports, there are no registration rights, proxies, voting trust agreements or other agreements or understandings with respect to any class or series of any capital stock or other security of ARMEAU. The shareholder list provided to the SANSAL and the Members is a current shareholder list generated by its stock transfer agent, and such list accurately reflects all of the issued and outstanding shares of the ARMEAU Shares.

 

(b)     The issuance of the ARMEAU Shares to the Members has been duly authorized and, upon issuance to the Members of certificates therefor in accordance with the terms of this Agreement, the ARMEAU Shares will have been duly and validly issued, fully paid and nonassessable, have the rights, preferences and privileges specified, will be free of preemptive rights and will be free and clear of all Liens and restrictions, other than Liens created by the Members and restrictions on transfer imposed by this Agreement and the Securities Act.

 

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Section 5.8    Compliance with Laws . The business and operations of ARMEAU have been and are being conducted in accordance with all applicable Laws and Orders. ARMEAU is not conflict with, or in default or violation of and, to the Knowledge of ARMEAU, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of or default under, any (a) Law, rule, regulation, judgment or Order; or (b) note, bond, mortgage, indenture, Contract, License, permit, franchise or other instrument or obligation to which ARMEAU is a party or by which ARMEAU or any of its respective assets and properties are bound or affected. There is no agreement, judgment or Order binding upon ARMEAU which has, or could reasonably be expected to have, the effect of prohibiting or materially impairing any business practice of ARMEAU or the conduct of business by ARMEAU as currently conducted. ARMEAU has filed all forms, reports and documents required to be filed with any Governmental Authority and ARMEAU has made available such forms, reports and documents to SANSAL and the Members As of their respective dates, such forms, reports and documents complied in all material respects with the applicable requirements pertaining thereto and none of such forms, reports and documents contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading.

 

Section 5.9    Certain Proceedings . Except as set forth in the SEC Reports, there is no Action pending against, or to the Knowledge of ARMEAU, threatened against or affecting, ARMEAU by any Governmental Authority or other Person with respect to ARMEAU or its business or that challenges, or may have the effect of preventing, delaying, making illegal, or otherwise interfering with, any of the transactions contemplated by this Agreement. ARMEAU, or to the Knowledge of ARMEAU, has not been a party to any material litigation or, within the past two (2) years, the subject of any threat of material litigation (litigation shall be deemed “material” if the amount at issue exceeds the lesser of $2,500 per matter or $10,000 in the aggregate). ARMEAU is not in violation of and, to the Knowledge of ARMEAU, is not under investigation with respect to and has not been threatened to be charged with or given notice of any violation of, any applicable Law, rule, regulation, judgment or Order. Neither ARMEAU nor any past or present director or officer (in his or her capacity as such) or affiliate, is or has been the subject of any civil, criminal, or administrative Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Neither ARMEAU nor any past or present director or officer (in his or her capacity as such) or affiliate, have any reason to believe that they will be the subject of any civil, criminal, or administrative Action involving a claim or violation of or liability under federal or state securities laws or a claim of breach of fiduciary duty. Neither ARMEAU nor any past or present director or officer (in his or her capacity as such) or affiliate, have any reason to believe that they will be the subject of any civil, criminal, or administrative Action brought by any federal or state agency.

 

Section 5.10  No Brokers or Finders . No Person has, or as a result of the transactions contemplated herein will have, any right or valid claim against ARMEAU for any commission, fee or other compensation as a finder or broker, or in any similar capacity, based upon arrangements made by or on behalf of ARMEAU, and ARMEAU will indemnify and hold SANSAL and the Member harmless against any liability or expense arising out of, or in connection with, any such claim.

 

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Section 5.11     Contracts . Except as disclosed in the SEC Reports, there are no Contracts that are material to the business, properties, assets, condition (financial or otherwise), results of operations or prospects of ARMEAU. ARMEAU is not in violation of or in default under (nor does there exist any condition which upon the passage of time or the giving of notice would cause such a violation of or default under) any Contract to which it is a party or to which it or any of its properties or assets is subject, except for violations or defaults that would not, individually or in the aggregate, reasonably be expected to result in a Material Adverse Effect of ARMEAU.

 

Section 5.12     Tax Matters .

 

(a)            Tax Returns . ARMEAU has filed all Tax Returns required to be filed (if any) by or on behalf of ARMEAU and has paid all Taxes of ARMEAU required to have been paid (whether or not reflected on any Tax Return). No Governmental Authority in any jurisdiction has made a claim, assertion or threat to ARMEAU that ARMEAU is or may be subject to taxation by such jurisdiction; there are no Liens with respect to Taxes on ARMEAU’s property or assets; and there are no Tax rulings, requests for rulings, or closing agreements relating to ARMEAU for any period (or portion of a period) that would affect any period after the date hereof.

 

(b)           No Adjustments, Changes . Neither ARMEAU nor any other Person on behalf of ARMEAU (i) has executed or entered into a closing agreement pursuant to Section 7121 of the Code or any predecessor provision thereof or any similar provision of state, local or foreign law; or (ii) has agreed to or is required to make any adjustments pursuant to Section 481(a) of the Code or any similar provision of state, local or foreign law.

 

(c)            No Disputes . There is no pending audit, examination, investigation, dispute, proceeding or claim with respect to any Taxes of ARMEAU, nor is any such claim or dispute pending or contemplated. ARMEAU has delivered to the SANSAL true, correct and complete copies of all Tax Returns and examination reports and statements of deficiencies assessed or asserted against or agreed to by ARMEAU, if any, since its inception and any and all correspondence with respect to the foregoing.

 

(d)           No Other Arrangements . ARMEAU is not a party to any Contract or arrangement for services that would result, individually or in the aggregate, in the payment of any amount that would not be deductible by reason of Section 162(m), 280G or 404 of the Code. ARMEAU is not a “consenting corporation” within the meaning of Section 341(f) of the Code. ARMEAU does not have any “tax-exempt bond financed property” or “tax-exempt use property” within the meaning of Section 168(g) or (h), respectively of the Code. ARMEAU does not have any outstanding closing agreement, ruling request, request for consent to change a method of accounting, subpoena or request for information to or from a Governmental Authority in connection with any Tax matter. During the last two years, ARMEAU has not engaged in any exchange with a related party (within the meaning of Section 1031(f) of the Code) under which gain realized was not recognized by reason of Section 1031 of the Code. SANSAL is not a party to any reportable transaction within the meaning of Treasury Regulation Section 1.6011-4.

 

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Section 5.13      Title to Assets .           ARMEAU has sufficient title to, or valid leasehold interests in, all of its properties and assets used in the conduct of its businesses. All such assets and properties, other than assets and properties in which ARMEAU has leasehold interests, are free and clear of all Liens, except for Liens that, in the aggregate, do not and will not materially interfere with the ability of ARMEAU to conduct business as currently conducted.

 

Section 5.14      SEC Reports .

 

(a)           ARMEAU has filed all reports, schedules, forms, statements and other documents required to be filed by it with the SEC pursuant to the Exchange Act (the “ SEC Reports ”).

 

(b)           As of their respective dates, the SEC Reports complied in all material respects with the requirements of the Exchange Act and the rules and regulations of the SEC promulgated thereunder, and none of the SEC Reports, when filed, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. All material Contracts to which ARMEAU is a party or to which the property or assets of ARMEAU are subject have been filed as exhibits to or incorporated by reference in the SEC Reports and to the extent required under the Exchange Act, as applicable. The financial statements of ARMEAU included in the SEC Reports comply in all respects with applicable accounting requirements and the rules and regulations of the SEC with respect thereto as in effect at the time of filing, were prepared in accordance with GAAP applied on a consistent basis during the periods involved (except as may be indicated in the notes thereto, or, in the case of unaudited statements as permitted by Form 10-Q), and fairly present in all material respects (subject in the case of unaudited statements, to normal, recurring audit adjustments) the financial position of ARMEAU as at the dates thereof and the results of its operations and cash flows for the periods then ended. The disclosure set forth in the SEC Reports regarding ARMEAU’s business is current and complete and accurately reflects operations of ARMEAU as it exists as of the date hereof.

 

Section 5.14      Listing and Maintenance Requirements . ARMEAU is, and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with the listing and maintenance requirements for continued listing or quotation of the ARMEAU Shares on the Principal Market. The issuance of the ARMEAU Shares under this Agreement does not contravene the rules and regulations of the Principal Market and no approval by the shareholders of ARMEAU is required for ARMEAU to issue and deliver the ARMEAU Shares to the Members at Closing.

 

Section 5.15      Undisclosed Events . No event, Liability, development or circumstance has occurred or exists, or is contemplated to occur with respect to ARMEAU, or its businesses, properties, prospects, operations or financial condition, that would be required to be disclosed by ARMEAU under the Securities Act in a registration statement on Form S-1 filed with the SEC relating to an issuance and sale by ARMEAU of its common stock and which has not been publicly announced.

 

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ARTICLE VI

POST CLOSING COVENANTS

 

Section 6.1      General . In case at any time after the Closing any further action is necessary to carry out the purposes of this Agreement, each of the Parties will take such further action (including the execution and delivery of such further instruments and documents) as any other Party reasonably may request.

 

Section 6.2      Public Announcements . Within four (4) business days of the Closing Date, ARMEAU shall file with the SEC a Form 8-K, describing the material terms of the transactions contemplated hereby. The Parties shall consult with each other in issuing the Form 8-K and any press releases or otherwise making public statements or filings and other communications with the SEC or any regulatory agency or stock market or trading facility with respect to the transactions contemplated hereby and no Party shall issue any such press release or otherwise make any such public statement, filings or other communications without the prior written consent of the other Parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by Law, in which case the disclosing Party shall provide the other Parties with prior notice of no less than three (3) calendar days, of such public statement, filing or other communication and shall incorporate into such public statement, filing or other communication the reason incorporate into such public statement, filing or other communication the reasonable comments of the other Parties.

 

ARTICLE VII SURVIVAL;
INDEMNIFICATION

 

Section 7.1      Survival . All representations, warranties, covenants, and obligations in this Agreement shall survive the Closing, and for a period of one (1) year after which they shall be of no further force and effect, other than those set forth in Sections 3.1, 3.2, 3.3, 3.4, 4.1, 4,2, 4.3, 4.4, 5.1, 5.2, 5.3 and 5.4 , which shall survive indefinitely, and those related to Tax Matters set forth in Sections 4.12 and 5.12 , which shall survive until forty-five (45) days after the expiration of applicable statutes of limitations. The right to indemnification, payment of damages or other remedy based on such representations, warranties, covenants, and obligations will not be affected by any investigation conducted with respect to, or any knowledge acquired (or capable of being acquired) at any time, whether before or after the execution and delivery of this Agreement, with respect to the accuracy or inaccuracy of or compliance with, any such representation, warranty, covenant, or obligation. The waiver of any condition based on the accuracy of any representation or warranty, or on the performance of or compliance with any covenant or obligation, will not affect the right to indemnification, payment of damages, or other remedy based on such representations, warranties, covenants, and obligations.

 

Section 7.2      Indemnification .

 

(a)           From and after the execution of this Agreement, ARMEAU shall indemnify and hold harmless the SANSAL Indemnified Parties, from and against any all costs or expenses (including attorneys’ fees), judgments, fines, losses, claims, damages, liabilities and amounts paid in settlement (collectively, “ Damages ”) arising, directly or indirectly, from or in connection with:

 

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(i) any breach (or alleged breach) of any representation or warranty made by ARMEAU in this Agreement or any Transaction Document or in any certificate delivered by ARMEAU pursuant to this Agreement; or (ii) any breach (or alleged breach) by ARMEAU of any covenant or obligation of ARMEAU in this Agreement or any Transaction Document required to be performed by ARMEAU on or prior to the Closing Date or by ARMEAU after the Closing Date.

 

(b)          From and after the execution of this Agreement, SANSAL and the Members, severally and not jointly, shall indemnify and hold harmless the ARMEAU Indemnified Parties, from and against any all Damages arising, directly or indirectly, from or in connection with: (i) any breach (or alleged breach) of any representation or warranty made by SANSAL or the Member in this Agreement or any Transaction Document or in any certificate delivered by SANSAL or the Members pursuant to this Agreement; or (ii) any breach (or alleged breach) by SANSAL or the Members of any covenant or obligation of SANSAL or Members in this Agreement or any Transaction Document required to be performed by SANSAL or the Members on or prior to the Closing Date or by SANSAL or the Members after the Closing Date.

 

Section 7.3      Matters Involving Third Parties . Promptly after the assertion of any claim by a third party or occurrence of any event which may give rise to a claim for indemnification from an indemnifying party ("Indemnifying Party") under this Article VII , an indemnified party ("Indemnified Party") shall notify the Indemnitor in writing of such claim. The Indemnitor shall have the right to assume the control and defense of any such action (including, but without limitation, tax audits), provided that the Indemnitee may participate in the defense of such action subject to the Indemnitor's reasonable direction and at Indemnitee's sole cost and expense. The party contesting any such claim shall be furnished all reasonable assistance in connection therewith by the other party and be given full access to all information relevant thereto. In no event shall any such claim be settled without the Indemnitor's consent.

 

Section 7.4      Exclusive Remedy . The Parties acknowledge and agree that the indemnification provisions in this Article VII shall be the exclusive remedies of the Parties with respect to the transactions contemplated by this Agreement, other than for fraud and willful misconduct.

 

ARTICLE VIII
MISCELLANEOUS PROVISIONS

 

Section 8.1      Expenses . Except as otherwise expressly provided in this Agreement, each Party will bear its respective expenses incurred in connection with the preparation, execution, and performance of this Agreement and the transactions contemplated by this Agreement, including all fees and expenses of agents, representatives, counsel, and accountants. In the event of termination of this Agreement, the obligation of each Party to pay its own expenses will be subject to any rights of such Party arising from a breach of this Agreement by another Party.

 

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Section 8.2      Confidentiality .

 

(a)          The Parties will maintain in confidence, and will cause their respective directors, officers, employees, agents, and advisors to maintain in confidence, any written, oral, or other information obtained in confidence from another Person in connection with this Agreement or the transactions contemplated by this Agreement, unless (i) such information is already known to such Party or to others not bound by a duty of confidentiality or such information becomes publicly available through no fault of such Party; (ii) the use of such information is necessary or appropriate in making any required filing with the SEC, or obtaining any consent or approval required for the consummation of the transactions contemplated by this Agreement, or (iii) the furnishing or use of such information is required by or necessary or appropriate in connection with legal proceedings.

 

(b)           In the event that any Party is required to disclose any information of another Person pursuant to clause (ii) or (iii) of Section 8.2(a) above, the Party requested or required to make the disclosure (the “ disclosing party ”) shall provide the Person that provided such information (the “ providing party ”) with prompt notice of any such requirement so that the providing party may seek a protective Order or other appropriate remedy and/or waive compliance with the provisions of this Section 8.2 . If, in the absence of a protective Order or other remedy or the receipt of a waiver by the providing party, the disclosing party is nonetheless, in the opinion of counsel, legally compelled to disclose the information of the providing party, the disclosing party may, without liability hereunder, disclose only that portion of the providing party’s information which such counsel advises is legally required to be disclosed, provided that the disclosing party exercises its reasonable efforts to preserve the confidentiality of the providing party’s information, including, without limitation, by cooperating with the providing party to obtain an appropriate protective Order or other relief assurance that confidential treatment will be accorded the providing party’s information.

 

(c)          If the transactions contemplated by this Agreement are not consummated, each Party will return or destroy all of such written information each party has regarding the other Parties.

 

Section 8.3      Notices . All notices, demands, consents, requests, instructions and other communications to be given or delivered or permitted under or by reason of the provisions of this Agreement or in connection with the transactions contemplated hereby shall be in writing and shall be deemed to be delivered and received by the intended recipient as follows: (a) if personally delivered, on the Business Day of such delivery (as evidenced by the receipt of the personal delivery service); (b) if mailed by certified mail, return receipt requested, two (2) Business Days after being mailed; or (c) if delivered by overnight courier (with all charges having been prepaid), on the Business Day of such delivery (as evidenced by the receipt of the overnight courier service of recognized standing. If any notice, demand, consent, request, instruction or other communication cannot be delivered because of a changed address of which no notice was given (in accordance with this Section 8.3 ), or the refusal to accept same, the notice, demand, consent, request, instruction or other communication shall be deemed received on the second business day the notice is sent (as evidenced by a sworn affidavit of the sender). All such notices, demands, consents, requests, instructions and other communications will be sent to the following addresses or facsimile numbers as applicable:

 

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If to ARMEAU, to: 6610 North University Drive, Suite 200
  Tamarac, FL 33321
  Attention: President
   
If to SANSAL or the Members,  
to: 8648 Lake Davis Rd
  Pueblo, CO 81005
  Attention: Manager

 

or such other address as shall be furnished in writing by any Party in the manner for giving notices hereunder.

 

Section 8.4      Further Assurances . The Parties agree (a) to furnish upon request to each other such further information; (b) to execute and deliver to each other such other documents; and (c) to do such other acts and things, all as the other Parties may reasonably request for the purpose of carrying out the intent of this Agreement and the documents referred to in this Agreement.

 

Section 8.5      Waiver . The rights and remedies of the Parties are cumulative and not alternative. Neither the failure nor any delay by any Party in exercising any right, power, or privilege under this Agreement or the documents referred to in this Agreement will operate as a waiver of such right, power, or privilege, and no single or partial exercise of any such right, power, or privilege will preclude any other or further exercise of such right, power, or privilege or the exercise of any other right, power, or privilege. To the maximum extent permitted by applicable Law, (a) no claim or right arising out of this Agreement or the documents referred to in this Agreement can be discharged by one Party, in whole or in part, by a waiver or renunciation of the claim or right unless in writing signed by the other Parties; (b) no waiver that may be given by a Party will be applicable except in the specific instance for which it is given; and (c) no notice to or demand on one Party will be deemed to be a waiver of any obligation of such Party or of the right of the Party giving such notice or demand to take further action without notice or demand as provided in this Agreement or the documents referred to in this Agreement.

