ALLDIGITAL EMPLOYMENT AGREEMENT

 

JOHN WALPUCK

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is made and entered into as of
August 1, 2011 (the “Effective Date”), by and between AllDigital, Inc., a
California corporation (the “Company”), and John Walpuck (“Employee”). In
consideration of the mutual covenants set forth below, the Company and Employee
hereby agree as follows:

 

1.          Employment Offer Contingencies. Employee will be required, as a
condition of employment with the Company, to: (a) successfully complete a
background check; (b) execute the Company’s Confidential, Proprietary
Information and Invention Assignment Agreement, (c) execute the Company’s
Security Training Acknowledgement Form, (d) provide, as required by law, legal
proof of identity and authorization to work in the United States, and (e) if
applicable, obtain a written consent or release from Employee’s current employer
to join Company in the form of the Company’s Release Agreement. The above
documents will be provided in advance and Employee will have adequate time to
review them, but the documents must be completed and submitted to Employer no
later than Employee’s first day of employment with the Company. Upon
commencement of employment, Employee will be provided a copy of the Company’s
Employee Handbook which Employee will be required to review and execute and
written acknowledgement thereof within 30 days of beginning employment with the
Company.

 

2.          At Will Employment. The Company hereby employs Employee, and
Employee hereby accepts employment by the Company. The parties acknowledge and
agree that the Employee’s employment relationship is “at-will”, meaning that
either party may terminate the employment relationship for any reason (or no
reason at all) at any time, with or without cause and with or without or prior
notice. Any termination of Employee by the Company shall be by action of the
Board of Directors of the “Parent Company.” “Parent Company” shall mean the
Company, except that if at any time the Company becomes a wholly-owned
subsidiary of another corporation or entity, “Parent Company” shall mean the
corporation or entity that owns the Company. The Parent Company, and its
consolidated subsidiaries, are referred to herein as the “Consolidated Company.”

 

3.          Services. Employee shall serve as Chief Operating Officer and Chief
Financial Officer of the Company (or Consolidated Company, as the case may be)
and perform such services for the Company as are customary for such position and
as may be assigned to him from time to time by the Board of Directors of the
Parent Company which, generally, shall include the following: (1) interact with
executive management to develop Company’s strategic plans, (2) develop
operational and financial objectives, (3) develop, implement and ensure
compliance with operational and financial policies and procedures in
collaboration with executive management, (4) prepare the Company’s annual
budget; (5) prepare and present monthly financial statements, (6) develop and
maintain effective systems of general accounting and cost determination, (7)
supervise cost analysis and make recommendations to ensure appropriate income
and cash flow, (8) review billing and collection patterns and make corrective
recommendations, (9) select, orient and train, as appropriate and necessary,
finance and other employees, including recommendation of merit increases,
promotions and disciplinary actions, (10) review financial performance and
ensure compliance with government reporting requirements, including tax reports,
(11) provide assistance to executive management related to performance of
operational and financial management matters, (12) monitor budgetary performance
and internal controls, and (13) other duties as may be assigned by the Chief
Executive Officer and Parent Company Board of Directors.

 

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4.          Outside Activities. During the term of this Agreement, or any
extensions thereof, Employee agrees to not engage in any other gainful
employment, business or activity that is competitive to, or in conflict
(directly, indirectly, actual or potential) with the Consolidated Company,
without the written consent of the Company. While Employee renders services to
the Consolidated Company, Employee will not assist any person or organization in
competing with the Consolidated Company, in preparing to compete with the
Consolidated Company, or in hiring any employees of the Consolidated Company.

 

5.          Work and Reside in Orange County. Employee agrees that he will work
full time at the Company’s main office in Irvine, California, and be required to
reside (in a primary residence) in the immediate Irvine or greater Orange
County, California metropolitan area for the duration of Employee’s employment.

