Exhibit 10.1

 

EXECUTIVE EMPLOYMENT AGREEMENT MARK SCIALDONE

 

THIS EMPLOYMENT AGREEMENT, dated May 1, 2015 (the "Agreement"), is between VAPE
HOLDINGS, INC., a Delaware corporation (the "Company"), and Dr. Mark Scialdone
("Executive"), an individual. Company and Executive may be referred to herein
individually as a "Party" or collectively as the "Parties."

 

RECITALS

 

WHEREAS, Executive is currently the chief executive officer of BetterChem
Consulting, L.L.C., a Pennsylvania limited liability company ("BetterChem"); and

 

WHEREAS, Company and Executive mutually desire to enter into an employment
relationship whereby Executive shall provide services to the Company in the
position of Chief Science Officer;

 

NOW, THEREFORE, in consideration of the mutual promises herein contained, the
parties hereto hereby agree as follows:

 

AGREEMENT

 

1.         POSITION AND RESPONSIBILITIES

 

a.                  Position. Pursuant to this Agreement, Executive shall render
services to the Company as its Chief Science Officer. Executive shall report to
the Chief Executive Officer ("CEO") and will have such duties, powers, and
responsibilities customary for the chief science officer of a corporation of the
size, type, and nature of the Company. Executive shall apply his best efforts,
skill, knowledge, and attention to the business of the Company in the
performance of his duties to the Company. Unless otherwise agreed, Executive
shall be offered the position of a Director on the Board of Directors of the
Company, which position shall require the formal approval of the Board of the
Company. Executive shall in addition be appointed to the position of Co-Chairman
of the Advisory Board of the Company.

 

b.                  Other Activities. Except upon the prior written consent of
the Company, which may be granted or withheld in the Company's sole discretion,
Executive will not, while employed by the Company, (i) engage, directly or
indirectly, in any other business activity (whether or not pursued for pecuniary
advantage) that might create a conflict of interest with the Company; (ii)
engage, directly or indirectly, in any other business activity or revenue stream
(whether or not pursued for pecuniary advantage) presented to or identified by
Executive in the same or similar businesses to those of the Company or related
to or arising from the operations of the Company. The Company and Executive
agree that services rendered by Executive by and through BetterChem, and that
are approved by Company in writing, are exempt from the requirements of this
paragraph.

 

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c.                   No Conflict. Executive represents and warrants that
Executive's execution of this Agreement, Executive's employment with the
Company, and the performance of Executive's proposed duties under this
Agreement, does not and will not violate any obligations the Executive may have
to any other employer, person or entity, including any obligations with respect
to proprietary or confidential information of any other person or entity.

 

d.                  Location of Services. Company acknowledges that Executive
maintains a primary residence in Pennsylvania. Nothing in this Agreement shall
be construed as requiring Executive to relocate his primary residence as a
condition of commencing or continuing employment under this Agreement. Company
acknowledges and agrees that Executive may perform some of Executive's duties
hereunder remotely, so long as it does not interfere materially with the
performance of Executive's duties. Notwithstanding the foregoing, Employee
acknowledges and agrees that Employee frequently will be required to travel to
the Company's offices and to other locations as requested by the Company's Chief
Executive Officer from time to time, at the Company's sole expense. The Parties
agree to revisit the amount of time Executive works remotely and adjust it as
necessary in accordance with the needs of the Company.

 

2.         COMPENSATION AND BENEFITS

 

a.                  Base Salary. In consideration of the services to be rendered
under this Agreement, the Company shall pay Executive an annual salary at the
rate of $102,000 per annum, less all applicable wage deductions ("Base Salary").
The Base Salary shall be paid in accordance with the Company's regularly
established payroll practice. To the extent Executive and the Company agree by
mutual written agreement which specifically refers to this Section 2(a) to defer
any Base Salary earned within a taxable year, this deferred compensation shall
paid to Executive within two and a half months of the end of the Company's tax
year in which the compensation is earned. The Base Salary will be reviewed from
time to time in accordance with the established procedures of the Company for
adjusting salaries for similarly situated Executives and may be adjusted in the
sole discretion of the Company.

