Exhibit 10.1 

 

EXECUTIVE RETENTION AGREEMENT

This Executive Retention Agreement (the “Agreement”) is made and entered into as
of August 9, 2017 (the “Effective Date”) by and between WORKHORSE GROUP INC., a
Nevada corporation (the “Company”), and Paul Gaitan (the “Executive”).

Recitals:

WHEREAS, the Executive is a key employee of the Company who possesses valuable
proprietary knowledge of the Company, its business and operations and the
markets in which the Company competes; and

WHEREAS, the Company and the Executive desire to enter into this Agreement to
encourage the Executive to continue to devote the Executive’s full attention and
dedication to the success of the Company, and to provide specified compensation
and benefits to the Executive in the event of a Termination Upon Change of
Control or certain other terminations pursuant to the terms of this Agreement.

NOW, THEREFORE, THE PARTIES HEREBY AGREE AS FOLLOWS:

1.                  PURPOSE AND TERM; DUTIES

1.1       The purpose of this Agreement is to provide specified compensation and
benefits to the Executive in the event of (i) a Termination Upon Change of
Control or (ii) an Involuntary Termination. Subject to the terms of any
applicable written employment agreement between Company and the Executive (as to
which Executive acknowledges no other such agreement exists as of the date
hereof), either the Executive or Company may terminate the Executive’s
employment at any time for any reason, with or without notice. The term of this
Agreement shall be the period from the date set forth above until Executive’s
employment is terminated for any reason or this Agreement is terminated by
mutual agreement of the parties.

1.2       The Executive shall serve as the Chief Financial Officer of the
Company. The Executive’s job responsibilities will comprise managing and
overseeing all financial operations and matters of the Company, including the
subsidiaries, including but not limited to:

 

 (a)Timely and accurate annual and quarterly financial reporting in accordance
with Securities & Exchange Commission (“SEC”) rules and regulations, applicable
law and United States Generally Accepted Accounting Principles (“GAAP”).    
 (b)Management of our Finance Department and oversight of all financial
personnel, accounting systems, procedures and policies.     (c)Establishing and
maintaining adequate financial controls, sufficient as a minimum to enable your
appropriate certification of the Company’s annual and quarterly reports in
accordance with SEC rules.

 

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 (d)Managing the treasury functions for the Company, as well as all borrowings,
debt facilities and equity fundraising, subject to the approval of the Board (as
defined below).      (e)Undertaking financial planning for the Company,
including preparing annual and other budgets and projections and managing in
compliance with such budgets as may be approved by the Board.      (f)Monthly
management reporting and analysis for the Board.

 

(g)Managing and corresponding with all potential investors with respect to due
diligence, documentation and closing of such financings.      (h)Investor
relations to the extent reasonably requested by the CEO.

  

(i)All such functions as are customarily applicable to your position, as well as
those that are reasonably assigned to you by the Company.

 

1.3        The Executive is entitled to four (4) weeks of vacation which will
accrue on a pro-rata basis during the year, in addition to all public holidays
when the office is closed.   Executive will be eligible to participate in all
employee benefit plans established by the Company for its employees from time to
time. In accordance with Company policies from time to time, the Company will
reimburse you for all reasonable and proper travel and business expenses
incurred by you in the performance of your duties.

 

2.                  COMPENSATION AND TERMINATION GENERALLY

2.1              Compensation.

2.1.1       Annual Salary. The Executive’s current base salary of $200,000 per
annum, subject to periodic review and modification which may not be adjusted
downward by the Company’s Board of Directors (the “Board”) as may be delegated
to the Compensation Committee of the Board (references herein to the
Compensation Committee shall include reference to the Board if no such Committee
exists at any time) at such time or times as it shall determine. The Company’s
Compensation Committee shall also from time to time, in its discretion,
determine the type and amount of other forms of compensation for Executive’s
service with the Company (including, without limitation, stock options or other
forms of equity awards).

