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June 6, 2012

 

 

 

Mr. Richard Lappenbusch

1463 E. Republican Street #184

Seattle, WA 98112

 

 

 

Subject:       Employment Agreement

 

Dear Richard:

 

This letter agreement amends and restates that certain offer letter (the
“Initial Employment Letter”) entered into between you and Net Element, Inc. (the
“Company”) on February 8, 2011 and terminates that offer. You began your
employment with the Company on February 15, 2011 (your “Start Date”). Your
continued employment by the Company shall be governed by the following terms and
conditions (this “Agreement”). If a Change of Control transaction is not
“closed” on November 1, 2012, your employment with the Company will be “at will”
at that point, and the Company or you may elect to terminate your employment
with 30 days notice with no further obligations.

 

1. Duties and Scope of Employment. For the term of your employment (your
“Employment”), the Company agrees to employ you in the position of Executive
Vice President and Chief Strategy Officer (“EVP & CSO”). You will report to the
CEO of the Company and/or to a Senior Executive identified by the CEO. The
Company will allow for you to work mostly from your own facilities in Seattle,
Washington. As a result of working away from corporate headquarters, your role
will require travel and telecommuting outside normal business hours. As part of
the duties and responsibilities that you will be performing as the EVP & CSO of
the Company you will work closely with key portfolio properties and projects of
the company in developing strategies, path to profitability and identifying
growth opportunities.

 

2. Cash and Incentive Compensation.

 

(a) Salary. The Company shall pay you as compensation for your services a base
salary at a gross annual rate of $200,000. Such salary shall be payable
bi-monthly in arrears and subject to deductions for taxes and other withholdings
as required by law.

 

(b) Regular Bonuses. You are eligible to receive a guaranteed bonus of $50,000,
contingent only upon you not have voluntarily resigned your Employment (other
than for Involuntary Termination) before December 28, 2012. In addition, you
will be eligible for a performance-based bonus at the sole discretion of the
Company’s board of directors.

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 2 of 8

 

 

(c) Restricted Stock, Incentive Stock Options, and Other Equity Awards. 
Currently you own 1,332,834 unrestricted shares in the Company. In addition, the
Company has granted you certain restricted stock awards and incentive stock
options, pursuant to the second paragraph of your Initial Employment Letter.
Effective immediately all incentive stock options will be cancelled and no
longer available to you and all unvested restricted shares that exceed 2,067,166
will be cancelled and no longer available to you. Thereafter unvested restricted
shares shall vest in full upon the termination of this contract on December 28,
2012 or your dismissal with or without cause, which ever happens first.

 

3. Vacation/PTO, Employee Benefits and other Incentive Compensation. 

 

(a) Vacation and PTO.  During your Employment you shall be eligible to accrue
paid vacation/paid time off at 6.67 hours per pay period, which is equivalent to
four weeks on an annual basis. Personal emergency days are generally accrued per
company policy. At least five (5) paid working days per year are reserved but
not required to complete professional training to maintain professional
accreditations. Current vacation balance is retained with no expiration date.

 

(b) Employee Benefits. You will have access to the standard Company sponsored
benefits plan as made available to other officers and executive plans.

 

4. Business Expenses. The Company will reimburse you for travel and for your
necessary and pre-approved business expenses incurred in connection with your
duties hereunder, in accordance with the Company’s generally applicable
policies. Without limiting the generality of the foregoing, it is expressly
acknowledged and agreed that, given that you are based in Seattle, Washington,
reasonable business expenses shall include, but not be limited to, computing and
access costs and fees for all phone, PC, webcam, microphone, fax, scanner,
tablet, printer and various forms of internet access to effectively and
generally perform the duties as EVP & CSO. In addition, dues, travel, conference
fees and other reasonable costs and expenses to attend or complete professional
training to maintain professional accreditations shall also be reimbursed by the
Company with prior approval.

 

5. Employment Term; Continued Employment “At Will”. You and the Company agree
that you will remain employed with the Company through December 28, 2012.
Thereafter, your Employment shall be “at will,” meaning that either you or the
Company shall be entitled to terminate your Employment at any time and for any
reason, with or without Cause (as defined below).

 

6. Severance. If you are terminated by the Company involuntarily without Cause
or any termination due to death or Disability or if you experience Involuntary
Termination, then you shall be entitled to receive: your equivalent base salary
through December 28, 2012, the guaranteed bonus and the unvested restricted
shares which shall vest immediately upon termination.