 

Section 8.6      Entire Agreement and Modification . This Agreement supersedes all prior agreements between the Parties with respect to its subject matter and constitutes (along with the documents referred to in this Agreement) a complete and exclusive statement of the terms of the agreement between the Parties with respect to its subject matter. This Agreement may not be amended except by a written agreement executed by the Party against whom the enforcement of such amendment is sought.

 

Section 8.7      Assignments, Successors, and No Third-Party Rights . No Party may assign any of its rights under this Agreement without the prior consent of the other Parties. Subject to the preceding sentence, this Agreement will apply to, be binding in all respects upon, and inure to the benefit of and be enforceable by the respective successors and permitted assigns of the Parties.

 

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Section 8.8      Severability . If any provision of this Agreement is held invalid or unenforceable by any court of competent jurisdiction, the other provisions of this Agreement will remain in full force and effect. Any provision of this Agreement held invalid or unenforceable only in part or degree will remain in full force and effect to the extent not held invalid or unenforceable.

 

Section 8.9     Section Headings . The headings of Articles and Sections in this Agreement are provided for convenience only and will not affect its construction or interpretation. All references to “ Article ” or “ Articles ” or “ Section ” or “ Sections ” refer to the corresponding Article or Articles or Section or Sections of this Agreement, unless the context indicates otherwise.

 

Section 8.10  Construction . The Parties have participated jointly in the negotiation and drafting of this Agreement. In the event an ambiguity or question of intent or interpretation arises, this Agreement shall be construed as if drafted jointly by the Parties and no presumption or burden of proof shall arise favoring or disfavoring any Party by virtue of the authorship of any of the provisions of this Agreement. Any reference to any federal, state, local, or foreign statute or Law shall be deemed also to refer to all rules and regulations promulgated thereunder, unless the context requires otherwise. Unless otherwise expressly provided, the word “including” shall mean including without limitation. The Parties intend that each representation, warranty, and covenant contained herein shall have independent significance. If any Party has breached any representation, warranty, or covenant contained herein in any respect, the fact that there exists another representation, warranty, or covenant relating to the same subject matter (regardless of the relative levels of specificity) which the Party has not breached shall not detract from or mitigate the fact that the Party is in breach of such representation, warranty, or covenant. All words used in this Agreement will be construed to be of such gender or number as the circumstances require.

 

Section 8.11   Counterparts . This Agreement may be executed in one or more counterparts, each of which will be deemed to be an original copy of this Agreement and all of which, when taken together, will be deemed to constitute one and the same agreement. In the event that any signature is delivered by facsimile transmission, electronic delivery, 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, electronic copy, or “.pdf” signature page were an original thereof.

 

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Section 8.12   Governing Law; Submission to Jurisdiction; Attorneys’ Fees . This Agreement shall be governed by and construed in accordance with the Laws of the State of Florida, without regard to conflicts of Laws principles. Each of the Parties submits to the jurisdiction of any state or federal court sitting in the State of Florida, Miami-Dade County, in any action or proceeding arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court. Each of the Parties waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Party with respect thereto. Any Party may make service on any other Party by sending or delivering a copy of the process to the Party to be served at the address and in the manner provided for the giving of notices in Section 8.3 above. Nothing in this Section 8.3 , however, shall affect the right of any Party to serve legal process in any other manner permitted by Law or at equity. Each Party agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by Law or at equity. In any action brought to interpret to enforce this Agreement, the prevailing Party or Parties shall be entitled to recover all cost related thereto from the non-prevailing Party or Parties, including attorneys’ fees and costs at both the trial and appellate levels.

 

Section 8.13 Waiver of Jury Trial . EACH OF THE PARTIES HEREBY IRREVOCABLY WANES ANY AND ALL RIGHT TO TRIAL BY JURY IN ANY LEGAL PROCEEDING ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.

 

[ SIGNATURE PAGESFOLLOW ]

 

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IN WITNESS WHEREOF , the undersigned have caused this Agreement to be executed as of the date first above written.

     
  ARMEAU :
   
  ARMEAU BRANDS, INC.
     
  By: /s/ Jaitegh Singh
    Jaitegh Singh, President
     
  SANSAL:
   
  271 LAKE DAVIS HOLDINGS, LLC D/B/A SANSAL
     
  By: /s/ Alexander Salgado
    Alexander Salgado, Manager
     
  THE MEMBERS:
     
  /s/ Alexander M. Salgado
  Alexander M. Salgado
     
  /s/ Erduis Sanabria
  Erduis Sanabria
   
  YCA HOLDINGS, LLC
     
  By: /s/ Yeylys Cabrera
    Name: Yeylys Cabrera
    Title: CEO
   
  YM LIMITED INVESTMENTS LLC
     
  By: /s/ Yenier Mirabales
    Name:Yenier Mirabales
    Title: Manager

 

[ SIGNATURES CONTINUE ON FOLLOWING PAGE ]

 

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  VELIZ INVESTMENTS GROUP, LLC
     
  By: /s/ Victor Veliz
    Name: Victor Veliz
    Title: Manager
     
  /s/ Edi Israelov
  Edi Israelov
   
  /s/ Alejandro Osorio
  Alejandro Osorio
   
  /s/ Etniel Sanabria
  Etniel Sanabria
   
  /s/ Henry Yanez
  Henry Yanez
   
  /s/ Joseph Michael Urciuoli
  Joseph Michael Urciuoli
   
  CFO VENTURES, INC.
     
  By: /s/ Oscar Ferreira
    Name: Oscar Ferreira
    Title: President

   
  AL UNLIMITED INVESTMENT, INC.
     
  By: /s/ Alexander Polanco
    Name: Alexander Polanco
    Title: President
   
  MENENDEZ INVESTMENTS, LLC
     
  By: /s/ Rosa Menendez
    Name: Rosa Menendez
    Title: President

  

[ SIGNATURES CONTINUE ON FOLLOWING PAGE ]

 

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  CAO INVESTMENT GROUP, LLC
     
  By: /s/ Erik Cao
    Name: Erik Cao
    Title: Manager
     
  /s/ Faullin Marshall Paletsky
  Faullin Marshall Paletsky
   
  /s/ Brenna Leigh Steinberg
  Brenna Leigh Steinberg
   
  7 MILE INVESTMENTS, LLC
     
  By: /s/ Francisco Valcarce
    Name: Francisco Valcarce
    Title: President
   
  R & J QUALITY INVESTMENTS, LLC
     
  By:  /s/
    Name:
    Title:
   
  RUMAR INVESTMENTS, LLC
     
  By: /s/ Maricela Nicolas
    Name: Maricela Nicolas
    Title: President/Manager
     
  /s/ Jesus Muley Pratts
  Jesus Muley Pratts
   
  NEW DAYS INVESTMENTS LLC
     
  By: /s/ Miguel Lopez
    Name: Miguel Lopez
    Title: Manager

 

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  DIAZ & ASSOCIATES INVESTMENTS LLC
     
  By: /s/ Elizabeth Diaz
    Name: Elizabeth Diaz
    Title: Manager
   
  e5 HOLDINGS I, LLC
     
  By: /s/ Manuel Enriquez
    Name: Manuel Enriquez
    Title: Manager

 

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EXHIBIT A

 

The Members
         
Name of Member   SANSAL Interest (%)        Number of Armeau Shares
         
Alexander M. Salgado   12.1375   946,725
         
Erduis Sanabria   12.1375   946,725
         
YCA Holdings, LLC   5.0   390,000
         
YM Limited Investments LLC   2.0   156,000
         
Veliz Investments Group, LLC   7.5   585,000
         
Edi Israelov   7.0   546,000
         
Alejandro Osorio   0.375   29,250
         
Etniel Sanabria   5.05   393,900
         
Henry Yanez   0.875   68,250
         
Joseph Michael Urciuoli   0.325   25,350
         
CFO Ventures, Inc.   5.0   390,000
         
AL Unlimited Investment, Inc.   5.0   390,000
         
Menendez Investments, LLC   1.0   78,000
         
CAO Investment Group, LLC   4.0   312,000
         
Faullin Marshall Paletsky and Brenna Leigh Steinberg JT   3.5   273,000
         
7 Mile Investments, LLC   10.0   780,000
         
R&J Quality Investments, LLC   2.5   195,000
         
Rumar Investments, LLC   4.0   312,000
         
Jesus Muley Pratts   0.1   7,800

 

33  

 

 

Name of Member   SANSAL Interest (%)   Number of Armeau Shares
         
New Days Investments LLC   3.0   234,000
         
Diaz & Associates Investments, LLC   4.5   351,000
         
e5 Holdings I, LLC   5.0   390,000

 

34  

 

Exhibit 10.2

 

ARMEAU BRANDS INC.

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EXECUTIVE EMPLOYMENT AGREEMENT (the “ Agreement ”) is made as of September 27, 2017 (the “ Effective Date ”), between ARMEAU BRANDS INC. , a Nevada corporation, (the “ Company ”) and ALEXANDER M. SALGADO , an individual (the “ Executive ”).

 

RECITAL

 

WHEREAS , the Company desires to employ the Executive and the Executive desires to be employed by the Company on the terms contained in this Agreement.

 

AGREEMENT

 

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

 

1.          Position and Duties . The Executive shall serve as Chief Executive Officer of the Company reporting to the Company’s Board of Directors (the “ Board ”). The Executive shall perform those services customary to that office and such other lawful duties that may be reasonably assigned to him from time to time by the Board, provided those duties are consistent with the Executive’s position and authority. The Executive further agrees to use his best efforts to promote the interests of the Company and to devote his full business time and energies to the business and affairs of the Company. The Board may decide in consultations with the Executive and subject to the Executive’s agreement, to assign the Executive throughout the term to another senior position within the Company that furthers the overall interests of the Company. Upon such a change, if it occurs, the rights and obligations as stated under this agreement will remain in full force and effect, notwithstanding the change in position and duties for the Executive.

 

2.          Term . The Company shall continue to employ the Executive and the Executive shall continue to serve the Company, on the terms and conditions set forth herein, for the period commencing on the Effective Date and expiring on the third anniversary of the Effective Date, unless sooner terminated as hereinafter set forth; provided, however, that the Term of this Agreement shall automatically be extended so that at all times, the balance of the Term shall not be less than three (3) years (as so extended, the “ Term ”).

 

3.          Compensation and Related Matters .

 

(a)          Base Salary . The Executive’s annual base salary shall be one hundred fifty thousand dollars ($150,000) from the Effective Date through April 1, 2018, increasing thereafter to two hundred fifty thousand ($250,000) dollars (together with any subsequent increases thereto as hereinafter provided, the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll procedures in effect from time to time. The Base Salary may be increased by the Board or its compensation committee (the “ Committee ”), if any, from time to time during the Term, but shall be reviewed by the Board or the Committee, if any, at least annually.

 

 

 

 

(b)           Annual Bonus . During the Term, the Executive may be paid a performance bonus to the extent earned, based on criteria established by the Board or the Committee from time to time during the Term (the “ Bonus ”). The amount of any Bonus and the performance criteria for earning the Bonus, if any for any subsequent fiscal year shall be determined by the Board or the Committee, in good faith, no later than sixty (60) days after the commencement of the relevant fiscal year. The Executive’s Bonus for a bonus period shall be determined by the Board or the Committee after the end of the applicable bonus period and be paid to the Executive in the year following the year to which the Bonus relates when annual bonuses for that year are paid to other senior executives of the Company generally.

 

(c)           Incentive Plan . The Executive shall be entitled to participate in all bonus plans, policies, practices and programs adopted by the Company and applicable generally to other senior executives of the Company , in accordance with the terms of such plans (if any).

 

(d)           Retention Incentive . In addition to the compensation set forth elsewhere in this Section 3 , and as additional consideration for the Executive to enter into this Agreement, the Executive shall be granted a stock option (the “ Option ”) under the Company’s 2017 Stock Incentive Plan (the “ 2017 Plan ”) to purchase 166,667 shares of the Company’s common stock (“ Shares ”). The Option shall be (i) exercisable at an exercise price of $.050 per Share; (ii) be fully vested on the Effective Date; and (iii) exercisable for ten (10) years from the Effective Date, subject to the Executive’s continued employment with the Company and the early Option termination provisions set forth in the 2017 Plan.

 

(e)            Business Expenses . The Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by him in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers.

 

(f)            Directors’ and Officers’ Liability Insurance . Promptly following the Effective Date, the Company shall procure Directors’ and Officers’ Liability Insurance in an amount not less than $1,000,000, which shall contain customary coverage for the Executive. The Company shall maintain such coverage in effect during the Term as long as it can be secured at commercially reasonable cost.

 

(g)           Other Benefits . The Executive shall be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company, including, without limitation, the Company’s group medical, dental, vision, disability, life insurance, and flexible-spending account plans.

 

(h)           Vacation . The Executive shall be entitled to accrue paid vacation days in accordance with the Company’s vacation policy for senior executives, as established from time to time. The Executive shall also be entitled to all paid holidays given by the Company to its senior executives.

 

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(i)          Withholding . All amounts payable to the Executive under this Section 3 shall be subject to all required federal, state and local withholding, payroll and insurance taxes.

 

(j)           Board Discretion . Nothing in this Section 3 shall obligate the Board to implement any particular benefit plan or prevent the Board from amending or terminating any benefit plan implemented.

 

4.         Termination . The Executive’s employment may be terminated and this Agreement terminated under the following circumstances:

 

(a)          Death . The Executive’s employment hereunder shall terminate upon his death.

 

(b)         Disability . The Company may terminate the Executive’s employment if the Executive becomes subject to a Disability. For purposes of this Agreement, “ Disability ” means the Executive is unable to perform the essential functions of his position as Founder and Chairman Emeritus, with or without a reasonable accommodation, for a period of ninety (90) consecutive calendar days or one hundred eighty (180) non-consecutive calendar days within any rolling twelve (12) month period.

 

(c)          Termination by Company for Cause . The Company may terminate the Executive’s employment for Cause. For purposes of this Agreement, “ Cause ” means the Executive’s (i) commission of an act of material dishonesty by him in connection with his responsibilities as an officer, director or employee of the Company; (ii) willful failure to follow the directions communicated to him by the Board that are legal and consistent with his position and duties as Founder and Chairman Emeritus; (iii) breach of a fiduciary duty owed by the Executive to the Company or its shareholders; (iv) willful misconduct or gross misconduct which is materially detrimental to the Company; (v) conviction, plea of nolo contendere , guilty plea, or confession during the Term; to any felony or any crime based upon an act of fraud, misappropriation or embezzlement; or (vi) a material breach of this Agreement; provided, that, the bases set forth in (i), (ii), (iii), (iv) and (vi), to the extent curable, shall not constitute Cause unless the Company has provided the Executive with written notice of the acts or omissions giving rise to a termination of his employment for Cause and the Executive fails to correct the act or omission within thirty (30) days after receiving the Company’s notice (the “ Executive Cure Period ”).

 

(d)          Termination by the Company Without Cause . A termination of the Executive’s employment by the Company for any reason, except death, disability or Cause, will be deemed to be a termination “ Without Cause .”

 

(e)          Termination by the Executive for Good Reason . The Executive may terminate his employment for “ Good Reason .” For purposes of this Agreement, “ Good Reason ” means (i) without the Executive’s written consent, a material reduction of his duties, positions or responsibilities; (ii) without the Executive’s written consent, a significant reduction by the Company in Base Salary as in effect immediately prior to such reduction; or (iii) the Company’s material breach of this Agreement; provided that, within ninety (90) days of the Company’s act or omission giving rise to a resignation for Good Reason, the Executive notifies the Company in writing of the act or omission, the Company fails to correct the act or omission within thirty (30) days after receiving the Executive’s written notice (the “ Company Cure Period ”) and the Executive actually terminates his employment within sixty (60) days after the date the Company receives the Executive’s notice.

 

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(f)          Termination by the Executive Without Good Reason . A resignation of the Executive’s employment for any reason other than Good Reason will be deemed to be a resignation “ Without Good Reason .” The Executive may terminate his employment at any time Without Good Reason, upon thirty (30) days prior written notice to the Company, provided however, the Company may accelerate the date of such termination to any date following the receipt of such written notice.

 

(g)          Termination Date . The “ Termination Date ” means (i) if the Executive’s employment is terminated by his death under Section 4(a) , the date of his death; (ii) if the Executive’s employment is terminated on account of his Disability under Section 4(b) , the date on which the Company provides the Executive a written termination notice; (iii) if the Company terminates the Executive’s employment for Cause under Section 4(c) , the date on which the Company provides the Executive a written termination notice, unless the circumstances giving rise to the termination are subject to the Executive Cure Period, in which case the date on which the Company provides the Executive a written termination notice following the end of the Executive Cure Period; (iv) if the Company terminates the Executive’s employment Without Cause under Section 4(d) , thirty (30) days after the date on which the Company provides the Executive a written termination notice; (v) if the Executive resigns his employment for Good Reason under Section 4(e) , the date on which the Executive provides the Company a written termination notice following the end of the Company Cure Period; or (vii) if the Executive resigns his employment Without Good Reason under Section 4(f) , thirty (30) days after the date on which the Executive provides the Company a written termination notice.

 

5.        Compensation Upon Termination .

 

(a)          Termination by the Company for Cause, upon the Executive’s Death or Disability or by the Executive Without Good Reason . If the Executive’s employment with the Company is terminated pursuant to Sections 4(a), (b), (c) or (f) , the Company shall pay or provide to the Executive (or to his authorized representative or estate) (i) any earned but unpaid Base Salary as of the Termination Date; (ii) unpaid expense reimbursements as of the Termination Date; (iii) any earned but unpaid Bonus as of the Termination Date; and (iv) any vested benefits the Executive may have under any employee benefit plan of the Company (the “ Accrued Obligations ”), on or before the time required by law but in no event more than thirty (30) days after the Termination Date

 

(b)          Termination by the Company Without Cause or by the Executive With Good Reason . If the Executive’s employment is terminated by the Company Without Cause or the Executive terminates his employment for Good Reason, then the Executive shall be entitled to the following:

 

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(i)       The Company shall pay the Executive the Accrued Obligations earned through the Termination Date (payable at the time provided for in Section 5(a) ).