2.1.2       Bonuses. Commencing during the year ended December 31, 2018,
Executive will be eligible for bonuses based on achievement of performance
milestones, calculated and payable in an amount equal to 25% of the Base Salary
(as amended by the Board from time to time) (the “Cash Bonus”), which shall be
payable during any fiscal year upon the Company generating 75% of its projected
revenue set forth in the Company’s budget as established by the Company’s Board
of Directors and management and evidenced by the Company’s financial statements
as filed in its Form 10-K Annual Report (the “Revenue Target”). In the event the
Company generates 100% or 125% of its Revenue Target, then the Cash Bonus will
be increased to 37.5% and 50% of the Annual Salary, respectively. If such
conditions are fulfilled, the Cash Bonus shall be payable with the next payroll
following the latest to occur of the above events, subject to all
applicable deductions required by law.

 

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2.1.3       Options. The Executive will be provided with an initial grant of
options to purchase 200,000 shares of common stock, which shall vest over four
(4) years in equal quarterly installments of 12,500 shares per quarter
commencing January 1, 2018.  The exercise price of the options shall be $2.74
per share and the term shall be ten years. The Executive may be eligible for
additional equity incentive grants, subject to Executive’s continued employment
and satisfactory job performance, which may be made from time to time, by the
Board, on the same terms as other executive employees of the Company. Terms and
conditions of all the equity incentive grants, will be in accordance with the
terms of the Company’s Equity Incentive Plan in effect at the time of each such
grant.

 

2.2              Termination of Employment Generally. In the event the
Executive’s employment with the Company terminates, for any reason whatsoever
including death or disability the Executive shall be entitled to the benefits
described in this Section 2.2.

2.2.1        Accrued Salary and Vacation. All salary and accrued vacation earned
through the Termination Date shall be paid to Executive on such date.

2.2.2        Accrued Bonus Payment. The Executive shall receive a lump sum
payment of any actual bonus amount to the extent that all the conditions for
payment of such bonus have been satisfied and any such bonus was earned and is
unpaid on the Termination Date.

2.2.3        Expense Reimbursement. Within ten (10) days following submission to
the Company of proper expense reports by the Executive, the Company shall
reimburse the Executive for all expenses incurred by the Executive, consistent
with the Company’s expense reimbursement policy in effect prior to the incurring
of each such expense, in connection with the business of the Company prior to
the Termination Date.

2.2.4       Equity Compensation. The period during which the Executive may
exercise any rights (“Exercise Period”) under any outstanding stock options (or
any other equity award, including, without limitation, stock appreciation rights
and restricted stock units) granted to the Executive under any equity incentive
plan or agreement adopted by the Board of Directors (the “Company Plans”) shall
continue as set forth in such security; provide, however, such Exercise Period
shall terminate immediately in the event Executive is terminated for Cause.
Further, in the event the Executive is terminated for Cause or leaves for any
reason except as set forth in Section 4, then the vesting of all outstanding
stock options (or any other equity award, including, without limitation, stock
appreciation rights and restricted stock units) shall cease.

 

3.                  TERMINATION UPON CHANGE OF CONTROL

3.1              Severance Payment. In the event of the Executive’s Termination
Upon Change of Control at any time after November 9, 2017, the Executive shall
be entitled to receive an amount equal to twelve (12) months of Executive’s Base
Salary, which shall be paid according to the following schedule: (i) a lump sum
payment equal to one-half of such amount shall be payable within ten (10) days
following the Termination Date, and (ii) one-third of the balance of such amount
shall be payable within ten (10) days of each of the three-month, six-month and
nine-month anniversaries of the Termination Date (and in each case no interest
shall accrue on such amount); provided, however, that if Section 409A of the
Code would otherwise apply to such cash severance payment, it instead shall be
paid at such time as permitted by Section 409A of the Code. In addition to the
foregoing severance payment, in the event of the Executive’s Termination Upon
Change of Control, the Executive shall be entitled to receive, within ten (10)
days following the Termination Upon Change of Control, a lump sum payment equal
to one hundred percent (100%) of (a) any actual bonus amount earned with respect
to a previous year to the extent that all the conditions for payment of such
bonus have been satisfied (excluding any requirement to be in employment with
the Company as of a given date which is after the Termination Date) and any such
bonus was earned but is unpaid on the Termination Date; and (b) the target bonus
then in effect for the Executive for the year in which such termination occurs,
such payment to be prorated to reflect the full number of months the Executive
remained in the employ of the Company; provided, however, that if Section 409A
of the Code would otherwise apply to such cash payment, it instead shall be paid
at such time as permitted by Section 409A of the Code. To illustrate, if the
Executive’s target bonus at 100% equals $120,000 for the calendar year and the
Executive is terminated on October 15th, then the foregoing payment shall equal
$100,000 (i.e., ten (10) months’ prorated bonus at one hundred percent (100%)
with October counting as a full month worked).

