Exhibit 10.1

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of August 1, 2015
(the “Effective Date”), between Vapor Corp., a Delaware corporation (the
“Company”), and Jeffrey Holman (the “Executive”).

 

WHEREAS, in its business, the Company has acquired and developed certain trade
secrets, including, but not limited to, proprietary processes, sales methods and
techniques, and other like confidential business and technical information,
including but not limited to, technical information, design systems, pricing
methods, pricing rates or discounts, processes, procedures, formulas, designs of
computer software, or improvements, or any portion or phase thereof, whether
patented, or not, or unpatentable, that is of any value whatsoever to the
Company, as well as information relating to the Company’s products and/or
services, information concerning proposed new products and/or services, market
feasibility studies, proposed or existing marketing techniques or plans (whether
developed or produced by the Company or by any other person or entity for the
Company), other Confidential Information, as defined in Section 9(a), and
information about the Company’s executives, officers, and directors, which
necessarily will be communicated to the Executive by reason of his employment by
the Company; and

 

WHEREAS, the Company has strong and legitimate business interests in preserving
and protecting its investment in the Executive, its trade secrets and
Confidential Information, and its substantial, significant, or key relationships
with vendors, whether actual or prospective; and

 

WHEREAS, the Company desires to preserve and protect its legitimate business
interests further by restricting competitive activities of the Executive during
the term of this Agreement and for a reasonable time following the termination
of this Agreement; and

 

WHEREAS, the Company desires to continue to employ the Executive and to ensure
the continued availability to the Company of the Executive’s services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement.

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants set
forth in this Agreement, and intending to be legally bound, the Company and the
Executive agree as follows:

 

1. Representations and Warranties. The Executive hereby represents and warrants
to the Company that he (i) is not subject to any non-solicitation or
non-competition agreement affecting his employment with the Company (other than
any prior agreement with the Company), (ii) is not subject to any
confidentiality or nonuse/nondisclosure agreement affecting his employment with
the Company (other than any prior agreement with the Company), and (iii) has
brought to the Company no trade secrets, confidential business information,
documents, or other personal property of a prior employer. The Executive and the
Company agree that this Agreement replaces that certain Employment Agreement
between the Executive and the Company dated February 19, 2013.

 

2. Term of Employment.

 

(a) Term . The Company hereby employs the Executive, and the Executive hereby
accepts employment with the Company for a period of three years commencing as of
the Effective Date (such period, as it may be extended or renewed, the “Term”),
unless sooner terminated in accordance with the provisions of Section 6. The
Term shall be automatically renewed for successive one-year terms unless notice
of non-renewal is given by either party at least 30 days before the end of the
Term.

 

 

   

 

(b) Continuing Effect . Notwithstanding any termination of this Agreement, at
the end of the Term or otherwise, the provisions of Sections 4(b), 6(e), 7, 8,
9, 10, 12 15, 18, 19, and 22 shall remain in full force and effect and the
provisions of Section 9 shall be binding upon the legal representatives,
successors and assigns of the Executive. Provided, however, if the Executive is
terminated without Cause or if he terminates his employment for Good Reason as
those terms are defined in Sections 6(b) and (c), the provisions of Section 8(a)
and 8(b) shall apply for nine months post termination. 4.                    

 

3. Duties.

 

(a) General Duties. The Executive shall serve as the Chief Executive Officer of
the Company, with duties and responsibilities that are customary for such an
executive. The Executive shall report to the Company’s Board of Directors (the
“Board”). The Executive shall also perform services for such subsidiaries of the
Company as may be necessary. The Executive shall use his best efforts to perform
his duties and discharge his responsibilities pursuant to this Agreement
competently, carefully and faithfully. In determining whether or not the
Executive has used his best efforts hereunder, the Executive’s and the Company’s
delegation of authority and all surrounding circumstances shall be taken into
account and the best efforts of the Executive shall not be judged solely on the
Company’s revenues or other results of the Executive’s performance, except as
specifically provided to the contrary by this Agreement.