 

6.          Restrictive Covenants During Term.

 

(a)          During his employment by the Company, Employee shall devote his
full time and services exclusively to the Consolidated Company and will not,
without the prior written consent of the Board of Directors of the Parent
Company, own, either directly or indirectly, any interest in any privately-held
business or commercial enterprise which is competitive with the business
conducted by the Consolidated Company. Furthermore, Employee shall not, without
the prior written consent of the Board of Directors of the Parent Company, serve
as a partner, officer, director, advisor or employee of, or act in any other
similar capacity for, any business or commercial enterprise which is competitive
with the business conducted by the Consolidated Company. However, nothing
contained in this Section 6 shall be construed to prohibit Employee from
purchasing the stock or other securities of any corporation or other business
entity whose stock or securities are traded on any national or regional
securities exchange or in the national over-the-counter market.

 

(b)          During his employment by the Company, Employee shall comply with
all employee manuals, handbook, policies and procedures adopted by the Board of
Directors of the Company, unless such manual, handbook, policies or procedure
expressly provides that it is not applicable to Employee or a person holding
Employee’s position. Without limiting the generality of the foregoing, and
whether included in any manual, handbook, policy or procedure, Employee shall
not enter into any agreement (written or verbal) or other instrument that
includes a financial, service or other obligation on the part of any
Consolidated Company unless another executive officer of the Company has
reviewed and approved such agreement or instrument.

 

7.          Compensation.

 

a.          Base Salary. As compensation for the services to be performed
hereunder, Employee shall receive an annual base salary (“Base Salary”) of
$12,000.00 per month. The Base Salary shall be subject to adjustment upward, but
not downward, in the sole and absolute discretion of the Parent Company’s Board
of Directors. All Base Salary hereunder shall be payable in accordance with the
Company’s customary payroll practices and subject to federal and state
withholding requirements.

 

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b.          Bonuses. Employee will have the ability to earn an amount equal to
50% of the annual Base Salary as a “Management by Objective Bonus” (“MBO
Bonus”). The MBO Bonus will be deemed earned by the Employee following the
successful achievement of quarterly objectives approved in writing by the Parent
Company’s Board of Directors. The MBO Bonus will be payable in quarterly
payments. The MBO Bonus, if earned, will be paid within 45 days of the end of
the fiscal quarter, except for any bonus due and payable at the Company’s
year-end, which will then be due no later than March 15 of the following year.
If Employee’s employment is terminated for any reason during any bonus term, the
Employee will receive the payment of his pro-rated share of the MBO Bonus within
45 days of the end of the fiscal quarter provided that the written objectives
for that quarter were in the process of being achieved (as reasonably determined
by the Parent Company’s Board and Directors) or were actually achieved during
that fiscal quarter.

 

c.          Payment Upon Termination.

 

(i)          Subject to the following paragraph and the last sentence of this
paragraph, upon any termination of Employee’s employment by the Company (other
than a termination for “Cause” as that term is defined below), the Company shall
pay to Employee, in addition to any accrued but unpaid compensation and accrued
but unused Paid Time Off pay earned by Employee through the effective date of
the termination of employment, the following “Severance Amount”: (A) an amount
equal to one year’s Base Salary at the annual rate of Base Salary being paid to
Employee as of the effective date of the termination of employment, and (B) an
amount equal to 100% of Employee’s group health and dental insurance premiums
with the Company (or, at the election of the Company, 100% of the amount payable
under COBRA necessary to maintain Employee’s health and dental insurance) for a
period of one year following Employee’s date of termination. Notwithstanding
anything in this Agreement to this contrary, (Y) any obligation of the Company
to pay any portion of the Severance Amount shall immediately and automatically
cease, without notice or opportunity to cure, upon Employee’s breach of Section
9 or 10 during, or following termination of, Employee’s employment with the
Consolidated Company, and (Z) any obligation of the Company to pay any portion
of the severance amount shall be suspended (but not terminated) at the option of
the Company (1) during any period that the Parent Company’s independent public
accountants require the Consolidated Company to include a going concern
qualification in the financial statements, until such going concern
qualification is removed or eliminated, (2) during any calendar month in which
the Consolidated Company’s current ratio (i.e. ratio of current assets to
current liabilities) as of the last day of the prior calendar month was less
than 2.5, or (3) during any period in which the Consolidated Company has current
assets of less than $650,000; provided, however, none of (1), (2) or (3) shall
apply if the Consolidated Company has cash or cash equivalents in excess of $1
million.