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3.2              Equity Compensation Acceleration. Upon the Executive’s
Termination Upon Change of Control at any time after November 9, 2017, the
vesting and exercisability of all then outstanding stock options (or any other
equity award, including, without limitation, stock appreciation rights and
restricted stock units) granted to the Executive under any Company Plans shall
be accelerated as to 100% of the shares subject to any such equity awards
granted to the Executive.

3.3              COBRA. If the Executive timely elects coverage under the
Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”), the
Company shall continue to provide to the Executive, at the Company’s expense,
the Company’s health-related employee insurance coverage for the employee only
as in effect immediately prior to the Executive’s Termination Upon Change of
Control for a period of twelve (12) months following such Termination Upon
Change of Control. The date of the “qualifying event” for the Executive and any
dependents shall be the Termination Date.

3.4              Indemnification. In the event of the Executive’s Termination
Upon Change of Control, (a) the Company shall continue to indemnify the
Executive against all claims related to actions arising prior to the termination
of the Executive’s employment to the fullest extent permitted by law, and (b) if
the Executive was covered by the Company’s directors’ and officers’ insurance
policy, or an equivalent thereto, (the “D&O Insurance Policy”) immediately prior
to the Change of Control, the Company or its Successor shall continue to provide
coverage under a D&O Insurance Policy for not less than twenty-four (24) months
following the Executive’s Termination Upon Change of Control on substantially
the same terms of the D&O Insurance Policy in effect immediately prior to the
Change of Control.

4.                  INVOLUNTARY TERMINATION

4.1              Severance Payment. In the event of the Executive’s Involuntary
Termination at any time after November 9, 2017, the Executive shall be entitled
to receive an amount equal to twelve (12) months of the Executive’s Base Salary
which shall be paid according to the following schedule: (i) a lump sum payment
equal to one-fourth of such amount shall be payable within ten (10) days
following the Termination Date, and (ii) one-fourth of such amount shall be
payable within ten (10) days of each of the three-month, six-month and
nine-month anniversaries of the Termination Date (and in each case no interest
shall accrue on such amount); provided, however, that if Section 409A of the
Code would otherwise apply to such cash severance payment, it instead shall be
paid at such time as permitted by Section 409A of the Code. In addition to the
foregoing severance payment, in the event of the Executive’s Involuntary
Termination, the Executive shall be entitled to receive, within ten (10) days
following the Executive’s Involuntary Termination, a lump sum payment equal to
one hundred percent (100%) of (a) any actual bonus amount earned with respect to
a previous year to the extent that all the conditions for payment of such bonus
have been satisfied (excluding any requirement to be in employment with the
Company as of a given date which is after the Termination Date) and any such
bonus was earned but is unpaid on the Termination Date; and (b) the target bonus
then in effect for the Executive for the year in which such termination occurs,
such payment to be prorated to reflect the full number of months the Executive
remained in the employ of the Company; provided, however, that if Section 409A
of the Code would otherwise apply to such cash payment, it instead shall be paid
at such time as permitted by Section 409A of the Code. To illustrate, if the
Executive’s target bonus at 100% equals $120,000 for the calendar year and the
Executive is terminated on October 15th, then the foregoing payment shall equal
$100,000 (i.e., ten (10) months’ prorated bonus at one hundred percent (100%)
with October counting as a full month worked).

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4.2              Equity Compensation Acceleration. Upon the Executive’s
Involuntary Termination at any time after November 9, 2017, the vesting and
exercisability of all then outstanding stock options (or any other equity award,
including, without limitation, stock appreciation rights and restricted stock
units) granted to the Executive under any Company Plans shall be accelerated as
to 100% of the shares subject to any such equity awards granted to the
Executive.

4.3              COBRA. In the event of the Executive’s Involuntary Termination,
at any time after November 9, 2017, if the Executive timely elects coverage
under the Consolidated Budget Reconciliation Act of 1985, as amended (“COBRA”),
the Company shall continue to provide to the Executive, at the Company’s
expense, the Company’s health-related employee insurance coverage for the
employee only as in effect immediately prior to the Executive’s Involuntary
Termination for a period of twelve (12) months following such Involuntary
Termination. The date of the “qualifying event” for the Executive and any
dependents shall be the Termination Date.