 

(ii)       The Company shall pay the Executive his Base Salary (less applicable withholding taxes) for the balance of the Term, in accordance with the Company’s normal payroll practices in effect on the Termination Date.

 

(iii)       One hundred percent (100%) of the greater of the Executive’s Bonus for the year of termination or the Bonus actually earned for the year prior to the year of termination, if any; which amount will be paid within sixty (60) days of the later of the Termination Date or the calculation of such Bonus.

 

(iv)       Subject to the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), the Company shall reimburse the Executive the monthly premium payable to continue his and his eligible dependents’ participation in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan) which covers the Executive (and the Executive’s eligible dependents) for the period that the Executive is eligible and remains eligible for COBRA coverage, provided, however, that in the event that the Executive obtains other employment that offers group health benefits, such continuation of coverage by the Company shall immediately cease.

 

6.         Release; Payment . The payments and benefits provided for in Sections 5(b) shall be conditioned on the Executive executing and delivering to the Company a full release of all claims that the Executive may have against the Company, and its directors, officers, employees and agents in a form reasonably acceptable to the Company (the “ Release ”). The Release must become enforceable and irrevocable on or before sixtieth (60 th ) day following the Termination Date. If the Executive fails to execute and deliver the Release, he shall be entitled to the Accrued Obligations only and no other benefits under Section 5(b) .

 

7.         Section 409A Compliance .

 

(a)          All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

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(b)          To the extent that any of the payments or benefits provided for in Section 5(b) are deemed to constitute non-qualified deferred compensation benefits subject to Section 409A of the United States Internal Revenue Code (the “ Code ”), the following interpretations apply to Section 5 : Any termination of the Executive’s employment triggering payment of benefits under Section 5(b) must constitute a “ separation from service ” under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) before distribution of such benefits can commence. To the extent that the termination of the Executive’s employment does not constitute a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) (as the result of further services that are reasonably anticipated to be provided by the Executive to the Company or any of its parents, subsidiaries or affiliates at the time the Executive’s employment terminates), any benefits payable under Section 5 that constitute deferred compensation under Section 409A of the Code shall be delayed until after the date of a subsequent event constituting a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h). For purposes of clarification, this Section 7(b) shall not cause any forfeiture of benefits on the Executive’s part, but shall only act as a delay until such time as a “ separation from service ” occurs. Further, if the Executive is a “ specified employee ” (as that term is used in Section 409A of the Code and regulations and other guidance issued thereunder) on the date his separation from service becomes effective, any benefits payable under Section 5 that constitute non-qualified deferred compensation under Section 409A of the Code shall be delayed until the earlier of (i) the business day following the six-month anniversary of the date his separation from service becomes effective, and (ii) the date of the Executive’s death, but only to the extent necessary to avoid such penalties under Section 409A of the Code. On the earlier of (i) the business day following the six-month anniversary of the date his separation from service becomes effective, and (ii) the Executive’s death, the Company shall pay the Executive in a lump sum the aggregate value of the non-qualified deferred compensation that the Company otherwise would have paid the Executive prior to that date under Section 5(b) of this Agreement. It is intended that each installment of the payments and benefits provided under Section 5(b) of this Agreement shall be treated as a separate “ payment ” for purposes of Section 409A of the Code. Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A of the Code.

 

8.         Change in Control .

 

(a)          For the purposes of this Agreement, a “ Change of Control ” shall be deemed to have taken place if (i) any person, including a “ group ” as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the owner or beneficial owner of Company securities, after the date of this Agreement, having twenty-five percent (25%) or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company, or open market purchases approved by the Board, as long as the majority of the Board approving the purchases is the majority at the time the purchases are made); or (ii) the persons who were directors of the Company before such transactions shall cease to constitute a majority of the Board of the Company, or any successor to the Company, as the direct or indirect result of or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transaction. For Change of Control purposes, if the company is a private entity, then the trigger on change of control would be the ownership, beneficially or otherwise, of a majority of the voting securities.

 

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(b)          The Company and Executive hereby agree that, if Executive is affiliated with the Company on the date on which a Change of Control occurs (the “ Change of Control Date ”), the Company will continue to retain Executive and Executive will remain affiliated with the Company for the period commencing on the Change of Control Date and ending on the third (3 rd ) anniversary of such date, to exercise such authority and perform such executive duties as are commensurate with the authority being exercised and duties being performed by the Executive immediately prior to the Change of Control Date. If after the Change of Control Executive is requested, and, in his sole and absolute discretion, consents to change his principal business location, the Company will reimburse the Executive for his reasonable relocation expenses, including, without limitation, moving expenses, temporary living and travel expenses for a reasonable time while arranging to move his residence to the changed location, closing costs, if any, associated with the sale of his existing residence and the purchase of a replacement residence at the changed location, plus an additional amount representing a gross-up of any state or federal taxes payable by Executive as a result of any such reimbursement. If the Executive shall not consent to change his business location, the Executive may continue to provide the services required of him hereunder from his then residence and/or business address, and the Company shall continue to maintain an office for Executive at that location commensurate with the Company’s office prior to the Change of Control Date.

 

(c)          During the remaining one year period of the Term commencing upon the second anniversary of the Change of Control Date, the Company) will (i) continue to pay Executive a salary at not less than the level applicable to Executive on the Change of Control Date; (ii) pay Executive Bonuses in amounts not less in amount than those paid during the twelve month period preceding the Change of Control Date; and (iii) continue employee benefit programs as to Executive at levels in effect on the Change of Control Date (but subject to such reductions as may be required to maintain such plans in compliance with applicable federal law regulating employee benefit programs).

 

(d)          If during the remaining term hereof after the Change of Control Date (i) Executive’s employment is terminated by the Company; or (ii) there shall have occurred a material reduction in Executive’s compensation or employment related benefits, or a material change in Executive’s status, working conditions, management responsibilities or titles, and Executive voluntarily terminates his relationship with the Company within sixty (60) days of an such occurrence, or the last in a series of occurrences, then Executive shall be entitled to receive, in addition to the compensation provided for in Section 5(b) , and subject to the provisions of subsections (e) and (f) below, a lump sum payment equal to two hundred ninety-nine percent (299%) of Executive’s “ base period income ” as determined under (e) below, plus an additional amount representing a gross-up of any state or federal taxes payable by Executive as a result of any such payment. Such amount will be paid to Executive within thirty (30) days after his termination of his affiliation with the Company.

 

(e)          The Executive’s “ base period income ” shall be his Base Salary and Bonuses paid or payable to him during or with respect to the twelve (12) month period preceding the date of his termination of affiliation. If Executive has not been affiliated for twelve (12) months at the time of his termination of affiliation, his “ base period income ” shall be his annualized Base Salary at the rate then in effect and any Performance Bonus paid to Executive prior to the date of his termination of affiliation or payable to Executive with respect to his period of affiliation.

 

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(f)           In the event of a proposed Change in Control, the Company will allow Executive to participate in all meetings and negotiations related thereto.

 

9.          Confidential Information .

 

(a)          As used in this Agreement, “ Confidential Information ” means information belonging to the Company which is of value to the Company in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Company. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market or sales information or plans; customer lists; business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Company. Confidential Information includes information developed by the Executive in the course of the Executive’s employment by the Company, as well as other information to which the Executive may have access in connection with his employment. Confidential Information also includes the confidential information of others with which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not include (i) information which now or in the future comes into the public domain, unless due to breach of the Executive’s duties under this Section 9(a) ; (ii) information which is disclosed to Executive by others who are not, to Executive’s actual knowledge, under obligation of non-disclosure to the Company; (iii) information which is independently developed by the Executive without breach of the Executive’s duties under this Section 9(a) ; or (iv) information which is disclosed by the Company to others without obligation of confidentiality.

 

(b)          At all times, both during the Executive’s employment with the Company and after its termination, the Executive will keep in confidence and trust all Confidential Information, and will not use or disclose for his own benefit or the benefit of any other Person any such Confidential Information without the written consent of the Company, except as may be necessary in the ordinary course of performing the Executive’s duties to the Company.

 

10.       Documents, Records, Etc. All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, which are furnished to the Executive by the Company or are produced by the Executive in connection with the Executive’s employment will be and remain the sole property of the Company. The Executive will return to the Company all such materials and property as and when requested by the Company. In any event, the Executive will return all such materials and property immediately upon termination of the Executive’s employment for any reason. The Executive will not retain any such material or property or any copies thereof after the termination of his employment.

 

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11.        Non-Competition . From the Effective Date through the second (2 nd ) anniversary of the Termination Date, regardless of the reason for such termination or expiration (the “ Restricted Period ”) the Executive will not, directly or indirectly, whether as owner, partner, shareholder, consultant, agent, employee, co-venturer or otherwise, engage, prepare to engage, participate, assist or invest in any Competing Business anywhere in the United States or any other geographic area in which the Company is actively distributing its products or providing its services as of the Termination Date. Notwithstanding the foregoing, (i) the Executive may own up to two percent (2%) of the outstanding stock of a publicly held corporation which constitutes or is affiliated with a Competing Business; and (ii) the Executive may be employed by a large organization which is engaged in a Competing Business as its non-primary business, so long as Executive is not involved with or assisting such Competing Business, and so long as Executive does not breach his obligations regarding Confidential Information.

 

12.        No Solicitation . During the Restricted Period, the Executive shall not, directly or indirectly, take any of the following actions, and, to the extent the Executive owns, manages, operates, controls, is employed by or participates in the ownership, management, operation or control of, or is connected in any manner with, any business, the Executive shall use his best efforts to ensure that such business does not take any of the following actions:

 

(a)          persuade or attempt to persuade any Customer, Prospective Customer or Supplier to cease doing business with the Company, or to reduce the amount of business it does with the Company;

 

(b)         solicit or service for himself or for any Person the business of a Customer, Prospective Customer or Supplier in order to provide goods or services that are competitive with the goods and services provided by the Company;

 

(c)          persuade or attempt to persuade any Service Provider to cease providing services to the Company; or

 

(d)          solicit for hire or hire for himself or for any third party any Service Provider.

 

The following definitions are applicable to Sections 9, 10, 11 and 12 :

 

(i)       “ Competing Business ” means the development, commercialization, marketing and sale of hemp, hemp derivative products and other goods or services which the Company is engaged in as of the Termination Date.

 

(ii)       “ Customer ” means any Person that purchased goods or services from the Company at any time within two (2) years prior to the date of the solicitation prohibited by Sections 12(a) or (b) .

 

(iii)       “ Prospective Customer ” means any Person with whom the Company met or to whom the Company presented for the purpose of soliciting the Person to become a Customer of the Company within six (6) months prior to the date of the solicitation prohibited by Sections 12(a) or (b) .

 

(iv)       “ Service Provider ” means any Person who is an employee or independent contractor of the Company or the Company or who was within twelve (12) months preceding the solicitation prohibited by Sections 5(c) or (d) an employee or independent contractor of the Company or the Company.

 

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(v)       “ Supplier ” means any Person that sold goods or services to the Company at any time within twelve (12) months prior to the date of the solicitation prohibited by Sections 12(a) or (b) .

 

(vi)       “ Person ” means an individual, a sole proprietorship, a corporation, a limited liability company, a partnership, an association, a trust, or other business entity, whether or not incorporated.

 

13.       Intellectual Property .

 

(a)          All creations, inventions, ideas, designs, copyrightable materials, trademarks, and other technology and rights (and any related improvements or modifications), whether or not subject to patent or copyright protection (collectively, “ Creations ”), relating to any activities of the Company which are conceived by the Executive or developed by the Executive in the course of his employment with the Company, whether prior to or during the Term, whether conceived alone or with others and whether or not conceived or developed during regular business hours, shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed “ works made for hire ” as that term is used in the United States Copyright Act.

 

(b)          To the extent, if any, that the Executive retains any right, title or interest with respect to any Creations delivered to the Company or related to his employment with the Company, the Executive hereby grants to the Company an irrevocable, paid-up, transferable, sub-licensable, worldwide right and license: (i) to modify all or any portion of such Creations, including, without limitation, the making of additions to or deletions from such Creations, regardless of the medium (now or hereafter known) into which such Creations may be modified and regardless of the effect of such modifications on the integrity of such Creations; and (ii) to identify the Executive, or not to identify his, as one or more authors of or contributors to such Creations or any portion thereof, whether or not such Creations or any portion thereof have been modified. The Executive further waives any “ moral ” rights, or other rights with respect to attribution of authorship or integrity of such Creations that he may have under any applicable law, whether under copyright, trademark, unfair competition, defamation, and right of privacy, contract, tort or other legal theory.

 

(c)          The Executive will promptly inform the Company of any Creations. The Executive will also allow the Company to inspect any Creations he conceives or develops within one (1) year after the termination of his employment for any reason to determine if they are based on Confidential Information. The Executive shall (whether during his employment or after the termination of his employment) execute such written instruments and do other such acts as may be necessary in the opinion of the Company or its counsel to secure the Company’s rights in the Creations, including obtaining a patent, registering a copyright, or otherwise (and the Executive hereby irrevocably appoints the Company and any of its officers as his attorney in fact to undertake such acts in his name). The Executive’s obligation to execute written instruments and otherwise assist the Company in securing its rights in the Creations will continue after the termination of his employment for any reason. The Company shall reimburse the Executive for any out-of-pocket expenses (but not attorneys’ fees) he incurs in connection with his compliance with this Section 13(c) .

 

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14.       Acknowledgement . The Executive understands that the restrictions set forth in Sections 9, 10, 11 and 12 of this Agreement are intended to protect the Company’s interest in its Confidential Information, goodwill and established employee and customer relationships, and agrees that such restrictions are reasonable and appropriate for this purpose.

 

15.        Indemnification . During the Term and thereafter, the Company shall indemnify and hold the Executive and the Executive’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against the Executive that arises out of or relates to the Executive’s service as an officer, director or employee, as the case may be, of the Company, or the Executive’s service in any such capacity or similar capacity with any affiliate of the Company or other entity at the Company’s request, both prior to and after the Effective Date, and to promptly advance to the Executive or the Executive’s heirs or representatives such expenses, including litigation costs and attorneys’ fees, upon written request with appropriate documentation of such expense upon receipt of an undertaking by the Executive or on the Executive’s behalf to repay such amount if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company. During the Term and thereafter, the Company also shall provide the Executive with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other executive officers. If the Executive has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which the Executive may request indemnity under this provision, the Executive will give the Company prompt written notice thereof; provided that the failure to give such notice shall not affect the Executive’s right to indemnification. The Company shall be entitled to assume the defense of any such proceeding and the Executive will use reasonable efforts to cooperate with such defense. To the extent that the Executive in good faith determines that there is an actual or potential conflict of interest between the Company and the Executive in connection with the defense of a proceeding, the Executive shall so notify the Company and shall be entitled to separate representation at the Company’s expense by counsel selected by the Executive (provided that the Company may reasonably object to the selection of counsel within ten (10) business days after notification thereof) which counsel shall cooperate, and coordinate the defense, with the Company’s counsel and minimize the expense of such separate representation to the extent consistent with the Executive’s separate defense.

 

16.        Survival . The provisions of Sections 9, 10, 11, 12, 13, 15, 16, 17 and 24 of this Agreement shall survive its expiration or termination.

 

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17.       Disputes .

 

(a)          The parties agree to resolve any dispute arising under or relating to the interpretation or enforcement of this Agreement, the Executive’s employment or the termination of the Executive’s employment before the Florida state courts of Miami-Dade County, Florida or the United States District Court for the Southern District of Florida, and hereby consent to the exclusive jurisdiction of such courts. Accordingly, with respect to any such court action, the Executive and the Company each (i) submits to the personal jurisdiction of these courts; (ii) consents to service of process under the notice provisions set forth in Section 22 of this Agreement; (iii) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process; and (iv) waives any objection to jurisdiction based on improper venue or improper jurisdiction.

 

(b)          Notwithstanding anything else provided in this Agreement, the Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of Sections 9, 10, 11, 12 and 13 of this Agreement. Accordingly, if the Executive breaches or proposes to breach, any term of Sections 9, 10, 11, 12 and 13 of this Agreement , the Company shall be entitled, in addition to all other remedies that it may have, to a temporary and preliminary injunction or other appropriate equitable relief to restrain any such breach without showing or providing any actual damage to the Company from any court having competent jurisdiction over the Executive.

 

(c)          BOTH THE COMPANY AND THE EXECUTIVE HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE FEDERAL OR STATE LAW.

 

(d)          The prevailing party shall be entitled to reasonable attorneys’ fees and costs from the non-prevailing party in connection with any action filed under this Section 17 .

 

18.       Integration . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter.

 

19.       Successors . This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation). The Company shall require any successor to the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

20.        Enforceability . If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

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21.       Waiver . No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

 

22.        Notices . Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Chief Financial Officer. Notices shall be effective on receipt, if delivered by hand, the next business day, if sent by overnight courier service or on the third (3 rd ) business day after mailing, if sent by mail.

 

23.        Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.

 

24.        Governing Law . This is a Florida contract and shall be construed under and be governed in all respects by the laws of Florida for contracts to be performed in that state and without giving effect to the conflict of laws principles of Florida or any other state.

 

25.        “Company” Defined . As used in this Agreement, the term “ Company ” shall mean the Company, its parent, subsidiaries and divisions.

 

26.        Counterparts . This Agreement may be executed in any number of counterparts, including by facsimile, .PDF or other electronic transmission (which shall be deemed to be an original), each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the Effective Date.

 

  THE COMPANY:
     
  ARMEAU BRANDS INC.
     
  By: /s/ Jaitegh Singh
    Name: Jaitegh Singh
    Title:   CEO

 

  THE EXECUTIVE:
   
  /s/ Alexander M. Salgado
  Alexander M. Salgado

 

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Exhibit 10.3

 

ARMEAU BRANDS INC.

EXECUTIVE EMPLOYMENT AGREEMENT

 

This EXECUTIVE EMPLOYMENT AGREEMENT (the “ Agreement ”) is made as of September 27, 2017 (the “ Effective Date ”), between ARMEAU BRANDS INC. , a Nevada corporation, (the “ Company ”) and ERDUIS SANABRIA , an individual (the “ Executive ”).