 

b.                  Bonus. Executive shall receive bonus compensation associated
with revenue generated from consulting services revenues generated by BetterChem
over the term of this Agreement such bonus compensation to be calculated in
accordance with Schedule A hereto. Executive may be eligible to receive a
discretionary annual bonus compensation based upon the Board's evaluation of the
performance of Executive, the Company's operating results and such other
criteria as may be determined by the Board to be relevant. Executive must be
employed on the date such discretionary bonus, if any, is paid in order to be
eligible for same.

 

c.                   Stock Options. Subject to the approval of the Company's
Board of Directors, the Company may grant options to purchase shares of common
stock of the Company to Executive (OTCQB:VAPE) pursuant to an approved stock
option plan (the "Stock Options"). The Stock Options will vest as determined by
the Board of Directors in its sole discretion. The exercise price per share will
be equal to the fair market value per share on the date the Stock Option is
granted.

 

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d.                Royalty Sharing. Company agrees that in the event that revenue
is realized by the Company or one of the Company's wholly owned or partially
owned subsidiaries ("VAPE Affiliates"), as applicable, from the exploitation of
intellectual property that is developed with Executive as the inventor or
co-inventor, then the Company will pay Executive as follows:

 

i.         For licenses to parties other than the Company or VAPE Affiliates,
fifteen percent (15%) of Net Royalties received by the Company and/or applicable
VAPE Affiliate on all such licenses and extensions thereof in perpetuity;

 

ii.        For licenses to or other exploitation by the Company or a VAPE
Affiliate, 5% of Net Profit received by the Company or applicable VAPE Affiliate
from the sales of products incorporating the intellectual property in
perpetuity.

 

iii.        For purposes this of Subsection 2(d):

 

(1)               "Net Royalties" shall be calculated by determining gross
royalties received and subtracting any unrecouped out-of-pocket costs incurred
by the Company and/or applicable VAPE Affiliate for filing, prosecution,
licensing and patent defense directly related to the specific rights that are
licensed.

 

(2)               "Net Profit" shall be calculated by determining the net profit
received by the Company or applicable VAPE Affiliate from the sales of the
product incorporating the invention starting with the gross revenue from sales
and subtracting the costs incurred by the Company, and any returns, sales
allowances and sales discounts.

 

iv.       With respect to intellectual property in which Executive is a
co-inventor but not the sole inventor, Executive's share of Net Royalties or Net
Profit, as applicable, will be will be prorated in accordance with Executive's
percentage contribution to the subject invention ("Co-Inventor Percentage").
Company and Executive agree to negotiate Executive's Co-Inventor Percentage for
each such invention, on a case-by-ease basis, upon first issuance of a patent
covering the invention.

 

e.                   Benefits. Executive shall be eligible to participate in the
benefits made generally available by the Company to similarly situated
employees, if any, in accordance with the benefit plans established by the
Company and subject to the terms, conditions, limitations and exclusions of the
applicable plans, and as may be amended from time to time in the Company's sole
discretion. The foregoing shall not, in any way, require the Company to
establish any such benefits or continue to maintain any such benefits.

 

f.                    Expenses. Upon presentation of verifiable invoices and
other documentation as may be requested by the Company, the Company shall
reimburse Executive for reasonable business expenses incurred in the performance
of Executive's duties hereunder in accordance with the Company's expense
reimbursement guidelines. The Parties have expressly agreed that necessary and
reasonable legal fees and costs incurred by Executive in connection with this
Agreement not to exceed $3,000.00.

 

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3.         TERM OF EMPLOYMENT

 

a.         Employment Term. The employment of Executive shall be for a period of
two (2) years and may be terminated at any time for any reason or no reason by
the Company or Executive upon thirty (30) days' written notice. Either Party
hereto shall have the right to terminate this Agreement without notice in the
event of the death, bankruptcy, insolvency, or assignment for the benefit of
creditors of the other Party.

 

b.         Severance. Except in situations where the employment of Executive is
terminated For Cause, By Death or By Disability (as defined in Section 4 below),
in the event that the Company terminates the employment of Executive at any
time, Executive will be eligible to receive an amount equal to the then-current
Base Salary of the Executive payable in the form of salary continuation for a
six month period following termination. Executive shall not be entitled to any
severance payments if Executive's employment is terminated For Cause, By Death
or By Disability (as defined in Section 4 below) or if Executive's employment is
terminated by Executive (in accordance with Section 5 below).