4.4              Indemnification. In the event of the Executive’s Involuntary
Termination, (a) the Company shall continue to indemnify the Executive against
all claims related to actions arising prior to the Termination Date to the
fullest extent permitted by law, and (b) if the Executive was covered by the D&O
Insurance Policy immediately prior to the Termination Date, the Company shall
continue to provide coverage under a D&O Insurance Policy for not less than
twenty-four (24) months following the Executive’s Involuntary Termination on
substantially the same terms of the D&O Insurance Policy in effect immediately
prior to the Termination Date.

5.                  FEDERAL EXCISE TAX UNDER SECTION 280G

5.1              Excise Tax. If (a) any amounts payable to the Executive under
this Agreement or otherwise are characterized as excess parachute payments
pursuant to Section 4999 of the Internal Revenue Code of 1986, as amended (the
“Code”), and (b) the Executive thereby would be subject to any United States
federal excise tax due to that characterization, then if Executive would thereby
be in a better after-tax position, the Company may elect, in the Company’s sole
discretion, to reduce the amounts payable under this Agreement or otherwise, or
to have any portion of applicable options or restricted stock not vest or become
exercisable, in order to avoid any “excess parachute payment” under Section
280G(b)(1) of the Code.

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5.2              Calculation by Independent Public Accountants. Unless the
Company and the Executive otherwise agree in writing, any calculation of the
amount of any excess parachute payments payable by the Executive shall be made
in writing by the Company’s independent public accountants (the “Accountants”)
whose conclusion shall be final and binding on the parties. For purposes of
making such calculations, the Accountants may rely on reasonable, good faith
interpretations concerning the application of Sections 280G and 4999 of the
Code. The Company and the Executive shall furnish to the Accountants such
information and documents as the Accountants may reasonably request in order to
make the required calculations. The Company shall bear all fees and expenses the
Accountants may charge in connection with these services, but the engagement of
the Accountants for this purpose shall be pursuant to an agreement between the
Executive and the Accountants.

6.                  DEFINITIONS

6.1              Capitalized Terms Defined. Capitalized terms used in this
Agreement shall have the meanings set forth in this Section 4, unless the
context clearly requires a different meaning.

6.2              “Base Salary” means the greater of (a) if applicable, the
monthly salary of the Executive in effect immediately prior to the Change of
Control, or (b) the monthly salary of the Executive in effect immediately prior
to the Termination Date.

6.3              “Cause” means:

(a)the Executive willfully failed to follow the lawful written directions of the
Board of Directors of the Company or Executive’s immediate superior; provided
that no termination for such Cause shall occur unless the Executive: (i) has
been provided with notice, specifying such willful failure in reasonable detail,
of the Company’s intention to terminate the Executive for Cause; and (ii) has
failed to cure or correct such willful failure within thirty (30) days of
receiving such notice;

(b)the Executive engaged in gross misconduct, or gross incompetence which is
materially detrimental to the Company; provided that no termination for such
Cause shall occur unless the Executive: (i) has been provided with notice,
specifying such gross misconduct or gross incompetence in reasonable detail, of
the Company’s intention to terminate the Executive for Cause; and (ii) has
failed to cure or correct such gross misconduct within thirty (30) days of
receiving such notice;

(c)the Executive willfully failed to comply in any material respect with the
Employee Invention Assignment & Confidentiality Agreement, the Company’s share
dealing code, the Employee’s non-competition agreement or any other reasonable
policies of the Company where non-compliance would be materially detrimental to
the Company; provided that no termination for such Cause shall occur unless the
Executive: (i) has been provided with notice of the Company’s intention to
terminate the Executive for such Cause, and (ii) has failed to cure or correct
such willful failure within thirty (30) days of receiving such notice, provided
that such notice and cure period requirements shall not apply in the event that
such non-compliance is of a nature that it is unable to be remedied; or

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(d)is convicted of a felony or crime involving moral turpitude (excluding drunk
driving unless combined with other aggravating circumstances or offenses) or
commission of a fraud which the Company reasonably believes would reflect
adversely on the Company.