 

(b) Devotion of Time. Subject to the last sentence of this Section 3(b), the
Executive shall devote such time, attention and energies to the affairs of the
Company and its subsidiaries and affiliates as are necessary to perform his
duties and responsibilities pursuant to this Agreement. The Executive shall not
enter the employ of or serve as a consultant to, or in any way perform any
services with or without compensation to, any other persons, business, or
organization, without the prior consent of the Board. Notwithstanding the above,
the Executive shall be permitted to devote a limited amount of his time, to
professional, charitable or similar organizations, including serving as a
non-executive director or an advisor to a board of directors, committee of any
company or organization provided that such activities do not interfere with the
Executive’s performance of his duties and responsibilities as provided
hereunder. The Company hereby acknowledges that the Executive may devote a
reasonable amount of time as President of Jeffrey E. Holman & Associates, P.A.

 

(c) Location of Office. The Executive’s principal business office shall be in
Broward County, Florida or such other location to which the Company may, in the
future, relocate its present Broward County, Florida office. However, the
Executive’s job responsibilities shall include all business travel necessary for
the performance of his job.

 

(d) Adherence to Inside Information Policies. The Executive acknowledges that
the Company is publicly-held and, as a result, has implemented inside
information policies designed to preclude its executives and those of its
subsidiaries from violating the federal securities laws by trading on material,
non-public information or passing such information on to others in breach of any
duty owed to the Company, or any third party. The Executive shall promptly
execute any agreements generally distributed by the Company to its employees
requiring such employees to abide by the Company’s inside information policies.

 

4. Compensation and Expenses.

 

(a) Salary. For the services of the Executive to be rendered under this
Agreement, the Company shall pay the Executive an annual salary of $300,000 (the
“Base Salary”) during the first 12 months of the Term, less such deductions as
shall be required to be withheld by applicable law and regulations payable in
accordance with the Company’s customary payroll practices. Thereafter, on each
12th month anniversary of this Agreement, the Executive shall receive a minimum
of a 10% increase in Base Salary.

 

 

   

 

(b) Target Bonus. For each calendar year during the Term (beginning January 1,
2016 and continuing through December 31,, 2018), the Executive shall have the
opportunity to earn a bonus up to 200% of his then Base Salary (the “Target
Bonus”) as follows:

 

When the Company achieves annual Adjusted EBITDA (as defined below) at certain
threshold levels (each, an “EBITDA Threshold”), the Executive shall receive an
automatic cash bonus (the “Automatic Cash Bonus”) equal to a percentage of his
then Base Salary. The Executive may opt to take said Automatic Cash Bonus in
stock (subject to the Board’s prior approval), in which case he will receive a
grant of fully vested shares of the Company’s common stock having an aggregate
Fair Market Value (as such term is defined in the Company’s 2015 Equity
Incentive Plan (“Incentive Plan”)) equal to 120% of the Executive’s Automatic
Cash Bonus. Notwithstanding the preceding, no common stock shall be issued if
such issuance would violate or trigger any anti-dilution rights contained in any
agreements of which the Company is a party.

 

The EBITDA Thresholds and corresponding bonus levels are set forth in the table
below. For the avoidance of doubt, the Executive shall only be eligible to
receive the bonuses associated with a single EBITDA Threshold; for example: in
the event the Company attains EBITDA Threshold (2), only the bonuses associated
with EBITDA Threshold (2) below (and not the bonuses associated with EBITDA
Threshold (1)) shall be applicable.

 

EBITDA Threshold  Automatic Cash Bonus  (1) $2,000,000   20% (2) $4,000,000 
 50% (3) $6,000,000   80% (4) $8,000,000   110% (5) $10,000,000   140% (6)
$12,000,000   170% (7) $14,000,000 and over   200%

 

 

   

 

Provided, however, that the earning of the Automatic Cash Bonus is subject to
the Executive continuing to provide services under this Agreement on the Target
Bonus determination date. As used in this Agreement, Adjusted EBITDA is
calculated as earnings (or loss) from continuing operations before interest
expense, income taxes, collateral valuation adjustment, bad debt expense,
one-time expenses, depreciation and amortization, and amortization of
stock-based compensation; however, if Adjusted EBITDA shall be defined
differently in any filing of the Company with the Securities and Exchange
Commission subsequent to the date of this Agreement, then Adjusted EBITDA shall
thereafter be defined in accordance with the definition most recently set forth
in any such filing at each Target Bonus determination date. The Automatic Cash
Bonus shall be paid within two-and-a-half months following the end of the
applicable fiscal year in which it is earned.