 

4.         TERMINATION

 

a.         Termination Without Cause. Either Party may terminate this Agreement
at any time for any reason or no reason, upon thirty (30) days advance written
notice. During such notice period Executive shall continue to diligently perform
all of Executive's duties hereunder. The Company shall have the option, in its
sole discretion, to make Executive's termination effective at any time prior to
the end of such notice period as long as the Company pays Executive all
compensation to which Executive is entitled up through the last day of the
thirty-day notice period. Thereafter all obligations of the Company to the
Executive shall cease.

 

b.         Termination by Company on Account of Cause. Notwithstanding anything
in this Agreement to contrary, if Executive's employment is terminated by the
Company on account of Cause (as defined below), Executive shall not receive any
benefits or compensation following the date of termination except for accrued
but unpaid salary, which shall be paid to Executive. "Cause" means (i) an
intentional tort (excluding any tort relating to a motor vehicle) which causes
substantial loss, damage, or injury to the property or reputation of the Company
or its subsidiaries; (ii) any serious crime or intentional, material act of
fraud or dishonesty against the Company, (iii) the commission of a felony that
results in other than immaterial harm to the Company's business or the
reputation of the Company or Executive, (iv) habitual neglect of Executive's
reasonable duties (for reason other than illness or incapacity) which is not
cured within thirty (30) days after written notice thereof by the CEO to
Executive, (v) the disregard of written, material policies of the Company which
causes other than immaterial loss, damage, or injury to the property or
reputation of the Company which is not cured within ten days after written
notice thereof by the Board to Executive, and (vi) any material breach of
Executive's ongoing obligation not to disclose confidential information.

 

c.         Termination By Death. Executive's employment shall terminate
automatically upon the Executive's death. The Company shall pay to Executive's
beneficiaries or estate, as appropriate, any compensation then due and owing up
through the date of Executive's death. Thereafter all obligations of the Company
under this Agreement shall cease. Nothing in this Section 4(c) shall affect any
entitlement of Executive's heirs or devisees to the benefits of any life
insurance plan or other applicable benefits.

 

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d.                Termination By Disability. If Executive becomes eligible for
the Company's long term disability benefits or if, in the sole opinion of the
Company, Executive is unable to carry out the responsibilities and functions of
the position held by Executive by reason of any physical or mental impairment
for more than ninety consecutive days or more than one hundred and twenty days
in any twelve-month period, then, to the extent permitted by law, the Company
may terminate Executive's employment. The Company shall pay to Executive all
compensation to which Executive is entitled up through the date of termination,
and thereafter all obligations of the Company under this Agreement shall cease.
Nothing in this Section 4(d) shall affect Executive's rights under any
disability plan in which Executive is a participant.

 

5.         TERMINATION OBLIGATIONS

 

a.                  Return of Property. Executive agrees that all property
(including without limitation all electronic devices, equipment, tangible
proprietary information, documents, records, notes, contracts and
computer-generated materials) which was furnished, created, or prepared
incidentally to Executive's employment belongs to the Company and shall be
promptly returned to the Company upon termination of Executive's employment.

 

b.                  Resignation and Cooperation. Upon termination of Executive's
employment, Executive shall be deemed to have resigned from all officer and
management positions then held with the Company. Following any termination of
employment and prior to the last day of Executive's employment, Executive shall
reasonably cooperate with the Company in the winding up of pending work on
behalf of the Company and the orderly transfer of work to other employees.
Executive shall also cooperate with the Company in the defense of any action
brought by any third party against the Company that relates to Executive's
employment by the Company at the Company's sole cost and expense. Finally,
because Executive is expressly expected during the scope of employment to
contribute to and develop intellectual property that is owned and/or managed by
the Company, Executive warrants and agrees that he will provide prompt and
reasonable cooperation to Company during and following his employment with
Company on the administrative and legal prosecution and defense of intellectual
property of Company in which Executive has participated directly or indirectly
during his employment with Company.