 

RECITAL

 

WHEREAS , the Company desires to employ the Executive and the Executive desires to be employed by the Company on the terms contained in this Agreement.

 

AGREEMENT

 

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

 

1.               Position and Duties . The Executive shall serve as Executive Vice President of the Company reporting to the Company’s Chief Executive Officer (the “ Board ”). The Executive shall perform those services customary to that office and such other lawful duties that may be reasonably assigned to him from time to time by the Board, provided those duties are consistent with the Executive’s position and authority. The Executive further agrees to use his best efforts to promote the interests of the Company and to devote his full business time and energies to the business and affairs of the Company. The Board may decide in consultations with the Executive and subject to the Executive's agreement, to assign the Executive throughout the term to another senior position within the Company that furthers the overall interests of the Company. Upon such a change, if it occurs, the rights and obligations as stated under this agreement will remain in full force and effect, notwithstanding the change in position and duties for the Executive.

 

2.               Term . The Company shall continue to employ the Executive and the Executive shall continue to serve the Company, on the terms and conditions set forth herein, for the period commencing on the Effective Date and expiring on the third anniversary of the Effective Date, unless sooner terminated as hereinafter set forth; provided, however, that the Term of this Agreement shall automatically be extended so that at all times, the balance of the Term shall not be less than three (3) years (as so extended, the “ Term ”).

 

3.              Compensation and Related Matters .

 

(a)              Base Salary . The Executive’s annual base salary shall be one hundred fifty thousand dollars ($150,000) from the Effective Date through April 1, 2018, increasing thereafter to two hundred fifty thousand ($250,000) dollars (together with any subsequent increases thereto as hereinafter provided, the “ Base Salary ”). The Base Salary shall be payable in accordance with the Company’s normal payroll procedures in effect from time to time. The Base Salary may be increased by the Board or its compensation committee (the “ Committee ”), if any, from time to time during the Term, but shall be reviewed by the Board or the Committee, if any, at least annually.

 

 

 

 

(b)             Annual Bonus . During the Term, the Executive may be paid a performance bonus to the extent earned, based on criteria established by the Board or the Committee from time to time during the Term (the “ Bonus ”). The amount of any Bonus and the performance criteria for earning the Bonus, if any for any subsequent fiscal year shall be determined by the Board or the Committee, in good faith, no later than sixty (60) days after the commencement of the relevant fiscal year. The Executive’s Bonus for a bonus period shall be determined by the Board or the Committee after the end of the applicable bonus period and be paid to the Executive in the year following the year to which the Bonus relates when annual bonuses for that year are paid to other senior executives of the Company generally.

 

(c)             Incentive Plan . The Executive shall be entitled to participate in all bonus plans, policies, practices and programs adopted by the Company and applicable generally to other senior executives of the Company, in accordance with the terms of such plans (if any).

 

(d)             Retention Incentive . In addition to the compensation set forth elsewhere in this Section 3 , and as additional consideration for the Executive to enter into this Agreement, the Executive shall be granted a stock option (the “ Option ”) under the Company’s 2017 Stock Incentive Plan (the “ 2017 Plan ”) to purchase 166,667 shares of the Company’s common stock (“ Shares ”). The Option shall be (i) exercisable at an exercise price of $.050 per Share; (ii) be fully vested on the Effective Date; and (iii) exercisable for ten (10) years from the Effective Date, subject to the Executive’s continued employment with the Company and the early Option termination provisions set forth in the 2017 Plan.

 

(e)             Business Expenses . The Executive shall be entitled to receive prompt reimbursement for all reasonable business expenses incurred by him in performing services hereunder, in accordance with the policies and procedures then in effect and established by the Company for its senior executive officers.

 

(f)              Directors’ and Officers’ Liability Insurance . Promptly following the Effective Date, the Company shall procure Directors’ and Officers’ Liability Insurance in an amount not less than $1,000,000, which shall contain customary coverage for the Executive. The Company shall maintain such coverage in effect during the Term as long as it can be secured at commercially reasonable cost.

 

(g)             Other Benefits . The Executive shall be eligible to participate in the employee benefit plans currently and hereafter maintained by the Company of general applicability to other senior executives of the Company, including, without limitation, the Company’s group medical, dental, vision, disability, life insurance, and flexible-spending account plans.

 

(h)             Vacation . The Executive shall be entitled to accrue paid vacation days in accordance with the Company’s vacation policy for senior executives, as established from time to time. The Executive shall also be entitled to all paid holidays given by the Company to its senior executives.

 

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(i)              Withholding .  All amounts payable to the Executive under this Section 3 shall be subject to all required federal, state and local withholding, payroll and insurance taxes.

 

(j)              Board Discretion . Nothing in this Section 3 shall obligate the Board to implement any particular benefit plan or prevent the Board from amending or terminating any benefit plan implemented.

 

4.               Termination . The Executive’s employment may be terminated and this Agreement terminated under the following circumstances:

 

(a)              Death . The Executive’s employment hereunder shall terminate upon his death.

 

(b)             Disability . The Company may terminate the Executive’s employment if the Executive becomes subject to a Disability. For purposes of this Agreement, “ Disability ” means the Executive is unable to perform the essential functions of his position as Founder and Chairman Emeritus, with or without a reasonable accommodation, for a period of ninety (90) consecutive calendar days or one hundred eighty (180) non-consecutive calendar days within any rolling twelve (12) month period.

 

(c)             Termination by Company for Cause . The Company may terminate the Executive’s employment for Cause. For purposes of this Agreement, “ Cause ” means the Executive’s (i) commission of an act of material dishonesty by him in connection with his responsibilities as an officer, director or employee of the Company; (ii) willful failure to follow the directions communicated to him by the Board that are legal and consistent with his position and duties as Founder and Chairman Emeritus; (iii) breach of a fiduciary duty owed by the Executive to the Company or its shareholders; (iv) willful misconduct or gross misconduct which is materially detrimental to the Company; (v) conviction, plea of nolo contendere , guilty plea, or confession during the Term; to any felony or any crime based upon an act of fraud, misappropriation or embezzlement; or (vi) a material breach of this Agreement; provided, that, the bases set forth in (i), (ii), (iii), (iv) and (vi), to the extent curable, shall not constitute Cause unless the Company has provided the Executive with written notice of the acts or omissions giving rise to a termination of his employment for Cause and the Executive fails to correct the act or omission within thirty (30) days after receiving the Company’s notice (the “ Executive Cure Period ”).

 

(d)             Termination by the Company Without Cause . A termination of the Executive’s employment by the Company for any reason, except death, disability or Cause, will be deemed to be a termination “ Without Cause .”

 

(e)             Termination by the Executive for Good Reason . The Executive may terminate his employment for “ Good Reason .” For purposes of this Agreement, “ Good Reason ” means (i) without the Executive’s written consent, a material reduction of his duties, positions or responsibilities; (ii) without the Executive’s written consent, a significant reduction by the Company in Base Salary as in effect immediately prior to such reduction; or (iii) the Company’s material breach of this Agreement; provided that, within ninety (90) days of the Company’s act or omission giving rise to a resignation for Good Reason, the Executive notifies the Company in writing of the act or omission, the Company fails to correct the act or omission within thirty (30) days after receiving the Executive’s written notice (the “ Company Cure Period ”) and the Executive actually terminates his employment within sixty (60) days after the date the Company receives the Executive’s notice.

 

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(f)              Termination by the Executive Without Good Reason . A resignation of the Executive’s employment for any reason other than Good Reason will be deemed to be a resignation “ Without Good Reason .” The Executive may terminate his employment at any time Without Good Reason, upon thirty (30) days prior written notice to the Company, provided however, the Company may accelerate the date of such termination to any date following the receipt of such written notice.

 

(g)             Termination Date . The “ Termination Date ” means (i) if the Executive’s employment is terminated by his death under Section 4(a) , the date of his death; (ii) if the Executive’s employment is terminated on account of his Disability under Section 4(b) , the date on which the Company provides the Executive a written termination notice; (iii) if the Company terminates the Executive’s employment for Cause under Section 4(c) , the date on which the Company provides the Executive a written termination notice, unless the circumstances giving rise to the termination are subject to the Executive Cure Period, in which case the date on which the Company provides the Executive a written termination notice following the end of the Executive Cure Period; (iv) if the Company terminates the Executive’s employment Without Cause under Section 4(d) , thirty (30) days after the date on which the Company provides the Executive a written termination notice; (v) if the Executive resigns his employment for Good Reason under Section 4(e) , the date on which the Executive provides the Company a written termination notice following the end of the Company Cure Period; or (vii) if the Executive resigns his employment Without Good Reason under Section 4(f) , thirty (30) days after the date on which the Executive provides the Company a written termination notice.

 

5.              Compensation Upon Termination .

 

(a)             Termination by the Company for Cause, upon the Executive’s Death or Disability or by the Executive Without Good Reason . If the Executive’s employment with the Company is terminated pursuant to Sections 4(a), (b), (c) or (f) , the Company shall pay or provide to the Executive (or to his authorized representative or estate) (i) any earned but unpaid Base Salary as of the Termination Date; (ii) unpaid expense reimbursements as of the Termination Date; (iii) any earned but unpaid Bonus as of the Termination Date; and (iv) any vested benefits the Executive may have under any employee benefit plan of the Company (the “ Accrued Obligations ”), on or before the time required by law but in no event more than thirty (30) days after the Termination Date

 

(b)             Termination by the Company Without Cause or by the Executive With Good Reason . If the Executive’s employment is terminated by the Company Without Cause or the Executive terminates his employment for Good Reason, then the Executive shall be entitled to the following:

 

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(i)            The Company shall pay the Executive the Accrued Obligations earned through the Termination Date (payable at the time provided for in Section 5(a) ).

 

(ii)           The Company shall pay the Executive his Base Salary (less applicable withholding taxes) for the balance of the Term, in accordance with the Company’s normal payroll practices in effect on the Termination Date.

 

(iii)          One hundred percent (100%) of the greater of the Executive’s Bonus for the year of termination or the Bonus actually earned for the year prior to the year of termination, if any; which amount will be paid within sixty (60) days of the later of the Termination Date or the calculation of such Bonus.

 

(iv)          Subject to the Executive’s timely election of continuation coverage under the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“ COBRA ”), the Company shall reimburse the Executive the monthly premium payable to continue his and his eligible dependents’ participation in the Company’s group health plan (to the extent permitted under applicable law and the terms of such plan) which covers the Executive (and the Executive’s eligible dependents) for the period that the Executive is eligible and remains eligible for COBRA coverage, provided, however, that in the event that the Executive obtains other employment that offers group health benefits, such continuation of coverage by the Company shall immediately cease.

 

6.               Release; Payment . The payments and benefits provided for in Sections 5(b) shall be conditioned on the Executive executing and delivering to the Company a full release of all claims that the Executive may have against the Company, and its directors, officers, employees and agents in a form reasonably acceptable to the Company (the “ Release ”). The Release must become enforceable and irrevocable on or before sixtieth (60 th ) day following the Termination Date. If the Executive fails to execute and deliver the Release, he shall be entitled to the Accrued Obligations only and no other benefits under Section 5(b) .

 

7.              Section 409A Compliance .

 

(a)              All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company or incurred by the Executive during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

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(b)             To the extent that any of the payments or benefits provided for in Section 5(b) are deemed to constitute non-qualified deferred compensation benefits subject to Section 409A of the United States Internal Revenue Code (the “ Code ”), the following interpretations apply to Section 5 : Any termination of the Executive’s employment triggering payment of benefits under Section 5(b) must constitute a “ separation from service ” under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) before distribution of such benefits can commence. To the extent that the termination of the Executive’s employment does not constitute a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h) (as the result of further services that are reasonably anticipated to be provided by the Executive to the Company or any of its parents, subsidiaries or affiliates at the time the Executive’s employment terminates), any benefits payable under Section 5 that constitute deferred compensation under Section 409A of the Code shall be delayed until after the date of a subsequent event constituting a separation of service under Section 409A(a)(2)(A)(i) of the Code and Treas. Reg. §1.409A-1(h). For purposes of clarification, this Section 7(b) shall not cause any forfeiture of benefits on the Executive’s part, but shall only act as a delay until such time as a “ separation from service ” occurs. Further, if the Executive is a “ specified employee ” (as that term is used in Section 409A of the Code and regulations and other guidance issued thereunder) on the date his separation from service becomes effective, any benefits payable under Section 5 that constitute non-qualified deferred compensation under Section 409A of the Code shall be delayed until the earlier of (i) the business day following the six-month anniversary of the date his separation from service becomes effective, and (ii) the date of the Executive’s death, but only to the extent necessary to avoid such penalties under Section 409A of the Code. On the earlier of (i) the business day following the six-month anniversary of the date his separation from service becomes effective, and (ii) the Executive’s death, the Company shall pay the Executive in a lump sum the aggregate value of the non-qualified deferred compensation that the Company otherwise would have paid the Executive prior to that date under Section 5(b) of this Agreement. It is intended that each installment of the payments and benefits provided under Section 5(b) of this Agreement shall be treated as a separate “ payment ” for purposes of Section 409A of the Code. Neither the Company nor the Executive shall have the right to accelerate or defer the delivery of any such payments or benefits except to the extent specifically permitted or required by Section 409A of the Code.

 

8.              Change in Control .

 

(a)              For the purposes of this Agreement, a " Change of Control " shall be deemed to have taken place if (i) any person, including a " group " as defined in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, becomes the owner or beneficial owner of Company securities, after the date of this Agreement, having twenty-five percent (25%) or more of the combined voting power of the then outstanding securities of the Company that may be cast for the election of directors of the Company (other than as a result of an issuance of securities initiated by the Company, or open market purchases approved by the Board, as long as the majority of the Board approving the purchases is the majority at the time the purchases are made); or (ii) the persons who were directors of the Company before such transactions shall cease to constitute a majority of the Board of the Company, or any successor to the Company, as the direct or indirect result of or in connection with, any cash tender or exchange offer, merger or other business combination, sale of assets or contested election, or any combination of the foregoing transaction. For Change of Control purposes, if the company is a private entity, then the trigger on change of control would be the ownership, beneficially or otherwise, of a majority of the voting securities.

 

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(b)             The Company and Executive hereby agree that, if Executive is affiliated with the Company on the date on which a Change of Control occurs (the " Change of Control Date "), the Company will continue to retain Executive and Executive will remain affiliated with the Company for the period commencing on the Change of Control Date and ending on the third (3 rd ) anniversary of such date, to exercise such authority and perform such executive duties as are commensurate with the authority being exercised and duties being performed by the Executive immediately prior to the Change of Control Date. If after the Change of Control Executive is requested, and, in his sole and absolute discretion, consents to change his principal business location, the Company will reimburse the Executive for his reasonable relocation expenses, including, without limitation, moving expenses, temporary living and travel expenses for a reasonable time while arranging to move his residence to the changed location, closing costs, if any, associated with the sale of his existing residence and the purchase of a replacement residence at the changed location, plus an additional amount representing a gross-up of any state or federal taxes payable by Executive as a result of any such reimbursement. If the Executive shall not consent to change his business location, the Executive may continue to provide the services required of him hereunder from his then residence and/or business address, and the Company shall continue to maintain an office for Executive at that location commensurate with the Company's office prior to the Change of Control Date.

 

(c)              During the remaining one year period of the Term commencing upon the second anniversary of the Change of Control Date, the Company) will (i) continue to pay Executive a salary at not less than the level applicable to Executive on the Change of Control Date; (ii) pay Executive Bonuses in amounts not less in amount than those paid during the twelve month period preceding the Change of Control Date; and (iii) continue employee benefit programs as to Executive at levels in effect on the Change of Control Date (but subject to such reductions as may be required to maintain such plans in compliance with applicable federal law regulating employee benefit programs).

 

(d)             If during the remaining term hereof after the Change of Control Date (i) Executive's employment is terminated by the Company; or (ii) there shall have occurred a material reduction in Executive's compensation or employment related benefits, or a material change in Executive's status, working conditions, management responsibilities or titles, and Executive voluntarily terminates his relationship with the Company within sixty (60) days of an such occurrence, or the last in a series of occurrences, then Executive shall be entitled to receive, in addition to the compensation provided for in Section 5(b) , and subject to the provisions of subsections (e) and (f) below, a lump sum payment equal to two hundred ninety-nine percent (299%) of Executive's “ base period income ” as determined under (e) below, plus an additional amount representing a gross-up of any state or federal taxes payable by Executive as a result of any such payment. Such amount will be paid to Executive within thirty (30) days after his termination of his affiliation with the Company.

 

(e)              The Executive's “ base period income ” shall be his Base Salary and Bonuses paid or payable to him during or with respect to the twelve (12) month period preceding the date of his termination of affiliation. If Executive has not been affiliated for twelve (12) months at the time of his termination of affiliation, his “ base period income ” shall be his annualized Base Salary at the rate then in effect and any Performance Bonus paid to Executive prior to the date of his termination of affiliation or payable to Executive with respect to his period of affiliation.

 

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(f)              In the event of a proposed Change in Control, the Company will allow Executive to participate in all meetings and negotiations related thereto.

 

9.               Confidential Information

 

(a)              As used in this Agreement, “ Confidential Information ” means information belonging to the Company which is of value to the Company in the course of conducting its business and the disclosure of which could result in a competitive or other disadvantage to the Company. Confidential Information includes, without limitation, financial information, reports, and forecasts; inventions, improvements and other intellectual property; trade secrets; know-how; designs, processes or formulae; software; market or sales information or plans; customer lists; business plans, prospects and opportunities (such as possible acquisitions or dispositions of businesses or facilities) which have been discussed or considered by the management of the Company. Confidential Information includes information developed by the Executive in the course of the Executive’s employment by the Company, as well as other information to which the Executive may have access in connection with his employment. Confidential Information also includes the confidential information of others with which the Company has a business relationship. Notwithstanding the foregoing, Confidential Information does not include (i) information which now or in the future comes into the public domain, unless due to breach of the Executive’s duties under this Section 9(a) ; (ii) information which is disclosed to Executive by others who are not, to Executive’s actual knowledge, under obligation of non-disclosure to the Company; (iii) information which is independently developed by the Executive without breach of the Executive’s duties under this Section 9(a) ; or (iv) information which is disclosed by the Company to others without obligation of confidentiality.