 

Payments of the cash portion of the Severance Amount shall be made to Employee
in six equal monthly installments, less any applicable taxes, except as set
forth below in this paragraph. Notwithstanding anything in this subsection (c)
(i) to the contrary: (A) no base salary continuation or bonus amount otherwise
payable to the Employee under this subsection (i) shall be paid unless and until
the Employee incurs a “separation from service” (as defined in Treasury
Regulation Section 1.409A-1(h)) from the Company (a “Separation from Service”)
(with any amounts deferred as a result of this subsection (A) being payable
promptly following such Separation from Service and as permitted by subsection
(B)); and (B) any base salary and bonus amounts that are otherwise due or
payable under this subsection (c)(i) during the six-month period following the
Employee’s Separation from Service shall instead be deferred and paid to the
Employee within five business days after, but in no instance prior to, the
six-month anniversary of Employee’s Separation from Service (or, if earlier, the
date of Employee’s death) if and to the extent that such amounts (1) do not
constitute “separation pay due to involuntary separation from service” (as
defined in Treasury Regulation Section 1.409A-1(b)(9)(iii); and (2) are subject
to Section 409A of the Internal Revenue of 1986, as amended (the “Code”). The
foregoing restrictions on the payment of continuing base salary and bonus are
intended to comply with the requirements of Section 409A of the Code and shall
be interpreted consistently with that intent.

 

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(ii)           Upon any termination of Employee’s employment by the Company for
“Cause”, the Company shall pay to Employee any accrued but unpaid compensation
and accrued but unused Paid Time Off earned by Employee through the effective
date of the termination of his employment. As used herein, the term “Cause”
shall mean (a) Employee’s conviction of, or plea of guilty, nolo contendere or
the equivalent, in any criminal action involving a felony, (b) Employee’s
misappropriation of any material funds or property of the Company,
(c) Employee’s willful misconduct in the performance of his duties for the
Company, (c) Employee’s breach of any of the covenants set forth in Sections 4,
5, 6, 9 or 10, or (d) the continuation of any breach, or repeat of any breach,
by Employee of any covenant not designated in subsection (c) of this paragraph
after the Company has given Employee written notice identifying such breach.

 

(iii)           If Employee elects to terminate his employment with the Company
for “Good Reason,” Employee shall be entitled to the same Severance Amount as
set forth in subsection (c)(i) above, including the modifying restrictions set
forth in the last sentence of the first paragraph, and the second paragraph, of
subsection (c)(i). “Good Reason” shall mean (A) a material reduction of
Employee’s compensation, responsibilities or duties; (B) a change in the
principal place of Employee’s employment such that it causes Employee to
relocate or materially increases Employee’s commute time; or (C) any other event
that is a functional equivalent of an involuntary termination and which falls
within the safe-harbor provisions related to termination for good reason set
forth in the regulations implementing Section 409A of the Code.

 

(iv)          The payments described in this Section 7(c) shall constitute the
entirety of the compensation payable to Employee by the any Consolidated Company
upon a termination of his employment with the Company.

 

8.          Employee Benefits.

 

a.          Paid Time Off. Employee shall be entitled to Paid Time Off (“PTO”)
plus company holidays in accordance with the PTO and Holiday policies set forth
in the Company’s Employee Handbook. Initially, it is understood that Employee
shall be entitled to of a maximum of 24 days per year, accruing at a rate of two
days per month, and a maximum accrual of 24 days at any one point in time,
excluding paid holidays, the scheduling of which will be approved in advance
(generally at least one month in advance) by the Chief Executive Officer, which
approval will not be unreasonably withheld. Any requested PTO days beyond 24
days shall only be approved in writing by the Chief Executive Officer and shall
be without compensation unless otherwise agreed by the Chief Executive Officer
or Parent Company Board of Directors.