 

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6.         CONFIDENTIAL INFORMATION

 

a.         Obligation to Maintain Confidentiality. Executive acknowledges that
the continued success of the Company depends upon the use and protection of a
large body of confidential and proprietary information. All of such confidential
and proprietary information now existing or to be developed in the future will
be referred to in this Agreement as "Confidential Information". Confidential
Information will be interpreted as broadly as possible to include all
information of any sort (whether merely remembered or embodied in a tangible or
intangible form) that is (i) related to the Company's prior, current or
potential business and (ii) is not generally or publicly known. Confidential
Information includes, without specific limitation, the information, observations
and data obtained by Executive during the course of the Employment Term and his
performance under this Agreement concerning the business and affairs of the
Company, information concerning acquisition opportunities in or reasonably
related to the Company's business or industry of which Executive is aware or
becomes aware during the Employment Term, the persons or entities that are
current, former or prospective suppliers or customers of any one or more of them
during the course of Executive's performance under this Agreement, as well as
development, transition and transformation plans, methodologies and methods of
doing business, strategic, marketing and expansion plans, including plans
regarding planned and potential sales, financial and business plans, Executive
lists and telephone numbers, new and existing programs and services, prices and
terms, customer service, integration processes, requirements and costs of
providing service, support and equipment. Therefore, Executive agrees that he
shall not disclose to any unauthorized person or use for his own account any of
such Confidential Information without the Company's prior written consent,
unless and to the extent that any Confidential Information: (i) becomes
generally known to and available for use by the public other than as a result of
Executive's acts or omissions to act or (ii) is required to be disclosed
pursuant to any applicable law or court order. Executive agrees to deliver to
the Company at the end of the Employment Term, or at any other time the Company
may request in writing, all memoranda, notes, plans, records, reports and other
documents (and copies thereof) relating to the business of the Company
(including, without limitation, all Confidential Information) that he may then
possess or have under his control.

 

b.         Ownership of Intellectual Property. Executive agrees to make prompt
and full disclosure to the Company of all ideas, discoveries, trade secrets,
inventions, innovations, improvements, developments, methods of doing business,
processes, programs, designs, analyses, drawings, reports, data, software,
firmware, logos and all similar or related information (whether or not
patentable and whether or not reduced to practice) that relate to the Company's
actual or anticipated business, research and development, or existing or future
products or services and that are conceived, developed, acquired, contributed
to, made, or reduced to practice by Executive (either solely or jointly with
others) while employed by the Company (collectively, "Work Product"). Any
copyrightable work falling within the definition of Work Product shall be deemed
a "work made for hire" under the copyright laws of the United States, and
ownership of all rights therein shall vest in the Company. To the extent that
any Work Product is not deemed to be a "work made for hire", Executive hereby
assigns and agrees to assign to the Company all right, title and interest,
including without limitation, the intellectual property rights that Executive
may have in and to such Work Product. Executive shall promptly perform all
actions reasonably requested by the CEO or his designee (whether during or after
the Employment Term) to establish and confirm the Company's ownership
(including, without limitation, providing testimony and executing assignments,
consents, powers of attorney, and other instruments).

 

c.         Third Party Information. Executive understands that the Company will
receive from third parties confidential or proprietary information ("Third Party
Information") subject to a duty on the Company's part to maintain the
confidentiality of such information and to use it only for certain limited
purposes. During the Employment Term and thereafter, and without in any way
limiting the provisions of Section 6, Executive will hold Third Party
Information in the strictest confidence and will not disclose to anyone (other
than personnel of the Company who need to know such information in connection
with their work for the Company) or use, except in connection with his work for
the Company, Third Party Information unless expressly authorized in writing by
the Manager.

 

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d.         Use of Information of Prior Employers. Executive represents and
warrants and covenants that Executive shall not disclose to the Company, or use,
or induce the Company to use, any proprietary information or trade secrets of
others at any time, including but not limited to any proprietary information or
trade secrets of any former employer, if any; and Executive acknowledges and
agrees that any violation of this provision shall be grounds for Executive's
immediate termination and could subject Executive to substantial civil
liabilities and criminal penalties. Executive further specifically and expressly
acknowledges that no officer or other Executive or representative of the Company
has requested or instructed Executive to disclose or use any such third party
proprietary information or trade secrets.