 

(c) Discretionary Bonus. During the Term of the Agreement, the Compensation
Committee shall have the discretion to award the Executive a bonus, in cash or
the Company’s common stock, based upon the Executive’s job performance, the
Company’s revenue growth or any other factors as determined by the Compensation
Committee.

 

(d) Expenses. In addition to any compensation received pursuant to this Section
4, the Company will reimburse or advance funds to the Executive for all
reasonable documented travel (including travel expenses incurred by the
Executive related to his travel to the Company’s other offices), entertainment
and miscellaneous expenses incurred in connection with the performance of his
duties under this Agreement, provided that the Executive properly provides a
written accounting of such expenses to the Company in accordance with the
Company’s practices. Such reimbursement or advances will be made in accordance
with policies and procedures of the Company in effect from time to time relating
to reimbursement of, or advances to, its executive officers.

 

5. Benefits.

 

(a) Paid Time Off. For each 12-month period during the Term, the Executive shall
be entitled to four weeks of Paid Time Off without loss of compensation or other
benefits to which he is entitled under this Agreement, to be taken at such times
as the Executive may select and the affairs of the Company may permit. Any
unused days will be carried over to the next 12 month period. Notwithstanding
anything contained herein, in no event shall the Executive be entitled to be
paid cash for unused Paid Time Off, and any unused vacation days at the end of
the Term or remaining as of the date of termination shall be forfeited.

 

(b) Employee Benefit Programs. The Executive is entitled to participate in any
pension, 401(k), insurance or other employee benefit plan that is maintained by
the Company for its executives, including programs of health insurance, life
insurance and reimbursement of membership fees in professional organizations.
The Company shall also pay for, or reimburse the Executive, medical insurance
premiums for the Executive, his spouse and dependent children.

 

6. Termination.

 

(a) Death or Disability. Except as otherwise provided in this Agreement, this
Agreement shall automatically terminate upon the death or disability of the
Executive. For purposes of this Section 6(a), “disability” shall mean (i) the
Executive is unable to engage in his customary duties by reason of any medically
determinable physical or mental impairment that can be expected to result in
death, or last for a continuous period of not less than 12 months; (ii) the
Executive is, by reason of any medically determinable physical or mental
impairment that can be expected to result in death, or last for continuous
period of not less than 12 months, receiving income replacement benefits for a
period of not less than three months under an accident and health plan covering
employees of the Company; or (iii) the Executive is determined to be totally
disabled by the Social Security Administration. Any question as to the existence
of a disability shall be determined by the written opinion of the Executive’s
regularly attending physician (or his guardian) (or the Social Security
Administration, where applicable). In the event that the Executive’s employment
is terminated by reason of Executive’s death or disability, the Company shall
pay the following to the Executive or his personal representative: (i) any
accrued but unpaid Base Salary for services rendered to the date of termination,
(ii) any accrued but unpaid expenses required to be reimbursed under this
Agreement, (iii) any earned but unpaid bonuses, and (iv) all equity awards
previously granted to the Executive under the Incentive Plan or similar plan
shall thereupon become fully vested, and the Executive or his legally appointed
guardian, as the case may be, shall have up to three months from the date of
termination (or one year from the date of death) to exercise all such previously
granted options, provided that in no event shall any option be exercisable
beyond its term.