 

7. Certain Defined Terms.

 

(a) Definition of “Cause”. For all purposes under this Agreement, “Cause” shall
mean: (i) you engaging in knowing and intentional illegal conduct that was or is
materially injurious to the Company or its affiliates; (ii) you violating a
federal or state law or regulation applicable to the Company’s business which
violation was or is reasonably likely to be injurious to the Company; (iii) you
materially breaching the terms of any confidentiality agreement or invention
assignment agreement between you and the Company; or (iv) you being convicted
of, or entering a plea of nolo contendere to, a felony or committing any act of
moral turpitude, dishonesty or fraud against, or the misappropriation of
material property belonging to, the Company or its affiliates.

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 3 of 8

 

 

The cessation of your Employment shall not be deemed to be for Cause unless and
until you are sent a written notice of the ground for the termination for
“Cause” by the Company finding that, in the good faith opinion of the Company,
you are guilty of the conduct described above, and specifying the particulars
thereof in detail. If the Company does not deliver to you a notice of
termination within ninety (90) days after the later of the date the Company has
knowledge that an event constituting Cause has occurred and, where applicable,
the date the Company has knowledge of the materiality of the injury to the
Company, the event will no longer constitute Cause. You will have fifteen
(15) days to cure from the date the notice is received by you.

 

(b) Definition of “Involuntary Termination”.  For purposes of this Agreement,
“Involuntary Termination” shall mean the termination of your Employment with the
Company by reason of: (i) your involuntary dismissal or discharge by the
Company, or by any acquiring or successor entity (or parent or any subsidiary
thereof employing you) for reasons other than Cause, or (ii) your voluntary
resignation after the occurrence of one of the following conditions without your
prior written consent: (A) a material diminution in your base salary; (B) a
material change in geographic location at which you must perform services (a
change in location of your office will be considered material only if it
increases your current one-way commute by more than fifty (50) miles); (C) any
material failure of the successors to the Company after a Change of Control to
perform or cause the Company to perform the obligations of the Company under
this Agreement; (D) any action or inaction of the Company that constitutes a
material breach of the terms of this Agreement; or (E) any other material
adverse change in your duties, authorities or responsibilities as specified or
cross-referenced in Section l(a), above, in each case, only if you provide
notice to the Company of the existence of the applicable condition within 90
days of the initial existence of the condition, the Company fails to remedy the
condition within 30 days thereafter, and within the 30 day period immediately
following such failure to remedy, you elect to terminate your Employment. The
parties intend that this trigger qualify as an involuntary separation from
service trigger under Treasury Regulation Section 1.409A-l(n)(2).

 

(c) Definition of “Disability”.  For all purposes under this Agreement,
“Disability” shall mean your inability to perform the essential functions of
your position with or without reasonable accommodation for a period of 30
consecutive days because of your physical or mental impairment.

 

(d) Definition of “Change of Control”.  For all purposes under this Agreement,
“Change of Control” shall mean (i) the acquisition of the Company by another
entity by means of any transaction or series of related transactions (including,
without limitation, any merger, consolidation or other form of reorganization in
which outstanding shares of the Company are exchanged for securities or other
consideration issued, or caused to be issued, by the acquiring entity or its
subsidiary) (each a “Merger Transaction”), unless the Company’s stockholders of
record as constituted immediately prior to such Merger Transaction will,
immediately after such Merger Transaction, hold at least a majority of the
voting power of the surviving or acquiring entity (50.1%) in the same
proportions, (ii) a sale of all or substantially all of the assets of the
Company or the exclusive license of all or substantially all of the Company’s
intellectual property by means of any transaction or series of related
transactions, or (iii) a liquidation, dissolution or winding up of the Company.

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 4 of 8

 

 

8. Successors.

 

(a) Company’s Successors.  This Agreement shall be binding upon any successor
(whether direct or indirect and whether by purchase, lease, merger,
consolidation, liquidation or otherwise) to all or substantially all of the
Company’s business and/or assets. Any such successor will within a reasonable
period of becoming the successor assume in writing and be bound by all of the
Company’s obligations under this Agreement. For all purposes under this
Agreement, the term “Company” shall include any successor to the Company’s
business or assets that become bound by this Agreement.

 

(b) Your Successors.  This Agreement and all of your rights hereunder shall
inure to the benefit of, and be enforceable by, your personal or legal
representatives, executors, administrators, successors, heirs, distributees,
devisees and legatees.