6.4              “Change of Control” means:

(a)any “person” (as such term is used in Sections 13(d) and 14(d) of the
Securities Exchange Act of 1934, as amended (the “Exchange Act”)) becomes the
“beneficial owner” (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing fifty
(50%) percent or more of (i) the outstanding shares of common stock of the
Company, or (ii) the combined voting power of the Company’s outstanding
securities;

(b)the Company is party to a merger or consolidation, or series of related
transactions, which results in the voting securities of the Company outstanding
immediately prior thereto failing to continue to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), directly or indirectly, at least fifty (50%) percent of the combined
voting power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation;

(c)the sale or disposition of all or substantially all of the Company’s assets,
or consummation of any transaction, or series of related transactions, having
similar effect (other than to a subsidiary of the Company);

6.5              “Company” shall mean Workhorse Group Inc. and, following a
Change of Control, any Successor.

6.6              “Involuntary Termination” means:

(a)any termination without Cause of the employment of the Executive by the
Company; or

(b)any resignation by Executive for Good Reason where such resignation occurs
within sixty (60) days following the occurrence of such Good Reason.

Notwithstanding the foregoing, the term “Involuntary Termination” shall not
include any termination of the employment of the Executive: (1) by the Company
for Cause; (2) by the Company as a result of the Permanent Disability of the
Executive; (3) as a result of the death of the Executive; (4) that occurs within
the period of time to qualify as a “Termination Upon Change of Control”; or (5)
as a result of the voluntary termination of employment by the Executive for any
reason other than Good Reason.

6.7              “Good Reason” means the occurrence of any of the following
conditions, without the Executive’s written consent:

(a)Any act, set of facts or omissions with respect to the Executive that would,
as a matter of applicable law, constitute a constructive termination of the
Executive.

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(b)A reduction in the Executive’s Base Salary or, if applicable, target bonus
opportunity (subject to applicable performance requirements with respect to the
actual amount of bonus compensation earned similar to the applicable performance
requirements currently in effect), and in the event of a Change of Control, as
compared to Executive’s Base Salary and target bonus opportunity in effect
immediately prior to the public announcement of the Change of Control; provided,
however, that this clause (c) shall not apply in the event of a reduction in the
Executive’s Base Salary or, if applicable, target bonus opportunity as part of a
Company-wide or executive team-wide cost-cutting measure or Company-wide or
executive team-wide cutback as a result of overall Company performance.

(c)The failure of the Company (i) to continue to provide the Executive an
opportunity to participate in any benefit or compensation plans provided to
employees who hold positions with the Company comparable to the Executive’s
position, (ii) to provide the Executive all other fringe benefits (or the
equivalent) in effect for the benefit of any employee group which includes any
employee who hold a position with the Company comparable to the Executive’s
position, where in the event of a Change of Control, such comparison shall be
made relative to the time immediately prior to the public announcement of such
Change of Control); or (iii) continue to provide director’s and officers’
insurance.

(d)A material breach of this Agreement by the Company, including, in the event
of a Change of Control, failure of the Company to obtain the consent of a
Successor to perform all of the obligations of the Company under this Agreement.

The Executive must first give the Company an opportunity to cure any of the
foregoing within thirty (30) days following delivery to the Company of a written
explanation specifying the specific basis for Executive’s belief that Executive
is entitled to terminate employment for Good Reason, and Executive terminates
employment with the Company not later than (30) days following the Company’s
failure to cure.

6.8              “Permanent Disability” means that:

(a)the Executive has been incapacitated by bodily injury, illness or disease so
as to be prevented thereby from engaging in the performance of the Executive’s
duties;

(b)such total incapacity shall have continued for a period of six consecutive
months; and

(c)such incapacity will, in the opinion of a qualified physician, be permanent
and continuous during the remainder of the Executive’s life.

6.9              Intentionally left blank.

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6.10          “Successor” means any successor in interest to, or assignee of,
substantially all of the business and assets of the Company.

6.11          “Termination Date” means the date of the termination of the
Executive’s employment with the Company.