 

7.         AMENDMENTS; WAIVERS; REMEDIES

 

This Agreement may not be amended or waived except by a writing signed by
Executive and by a duly authorized representative of the Company other than
Executive. Failure to exercise any right under this Agreement shall not
constitute a waiver of such right. Any waiver of any breach of this Agreement
shall not operate as a waiver of any subsequent breaches. All rights or remedies
specified for a party herein shall be cumulative and in addition to all other
rights and remedies of the party hereunder or under applicable law.

 

8.         ASSIGNMENT; BINDING EFFECT

 

a.                  Assignment. The performance of Executive is personal
hereunder, and Executive agrees that Executive shall have no right to assign and
shall not assign or purport to assign any rights or obligations under this
Agreement. This Agreement may be assigned or transferred by the Company; and
nothing in this Agreement shall prevent the consolidation, merger or sale of the
Company or a sale of any or all or substantially all of its assets.

 

b.                  Binding Effect. Subject to the foregoing restriction on
assignment by Executive, this Agreement shall inure to the benefit of and be
binding upon each of the parties; the affiliates, officers, managers, agents,
successors and assigns of the Company; and the heirs, devisees, spouses, legal
representatives and successors of Executive.

 

9.         NOTICES

 

All notices or other communications required or permitted hereunder shall be
made in writing and shall be deemed to have been duly given if delivered: (a) by
hand; (b) by a nationally recognized overnight courier service; or (c) by United
States first class registered or certified mail, return receipt requested, to
the principal address of the other party. The date of notice shall be deemed to
be the earlier of: (i) actual receipt of notice by any permitted means, or (ii)
five business days following dispatch by overnight delivery service or the
United States Mail. Executive shall be obligated to notify the Company in
writing of any change in Executive's address.

 

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10.       SEVERABILITY

 

If any provision of this Agreement shall be held by a court or arbitrator to be
invalid, unenforceable, or void, such provision shall be enforced to the fullest
extent permitted by law, and the remainder of this Agreement shall remain in
full force and effect. In the event that the time period or scope of any
provision is declared by a court or arbitrator of competent jurisdiction to
exceed the maximum time period or scope that such court or arbitrator deems
enforceable, then such court or arbitrator shall reduce the time period or scope
to the maximum time period or scope permitted by law.

 

11.     TAXES

 

All amounts paid under this Agreement (including without limitation Base Salary)
shall be paid less all applicable state and federal tax withholdings and any
other withholdings required by any applicable jurisdiction.

 

12.         GOVERNING LAW; DISPUTE RESOLUTION

 

The parties agree that any dispute, controversy or claim between Executive and
the Company based on, arising out of or relating to Executive's employment under
this Agreement or the termination of same, including, without limitation, any
and all claims under Title VII of the Civil Rights Acts of 1964 as amended, the
Civil Rights Act of 1870, the Americans with Disabilities Act of 1990 as
amended, the Americans with Disabilities Act Amendments Act of 2008, the Age
Discrimination in Employment Act as amended, the Older Workers Benefit
Protection Act, the Fair Labor Standards Act of 1938 as amended by the Equal Pay
Act of 1963, the Lilly Ledbetter Fair Pay Act of 2009, the Family and Medical
Leave Act, the Executive Retirement Income Security Act of 1974, the Civil
Rights Act of 1991, the Genetic Information Nondiscrimination Act of 2008, the
Consolidated Omnibus Budget Reconciliation Act, the U.S. Patriot Act, the
Sarbanes-Oxley Act of 2002, the Dodd—Frank Wall Street Reform and Consumer
Protection Act, and any other federal, state or local civil rights, disability,
discrimination, retaliation or labor law, or any theory of contract, criminal,
arbitral or tort law, shall be settled by final and binding arbitration in Los
Angeles County, California, administered by the American Arbitration Association
("AAA") pursuant to the National Rules for the Resolution of Employment Disputes
of the AAA ("Rules of the AAA"). This Agreement shall be construed in accordance
with the laws of the State of California without reference to the conflict of
laws provisions thereof, and judgment upon any resulting arbitration award may
be entered in any court of competent jurisdiction.