 

(b)             At all times, both during the Executive’s employment with the Company and after its termination, the Executive will keep in confidence and trust all Confidential Information, and will not use or disclose for his own benefit or the benefit of any other Person any such Confidential Information without the written consent of the Company, except as may be necessary in the ordinary course of performing the Executive’s duties to the Company.

 

10.            Documents, Records, Etc.  All documents, records, data, apparatus, equipment and other physical property, whether or not pertaining to Confidential Information, which are furnished to the Executive by the Company or are produced by the Executive in connection with the Executive’s employment will be and remain the sole property of the Company. The Executive will return to the Company all such materials and property as and when requested by the Company. In any event, the Executive will return all such materials and property immediately upon termination of the Executive’s employment for any reason. The Executive will not retain any such material or property or any copies thereof after the termination of his employment.

 

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11.             Non-Competition . From the Effective Date through the second (2 nd ) anniversary of the Termination Date, regardless of the reason for such termination or expiration (the “ Restricted Period ”) the Executive will not, directly or indirectly, whether as owner, partner, shareholder, consultant, agent, employee, co-venturer or otherwise, engage, prepare to engage, participate, assist or invest in any Competing Business anywhere in the United States or any other geographic area in which the Company is actively distributing its products or providing its services as of the Termination Date. Notwithstanding the foregoing, (i) the Executive may own up to two percent (2%) of the outstanding stock of a publicly held corporation which constitutes or is affiliated with a Competing Business; and (ii) the Executive may be employed by a large organization which is engaged in a Competing Business as its non-primary business, so long as Executive is not involved with or assisting such Competing Business, and so long as Executive does not breach his obligations regarding Confidential Information.

 

12.            No Solicitation . During the Restricted Period, the Executive shall not, directly or indirectly, take any of the following actions, and, to the extent the Executive owns, manages, operates, controls, is employed by or participates in the ownership, management, operation or control of, or is connected in any manner with, any business, the Executive shall use his best efforts to ensure that such business does not take any of the following actions:

 

(a)             persuade or attempt to persuade any Customer, Prospective Customer or Supplier to cease doing business with the Company, or to reduce the amount of business it does with the Company;

 

(b)            solicit or service for himself or for any Person the business of a Customer, Prospective Customer or Supplier in order to provide goods or services that are competitive with the goods and services provided by the Company;

 

(c)             persuade or attempt to persuade any Service Provider to cease providing services to the Company; or

 

(d)            solicit for hire or hire for himself or for any third party any Service Provider.

 

The following definitions are applicable to Sections 9, 10, 11 and 12 :

 

(i)            Competing Business ” means the development, commercialization, marketing and sale of hemp, hemp derivative products and other goods or services which the Company is engaged in as of the Termination Date.

 

(ii)           Customer ” means any Person that purchased goods or services from the Company at any time within two (2) years prior to the date of the solicitation prohibited by Sections 12(a) or (b) .

 

(iii)          Prospective Customer ” means any Person with whom the Company met or to whom the Company presented for the purpose of soliciting the Person to become a Customer of the Company within six (6) months prior to the date of the solicitation prohibited by Sections 12(a) or (b) .

 

(iv)          Service Provider ” means any Person who is an employee or independent contractor of the Company or the Company or who was within twelve (12) months preceding the solicitation prohibited by Sections 5(c) or (d) an employee or independent contractor of the Company or the Company.

 

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(v)           Supplier ” means any Person that sold goods or services to the Company at any time within twelve (12) months prior to the date of the solicitation prohibited by Sections 12(a) or (b) .

 

(vi)        “ Person ” means an individual, a sole proprietorship, a corporation, a limited liability company, a partnership, an association, a trust, or other business entity, whether or not incorporated.

 

13.            Intellectual Property .

 

(a)              All creations, inventions, ideas, designs, copyrightable materials, trademarks, and other technology and rights (and any related improvements or modifications), whether or not subject to patent or copyright protection (collectively, “ Creations ”), relating to any activities of the Company which are conceived by the Executive or developed by the Executive in the course of his employment with the Company, whether prior to or during the Term, whether conceived alone or with others and whether or not conceived or developed during regular business hours, shall be the sole property of the Company and, to the maximum extent permitted by applicable law, shall be deemed “ works made for hire ” as that term is used in the United States Copyright Act.

 

(b)              To the extent, if any, that the Executive retains any right, title or interest with respect to any Creations delivered to the Company or related to his employment with the Company, the Executive hereby grants to the Company an irrevocable, paid-up, transferable, sub-licensable, worldwide right and license: (i) to modify all or any portion of such Creations, including, without limitation, the making of additions to or deletions from such Creations, regardless of the medium (now or hereafter known) into which such Creations may be modified and regardless of the effect of such modifications on the integrity of such Creations; and (ii) to identify the Executive, or not to identify his, as one or more authors of or contributors to such Creations or any portion thereof, whether or not such Creations or any portion thereof have been modified. The Executive further waives any “ moral ” rights, or other rights with respect to attribution of authorship or integrity of such Creations that he may have under any applicable law, whether under copyright, trademark, unfair competition, defamation, and right of privacy, contract, tort or other legal theory.

 

(c)              The Executive will promptly inform the Company of any Creations. The Executive will also allow the Company to inspect any Creations he conceives or develops within one (1) year after the termination of his employment for any reason to determine if they are based on Confidential Information. The Executive shall (whether during his employment or after the termination of his employment) execute such written instruments and do other such acts as may be necessary in the opinion of the Company or its counsel to secure the Company’s rights in the Creations, including obtaining a patent, registering a copyright, or otherwise (and the Executive hereby irrevocably appoints the Company and any of its officers as his attorney in fact to undertake such acts in his name). The Executive’s obligation to execute written instruments and otherwise assist the Company in securing its rights in the Creations will continue after the termination of his employment for any reason. The Company shall reimburse the Executive for any out-of-pocket expenses (but not attorneys’ fees) he incurs in connection with his compliance with this Section 13(c) .

 

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14.             Acknowledgement . The Executive understands that the restrictions set forth in Sections 9, 10, 11 and 12 of this Agreement are intended to protect the Company’s interest in its Confidential Information, goodwill and established employee and customer relationships, and agrees that such restrictions are reasonable and appropriate for this purpose.

 

15.             Indemnification . During the Term and thereafter, the Company shall indemnify and hold the Executive and the Executive’s heirs and representatives harmless, to the maximum extent permitted by law, against any and all damages, costs, liabilities, losses and expenses (including reasonable attorneys’ fees) as a result of any claim or proceeding (whether civil, criminal, administrative or investigative), or any threatened claim or proceeding (whether civil, criminal, administrative or investigative), against the Executive that arises out of or relates to the Executive’s service as an officer, director or employee, as the case may be, of the Company, or the Executive’s service in any such capacity or similar capacity with any affiliate of the Company or other entity at the Company’s request, both prior to and after the Effective Date, and to promptly advance to the Executive or the Executive’s heirs or representatives such expenses, including litigation costs and attorneys’ fees, upon written request with appropriate documentation of such expense upon receipt of an undertaking by the Executive or on the Executive’s behalf to repay such amount if it shall ultimately be determined that the Executive is not entitled to be indemnified by the Company. During the Term and thereafter, the Company also shall provide the Executive with coverage under its current directors’ and officers’ liability policy to the same extent that it provides such coverage to its other executive officers. If the Executive has any knowledge of any actual or threatened action, suit or proceeding, whether civil, criminal, administrative or investigative, as to which the Executive may request indemnity under this provision, the Executive will give the Company prompt written notice thereof; provided that the failure to give such notice shall not affect the Executive’s right to indemnification. The Company shall be entitled to assume the defense of any such proceeding and the Executive will use reasonable efforts to cooperate with such defense. To the extent that the Executive in good faith determines that there is an actual or potential conflict of interest between the Company and the Executive in connection with the defense of a proceeding, the Executive shall so notify the Company and shall be entitled to separate representation at the Company’s expense by counsel selected by the Executive (provided that the Company may reasonably object to the selection of counsel within ten (10) business days after notification thereof) which counsel shall cooperate, and coordinate the defense, with the Company’s counsel and minimize the expense of such separate representation to the extent consistent with the Executive’s separate defense.

 

16.             Survival . The provisions of Sections 9, 10, 11, 12, 13, 15, 16, 17 and 24 of this Agreement shall survive its expiration or termination.

 

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17.           Disputes .

 

(a)              The parties agree to resolve any dispute arising under or relating to the interpretation or enforcement of this Agreement, the Executive’s employment or the termination of the Executive’s employment before the Florida state courts of Miami-Dade County, Florida or the United States District Court for the Southern District of Florida, and hereby consent to the exclusive jurisdiction of such courts. Accordingly, with respect to any such court action, the Executive and the Company each (i) submits to the personal jurisdiction of these courts; (ii) consents to service of process under the notice provisions set forth in Section 22 of this Agreement; (iii) waives any other requirement (whether imposed by statute, rule of court, or otherwise) with respect to personal jurisdiction or service of process; and (iv) waives any objection to jurisdiction based on improper venue or improper jurisdiction.

 

(b)             Notwithstanding anything else provided in this Agreement, the Executive agrees that it would be difficult to measure any damages caused to the Company which might result from any breach by the Executive of Sections 9, 10, 11, 12 and 13 of this Agreement. Accordingly, if the Executive breaches or proposes to breach, any term of Sections 9, 10, 11, 12 and 13 of this Agreement , the Company shall be entitled, in addition to all other remedies that it may have, to a temporary and preliminary injunction or other appropriate equitable relief to restrain any such breach without showing or providing any actual damage to the Company from any court having competent jurisdiction over the Executive.

 

(c)             BOTH THE COMPANY AND THE EXECUTIVE HEREBY WAIVE ANY RIGHT TO A TRIAL BY JURY TO THE MAXIMUM EXTENT PERMITTED BY APPLICABLE FEDERAL OR STATE LAW.

 

(d)             The prevailing party shall be entitled to reasonable attorneys’ fees and costs from the non-prevailing party in connection with any action filed under this Section 17 .

 

18.            Integration . This Agreement constitutes the entire agreement between the parties with respect to the subject matter hereof and supersedes all prior agreements between the parties concerning such subject matter.

 

19.            Successors . This Agreement shall inure to the benefit of and be enforceable by the Executive’s personal representatives, executors, administrators, heirs, distributees, devisees and legatees. In the event of the Executive’s death after his termination of employment but prior to the completion by the Company of all payments due him under this Agreement, the Company shall continue such payments to the Executive’s beneficiary designated in writing to the Company prior to his death (or to his estate, if the Executive fails to make such designation). The Company shall require any successor to the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.

 

20.            Enforceability . If any portion or provision of this Agreement (including, without limitation, any portion or provision of any section of this Agreement) shall to any extent be declared illegal or unenforceable by a court of competent jurisdiction, then the remainder of this Agreement, or the application of such portion or provision in circumstances other than those as to which it is so declared illegal or unenforceable, shall not be affected thereby, and each portion and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law.

 

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21.             Waiver . No waiver of any provision hereof shall be effective unless made in writing and signed by the waiving party. The failure of any party to require the performance of any term or obligation of this Agreement, or the waiver by any party of any breach of this Agreement, shall not prevent any subsequent enforcement of such term or obligation or be deemed a waiver of any subsequent breach.

 

22.             Notices . Any notices, requests, demands and other communications provided for by this Agreement shall be sufficient if in writing and delivered in person or sent by a nationally recognized overnight courier service or by certified mail, postage prepaid, return receipt requested, to the Executive at the last address the Executive has filed in writing with the Company or, in the case of the Company, at its main offices, attention of the Chief Financial Officer. Notices shall be effective on receipt, if delivered by hand, the next business day, if sent by overnight courier service or on the third (3 rd ) business day after mailing, if sent by mail.

 

23.             Amendment . This Agreement may be amended or modified only by a written instrument signed by the Executive and by a duly authorized representative of the Company.

 

24.             Governing Law . This is a Florida contract and shall be construed under and be governed in all respects by the laws of Florida for contracts to be performed in that state and without giving effect to the conflict of laws principles of Florida or any other state.

 

25.             “Company” Defined . As used in this Agreement, the term “ Company ” shall mean the Company, its parent, subsidiaries and divisions.

 

26.             Counterparts . This Agreement may be executed in any number of counterparts, including by facsimile, .PDF or other electronic transmission (which shall be deemed to be an original), each of which when so executed and delivered shall be taken to be an original; but such counterparts shall together constitute one and the same document.

 

IN WITNESS WHEREOF , the parties have executed this Agreement effective as of the Effective Date.

 

  THE COMPANY:
     
  ARMEAU BRANDS INC.
     
  By: /s/ Jaitegh Singh
    Name: Jaitegh Singh
    Title: CEO
     
  THE EXECUTIVE:
   
  /s/ Erduis Sanabria
  Erduis Sanabria

 

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Exhibit 10.4

 

ARMEAU BRANDS INC.

 

2017 STOCK INCENTIVE PLAN

 

1.              Purposes of the Plan . The purposes of this Plan are to attract and retain the best available personnel, to provide additional incentives to Employees, Directors and Consultants and to promote the success of the Company’s business.

 

2.              Definitions . The following definitions shall apply as used herein and in the individual Award Agreements except as defined otherwise in an individual Award Agreement. In the event a term is separately defined in an individual Award Agreement, such definition shall supersede the definition contained in this Section 2 .

 

(a)             Administrator ” means the Board or any of the Committees appointed to administer the Plan.

 

(b)             Affiliate ” and “ Associate ” shall have the respective meanings ascribed to such terms in Rule 12b-2 promulgated under the Exchange Act.

 

(c)             Applicable Laws ” means the legal requirements relating to the Plan and the Awards under applicable provisions of federal securities laws, state corporate and securities laws, the Code, the rules of any applicable stock exchange or national market system, and the rules of any non-U.S. jurisdiction applicable to Awards granted to residents therein.

 

(d)              Assumed ” means that pursuant to a Corporate Transaction either (i) the Award is expressly affirmed by the Company or (ii) the contractual obligations represented by the Award are expressly assumed (and not simply by operation of law) by the successor entity or its Parent in connection with the Corporate Transaction with appropriate adjustments to the number and type of securities of the successor entity or its Parent subject to the Award and the exercise or purchase price thereof which at least preserves the compensation element of the Award existing at the time of the Corporate Transaction as determined in accordance with the instruments evidencing the agreement to assume the Award.

 

(e)             Award ” means the grant of an Option, SAR, Dividend Equivalent Right, Restricted Stock, Restricted Stock Unit or other right or benefit under the Plan.

 

(f)             Award Agreement ” means the written agreement evidencing the grant of an Award executed by the Company and the Grantee, including any amendments thereto.

 

(g)             Board ” means the Board of Directors of the Company.

 

(h)             Cause ” means, with respect to the termination by the Company or a Related Entity of the Grantee’s Continuous Service, that such termination is for “ Cause ” as such term (or word of like import) is expressly defined in a then-effective written agreement between the Grantee and the Company or such Related Entity, or in the absence of such then-effective written agreement and definition, is based on, in the determination of the Administrator, the Grantee’s: (i) performance of any act or failure to perform any act in bad faith and to the detriment of the Company or a Related Entity; (ii) dishonesty, intentional misconduct or material breach of any agreement with the Company or a Related Entity; or (iii) commission of a crime involving dishonesty, breach of trust, or physical or emotional harm to any person; provided, however, that with regard to any agreement that defines “ Cause ” on the occurrence of or in connection with a Corporate Transaction or a Change in Control, such definition of “ Cause ” shall not apply until a Corporate Transaction or a Change in Control actually occurs.

 

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(i)             Change in Control ” means a change in ownership or control of the Company after the Registration Date effected through either of the following transactions:

 

(i)              the direct or indirect acquisition by any person or related group of persons (other than an acquisition from or by the Company or by a Company-sponsored employee benefit plan or by a person that directly or indirectly controls, is controlled by, or is under common control with, the Company) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities pursuant to a tender or exchange offer made directly to the Company’s shareholders which a majority of the Continuing Directors who are not Affiliates or Associates of the offeror do not recommend such shareholders accept, or

 

(ii)              a change in the composition of the Board over a period of twelve (12) months or less such that a majority of the Board members (rounded up to the next whole number) ceases, by reason of one or more contested elections for Board membership, to be comprised of individuals who are Continuing Directors.

 

(j)             Code ” means the Internal Revenue Code of 1986, as amended.

 

(k)             Committee ” means any committee composed of members of the Board appointed by the Board to administer the Plan.

 

(l)             Common Stock ” means the common stock of the Company.

 

(m)            Company ” means Armeau Brands Inc., a Nevada corporation, or any successor entity that adopts the Plan in connection with a Corporate Transaction.

 

(n)             Consultant ” means any person (other than an Employee or a Director, solely with respect to rendering services in such person’s capacity as a Director) who is engaged by the Company or any Related Entity to render consulting or advisory services to the Company or such Related Entity.

 

(o)             Continuing Directors ” means members of the Board who either (i) have been Board members continuously for a period of at least twelve (12) months or (ii) have been Board members for less than twelve (12) months and were elected or nominated for election as Board members by at least a majority of the Board members described in clause (i) who were still in office at the time such election or nomination was approved by the Board.