6.12          “Termination Upon Change of Control” means:

(a)any termination of the employment of the Executive by the Company without
Cause during the period commencing on or after the date that the Company first
publicly announces a definitive agreement that results in a Change of Control
(even though still subject to approval by the Company’s stockholders and other
conditions and contingencies, but provided that the Change of Control actually
occurs) and ending on the date which is twelve (12) months following the Change
of Control; or

(b)any resignation by Executive for Good Reason where (i) such Good Reason
occurs during the period commencing on or after the date that the Company first
publicly announces a definitive agreement that results in a Change of Control
(even though still subject to approval by the Company’s stockholders and other
conditions and contingencies, but provided that the Change of Control actually
occurs) and ending on the date which is twelve (12) months following the Change
of Control, and (ii) such resignation occurs at or after such Change of Control
and in any event within six (6) months following the occurrence of such Good
Reason.

Notwithstanding the foregoing, the term “Termination Upon Change of Control”
shall not include any termination of the employment of the Executive: (1) by the
Company for Cause; (2) by the Company as a result of the Permanent Disability of
the Executive; (3) as a result of the death of the Executive; or (4) as a result
of the voluntary termination of employment by the Executive for any reason other
than Good Reason.

7.                  EXCLUSIVE REMEDY

7.1              No Other Benefits Payable. The Executive shall be entitled to
no other termination, severance or change of control compensation, benefits, or
other payments from the Company as a result of any termination with respect to
which the payments and benefits described in Section 2 have been provided to the
Executive, except as expressly set forth in this Agreement.

7.2              No Limitation of Regular Benefit Plans. Except as may be
provided elsewhere in this Agreement, this Agreement is not intended to and
shall not affect, limit or terminate any plans, programs or arrangements of the
Company that are regularly made available to a significant number of employees
or officers of the Company, including, without limitation, the Company’s stock
option plans.

7.3              Release of Claims. The payment of the benefits described in
Sections 3 and 4 of this Agreement is conditioned upon the delivery by the
Executive to the Company of a signed and effective general release of claims as
provided by the Company; provided, however, that the Executive shall not be
required to release any rights the Executive may have to be indemnified by the
Company or as otherwise provided under this Agreement.

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7.4              Noncumulation of Benefits. The Executive may not cumulate cash
severance payments, stock option vesting and exercisability and restricted stock
vesting under this Agreement, any other written agreement with the Company
and/or another plan or policy of the Company. If the Executive has any other
binding written agreement with the Company which provides that, upon a Change of
Control or Termination Upon a Change of Control or Involuntary Termination, the
Executive shall receive termination, severance or similar benefits, then no
benefits shall be received by Executive under this Agreement unless, prior to
payment or receipt of benefits under this Agreement, the Executive waives
Executive’s rights to all such other benefits, in which case this Agreement
shall supersede any such written agreement with respect to such other benefits.

8.                  NON-COMPETE; PROPRIETARY AND CONFIDENTIAL INFORMATION

During the term of this Agreement and following any termination of employment,
Executive agrees to continue to abide by the terms and conditions of each of the
non-competition agreement (during the term of such Agreement) and the Employee
Invention Assignment & Confidentiality Agreement between the Executive and the
Company.

9.                  ARBITRATION

9.1              Disputes Subject to Arbitration. Any claim, dispute or
controversy arising out of this Agreement (other than claims relating to misuse
or misappropriation of the intellectual property of the Company), the
interpretation, validity or enforceability of this Agreement or the alleged
breach thereof shall be submitted by the parties to binding arbitration by a
sole arbitrator under the rules of the American Arbitration Association;
provided, however, that (a) the arbitrator shall have no authority to make any
ruling or judgment that would confer any rights with respect to the trade
secrets, confidential and proprietary information or other intellectual property
of the Company upon the Executive or any third party; and (b) this arbitration
provision shall not preclude the Company from seeking legal and equitable relief
from any court having jurisdiction with respect to any disputes or claims
relating to or arising out of the misuse or misappropriation of the Company’s
intellectual property. Judgment may be entered on the award of the arbitrator in
any court having jurisdiction.

9.2              Costs of Arbitration. All costs of arbitration, including
reasonable attorney’s fees of the Executive, will be borne by the Company,
except that if the Executive initiates arbitration and the arbitrator finds the
Executive’s claims to be frivolous the Executive shall be responsible for his
own costs and attorneys fees.