 

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b.          Group Health Insurance Benefits. The Company shall provide for
Employee and his dependents, at the Company’s expense, participation in such
health, accident and dental insurance plans as are made available generally to
the Company’s senior executive management level employees (i.e. officers party
to substantially similar written employment agreements) from time to time.

 

c.          Business Expenses. Employee shall be entitled to reimbursement by
the Company for any ordinary and necessary expenses reasonably incurred by
Employee in the performance of his duties and in acting for the Company,
provided that:

 

i.          Each such expenditure over $1,000.00 is pre-approved in writing by
the Employee’s supervisor, or in the case of the Chief Executive Officer, by
another executive officer of the Company, in accordance with Company policy.

 

ii.          Employee furnishes to the Company such documentation regarding such
expenses as is required by the rules and policies relating to expense
reimbursements that the Company shall from time to time establish in order to
permit such reimbursement payments to be taken as proper deductions by the
Company under applicable state and federal tax laws.

 

Repeated violations of this provision shall be deemed cause for termination as
defined in Section 7(c)(ii)(d).

 

d.          Indemnification. Employee shall have the full benefit of all
provisions of the Company’s limits of liability as may be provided to an
employee of the Company in the Company’s articles of incorporation, bylaws, and
California Labor Code Section 2802 providing for indemnification of Employee in
the circumstances described therein.

 

9.          Confidential Information.

 

a.          Access to Confidential and Trade Secret Information. Employee
acknowledges that during the course of Employee’s retention by the Consolidated
Company, Employee will be exposed to and provided documents and other
information regarding the confidential business and technical affairs of the
Consolidated Company, whether reduced to writing, maintained on any form of
electronic media or maintained in the mind or memory and whether compiled by
Employee or the Consolidated Company, including, without limitation, information
about the Consolidated Company’s past, present and future financial condition,
the markets for its products, key personnel, past, present or future actual or
threatened litigation, trade secrets, current and prospective customer lists,
operational methods, acquisition plans, prospects, plans for future development,
pricing information, cost information, sources of supply, sources of customers,
customer lists, identities and purchasing characteristics and histories,
business plans, models, projections or prospects, actual and/or projected
expenses, actual and/or projected revenues, actual and/or projected profits,
financial information, data, know-how, formulae, processes, designs,
specifications, drawings, contract rights, and other information concerning the
Consolidated Company’s organization, business operations, business affairs,
marketing plans, clients, customers, suppliers, vendors, licensees, or
licensors, of a confidential, proprietary, or secret nature not readily
available to the public (the “Confidential Information”).

 

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Employee expressly acknowledges that this Confidential Information has
independent economic value from not being readily known, disclosed to or
ascertainable by proper means by the public and/or others in the industry and
business of the Consolidated Company, and that reasonable efforts have been made
by the Consolidated Company to maintain the secrecy of such Confidential
Information, and this Confidential Information shall be considered and deemed
the Consolidated Company’s trade secrets and confidential, proprietary
information.

 

b.          No Disclosure or Use of Confidential Information. At no time during
Employee’s employment or thereafter shall Employee ever divulge, disclose, or
otherwise use any Confidential Information for any purpose other than to do and
perform the business and activities of the Consolidated Company, unless and
until such information is readily available in the public domain by reason other
than Employee’s disclosure or use thereof in violation of this Section 9, or
unless such disclosure is required by law. Employee specifically acknowledges
that the Confidential Information derives independent economic value from not
being readily known, disclosed to or ascertainable by proper means by the public
or the industry or business of the Consolidated Company, that reasonable efforts
have been made by the Consolidated Company to maintain the secrecy of such
Confidential Information, that such Confidential Information is the sole
property of the Consolidated Company, is considered the Consolidated Company’s
trade secrets, and that any retention, use or disclosure of such Confidential
Information by Employee (except in the course of performing duties hereunder)
shall constitute a misappropriation of trade secrets of the Consolidated Company
and/or unfair competition.