 

9. Miscellaneous Provisions.

 

(a) Indemnification.  The Company agrees that if you are made a party or
threatened to be made a party to any action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action brought against
you by the Company) by reason of the fact that you are or were an employee of
the Company or are or were serving at the request of the Company, as a director,
officer, member, employee or agent of another corporation or a partnership,
joint venture, trust or other enterprise, you shall be indemnified by the
Company to the fullest extent permitted by applicable law and the Company’s
certificate of incorporation and by-laws, as the same exists or may hereafter be
amended, against all reasonably and actually incurred legal expenses and related
costs incurred or suffered by you in connection therewith provided that you
cooperate with the Company in connection with such actual or threatened action,
suit, proceeding or investigation, and such indemnification shall continue even
if you have ceased to be an officer or are no longer employed by the Company and
shall inure to the benefit of your heirs, executors and administrators. The
Company shall provide you with directors’ and officers’ liability insurance at
least as favorable as the insurance coverage provided to other senior executive
officers and directors of the Company respecting liabilities, and reasonable
legal fees and costs, charges and expenses incurred or sustained by you (or your
legal representative or other successors) in connection with any such
proceeding. Unless otherwise provided in an indemnification agreement with the
Company, no indemnity shall be paid by the Company (i) if it shall be determined
by a final judgment or other final adjudication that such remuneration was in
violation of law; (ii) if it is finally determined that, in connection with the
above action, suit or proceeding, that your conduct was finally adjudged to have
been knowingly fraudulent, deliberately dishonest or willful; or (iii) if a
final decision by a Court having jurisdiction in the matter shall determine that
such indemnification is not lawful. Unless otherwise provided in an
indemnification agreement with the Company, you agree to reimburse the Company
for all reasonable expenses paid by the Company in defending any civil or
criminal action suit or proceeding against you in the event and only to the
extent that it shall be ultimately determined that you are not entitled to be
indemnified by the Company for such expenses under the provisions of applicable
law, the Company’s bylaws, this Agreement or otherwise.

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 5 of 8

 

 

(b) Parachute Payments.  If any payment or benefit you would receive pursuant to
a Change of Control from the Company or otherwise (“Payment”) would
(i) constitute a “parachute payment” within the meaning of Section 280G of the
Internal Revenue Code of 1986, as amended (the “Code”), and (ii) but for this
sentence, be subject to the excise tax imposed by Section 4999 of the Code (the
“Excise Tax”), then such Payment shall be reduced to the Reduced Amount. The
“Reduced Amount” shall be either (x) the largest portion of the Payment that
would result in no portion of the Payment being subject to the Excise Tax or
(y) the largest portion, up to and including the total, of the Payment,
whichever amount, after taking into account all applicable federal, state and
local employment taxes, income taxes, and the Excise Tax (all computed at the
highest applicable marginal rate), results in your receipt, on an after-tax
basis, of the greater amount of the Payment notwithstanding that all or some
portion of the Payment may be subject to the Excise Tax. If a reduction in
payments or benefits constituting “parachute payments” is necessary so that the
Payment equals the Reduced Amount and none of the parachute payments are
non-qualified deferred compensation subject to Section 409A of the Code, then
the reduction shall occur in the manner you elect in writing prior to the date
of payment. If any parachute payment constitutes non-qualified deferred
compensation subject to Section 409A or you fail to elect an order, then the
reduction shall occur in the following order: first a pro rata reduction of
(i) cash payments subject to Section 409A of the Code as non-qualified deferred
compensation and (ii) cash payments not subject to Section 409A of the Code, and
second a pro rata cancellation of accelerated vesting of (i) equity-based
compensation subject to Section 409A of the Code as non-qualified deferred
compensation and (ii) equity-based compensation not subject to Section 409A of
the Code with, in each case, the cancellation of accelerated vesting being
applied first to vesting that is not subject to Treasury Regulation section
1.280G-1 Q/A 24(c) and subsequently to vesting that is subject to such section.
Reduction in either cash payments or equity compensation benefits shall be made
pro rata between and among benefits which are subject to Section 409A of the
Code and benefits which are exempt from Section 409A of the Code. The accounting
firm engaged by the Company for general audit purposes as of the day prior to
the effective date of the Change of Control shall perform the foregoing
calculations. The Company shall bear all expenses with respect to the
determinations by such accounting firm required to be made hereunder. Any good
faith determination of the accounting firm made hereunder shall be final,
binding and conclusive upon the Company and you.

 

(c) Notice.  Notices and all other communications contemplated by this Agreement
shall be in writing and shall be deemed to have been duly given when personally
delivered or when mailed by U.S. registered or certified mail, return receipt
requested and postage prepaid or electronic mail to the email address listed
below. In your case, mailed notices shall be addressed to you at the home
address that you most recently communicated to the Company in writing. In the
case of the Company, mailed notices shall be addressed to its corporate
headquarters, and all notices shall be directed to the attention of its
Secretary. Notice delivered to the following shall constitute proper notice
pursuant to this section:

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 6 of 8

 

 

If to the Company, to:

 

Net Element, Inc.