 

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(p)             Continuous Service ” means that the provision of services to the Company or a Related Entity in any capacity of Employee, Director or Consultant is not interrupted or terminated. In jurisdictions requiring notice in advance of an effective termination as an Employee, Director or Consultant, Continuous Service shall be deemed terminated upon the actual cessation of providing services to the Company or a Related Entity notwithstanding any required notice period that must be fulfilled before a termination as an Employee, Director or Consultant can be effective under Applicable Laws. A Grantee’s Continuous Service shall be deemed to have terminated either upon an actual termination of Continuous Service or upon the entity for which the Grantee provides services ceasing to be a Related Entity. Continuous Service shall not be considered interrupted in the case of (i) any approved leave of absence; (ii) transfers among the Company, any Related Entity, or any successor, in any capacity of Employee, Director or Consultant; or (iii) any change in status as long as the individual remains in the service of the Company or a Related Entity in any capacity of Employee, Director or Consultant (except as otherwise provided in the Award Agreement). Notwithstanding the foregoing, except as otherwise determined by the Administrator, in the event of any spin-off of a Related Entity, service as an Employee, Director or Consultant for such Related Entity following such spin-off shall be deemed to be Continuous Service for purposes of the Plan and any Award under the Plan. An approved leave of absence shall include sick leave, military leave, or any other authorized personal leave. For purposes of each Incentive Stock Option granted under the Plan, if such leave exceeds three months, and reemployment upon expiration of such leave is not guaranteed by statute or contract, then the Incentive Stock Option shall be treated as a Non-Qualified Stock Option on the day three months and one day following the expiration of such three month period.

 

(q)             Corporate Transaction ” means any of the following transactions, provided, however, that the Administrator shall determine under parts (iv) and (v) whether multiple transactions are related, and its determination shall be final, binding and conclusive:

 

(i)              a merger or consolidation in which the Company is not the surviving entity, except for a transaction the principal purpose of which is to change the state in which the Company is incorporated;

 

(ii)              the sale, transfer or other disposition of all or substantially all of the assets of the Company;

 

(iii)             the complete liquidation or dissolution of the Company;

 

(iv)             any reverse merger or series of related transactions culminating in a reverse merger (including, but not limited to, a tender offer followed by a reverse merger) in which the Company is the surviving entity but (A) the shares of Common Stock outstanding immediately prior to such merger are converted or exchanged by virtue of the merger into other property, whether in the form of securities, cash or otherwise; or (B) in which securities possessing more than forty percent (40%) of the total combined voting power of the Company’s outstanding securities are transferred to a person or persons different from those who held such securities immediately prior to such merger or the initial transaction culminating in such merger, but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction; or

 

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(v)              acquisition in a single or series of related transactions by any person or related group of persons (other than the Company or by a Company-sponsored employee benefit plan) of beneficial ownership (within the meaning of Rule 13d-3 of the Exchange Act) of securities possessing more than fifty percent (50%) of the total combined voting power of the Company’s outstanding securities but excluding any such transaction or series of related transactions that the Administrator determines shall not be a Corporate Transaction.

 

(r)             Covered Employee ” means an Employee who is a “covered employee” under Section 162(m) (3) of the Code.

 

(s)            Director ” means a member of the Board or the board of directors of any Related Entity.

 

(t)             Disability ” means as defined under the long-term disability policy of the Company or the Related Entity to which the Grantee provides services regardless of whether the Grantee is covered by such policy. If the Company or the Related Entity to which the Grantee provides service does not have a long-term disability plan in place, “Disability” means that a Grantee is unable to carry out the responsibilities and functions of the position held by the Grantee by reason of any medically determinable physical or mental impairment for a period of not less than ninety (90) consecutive days. A Grantee will not be considered to have incurred a Disability unless he or she furnishes proof of such impairment sufficient to satisfy the Administrator in its discretion.

 

(u)             Dividend Equivalent Right ” means a right entitling the Grantee to compensation measured by dividends paid with respect to Common Stock.

 

(v)             Employee ” means any person, including an Officer or Director, who is in the employ of the Company or any Related Entity, subject to the control and direction of the Company or any Related Entity as to both the work to be performed and the manner and method of performance. The payment of a Director’s fee by the Company or a Related Entity shall not be sufficient to constitute “ employment ” by the Company.

 

(w)            Exchange Act ” means the Securities Exchange Act of 1934, as amended.

 

(x)             Fair Market Value ” means, as of any date, the value of Common Stock determined as follows:

 

(i)              If the Common Stock is listed on one or more established stock exchanges or national market systems, including without limitation The NASDAQ Global Select Market, The NASDAQ Global Market, The NASDAQ Capital Market of The NASDAQ Stock Market LLC, the New York Stock Exchange or the NYSE MKT, its Fair Market Value shall be the closing sales price for such stock (or the closing bid, if no sales were reported) as quoted on the principal exchange or system on which the Common Stock is listed (as determined by the Administrator) on the date of determination (or, if no closing sales price or closing bid was reported on that date, as applicable, on the last trading date such closing sales price or closing bid was reported), as reported in The Wall Street Journal or such other source as the Administrator deems reliable;

 

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(ii)              If the Common Stock is regularly quoted on an automated quotation system (including the various tiers of the over-the-counter market maintained by OTC Markets Group, Inc. or by a recognized securities dealer, its Fair Market Value shall be the closing sales price for such stock as quoted on such system or by such securities dealer on the date of determination or the average of any such prices for such period as determined by the Administrator in good faith not to exceed thirty (30) trading days prior to the date of determination, but if selling prices are not reported, the Fair Market Value of a share of Common Stock shall be the mean between the high bid and low asked prices for the Common Stock on the date of determination (or, if no such prices were reported on that date, on the last date such prices were reported) or the average thereof for such period prior to the date of determination as established by the Administrator above, as reported in The Wall Street Journal or such other source as the Administrator deems reliable; or

 

(iii)             In the absence of an established market for the Common Stock of the type described in (i) and (ii), above, the Fair Market Value thereof shall be determined by the Administrator in good faith.

 

(y)            Good Reason means the occurrence after a Corporate Transaction or Change in Control of any of the following events or conditions unless consented to by the Grantee (and the Grantee shall be deemed to have consented to any such event or condition unless the Grantee provides written notice of the Grantee’s non-acquiescence within thirty (30) days of the effective time of such event or condition):

 

(i)              a change in the Grantee’s responsibilities or duties that represents a material and substantial diminution in the Grantee’s responsibilities or duties as in effect immediately preceding the consummation of a Corporate Transaction or Change in Control;

 

(ii)              a reduction in the Grantee’s base salary to a level below that in effect at any time within six months preceding the consummation of a Corporate Transaction or Change in Control or at any time thereafter; provided that an across-the-board reduction in the salary level of substantially all other individuals in positions similar to the Grantee’s by substantially the same percentage amount shall not constitute such a salary reduction; or

 

(iii)             requiring the Grantee to be based at any place outside a 50-mile radius from the Grantee’s job location or residence prior to the Corporate Transaction or Change in Control except for reasonably required travel on business that is not materially greater than such travel requirements prior to the Corporate Transaction or Change in Control.

 

(z)            Grantee ” means an Employee, Director or Consultant who receives an Award under the Plan.

 

(aa)         “ Incentive Stock Option ” means an Option intended to qualify as an incentive stock option within the meaning of Section 422 of the Code.

 

(bb)           Non-Qualified Stock Option ” means an Option not intended to qualify as an Incentive Stock Option.

 

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(cc)         “ Officer ” means a person who is an officer of the Company or a Related Entity within the meaning of Section 16 of the Exchange Act and the rules and regulations promulgated thereunder.

 

(dd)          Option ” means an option to purchase Shares pursuant to an Award Agreement granted under the Plan.

 

(ee)         “ Parent ” means a “parent corporation”, whether now or hereafter existing, as defined in Section 424(e) of the Code.

 

(ff)           Performance-Based Compensation ” means compensation qualifying as “performance-based compensation” under Section 162(m) of the Code.

 

(gg)           Plan ” means this 2017 Stock Incentive Plan.

 

(hh)           Registration Date ” means the first to occur of (i) the closing of the first sale, subsequent to the date this Plan is adopted, to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act, of (A) the Common Stock; or (B) the same class of securities of a successor corporation (or its Parent) issued pursuant to a Corporate Transaction in exchange for or in substitution of the Common Stock; (ii) the date the Common Stock is otherwise registered under and the Company becomes subject to the reporting requirements of Sections 13 or 15 (d) or the Exchange Act; and (iii) in the event of a Corporate Transaction, the date of the consummation of the Corporate Transaction if the same class of securities of the successor corporation (or its Parent) issuable in such Corporate Transaction shall have been sold to the general public pursuant to a registration statement filed with and declared effective by the Securities and Exchange Commission under the Securities Act, on or prior to the date of consummation of such Corporate Transaction.

 

(ii)             Related Entity ” means any Parent or Subsidiary of the Company.

 

(jj)             Replaced ” means that pursuant to a Corporate Transaction the Award is replaced with a comparable stock award or a cash incentive program of the Company, the successor entity (if applicable) or Parent of either of them which preserves the compensation element of such Award existing at the time of the Corporate Transaction and provides for subsequent payout in accordance with the same (or a more favorable) vesting schedule applicable to such Award. The determination of Award comparability shall be made by the Administrator and its determination shall be final, binding and conclusive.

 

(kk)           Restricted Stock ” means Shares issued under the Plan to the Grantee for such consideration, if any, and subject to such restrictions on transfer, rights of first refusal, repurchase provisions, forfeiture provisions, and other terms and conditions as established by the Administrator.

 

(ll)             Restricted Stock Units ” means an Award that may be earned in whole or in part upon the passage of time or the attainment of performance criteria established by the Administrator and that may be settled for cash, Shares or other securities or a combination of cash, Shares or other securities as established by the Administrator.

 

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(mm)        Rule 16b-3 ” means Rule 16b-3 promulgated under the Exchange Act or any successor thereto.

 

(nn)           SAR ” means a stock appreciation right entitling the Grantee to Shares or cash compensation, as established by the Administrator, measured by appreciation in the value of Common Stock.

 

(oo)           Securities Act ” means the Securities Act of 1933, as amended.

 

(pp)           Share ” means a share of the Common Stock.

 

(qq)           Subsidiary ” means a “subsidiary corporation”, whether now or hereafter existing, as defined in Section 424(f) of the Code.

 

3.              Stock Subject to the Plan .

 

(a)     Subject to the provisions of Section 10 , below, the maximum aggregate number of Shares that may be issued pursuant to all Awards is 1,250,000 Shares, plus an annual increase to be added on the first day of the calendar year beginning January 1, 2018 equal to (i) the greater of such number of shares as (A) will set the maximum number of Shares that may be issued pursuant to all Awards equal to 15% of the number of Shares outstanding as of such date; or (B) 2% of the number of Shares outstanding as of such date; or (ii) a lesser number of Shares determined by the Administrator. Notwithstanding the foregoing, subject to the provisions of Section 10 , below, of the number of Shares specified above, the maximum aggregate number of Shares available for grant of Incentive Stock Options shall be 425,000 Shares, increased on the first day of the calendar year beginning January 1, 2018, in a number of Shares proportionate to the increase in the total number of Shares that may be issued pursuant to all Awards under this Plan, as set forth in this Section 3 .  The Shares to be issued pursuant to Awards may be authorized, but unissued or reacquired Shares.

 

(b)             Any Shares covered by an Award (or portion of an Award) that is forfeited, canceled or expires (whether voluntarily or involuntarily) shall be deemed not to have been issued for purposes of determining the maximum aggregate number of Shares that may be issued under the Plan. Shares that actually have been issued under the Plan pursuant to an Award shall not be returned to the Plan and shall not become available for future issuance under the Plan, except that if unvested Shares are forfeited, or repurchased by the Company at the lesser of their original purchase price or their Fair Market Value at the time of repurchase, such Shares shall become available for future grant under the Plan

 

(c)             To the extent not prohibited by the listing requirements of The NASDAQ Stock Market LLC (or other established stock exchange or national market system on which the Common Stock is traded) or Applicable Law, any Shares covered by an Award that are surrendered (i) in payment of the Award exercise or purchase price (including pursuant to the “net exercise” of an option pursuant to Section 7(b)(v)) or (ii) in satisfaction of tax withholding obligations incident to the exercise of an Award shall be deemed not to have been issued for purposes of determining the maximum number of Shares that may be issued pursuant to all Awards under the Plan, unless otherwise determined by the Administrator.

 

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4.              Administration of the Plan .

 

(a)            Plan Administrator .

 

(i)             Administration with Respect to Directors and Officers . With respect to grants of Awards to Directors or Employees who are also Officers or Directors of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws and to permit such grants and related transactions under the Plan to be exempt from Section 16(b) of the Exchange Act in accordance with Rule 16b-3. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board.

 

(ii)             Administration With Respect to Consultants and Other Employees . With respect to grants of Awards to Employees or Consultants who are neither Directors nor Officers of the Company, the Plan shall be administered by (A) the Board or (B) a Committee designated by the Board, which Committee shall be constituted in such a manner as to satisfy the Applicable Laws. Once appointed, such Committee shall continue to serve in its designated capacity until otherwise directed by the Board. The Board may authorize one or more Officers to grant such Awards and may limit such authority as the Board determines from time to time.

 

(iii)            Administration With Respect to Covered Employees . Notwithstanding the foregoing, as of and after the date that the exemption for the Plan under Section 162(m) of the Code expires, as set forth in Section 18 below, grants of Awards to any Covered Employee intended to qualify as Performance-Based Compensation shall be made only by a Committee (or subcommittee of a Committee) that is comprised solely of two or more Directors eligible to serve on a committee making Awards qualifying as Performance-Based Compensation. In the case of such Awards granted to Covered Employees, references to the “ Administrator ” or to a “ Committee ” shall be deemed to be references to such Committee or subcommittee.

 

(iv)            Administration Errors . In the event an Award is granted in a manner inconsistent with the provisions of this subsection (a) , such Award shall be presumptively valid as of its grant date to the extent permitted by the Applicable Laws.

 

(b)            Powers of the Administrator . Subject to Applicable Laws and the provisions of the Plan (including any other powers given to the Administrator hereunder), and except as otherwise provided by the Board, the Administrator shall have the authority, in its discretion:

 

(i)             to select the Employees, Directors and Consultants to whom Awards may be granted from time to time hereunder;

 

(ii)             to determine whether and to what extent Awards are granted hereunder;

 

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(iii)            to determine the number of Shares or the amount of other consideration to be covered by each Award granted hereunder;

 

(iv)            to approve forms of Award Agreements for use under the Plan;

 

(v)             to determine the terms and conditions of any Award granted hereunder;

 

(vi)            to amend the terms of any outstanding Award granted under the Plan, provided that

 

(A)             any amendment that would adversely affect the Grantee’s rights under an outstanding Award shall not be made without the Grantee’s written consent, provided , however , that an amendment or modification that may cause an Incentive Stock Option to become a Non-Qualified Stock Option shall not be treated as adversely affecting the rights of the Grantee;

 

(B)              the reduction of the exercise price of any Option awarded under the Plan and the base appreciation amount of any SAR awarded under the Plan shall be subject to shareholder approval; and

 

(C)              canceling an Option or SAR at a time when its exercise price or base appreciation amount (as applicable) exceeds the Fair Market Value of the underlying Shares, in exchange for another Option, SAR, Restricted Stock, or other Award or for cash shall be subject to shareholder approval, unless the cancellation and exchange occurs in connection with a Corporate Transaction. Notwithstanding the foregoing, canceling an Option or SAR in exchange for another Option, SAR, Restricted Stock, or other Award or for cash with an exercise price, purchase price or base appreciation amount (as applicable) that is equal to or greater than the exercise price or base appreciation amount (as applicable) of the original Option or SAR shall not be subject to shareholder approval;

 

(vii)          to construe and interpret the terms of the Plan and Awards, including without limitation, any notice of award or Award Agreement, granted pursuant to the Plan;

 

(viii)         to grant Awards to Employees, Directors and Consultants employed outside the United States on such terms and conditions different from those specified in the Plan as may, in the judgment of the Administrator, be necessary or desirable to further the purpose of the Plan; and

 

(ix)            to take such other action, not inconsistent with the terms of the Plan, as the Administrator deems appropriate.

 

The express grant in the Plan of any specific power to the Administrator shall not be construed as limiting any power or authority of the Administrator; provided that the Administrator may not exercise any right or power reserved to the Board. Any decision made, or action taken, by the Administrator or in connection with the administration of this Plan shall be final, conclusive and binding on all persons having an interest in the Plan.

 

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(c)             Indemnification . In addition to such other rights of indemnification as they may have as members of the Board or as Officers or Employees of the Company or a Related Entity, members of the Board and any Officers or Employees of the Company or a Related Entity to whom authority to act for the Board, the Administrator or the Company is delegated shall be defended and indemnified by the Company to the extent permitted by law on an after-tax basis against all reasonable expenses, including attorneys’ fees, actually and necessarily incurred in connection with the defense of any claim, investigation, action, suit or proceeding, or in connection with any appeal therein, to which they or any of them may be a party by reason of any action taken or failure to act under or in connection with the Plan, or any Award granted hereunder, and against all amounts paid by them in settlement thereof (provided such settlement is approved by the Company) or paid by them in satisfaction of a judgment in any such claim, investigation, action, suit or proceeding, except in relation to matters as to which it shall be adjudged in such claim, investigation, action, suit or proceeding that such person is liable for gross negligence, bad faith or intentional misconduct; provided, however, that within 30 days after the institution of such claim, investigation, action, suit or proceeding, such person shall offer to the Company, in writing, the opportunity at the Company’s expense to defend the same.

 

5.              Eligibility . Awards other than Incentive Stock Options may be granted to Employees, Directors and Consultants. Incentive Stock Options may be granted only to Employees of the Company or a Parent or a Subsidiary of the Company. An Employee, Director or Consultant, who has been granted an Award may, if otherwise eligible, be granted additional Awards. Awards may be granted to such Employees, Directors or Consultants who are residing in non-U.S. jurisdictions as the Administrator may determine from time to time.

 

6.              Terms and Conditions of Awards .

 

(a)             Types of Awards . The Administrator is authorized under the Plan to award any type of arrangement to an Employee, Director or Consultant that is not inconsistent with the provisions of the Plan and that by its terms involves or might involve the issuance of (i) Shares; (ii) cash; (iii) an Option; (iv) a SAR; or (v) a similar right with a fixed or variable price related to the Fair Market Value of the Shares and with an exercise or conversion privilege related to the passage of time, the occurrence of one or more events, or the satisfaction of performance criteria or other conditions. Such awards include, without limitation, Options, SARs, sales or bonuses of Restricted Stock, Restricted Stock Units or Dividend Equivalent Rights, and an Award may consist of one such security or benefit, or two or more of them in any combination or alternative.