 

 

   

 

(b) Termination by the Company for Cause or by the Executive Without Good
Reason. The Company may terminate the Executive’s employment pursuant to the
terms of this Agreement at any time for Cause (as defined below) by giving the
Executive written notice of termination. Such termination shall become effective
upon the giving of such notice. Upon any such termination for Cause, or in the
event the Executive terminates his employment with the Company without Good
Reason (as defined in Section 6(c)), then the Executive shall have no right to
compensation, or reimbursement under Section 4, or to participate in any
Executive benefit programs under Section 5, except as may otherwise be provided
for herein or by law, for any period subsequent to the effective date of
termination. For purposes of this Agreement, “Cause” shall mean: (i) the
Executive is convicted of, or pleads guilty or nolo contendere to, a felony
related to the business of the Company; (ii) the Executive, in carrying out his
duties hereunder, has acted with gross negligence or intentional misconduct
resulting, in any case, in harm to the Company; (iii) the Executive
misappropriates Company funds or otherwise defrauds the Company; (iv) the
Executive materially breaches any agreement with the Company; (v) the Executive
breaches any provision of Section 8 or Section 9; (vi) the Executive becomes
subject to a preliminary or permanent injunction issued by a United States
District Court enjoining the Executive from violating any securities law
administered or regulated by the Securities and Exchange Commission; (vii) the
Executive becomes subject to a cease and desist order or other order issued by
the Securities and Exchange Commission after an opportunity for a hearing;
(viii) the Executive refuses to carry out a resolution adopted by the Company’s
Board at a meeting in which the Executive was offered a reasonable opportunity
to argue that the resolution should not be adopted; or (ix) the Executive abuses
alcohol or drugs in a manner that interferes with the successful performance of
his duties.

 

Except for a failure, breach or refusal which, by its nature, cannot reasonably
be expected to be cured, the Executive shall have 10 business days from the
delivery of written notice by the Company within which to cure any acts
constituting Cause; provided however, that, if the Company reasonably expects
irreparable injury from a delay of 10 business days, the Company may give the
Executive notice of such shorter period within which to cure as is reasonable
under the circumstances, which may include the termination of the Executive’s
employment without notice and with immediate effect.

 

(c) Other Termination.

 

(1) This Agreement may be terminated: (i) by the Executive for Good Reason (as
defined below), (ii) by the Company without Cause, (iii) automatically upon any
Change of Control event as defined in Treasury Regulation Section 1.409A-3(i)(5)
through (vii) at the end of a Term after the Company provides the Executive with
notice of non-renewal.

 

(2) In the event this Agreement is terminated by the Executive for Good Reason
or by the Company without Cause, the Executive shall be entitled to the
following:

 

(A) any accrued but unpaid Base Salary for services rendered to the date of
termination;

 

(B) any accrued but unpaid expenses required to be reimbursed under this
Agreement;

 

(C) a payment equal to two years of the then Base Salary (“Severance Amount”);

 

(D) the Executive or his legally appointed guardian, as the case may be, shall
have up to two years from the date of termination to exercise all such
previously granted options, provided that in no event shall any option be
exercisable beyond its term;

 

(E) all equity awards previously granted to the Executive under the Incentive
Plan or similar plan shall thereupon become fully vested;

 

(F) any benefits (except perquisites) to which the Executive was entitled
pursuant to Section 5(b) hereof shall continue to be paid or provided by the
Company, as the case may be, for 18 months, subject to the terms of any
applicable plan or insurance contract and applicable law provided that such
benefits are exempt from Section 409A of the Code by reason of Treasury
Regulation 1.409A-1(a)(5) or otherwise. In the event all or a portion of the
benefits to which the Executive was entitled pursuant to Section 5(b) hereof are
subject to 409A of the Code, the Executive shall not be entitled to the benefits
that are subject to Section 409A of the Code subsequent to the “applicable 2 ½
month period” (as such term is defined under Treasury Regulation Section
1.409A-1(b)(4)(i)(A)); and

 

(G) a payment equal to the product of (i) the Target Bonus, if any, that the
Executive would have earned for the fiscal year in which the termination date
(as determined in accordance with Section 6) occurs based on achievement of the
applicable EBITDA Thresholds and corresponding bonus levels for such year and
(ii) a fraction, the numerator of which is the number of days the Executive was
employed by the Company during the year of termination and the denominator of
which is the number of days in such year (the “Pro-Rata Target Bonus”). This
amount shall be paid on the date which is the later of: (i) April 30th of the
year following the year in which the termination occurs and (ii) the six month
anniversary of the termination date.