 

10.          Non-Solicitation. Employee shall not, for a period of 12 months
following the termination of his employment with the Consolidated Company, for
any reason whatsoever, directly or indirectly, for himself or for, on behalf of
or in conjunction with any other person or entity, solicit or induce any
employee, agent, independent contractor or consultant of or to the Consolidated
Company to terminate his, her or its employment or other relationship with the
Consolidated Company for the purpose of associating with any competitor of the
Consolidated Company or otherwise encourage any such person to leave or sever
his, her or its employment or other business relationship with the Consolidated
Company.

 

11.          Damages and Injunction. Because of the difficulty of measuring
economic losses to the Consolidated Company as a result of a breach by Employee
of the provisions of Sections 9 and 10 hereof, and because of the immediate and
irreparable damage that could be caused for which it would have no other
adequate remedy, Employee agrees that the provisions of Sections 9 and 10 hereof
may be enforced by the Consolidated Company in the event of breach or threatened
breach by Employee, by injunctions and restraining orders without having to post
a bond or other security. Such actions may be taken in state or federal court
notwithstanding the inclusion of an arbitration provision in this Agreement.
Nothing herein shall be construed as prohibiting the Consolidated Company from
pursuing any other available remedy for such breach or threatened breach,
including the recovery of damages as provided for in this Agreement.

 

12.          Agency and Authority. Employee agrees that his employment by the
Company shall deem him an agent for the Company only for such purposes as are
customary for his position. Employee agrees that he will not act or purport to
act in any way for the Company, except as to matters directly related to his
employment or as may otherwise be authorized by the Parent Company’s Board of
Directors.

 

13.          Severability. Nothing contained in this Agreement shall be
construed as requiring the commission of any act contrary to law, and wherever
there is any conflict between any provision of this Agreement and any present or
future statute, law, ordinance or regulation contrary to which the parties have
no legal right to contract, the latter shall prevail, but in such event, the
provision of this Agreement thus affected shall be curtailed and limited only to
the extent necessary to bring it within the requirements of the law. In the
event that any part, article, paragraph, section or clause of this Agreement
shall be held to be indefinite or invalid, the entire Agreement shall not fail
on account thereof, and the balance of the Agreement shall continue in full
force and effect.

 

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14.          Notices. Any notice required to be given under this Agreement shall
be in writing and shall be deemed effective upon personal delivery or three (3)
days after deposit in the U.S. mail, postage prepaid and properly addressed to
the party entitled to such notice, at the address indicated beside such party’s
signature line on this Agreement or at such other address as such party may
designate by ten (10) days advance written notice under this paragraph to all
other parties to this Agreement.

 

15.          Amendment. Any waiver, alteration or modification of any of the
provisions of this Agreement or cancellation or replacement of this Agreement
shall not be valid unless made in writing and signed by the parties hereto.

 

16.          Governing Law. This Agreement shall be construed and governed in
accordance with the laws of the State of California applicable to contracts
executed and to be wholly performed within the State of California, with venue
and jurisdiction for any dispute in the County of Orange.

 

17.          Waiver. Waiver by either party of the breach of any provision of
this Agreement shall not operate or be construed as a waiver of any subsequent
breach.