 

(b)             Designation of Award . Each Award shall be designated in the Award Agreement. In the case of an Option, the Option shall be designated as either an Incentive Stock Option or a Non-Qualified Stock Option. However, notwithstanding such designation, an Option will qualify as an Incentive Stock Option under the Code only to the extent the $100,000 limitation of Section 422(d) of the Code is not exceeded. The $100,000 limitation of Section 422(d) of the Code is calculated based on the aggregate Fair Market Value of the Shares subject to Options designated as Incentive Stock Options that become exercisable for the first time by a Grantee during any calendar year (under all plans of the Company or any Parent or Subsidiary of the Company). For purposes of this calculation, Incentive Stock Options shall be taken into account in the order in which they were granted, and the Fair Market Value of the Shares shall be determined as of the grant date of the relevant Option. In the event that the Code or the regulations promulgated thereunder are amended after the date the Plan becomes effective to provide for a different limit on the Fair Market Value of Shares permitted to be subject to Incentive Stock Options, then such different limit will be automatically incorporated herein and will apply to any Options granted after the effective date of such amendment.

 

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(c)             Conditions of Award . Subject to the terms of the Plan, the Administrator shall determine the provisions, terms, and conditions of each Award including, but not limited to, the Award vesting schedule, repurchase provisions, rights of first refusal, forfeiture provisions, form of payment (cash, Shares, or other consideration) upon settlement of the Award, payment contingencies, and satisfaction of any performance criteria. The performance criteria established by the Administrator may be based on any one of, or combination of, the following: (i) increase in share price; (ii) earnings per share; (iii) total shareholder return; (iv) operating margin; (v) gross margin; (vi) return on equity; (vii) return on assets; (viii) return on investment; (ix) operating income; (x) net operating income; (xi) pre-tax profit; (xii) cash flow; (xiii) revenue; (xiv) expenses; (xv) earnings before interest, taxes and depreciation; (xvi) economic value added; and (xvii) market share. The performance criteria may be applicable to the Company, Related Entities and/or any individual business units of the Company or any Related Entity. Partial achievement of the specified criteria may result in a payment or vesting corresponding to the degree of achievement as specified in the Award Agreement. In addition, the performance criteria shall be calculated in accordance with generally accepted accounting principles, but excluding the effect (whether positive or negative) of any change in accounting standards and any extraordinary, unusual or nonrecurring item, as determined by the Administrator, occurring after the establishment of the performance criteria applicable to the Award intended to be performance-based compensation. Each such adjustment, if any, shall be made solely for the purpose of providing a consistent basis from period to period for the calculation of performance criteria in order to prevent the dilution or enlargement of the Grantee’s rights with respect to an Award intended to be performance-based compensation.

 

(d)             Acquisitions and Other Transactions . The Administrator may issue Awards under the Plan in settlement, assumption or substitution for, outstanding awards or obligations to grant future awards in connection with the Company or a Related Entity acquiring another entity, an interest in another entity or an additional interest in a Related Entity whether by merger, stock purchase, asset purchase or other form of transaction.

 

(e)             Deferral of Award Payment . The Administrator may establish one or more programs under the Plan to permit selected Grantees the opportunity to elect to defer receipt of consideration upon exercise of an Award, satisfaction of performance criteria, or other event that absent the election would entitle the Grantee to payment or receipt of Shares or other consideration under an Award. The Administrator may establish the election procedures, the timing of such elections, the mechanisms for payments of, and accrual of interest or other earnings, if any, on amounts, Shares or other consideration so deferred, and such other terms, conditions, rules and procedures that the Administrator deems advisable for the administration of any such deferral program.

 

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(f)             Separate Programs . The Administrator may establish one or more separate programs under the Plan for the purpose of issuing particular forms of Awards to one or more classes of Grantees on such terms and conditions as determined by the Administrator from time to time.

 

(g)             Individual Limitations on Awards .

 

(i)             Individual Limit for Options and SARs . Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, the maximum number of Shares with respect to which Options and SARs may be granted to any Grantee in any calendar year shall be 100,000 Shares. In connection with a Grantee’s commencement of Continuous Service, a Grantee may be granted Options and SARs for up to an additional 150,000 Shares that shall not count against the limit set forth in the previous sentence. The foregoing limitations shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10 , below. To the extent required by Section 162(m) of the Code or the regulations thereunder, in applying the foregoing limitations with respect to a Grantee, if any Option or SAR is canceled, the canceled Option or SAR shall continue to count against the maximum number of Shares with respect to which Options and SARs may be granted to the Grantee. For this purpose, the repricing of an Option (or in the case of a SAR, the base amount on which the stock appreciation is calculated is reduced to reflect a reduction in the Fair Market Value of the Common Stock) shall be treated as the cancellation of the existing Option or SAR and the grant of a new Option or SAR.

 

(ii)             Individual Limit for Restricted Stock and Restricted Stock Units . Following the date that the exemption from application of Section 162(m) of the Code described in Section 18 (or any exemption having similar effect) ceases to apply to Awards, for awards of Restricted Stock and Restricted Stock Units that are intended to be Performance-Based Compensation, the maximum number of Shares with respect to which such Awards may be granted to any Grantee in any calendar year shall be 250,000 Shares. The foregoing limitation shall be adjusted proportionately in connection with any change in the Company’s capitalization pursuant to Section 10 .

 

(h)            Deferral . If the vesting or receipt of Shares under an Award is deferred to a later date, any amount (whether denominated in Shares or cash) paid in addition to the original number of Shares subject to such Award will not be treated as an increase in the number of Shares subject to the Award if the additional amount is based either on a reasonable rate of interest or on one or more predetermined actual investments such that the amount payable by the Company at the later date will be based on the actual rate of return of a specific investment (including any decrease as well as any increase in the value of an investment).

 

(i)             Early Exercise . The Award Agreement may, but need not, include a provision whereby the Grantee may elect at any time while an Employee, Director or Consultant to exercise any part or all of the Award prior to full vesting of the Award. Any unvested Shares received pursuant to such exercise may be subject to a repurchase right in favor of the Company or a Related Entity or to any other restriction the Administrator determines to be appropriate.

 

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(j)             Term of Award . The term of each Award shall be the term stated in the Award Agreement, provided, however, that the term of an Award shall be no more than ten years from the date of grant thereof. However, in the case of an Incentive Stock Option granted to a Grantee who, at the time the Option is granted, owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the term of the Incentive Stock Option shall be five (5) years from the date of grant thereof or such shorter term as may be provided in the Award Agreement. Notwithstanding the foregoing, the specified term of any Award shall not include any period for which the Grantee has elected to defer the receipt of the Shares or cash issuable pursuant to the Award.

 

(k)            Transferability of Awards . Incentive Stock Options may not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any manner other than by will or by the laws of descent or distribution and may be exercised, during the lifetime of the Grantee, only by the Grantee. Other Awards shall be transferable (i) by will and by the laws of descent and distribution and (ii) during the lifetime of the Grantee, to the extent and in the manner authorized by the Administrator but only to the extent such transfers are made to family members, to family trusts, to family controlled entities, to charitable organizations, and pursuant to domestic relations orders or agreements, in all cases without payment for such transfers to the Grantee. Notwithstanding the foregoing, the Grantee may designate one or more beneficiaries of the Grantee’s Award in the event of the Grantee’s death on a beneficiary designation form provided by the Administrator.

 

(l)             Time of Granting Awards . The date of grant of an Award shall for all purposes be the date on which the Administrator makes the determination to grant such Award, or such other later date as is determined by the Administrator.

 

7.              Award Exercise or Purchase Price, Consideration and Taxes .

 

(a)            Exercise or Purchase Price . The exercise or purchase price, if any, for an Award shall be as follows:

 

(i)             In the case of an Incentive Stock Option:

 

(A)             granted to an Employee who, at the time of the grant of such Incentive Stock Option owns stock representing more than ten percent (10%) of the voting power of all classes of stock of the Company or any Parent or Subsidiary of the Company, the per Share exercise price shall be not less than one hundred ten percent (110%) of the Fair Market Value per Share on the date of grant; or

 

(B)              granted to any Employee other than an Employee described in the preceding paragraph, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(ii)             In the case of a Non-Qualified Stock Option, the per Share exercise price shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

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(iii)            In the case of Awards intended to qualify as Performance-Based Compensation, the exercise or purchase price, if any, shall be not less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(iv)            In the case of SARs, the base appreciation amount shall not be less than one hundred percent (100%) of the Fair Market Value per Share on the date of grant.

 

(v)             In the case of other Awards, such price as is determined by the Administrator.

 

(vi)            Notwithstanding the foregoing provisions of this Section 7(a) , in the case of an Award issued pursuant to Section 6(d) , above, the exercise or purchase price for the Award shall be determined in accordance with the provisions of the relevant instrument evidencing the agreement to issue such Award.

 

(b)             Consideration . Subject to Applicable Laws, the consideration to be paid for the Shares to be issued upon exercise or purchase of an Award including the method of payment shall be determined by the Administrator. In addition to any other types of consideration the Administrator may determine, the Administrator is authorized to accept as consideration for Shares issued under the Plan the following, provided that the portion of the consideration equal to the par value of the Shares must be paid in cash or other legal consideration permitted by Applicable Law:

 

(i)             cash;

 

(ii)             check;

 

(iii)            surrender of Shares, or delivery of a properly executed form of attestation of ownership of Shares as the Administrator may require, that have a Fair Market Value on the date of surrender or attestation equal to the aggregate exercise price of the Shares as to which said Award shall be exercised;

 

(iv)            with respect to Options, if the exercise occurs on or after the Registration Date, payment through a broker-dealer sale and remittance procedure pursuant to which the Grantee (A) shall provide written instructions to a Company designated brokerage firm to effect the immediate sale of some or all of the purchased Shares and remit to the Company sufficient funds to cover the aggregate exercise price payable for the purchased Shares and (B) shall provide written directives to the Company to deliver the certificates for the purchased Shares directly to such brokerage firm in order to complete the sale transaction;

 

(v)             with respect to Options, payment through a “ net exercise ” such that, without the payment of any funds, the Grantee may exercise the Option and receive the net number of Shares equal to the number of Shares as to which the Option is being exercised, multiplied by (A) a fraction, the numerator of which is the Fair Market Value per Share (on such date as is determined by the Administrator) less the exercise price per Share, and (B) the denominator of which is such Fair Market Value per Share (the number of net Shares to be received shall be rounded down to the nearest whole number of Shares); or

 

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(vi)            any combination of the foregoing methods of payment.

 

The Administrator may at any time or from time to time, by adoption of or by amendment to the standard forms of Award Agreement described in Section 4(b) (iv) , or by other means, grant Awards that do not permit all of the foregoing forms of consideration to be used in payment for the Shares or that otherwise restrict one or more forms of consideration.

 

(c)             Taxes . No Shares shall be delivered under the Plan to any Grantee or other person until such Grantee or other person has made arrangements acceptable to the Administrator for the satisfaction of any non-U.S., federal, state, or local income and employment tax withholding obligations, including, without limitation, obligations incident to the receipt of Shares. Upon exercise or vesting of an Award the Company shall withhold or collect from the Grantee an amount sufficient to satisfy such tax obligations, including, but not limited to, by surrender of the whole number of Shares covered by the Award sufficient to satisfy the minimum applicable tax withholding obligations incident to the exercise or vesting of an Award (reduced to the lowest whole number of Shares if such number of Shares withheld would result in withholding a fractional Share with any remaining tax withholding settled in cash).

 

8.              Exercise of Award .

 

(a)            Procedure for Exercise; Rights as a Shareholder .

 

(i)            Any Award granted hereunder shall be exercisable at such times and under such conditions as determined by the Administrator under the terms of the Plan and specified in the Award Agreement.

 

(ii)            An Award shall be deemed to be exercised when written notice of such exercise has been given to the Company in accordance with the terms of the Award by the person entitled to exercise the Award and full payment for the Shares with respect to which the Award is exercised has been made, including, to the extent selected, use of the broker-dealer sale and remittance procedure to pay the purchase price as provided in Section 7(b) (iv) .

 

(b)            Exercise of Award Following Termination of Continuous Service . In the event of termination of a Grantee’s Continuous Service for any reason other than Disability or death (but not in the event of a Grantee’s change of status from Employee to Consultant or from Consultant to Employee), such Grantee may, but only during the post-termination exercise period (but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination or such other portion of the Grantee’s Award as may be determined by the Administrator. Unless otherwise provided in the Grantee’s Award Agreement or as determined in writing by the Committee or the Board, the Grantee’s right to exercise the Award shall terminate concurrently with the termination of Grantee’s Continuous Service, if Grantee’s Continuous Service is terminated for Cause and three months and one day after the termination of the Grantee’s Continuous Service, if Grantee’s Continuous Service is terminated without Cause. In the event of a Grantee’s change of status from Employee to Consultant, an Employee’s Incentive Stock Option shall convert automatically to a Non-Qualified Stock Option on the day three months and one day following such change of status. To the extent that the Grantee’s Award was unvested at the date of termination, or if the Grantee does not exercise the vested portion of the Grantee’s Award within the post-termination exercise period, the Award shall terminate.

 

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(c)           Disability of Grantee . In the event of termination of a Grantee’s Continuous Service as a result of his or her Disability, such Grantee may, but only within six months from the date of such termination (or such longer period as specified in the Award Agreement but in no event later than the expiration date of the term of such Award as set forth in the Award Agreement), exercise the portion of the Grantee’s Award that was vested at the date of such termination; provided, however, that if such Disability is not a “disability” as such term is defined in Section 22(e)(3) of the Code, in the case of an Incentive Stock Option such Incentive Stock Option shall automatically convert to a Non-Qualified Stock Option on the day three months and one day following such termination. To the extent that the Grantee’s Award was unvested at the date of termination, or if Grantee does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(d)            Death of Grantee . In the event of a termination of the Grantee’s Continuous Service as a result of his or her death, or in the event of the death of the Grantee during the post-termination exercise period or during the six month period following the Grantee’s termination of Continuous Service as a result of his or her Disability, the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance may exercise the portion of the Grantee’s Award that was vested as of the date of termination, within six months from the date of death (or such longer period as specified in the Award Agreement but in no event later than the expiration of the term of such Award as set forth in the Award Agreement). To the extent that, at the time of death, the Grantee’s Award was unvested, or if the Grantee’s estate or a person who acquired the right to exercise the Award by bequest or inheritance does not exercise the vested portion of the Grantee’s Award within the time specified herein, the Award shall terminate.

 

(e)            Extension if Exercise Prevented by Law . Notwithstanding the foregoing, if the exercise of an Award within the applicable time periods set forth in this Section 8 is prevented by the provisions of Section 9 below, the Award shall remain exercisable until one month after the date the Grantee is notified by the Company that the Award is exercisable, but in any event no later than the expiration of the term of such Award as set forth in the Award Agreement and only in a manner and to the extent permitted under Code Section 409A.

 

9.              Conditions Upon Issuance of Shares .

 

(a)     If at any time the Administrator determines that the delivery of Shares pursuant to the exercise, vesting or any other provision of an Award is or may be unlawful under Applicable Laws, the vesting or right to exercise an Award or to otherwise receive Shares pursuant to the terms of an Award shall be suspended until the Administrator determines that such delivery is lawful and shall be further subject to the approval of counsel for the Company with respect to such compliance. The Company shall have no obligation to effect any registration or qualification of the Shares under federal or state laws.

 

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(b)    As a condition to the exercise of an Award, the Company may require the person exercising such Award to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or distribute such Shares if, in the opinion of counsel for the Company, such a representation is required by any Applicable Laws.

 

10.            Adjustments Upon Changes in Capitalization . Subject to any required action by the shareholders of the Company and Section 11 hereof, the number of Shares covered by each outstanding Award, and the number of Shares that have been authorized for issuance under the Plan but as to which no Awards have yet been granted or that have been returned to the Plan, the exercise or purchase price of each such outstanding Award, the maximum number of Shares with respect to which Awards may be granted to any Grantee in any calendar year, as well as any other terms that the Administrator determines require adjustment shall be proportionately adjusted for (i) any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, recapitalization, combination or reclassification of the Shares, or similar transaction affecting the Shares; (ii) any other increase or decrease in the number of issued Shares effected without receipt of consideration by the Company; or (iii)  any other transaction with respect to Common Stock including a corporate merger, consolidation, acquisition of property or stock, separation (including a spin-off or other distribution of stock or property), reorganization, liquidation (whether partial or complete) or any similar transaction; provided , however that conversion of any convertible securities of the Company shall not be deemed to have been “effected without receipt of consideration.” In the event of any distribution of cash or other assets to shareholders other than a normal cash dividend, the Administrator shall also make such adjustments as provided in this Section 10 or substitute, exchange or grant Awards to effect such adjustments (collectively “ adjustments ”). Any such adjustments to outstanding Awards will be effected in a manner that precludes the enlargement of rights and benefits under such Awards. In connection with the foregoing adjustments, the Administrator may, in its discretion, prohibit the exercise of Awards or other issuance of Shares, cash or other consideration pursuant to Awards during certain periods of time. Except as the Administrator determines, no issuance by the Company of shares of any class, or securities convertible into shares of any class, shall affect, and no adjustment by reason hereof shall be made with respect to, the number or price of Shares subject to an Award.

 

11.            Corporate Transactions and Changes in Control .

 

(a)             Termination of Award to Extent Not Assumed in Corporate Transaction . Effective upon the consummation of a Corporate Transaction, all outstanding Awards under the Plan shall terminate. However, all such Awards shall not terminate to the extent they are Assumed in connection with the Corporate Transaction.

 

(b)             Acceleration of Award Upon Corporate Transaction or Change in Control . The Administrator shall have the authority, exercisable either in advance of any actual or anticipated Corporate Transaction or Change in Control or at the time of an actual Corporate Transaction or Change in Control and exercisable at the time of the grant of an Award under the Plan or any time while an Award remains outstanding, to provide for the full or partial automatic vesting and exercisability of one or more outstanding unvested Awards under the Plan and the release from restrictions on transfer and repurchase or forfeiture rights of such Awards in connection with a Corporate Transaction or Change in Control, on such terms and conditions as the Administrator may specify. The Administrator also shall have the authority to condition any such Award vesting and exercisability or release from such limitations upon the subsequent termination of the Continuous Service of the Grantee within a specified period following the effective date of the Corporate Transaction or Change in Control. The Administrator may provide that any Awards so vested or released from such limitations in connection with a Change in Control, shall remain fully exercisable until the expiration or sooner termination of the Award.