 

 

   

 

(3) In the event of a Change of Control during the Term, the Executive receive
each of the provisions of Section 6(c)(2)(A) – (F) above except the Executive
shall receive 100% of the existing Target Bonus, for that fiscal year, when the
Change of Control occurs. All payments due to the Executive shall be paid
immediately on the occurrence of a Change of Control.

 

(4) In the event this Agreement is terminated at the end of a Term after the
Company provides the Executive with notice of non-renewal and the Executive
remains employed until the end of the Term, the Executive shall be entitled to
the following:

 

(A) any accrued but unpaid Base Salary for services rendered to the date of
termination;

 

(B) any accrued but unpaid expenses required to be reimbursed under this
Agreement;

 

(C) a Severance Amount equal to two years of the then Base Salary;

 

(D) the Executive or his legally appointed guardian, as the case may be, shall
have up to two years from the date of termination to exercise all such
previously granted options, provided that in no event shall any option be
exercisable beyond its Term;

 

(E) any benefits (except perquisites) to which the Executive was entitled
pursuant to Section 5(b) hereof shall continue to be paid or provided by the
Company, as the case may be, for 18 months, subject to the terms of any
applicable plan or insurance contract and applicable law provided that such
benefits are exempt from Section 409A of the Code by reason of Treasury
Regulation 1.409A-1(a)(5) or otherwise. In the event all or a portion of the
benefits to which the Executive was entitled pursuant to Section 5(b) hereof are
subject to 409A of the Code, the Executive shall not be entitled to the benefits
that are subject to Section 409A of the Code subsequent to the “applicable 2 ½
month period” (as such term is defined under Treasury Regulation Section
1.409A-1(b)(4)(i)(A)); and

 

(F) the Target Bonus, if any, due to the Executive.

 

Provided, however, that the Executive shall only be entitled to receive each of
the provisions of this Section 6(c)(4)(A)-(F) if the Executive is willing and
able (i) to execute a new agreement providing terms and conditions substantially
similar to those in this Agreement with a Base Salary equal to or greater than
the then Base Salary and (ii) to continue providing such services, and
therefore, the Company’s non-renewal of the Term will be considered an
“involuntary separation from service” within the meaning of Treasury Regulation
Section 1.409A-1(n).

 

(5) In the event of a termination for Good Reason, without Cause, or non-renewal
by the Company, the payment of the Severance Amount shall be shall be paid at
the same times as the Company pays compensation to its employees over the
applicable monthly periods and any other payments (except the Target Bonus or
the Pro-Rata Target Bonus) shall be promptly paid. Provided, however, that any
balance of the Severance Amount remaining due on the “applicable 2 ½ month
period” (as such term is defined under Treasury Regulation Section
1.409A-1(b)(4)(i)(A)) after the end of the tax year in which the Executive’s
employment is terminated or the Term ends shall be paid on the last day of the
applicable 2 ½ month period. The payment of the Severance Amount shall be
conditioned on the Executive signing an Agreement and General Release (in the
form which is attached as Exhibit A) which releases the Company or any of its
affiliates (including its officers, directors and their affiliates) from any
liability under this Agreement or related to the Executive’s employment with the
Company provided that (x) the payment of the Severance Amount is made on or
before the 90th day following the Executive’s termination of employment; (y)
such Agreement and General Release is executed by the Executive, submitted to
the Company, and the statutory period during which the Executive is entitled to
revoke the Agreement and General Release under applicable law has expired on or
before that 90th day; and (z) in the event that the 90 day period begins in one
taxable year and ends in a second taxable year, then the payment of the
Severance Amount shall be made in the second taxable year.