1450 South Miami Avenue

Miami, FL 33130

Attn: Mike Zoi, CEO

Email: mzoi@netelement.com

 

With a copy to:

 

Bilzin Sumberg Baena Price & Axelrod, LLP

1450 Brickell Avenue, Suite 2300

Miami, FL 33130

Attn: Serge Pavluk

Email: spavluk@bilzin.com

 

If to You, to:

 

Richard Lappenbusch

1463 E. Republican Street #184

Seattle, WA 98112

Email: Richlappenbusch@gmail.com

 

(d) Modifications and Waivers.  No provision of this Agreement shall be
modified, waived or discharged unless the modification, waiver or discharge is
agreed to in writing and signed by you and by an authorized officer of the
Company (other than you). 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.

 

(e) Whole Agreement.  No other agreements, representations or understandings
(whether oral or written and whether express or implied) which are not expressly
set forth in this Agreement have been made or entered into by either party with
respect to the subject matter hereof. This Agreement contains the entire
understanding of the parties with respect to the subject matter hereof.

 

(f) Choice of Law and Severability.  This Agreement shall be interpreted in
accordance with the laws of the State of Florida without giving effect to
provisions governing the choice of law. If any provision of this Agreement
becomes or is deemed invalid, illegal or unenforceable in any applicable
jurisdiction by reason of the scope, extent or duration of its coverage, then
such provision shall be deemed amended to the minimum extent necessary to
conform to applicable law so as to be valid and enforceable or, if such
provision cannot be so amended without materially altering the intention of the
parties, then such provision shall be stricken and the remainder of this
Agreement shall continue in full force and effect. If any provision of this
Agreement is rendered illegal by any present or future statute, law, ordinance
or regulation (collectively, the “Law”) then that provision shall be curtailed
or limited only to the minimum extent necessary to bring the provision into
compliance with the Law. All the other terms and provisions of this Agreement
shall continue in full force and effect without impairment or limitation.

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 7 of 8

 

 

(g)  Authority.  The Company represents and warrants that (i) the execution of
this Agreement has been duly authorized by the Company, including action of the
Board, (ii) the execution, delivery and performance of this Agreement by the
Company does not and will not violate any law, regulation, order, judgment or
decree or any agreement, plan or corporate governance document of the Company
and (iii) upon the execution and delivery of this Agreement, this Agreement
shall be the valid and binding obligation of the Company, enforceable in
accordance with its terms, except to the extent enforceability may be limited by
bankruptcy, insolvency or similar laws affecting the enforcement of creditors’
rights generally and by the effect of general principles of equity (regardless
of whether enforceability is considered in a proceeding in equity or at law).

 

(h) Arbitration. The Parties hereby submit to the exclusive jurisdiction of the
American Arbitration Association (AAA). Any and all disputes and controversies
arising under, relating to or in connection with this Note shall be settled
exclusively by arbitration by a panel of one (1) arbitrator under the Commercial
Rules of the AAA and the appointing authority shall be the AAA. The English
language shall be used as the written and spoken language for the arbitration
and all matters connected with all references to arbitration. Each Party hereby
irrevocably waives any right it may have to object to an action being brought in
the AAA, to claim that the claim has been brought in an inconvenient forum or to
claim that the AAA does not have exclusive jurisdiction, provided that
proceedings may be brought in another jurisdiction in order to enforce a
judgment of the courts of the AAA.

 

(i) Attorneys Fees. In the event of a dispute between the parties, the
prevailing party shall be entitled to all reasonable attorneys’ fees and costs
incurred in connection with any trial, arbitration, or other proceeding as well
as all other relief granted in any suit or other proceeding.

 

(j)  Counterparts.  This Agreement may be executed in two or more counterparts;
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.

(k) Representation by Counsel. By countersigning below, You hereby represent and
acknowledge that you have reviewed this letter agreement in its entirety, have
had an opportunity to obtain the advice of counsel prior to executing this
letter agreement and fully understand all provisions of this letter agreement.

 

  Sincerely,   Net Element, Inc.               /s/  Jonathan New          
.          By Jonathan New, CFO   06/06/2012

 

 

 

Mr. Richard Lappenbusch

June 6, 2012

Page 8 of 8

 

 

ACCEPTED AND AGREED:

 

 

    /s/ Richard Lappenbusch     .

Richard Lappenbusch

 

06/06/2012