 

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(c)             Effect of Acceleration on Incentive Stock Options . Any Incentive Stock Option accelerated under this Section 11 in connection with a Corporate Transaction or Change in Control shall remain exercisable as an Incentive Stock Option under the Code only to the extent the $100,000 dollar limitation of Section 422(d) of the Code is not exceeded.

 

12.            Effective Date and Term of Plan . The Plan shall become effective upon the earlier to occur of its adoption by the Board or its approval by the shareholders of the Company. It shall continue in effect for a term of ten years unless sooner terminated. Subject to Section 17 , below, and Applicable Laws, Awards may be granted under the Plan upon its becoming effective.

 

13.            Amendment, Suspension or Termination of the Plan .

 

(a)            The Board may at any time amend, suspend or terminate the Plan; provided, however, that no such amendment shall be made without the approval of the Company’s shareholders to the extent such approval is required by Applicable Laws.

 

(b)             No Award may be granted during any suspension of the Plan or after termination of the Plan.

 

(c)             No suspension or termination of the Plan (including termination of the Plan under Section 11 , above) shall adversely affect any rights under Awards already granted to a Grantee.

 

14.             Reservation of Shares .

 

(a)     The Company, during the term of the Plan, will at all times reserve and keep available such number of Shares as shall be sufficient to satisfy the requirements of the Plan.

 

(b)    The inability of the Company to obtain authority from any regulatory body having jurisdiction, which authority is deemed by the Company’s counsel to be necessary to the lawful issuance and sale of any Shares hereunder, shall relieve the Company of any liability in respect of the failure to issue or sell such Shares as to which such requisite authority shall not have been obtained.

 

15.             No Effect on Terms of Employment/Consulting Relationship . The Plan shall not confer upon any Grantee any right with respect to the Grantee’s Continuous Service, nor shall it interfere in any way with his or her right or the right of the Company or any Related Entity to terminate the Grantee’s Continuous Service at any time, with or without cause, including, but not limited to, Cause, and with or without notice. The ability of the Company or any Related Entity to terminate the employment of a Grantee who is employed at will is in no way affected by its determination that the Grantee’s Continuous Service has been terminated for Cause for the purposes of this Plan.

 

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16.             No Effect on Retirement and Other Benefit Plans . Except as specifically provided in a retirement or other benefit plan of the Company or a Related Entity, Awards shall not be deemed compensation for purposes of computing benefits or contributions under any retirement plan of the Company or a Related Entity, and shall not affect any benefits under any other benefit plan of any kind or any benefit plan subsequently instituted under which the availability or amount of benefits is related to level of compensation. The Plan is not a “Pension Plan” or “Welfare Plan” under the Employee Retirement Income Security Act of 1974, as amended.

 

17.             Shareholder Approval . The grant of Incentive Stock Options under the Plan shall be subject to approval of the Plan by the shareholders of the Company within twelve (12) months before or after the date the Plan is adopted excluding Incentive Stock Options issued in substitution for outstanding Incentive Stock Options pursuant to Section 424(a) of the Code. Such shareholder approval shall be obtained in the degree and manner required under Applicable Laws. The Administrator may grant Incentive Stock Options under the Plan prior to approval by the shareholders, but until such approval is obtained, no such Incentive Stock Option shall be exercisable. In the event that shareholder approval is not obtained within the twelve (12) month period provided above, all Incentive Stock Options previously granted under the Plan shall be exercisable as Non-Qualified Stock Options.

 

18.             Effect of Section 162(m) of the Code . Section 162(m) of the Code does not apply to the Plan prior to the Registration Date. Following the Registration Date, the Plan, and all Awards issued thereunder, are intended to be exempt from the application of Section 162(m) of the Code, which restricts under certain circumstances the Federal income tax deduction for compensation paid by a public company to named executives in excess of $1 million per year. The exemption is based on Treasury Regulation Section 1.162-27 (f), in the form existing on the effective date of the Plan, with the understanding that such regulation generally exempts from the application of Section 162(m) of the Code compensation paid pursuant to a plan that existed before a company becomes publicly held. Under such Treasury Regulation, this exemption is available to the Plan for the duration of the period that lasts until the earlier of (i) the expiration of the Plan; (ii) the material modification of the Plan; (iii) the exhaustion of the maximum number of shares of Common Stock available for Awards under the Plan, as set forth in Section 3(a) ; (iv) the first meeting of shareholders at which Directors are to be elected that occurs after the close of the third calendar year following the calendar year in which the Company first becomes subject to the reporting obligations of Section 13 or 15(d) of the Exchange Act; or (v) such other date required by Section 162(m) of the Code and the rules and regulations promulgated thereunder. To the extent that the Administrator determines as of the date of grant of an Award that (i) the Award is intended to qualify as Performance-Based Compensation; and (ii) the exemption described above is no longer available with respect to such Award, such Award shall not be effective until any shareholder approval required under Section 162(m) of the Code has been obtained.

 

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19.             Unfunded Obligation . Grantees shall have the status of general unsecured creditors of the Company. Any amounts payable to Grantees pursuant to the Plan shall be unfunded and unsecured obligations for all purposes, including, without limitation, Title I of the Employee Retirement Income Security Act of 1974, as amended. Neither the Company nor any Related Entity shall be required to segregate any monies from its general funds, or to create any trusts, or establish any special accounts with respect to such obligations. The Company shall retain at all times beneficial ownership of any investments, including trust investments, which the Company may make to fulfill its payment obligations hereunder. Any investments or the creation or maintenance of any trust or any Grantee account shall not create or constitute a trust or fiduciary relationship between the Administrator, the Company or any Related Entity and a Grantee, or otherwise create any vested or beneficial interest in any Grantee or the Grantee’s creditors in any assets of the Company or a Related Entity. The Grantees shall have no claim against the Company or any Related Entity for any changes in the value of any assets that may be invested or reinvested by the Company with respect to the Plan.

 

20.             Construction . Captions and titles contained herein are for convenience only and shall not affect the meaning or interpretation of any provision of the Plan. Except when otherwise indicated by the context, the singular shall include the plural and the plural shall include the singular. Use of the term “ or ” is not intended to be exclusive, unless the context clearly requires otherwise.

 

21.             Nonexclusivity of the Plan . Neither the adoption of the Plan by the Board, the submission of the Plan to the shareholders of the Company for approval, nor any provision of the Plan will be construed as creating any limitations on the power of the Board to adopt such additional compensation arrangements as it may deem desirable, including, without limitation, the granting of Awards otherwise than under the Plan, and such arrangements may be either generally applicable or applicable only in specific cases.

 

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Exhibit 10.5

 

VOTING AGREEMENT

 

This VOTING AGREEMENT (this “Agreement” ), is made and entered into as of this 27 th day of September, 2017 (the “Effective Date” ), by and among ALEXANDER M. SALGADO and ERDUIS SANABRIA (the “Management Shareholders” ) and the other individuals and entities signatory to this Agreement (the “Investing Shareholders , and together with the Management Shareholders, collectively, the “Shareholders” and individually, a “ Shareholder ”).

 

RECITALS

 

WHEREAS , concurrently with the execution of this Agreement, the Shareholders, who are currently members of 271 LAKE DAVIS HOLDINGS, LLC D/B/A SANSAL (the “LLC” ) are acquiring shares of common stock (the “Shares” ) of ARMEAU BRANDS, INC. , a Nevada corporation (the “Company” ) in exchange for their respective limited liability company membership interests in the LLC; and

 

WHEREAS , the Shareholders wish to provide for the orderly management of certain of the Company’s affairs on an ongoing basis.

 

AGREEMENT

 

NOW, THEREFORE , the Shareholders agree as follows:

 

1.               Voting Provisions . Each Shareholder agrees to vote, or cause to be voted, all Shares owned by such Shareholder, or over which such Shareholder has voting control, from time to time and at all times, in whatever manner as shall be necessary, in accordance with the recommendations with respect to all matters brought to a vote of shareholders of the Company, including without limitation, the election or removal of directors, the amendment of the Company’s Articles of Incorporation or the merger or sale of the Company. For purposes of this Agreement, the term “Shares” shall mean and include any securities of the Company the holders of which are entitled to vote for members of the Board, including without limitation, all shares of common stock and preferred stock, by whatever name called, now owned or subsequently acquired by a Shareholder, however acquired, whether through stock splits, stock dividends, reclassifications, recapitalizations, similar events or otherwise. In the absence of a voting recommendation by the Management Shareholders on one or more matters brought to a vote of shareholders, each Shareholder may vote such Shareholder’s Shares as determined by the Shareholder in the Shareholders’ sole and absolute discretion.

 

2.               Remedies .

 

2.1             Irrevocable Proxy and Power of Attorney . Each Shareholder hereby constitutes and appoints as the proxies of such Shareholder and hereby grants a power of attorney to the Managing Shareholders, and each of them, with full power of substitution, to vote such Shareholder’s Shares in accordance with Section 1 , and hereby authorizes each of them to represent and vote, if and only if the Shareholder (a) fails to vote or (b) attempts to vote (whether by proxy, in person or by written consent), in a manner which is inconsistent with the terms of this Agreement, all of such Shareholder’s Shares Each of the proxy and power of attorney granted pursuant to the immediately preceding sentence is given in consideration of the agreements and covenants of the Shareholders in connection with the transactions contemplated by this Agreement and, as such, each is coupled with an interest and shall be irrevocable unless and until this Agreement terminates or expires pursuant to this Agreement.

 

 

 

 

2.2             Specific Enforcement . Each Shareholder acknowledges and agrees that each other Shareholder party hereto will be irreparably damaged in the event any of the provisions of this Agreement are not performed by Shareholders parties in accordance with their specific terms or are otherwise breached. Accordingly, it is agreed that each of Managing Shareholders, on behalf of themselves and the other the Shareholders, shall be entitled to an injunction to prevent breaches of this Agreement, and to specific enforcement of this Agreement and its terms and provisions in any action instituted in any court of the United States or any state having subject matter jurisdiction.

 

2.3            Remedies Cumulative . All remedies, either under this Agreement or by law or otherwise afforded to any party, shall be cumulative and not alternative.

 

3.               Term . This Agreement shall be effective as of the date hereof and shall continue in effect until and shall terminate upon the earliest to occur of (a) the sale or merger of the Company; (b) the Management Shareholders beneficially owning in the aggregate fewer than twenty-five percent (25%) of the Shares owned as of the Effective Date; (b) termination of this Agreement in accordance with Section 4.6 ; or (c) the fifth (5 th ) anniversary of this Agreement.

 

4.               Miscellaneous .

 

4.1             Successors and Assigns . The terms and conditions of this Agreement shall inure to the benefit of and be binding upon the Shareholders and their respective heirs, legal representatives, successors and assigns. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.

 

4.2             Governing Law; Jurisdiction; Attorney’s Fees . This Agreement shall be governed by and construed in accordance with the Laws of the State of Florida, without regard to conflicts of law principles.  Each of the Shareholders submits to the jurisdiction of any state or federal court sitting in the State of Florida, Miami-Dade County, in any action or proceeding to interpret enforce or otherwise arising out of or relating to this Agreement and agrees that all claims in respect of the action or proceeding may be heard and determined in any such court.  Each of the Shareholders waives any defense of inconvenient forum to the maintenance of any action or proceeding so brought and waives any bond, surety, or other security that might be required of any other Shareholder with respect thereto.  Any Shareholder may make service on any other Shareholder by sending or delivering a copy of the process to the Shareholder to be served at the address and in the manner provided for the giving of notices in Section 4.5 .  Nothing in this Section 4.2 , however, shall affect the right of any Shareholder to serve legal process in any other manner permitted by law.  Each Shareholder agrees that a final judgment in any action or proceeding so brought shall be conclusive and may be enforced by suit on the judgment or in any other manner provided by law or at equity. In any action brought to interpret to enforce this Agreement, the prevailing Shareholder or Shareholders shall be entitled to recover all cost related thereto from the non-prevailing Shareholder or Shareholders, including attorneys’ fees and costs at both the trial and appellate levels. 

 

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4.3             Counterparts . This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument. Counterparts may be delivered via facsimile, .PDF or any other electronic transmission and any counterpart so delivered shall be deemed to have been duly and validly delivered and be valid and effective for all purposes.

 

4.4             Titles and Subtitles . The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.

 

4.5             Notices . All notices and other communications given or made pursuant to this Agreement shall be (a) in writing; (b) sent by (i) personal delivery or (ii) a nationally recognized overnight courier to the addresses set forth under each Shareholder’s signature on the signature pages hereto (or to such subsequent address as a Shareholder may notify the Management Shareholders by written notice pursuant to this Section 4.5 ); and (c) shall be effective upon receipt.

 

4.6             Consent Required to Amend, Terminate or Waive . This Agreement may be amended or terminated and the observance of any term hereof may be waived (either generally or in a particular instance and either retroactively or prospectively) only by a written instrument executed by (a) the Management Shareholders; and (b) Investing Shareholders holding of at least a majority of the Shares then held by the Investing Shareholders. The Management Shareholders shall give prompt written notice of any amendment, termination, or waiver hereunder to any Shareholder that did not consent in writing thereto. Any amendment, termination, or waiver effected in accordance with this Section 4.6 shall be binding on each Shareholder and all of such Shareholder’s heirs, legal representatives, and permitted assigns, whether or not any such Shareholder or such Shareholder’s heirs, legal representatives, successors or assigns entered into or approved such amendment, termination or waiver.

 

4.7             Delays or Omissions . No delay or omission to exercise any right, power or remedy accruing to any Shareholder under this Agreement, upon any breach or default of any other Shareholder under this Agreement, shall impair any such right, power or remedy of such non-breaching or non-defaulting Shareholder nor shall it be construed to be a waiver of any such breach or default, or an acquiescence therein, or of or in any similar breach or default thereafter occurring; nor shall any waiver of any single breach or default be deemed a waiver of any other breach or default previously or thereafter occurring. Any waiver, permit, consent or approval of any kind or character on the part of any party of any breach or default under this Agreement, or any waiver on the part of any party of any provisions or conditions of this Agreement, must be in writing and shall be effective only to the extent specifically set forth in such writing. All remedies, either under this Agreement or by law or otherwise afforded to any Shareholder, shall be cumulative and not alternative.

 

4.8             Severability . The invalidity or unenforceability of any provision hereof shall in no way affect the validity or enforceability of any other provision.

 

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4.9             Entire Agreement . This Agreement constitutes the full and entire understanding and agreement among the Shareholders with respect to the subject matter hereof, and any other written or oral agreement relating to the subject matter hereof existing among the Shareholders is expressly canceled.

 

4.10           Stock Splits, Stock Dividends and Similar Transactions .In the event of any issuance of Shares to any of the Shareholders (including, without limitation, in connection with any stock split, stock dividend, recapitalization, reorganization or similar transaction), such Shares shall become subject to this Agreement.

 

4.11           Further Assurances . At any time or from time to time after the Effective Date, the Shareholders agree to cooperate with each other, and at the request of any other party, to execute and deliver any further instruments or documents and to take all such further action as the other party may reasonably request in order to evidence or effectuate the consummation of the transactions contemplated hereby and to otherwise carry out the intent of the Shareholders hereunder.

 

[ Signature Pages Follow ]

 

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IN WITNESS WHEREOF , the Shareholders have executed this Voting Agreement as of the Effective Date

 

  MANAGEMENT SHAREHOLDERS:
   
  /s/Alexander Salgado
  Alexander M. Salgado
  Number of Shares: 946,725
   
   
  Address
   
  /s/ Erduis Sanabria
  Erduis Sanabria
  Number of Shares: 946,725
   
   
  Address

  

[ SIGNATURES CONTINUE ON FOLLOWING PAGE ]

 

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  INVESTING SHAREHOLDERS:
   
  RUMAR INVESTMENTS, LLC
   
  By: /s/ Maricela Nicolas
  Print Name: Maricela Nicolas
  Title: Manager
  Number of Shares: 312,000
   
   
  Address
   
  /s/ Etniel Sanabria
  Etniel Sanabria
  Number of Shares: 393,900
   
   
  Address

  

[ SIGNATURES CONTINUE FOLLOWING PAGE ]

 

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  /s/ Henry Yanez
  Henry Yanez
  Number of Shares: 68,250
   
   
  Address
   
  /s/ Edi Israelov
  Edi Israelov
  Number of Shares: 546,000
   
   
  Address
   
  /s/ Faullin Marshall Paletsky
  Faullin Marshall Paletsky
   
  /s/ Brenna Leigh Steinberg
  Brenna Leigh Steinberg
  Number of Shares: 273,000
   
   
  Address
   
  /s/ Joseph Michael Urciuoli
  Joseph Michael Urciuoli
  Number of Shares: 25,350
   
   
  Address

  

[ SIGNATURES CONTINUE FOLLOWING PAGE ]

 

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  YCA HOLDINGS, LLC
   
  By: /s/ Yeylys Cabrera
  Print Name: Yeylys Cabrera
  Title: CEO
  Number of Shares: 390,000
   
   
  Address
   
  CAO INVESTMENT GROUP, LLC
   
  By: /s/ Erik Cao
  Print Name: Erik Cao
  Title: Manager
  Number of Shares: 312,000
   
   
  Address
   
  YM LIMITED INVESTMENTS LLC
   
  By: /s/ Yenier Mirabales
  Print Name: Yenier Mirabales
  Title: Manager
  Number of Shares: 156,000
   
   
  Address
   
  /s/ Jesus Muley Pratts
  Jesus Muley Pratts
  Number of Shares: 7,800
   
   
  Address

 

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  MENENDEZ INVESTMENT LLC
   
  By: /s/ Rosa Menendez
  Print Name: Rosa Menendez
  Title: Manager
  Number of Shares: 78,000
   
   
  Address

 

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