 

The term “Good Reason” shall mean: (i) a material diminution in the Executive’s
authority, duties or responsibilities; (ii) the Company no longer maintains or
operates an office in the Dade or Broward County Area; or (iii) any other action
or inaction that constitutes a material breach by the Company under this
Agreement. Prior to the Executive terminating his employment with the Company
for Good Reason, the Executive must provide written notice to the Company,
within 30 days following the Executive’s initial awareness of the existence of
such condition, that such Good Reason exists and setting forth in detail the
grounds the Executive believes constitutes Good Reason. If the Company does not
cure the condition(s) constituting Good Reason within 30 days following receipt
of such notice, then the Executive’s employment shall be deemed terminated for
Good Reason.

 

 

   

 

(d) Any termination made by the Company under this Agreement shall be approved
by the Board.

 

(e) Upon (a) voluntary or involuntary termination of the Executive’s employment
or (b) the Company’s request at any time during the Executive’s employment, the
Executive shall (i) provide or return to the Company any and all Company
property, including keys, key cards, access cards, security devices, employer
credit cards, network access devices, computers, cell phones, smartphones,
manuals, work product, thumb drives or other removable information storage
devices, and hard drives, and all Company documents and materials belonging to
the Company and stored in any fashion, including but not limited to those that
constitute or contain any Confidential Information or work product, that are in
the possession or control of the Executive, whether they were provided to the
Executive by the Company or any of its business associates or created by the
Executive in connection with his employment by the Company; and (ii) delete or
destroy all copies of any such documents and materials not returned to the
Company that remain in the Executive’s possession or control, including those
stored on any non-Company devices, networks, storage locations and media in the
Executive’s possession or control.

 

7. Indemnification. The Company shall indemnify the Executive, to the maximum
extent permitted by applicable law, against all costs, charges and expenses
incurred or sustained by his in connection with any action, suit or proceeding
to which he may be made a party by reason of his being an officer, director or
employee of the Company or of any subsidiary or affiliate of the Company. This
indemnification shall be pursuant to an Indemnification Agreement, a copy of
which is annexed as Exhibit B.

 

8. Non-Competition Agreement.

 

(a) Competition with the Company. Except as provided for in Section 2(b), until
termination of his employment and for a period of 18 months commencing on the
date of termination, the Executive (individually or in association with, or as a
shareholder, director, officer, consultant, employee, partner, joint venturer,
member, or otherwise, of or through any person, firm, corporation, partnership,
association or other entity) shall not, directly or indirectly, act as an
employee or officer (or comparable position) of, owning an interest in, or
providing services substantially similar to those services the Executive
provided to the Company. Notwithstanding the preceding, the Company acknowledges
that the Executive has a passive investment in Liquid Sciences LLC, a supplier
to the Company and that such investment shall not be a breach of this Section
8(a).

 

(b) Solicitation of Employees. During the period in which the provisions of
Section 8(a) shall be in effect, the Executive agrees that he shall not,
directly or indirectly, request, recommend or advise any employee of the Company
to terminate his employment with the Company, for the purposes of providing
services for a Prohibited Business, or solicit for employment or recommend to
any third party the solicitation for employment of any individual who was
employed by the Company or any of its subsidiaries and affiliates at any time
during the one year period preceding the Executive’s termination of employment.
A “Prohibited Business” means any entity in the same or similar business as the
Company including those engaged in the vaporizer business.

 

(c) Non-disparagement. The Executive agrees that, after the end of his
employment, he will refrain from making, in writing or orally, any unfavorable
comments about the Company, its operations, policies, or procedures that would
be likely to injure the Company’s reputation or business prospects; provided,
however, that nothing herein shall preclude the Executive from responding
truthfully to a lawful subpoena or other compulsory legal process or from
providing truthful information otherwise required by law.

 

 

   

 

(d) No Payment. The Executive acknowledges and agrees that no separate or
additional payment will be required to be made to his in consideration of his
undertakings in this Section 8, and confirms he has received adequate
consideration for such undertakings.

 

(e) References. References to the Company in this Section 8 shall include the
Company’s subsidiaries and affiliates.