9.3              Site of Arbitration. The site of the arbitration proceeding
shall be in New York City, New York.

10.              NOTICES

For purposes of this Agreement, notices and all other communications provided
for in the Agreement shall be in writing and shall be deemed to have been duly
given when delivered or five (5) business days after being mailed, return
receipt requested, as follows: (a) if to the Company, attention: Chief Executive
Officer, at the Company’s offices at 100 Commerce Blvd., Loveland, OH 45140 and,
(b) if to the Executive, at the address indicated below or such other address
specified by the Executive in writing to the Company. Either party may provide
the other with notices of change of address, which shall be effective upon
receipt.

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11.       MISCELLANEOUS PROVISIONS

11.1       Heirs and Representatives of the Executive; Successors and Assigns of
the Company. This Agreement shall be binding upon and shall inure to the benefit
of and be enforceable by the Executive’s personal and legal representatives,
executors, administrators, successors, heirs, distributees, devises and
legatees. This Agreement shall be binding upon and inure to the benefit of and
be enforceable by the successors and assigns of the Company.

11.2       Amendment and Waiver. No provision of this Agreement shall be
modified, amended, waived or discharged unless the modification, amendment,
waiver or discharge is agreed to in writing, specifying such modification,
amendment, waiver or discharge, and signed by the Executive and by an authorized
officer of the Company (other than the Executive). No waiver by either party of
any breach of, or of compliance with, any condition or provision of this
Agreement by the other party shall be considered a waiver of any other condition
or provision or of the same condition or provision at another time.

11.3       Withholding Taxes. All payments made under this Agreement shall be
subject to deduction of all federal, state, local and other taxes required to be
withheld by applicable law.

11.4       Severability. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision hereof, which shall remain in full force and effect.

11.5       Choice of Law. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Ohio, without regard to where the Executive has his residence or principal
office or where he performs his duties hereunder.

11.6       No Duty to Mitigate. The Executive is not required to seek
alternative employment following termination, and payments called for under this
Agreement will not be reduced by earnings from any other source.

11.7.       Section 409A of the Code. To the extent (a) any payments or benefits
to which Employee becomes entitled under this Agreement, or under any agreement
or plan referenced herein, in connection with Employee’s termination of
employment with the Company constitute deferred compensation subject to Section
409A of the Code and (b) Employee is deemed at the time of such termination of
employment to be a “specified employee” under Section 409A of the Code, then
such payments shall not be made or commence until the earliest of (i) the
expiration of the six (6)-month period measured from the date of Employee’s
“separation from service” (as such term is at the time defined in Treasury
Regulations under Section 409A of the Code) from the Company; or (ii) the date
of Employee’s death following such separation from service; provided, however,
that such deferral shall only be effected to the extent required to avoid
adverse tax treatment to Employee, including (without limitation) the additional
twenty percent (20%) tax for which Employee would otherwise be liable under
Section 409A(a)(1)(B) of the Code in the absence of such deferral. Upon the
expiration of the applicable deferral period, any payments which would have
otherwise been made during that period (whether in a single sum or in
installments) in the absence of this paragraph shall be paid to Employee or
Employee’s beneficiary in one lump sum (without interest). Any termination of
Employee’s employment is intended to constitute a “separation from service” as
such term is defined in Treasury Regulation Section 1.409A-1. It is intended
that each installment of the payments provided hereunder constitute separate
“payments” for purposes of Treasury Regulation Section 1.409A-2(b)(2)(i). It is
further intended that payments hereunder satisfy, to the greatest extent
possible, the exemption from the application of Code Section 409A (and any state
law of similar effect) provided under Treasury Regulation Section 1.409A-1(b)(4)
(as a “short-term deferral”).

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11.8       Entire Agreement. This Agreement represents the entire agreement and
understanding between the parties as to the subject matter herein (whether oral
or written and whether express or implied).

 

[SIGNATURE PAGE TO EXECUTIVE RETENTION AGREEMENT FOLLOWS]

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In Witness Whereof, each of the parties has executed this Agreement, in the case
of the Company, by its duly authorized officer, as of the day and year first
above written.

 

  Executive         /s/Paul Gaitan   Paul Gaitan                     Workhorse
Group Inc.               By: /s/ Stephen S. Burns   Name: Stephen S. Burns  
Title: Chief Executive Officer