 

18.          Arbitration. In the event of any dispute or any claim arising out
of this agreement, the termination of Employee’s employment, or the employment
relationship between the Employee and the Company (including, but not limited
to, any claims of wrongful termination or claims for discrimination based on
race, age, sex, disability, creed, color, religion, sexual orientation, marital
status, or any other protected category, under California Fair Employment and
Housing Act, Title VII of the Civil Rights Act, Age Discrimination in Employment
Act, or Americans with Disabilities Act), Employee and the Company agree that
all such disputes shall be fully and finally resolved by binding arbitration
conducted under the rules of the California Arbitration Act, Code of Civil
Procedure Section 1280 et seq. (the “Arbitration Act”). The parties shall (1)
select a neutral arbitrator from a panel obtained from Orange County Superior
Court (or some other source mutually agreed upon between the parties), (2) be
permitted adequate and reasonable discovery necessary to arbitrate or resolve
all issues in dispute in the arbitration, and (3) direct the arbitrator to
render a written award setting forth his findings of fact and conclusions of law
which shall be afforded appropriate judicial review as permitted by and provided
for in the Arbitration Act and state laws interpreting the Arbitration Act. Each
party shall bear his or its own expenses incurred in connection with the
arbitration, including attorneys’ fees and costs, except that the Company will
pay all the arbitrator’s costs and fees unique to the arbitration. This
arbitration provision shall not apply to claims for unemployment insurance
benefits filed with the Employment Development Department or to claims for
normal workers compensation benefits filed with the Workers Compensation Appeals
Board. In the event Employee prevails in the resolution of any dispute arising
out of this agreement, Company shall reimburse Employee for all expenses
Employee incurred in connection with the arbitration, including attorneys fees
and costs, and any other costs, fees or attorneys fees as may otherwise be
provided under state or federal law.

 

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19.          Entire Agreement. This Agreement, along with the other documents
and agreements executed contemporaneously herewith by the parties, which
includes the Confidential, Proprietary Information and Invention Assignment
Agreement, the Offer Letter, New Hire Information Form, and the SBW Security
Training Acknowledgement Form, and the Stock Option Agreement (incorporating the
2011 Stock Incentive Plan), contains all the terms and conditions agreed upon by
the parties hereto and sets forth the entirety of the consideration to which
Employee shall be entitled hereunder. No other agreements, oral or otherwise,
shall be deemed to exist or to bind any of the parties hereto in any manner
related to this Agreement. No officer or employee of the Company has any
authorization to make any representation or promise in any manner related to
this Agreement not contained in this Agreement, and Employee agrees that he has
not executed this Agreement in reliance upon any such representation or promise.
This Agreement cannot be modified or changed except by written instrument,
signed by both parties hereto.

 

20.          Employee Handbook. Employee shall be governed by the personnel
rules and regulations set forth in the Company’s employee handbook and related
documents. To the extent there exists a conflict between this Agreement and the
personnel rules and regulations of the Company, this Agreement shall be the
controlling document and supersede any conflicting policy.

 

21.          Section Headings. The headings of this Agreement are for purposes
of reference only and shall not limit or otherwise affect the meaning hereof.

 

22.          Counterparts. This Agreement may be executed in a number of
counterparts, each of which shall be construed as an original for all purposes.

 

23.          Acceleration of Vesting of Options. Upon the occurrence of a
“Transaction” as defined in paragraph 9.2 of the 2011 Stock Incentive Plan
(“Incentive Plan”) or 2011 Stock Option Agreement (“Option Agreement”), as well
as any and all other individual stock option agreements that that may be
executed during the term of Employee’s employment with the Company (“Future
Option Agreements”), all stock options granted to Employee in connection with
his employment at the Company including, without limitation, those granted in
connection with the execution of the Option Agreement, shall immediately vest
and Employee will have the immediate right and option to purchase those shares
of stock on the terms and conditions set forth in the Option Agreement, the
Incentive Plan and Future Option Agreements. The acceleration of the vesting of
the options described herein shall occur regardless of any contrary provision or
language found in the Incentive Plan, Option Agreement and Future Option
Agreements.

 

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

 

    ALLDIGITAL,  INC.             By: /s/     Its:       Date:          
Address:                     EMPLOYEE           /s/   JOHN WALPUCK     Date:    
  Address:          

 

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