 

13.         INTERPRETATION

 

This Agreement shall be construed as a whole, according to its fair meaning, and
not in favor of or against any party. Sections and section headings contained in
this Agreement are for reference purposes only, and shall not affect in any
manner the meaning or interpretation of this Agreement. Whenever the context
requires, references to the singular shall include the plural and the plural the
singular and references to the masculine pronoun shall include the feminine and
the neuter, and the singular shall include the plural. This Agreement and the
provisions contained herein shall not be construed or interpreted for or against
any party hereto because that party drafted or caused that party's legal
representative to draft any of its proVisions.

 

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14.         OBLIGATIONS SURVIVE TERMINATION OF EMPLOYMENT

 

Executive agrees that any and all of Executive's obligations under this
Agreement (other than Section 1) shall survive the termination of employment and
the termination of this Agreement in accordance with their terms. Company agrees
that all of Company's obligations under Paragraph 2(d) shall survive the
termination of employment and the termination of this Agreement in accordance
with their terms.

 

15.         COUNTERPARTS

 

This Agreement may be executed in any number of counterparts, each of which
shall be deemed an original of this Agreement, but all of which together shall
constitute one and the same instrument.

 

16.         AUTHORITY

 

Each party represents and warrants that such party has the right, power and
authority to enter into and execute this Agreement and to perform and discharge
all of its obligations hereunder; and that this Agreement constitutes the valid
and legally binding agreement and obligation of such party and is enforceable in
accordance with its terms.

 

17.         ENTIRE AGREEMENT

 

This Agreement constitutes the entire agreement of the Company and Executive
relating to the subject matter hereof and supersedes all prior oral and written
understandings and agreements relating to such subject matter. To the extent
that the practices, policies or procedures of the Company, now or in the future,
apply to Executive and are inconsistent with the terms of this Agreement, the
provisions of this Agreement shall control.

 

18.         PRESS RELEASES

 

The Parties shall jointly agree on the language of any press releases or other
public announcements concerning Company's employment of Executive and/or the
Proposed Transaction.

 

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19.        EXECUTIVE ACKNOWLEDGEMENT

 

EXECUTIVE ACKNOWLEDGES EXECUTIVE HAS HAD THE OPPORTUNITY TO CONSULT LEGAL
COUNSEL CONCERNING THIS AGREEMENT, THAT EXECUTIVE HAS READ AND UNDERSTANDS THE
AGREEMENT, THAT EXECUTIVE IS FULLY AWARE OF ITS LEGAL EFFECT, AND THAT EXECUTIVE
HAS ENTERED INTO IT FREELY BASED ON EXECUTIVE'S OWN JUDGMENT AND NOT ON ANY
REPRESENTATIONS OR PROMISES OTHER THAN THOSE CONTAINED IN THIS AGREEMENT.

 

IN WITNESS WHEREOF, the parties have duly executed this Agreement s of the date
first written above.

 

VAPE HOLDINGS, INC.:   EXECUTIVE:       By: /s/ Kyle Tracey   /s/ Mark Scialdone
  Kyle Tracey   Mark Scialdone, an individual   its Chief Executive Officer    

 

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SCHEDULE A: Performance Based Non Discretionary Bonus Compensation

 

Gross Consulting Revenue* Earned:         Industry Related

 

Year 1 (from May 1, 2015 through April 30, 2016)

 

Up to $200,000 gross revenue 2,5% From $200,000—$400,000 gross revenue 5.0% From
$400,000—$600,000 gross revenue 7.5% Above $600,000 gross revenue 10.0%     Year
2 (from May 1, 2016 through April 30, 2017)       Up to $200,000 gross revenue
2.5% From $200,000—$400,000 gross revenue 5.0% From $400,000—$600,000 gross
revenue 7.5% Above $600,000 gross revenue 10.0%     Gross Revenue Earned Non
Industry Related (including Legacy Business Relationships)     50/50 share
(payable monthly based on actual net revenue collections.

 

 

 

*Gross Consulting Revenue is defined herein to exclude specific reimbursable
vendor costs, travel expenses including airfare.

 

 

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