 

9. Non-Disclosure of Confidential Information.

 

(a) Confidential Information. For purposes of this Agreement, “Confidential
Information” includes, but is not limited to, trade secrets, processes,
policies, procedures, techniques, designs, drawings, know-how, show-how,
technical information, specifications, computer software and source code,
information and data relating to the development, research, testing, costs,
marketing, and uses of the Company’s products and/or services, the Company’s
budgets and strategic plans, and the identity vendors and suppliers, subjects
and databases, data, and all technology relating to the Company’s businesses,
systems, methods of operation, and solicitation leads, marketing and advertising
materials, methods and manuals and forms, all of which pertain to the activities
or operations of the Company, the names, home addresses and all telephone
numbers and e-mail addresses of the Company’s directors, employees, officers,
executives, former executives. Confidential Information also includes, without
limitation, Confidential Information received from the Company’s subsidiaries
and affiliates. For purposes of this Agreement, the following will not
constitute Confidential Information (i) information which is or subsequently
becomes generally available to the public through no act or fault of the
Executive, (ii) information set forth in the written records of the Executive
prior to disclosure to the Executive by or on behalf of the Company which
information is given to the Company in writing as of or prior to the date of
this Agreement, and (iii) information which is lawfully obtained by the
Executive in writing from a third party (excluding any affiliates of the
Executive) who lawfully acquired the confidential information and who did not
acquire such confidential information or trade secret, directly or indirectly,
from the Executive or the Company or its subsidiaries or affiliates and who has
not breached any duty of confidentiality.

 

(b) Legitimate Business Interests. The Executive recognizes that the Company has
legitimate business interests to protect and as a consequence, the Executive
agrees to the restrictions contained in this Agreement because they further the
Company’s legitimate business interests. These legitimate business interests
include, but are not limited to (i) trade secrets; (ii) valuable confidential
business, technical, and/or professional information that otherwise may not
qualify as trade secrets, including, but not limited to, all Confidential
Information; (iii) substantial, significant, or key relationships with specific
prospective or existing vendors or suppliers; (iv) goodwill associated with the
Company’s business; and (v) specialized training relating to the Company’s
products, services, methods, operations and procedures. Notwithstanding the
foregoing, nothing in this Section 9(b) shall be construed to impose
restrictions greater than those imposed by other provisions of this Agreement.

 

(c) Confidentiality. During the Term of this Agreement and following termination
of employment, for any reason, the Confidential Information shall be held by the
Executive in the strictest confidence and shall not, without the prior express
written consent of the Company, be disclosed to any person other than in
connection with the Executive’s employment by the Company. The Executive further
acknowledges that such Confidential Information as is acquired and used by the
Company or its subsidiaries or affiliates is a special, valuable and unique
asset. The Executive shall exercise all due and diligent precautions to protect
the integrity of the Company’s Confidential Information and to keep it
confidential whether it is in written form, on electronic media, oral, or
otherwise. The Executive shall not copy any Confidential Information except to
the extent necessary to his employment nor remove any Confidential Information
or copies thereof from the Company’s premises except to the extent necessary to
his employment. All records, files, materials and other Confidential Information
obtained by the Executive in the course of his employment with the Company are
confidential and proprietary and shall remain the exclusive property of the
Company. The Executive shall not, except in connection with and as required by
his performance of his duties under this Agreement, for any reason use for his
own benefit or the benefit of any person or entity other than the Company or
disclose any such Confidential Information to any person, firm, corporation,
association or other entity for any reason or purpose whatsoever without the
prior express written consent of an executive officer of the Company (excluding
the Executive).

 

 

   

 

(d) References. References to the Company in this Section 9 shall include the
Company’s subsidiaries and affiliates.

 

10. Equitable Relief.

 

(a) The Company and the Executive recognize that the services to be rendered
under this Agreement by the Executive are special, unique and of extraordinary
character, and that in the event of the breach by the Executive of the terms and
conditions of this Agreement or if the Executive, without the prior express
consent of the Board, shall leave his employment for any reason and/or take any
action in violation of Section 8 and/or Section 9, the Company shall be entitled
to institute and prosecute proceedings in any court of competent jurisdiction
referred to in Section 10(b) below, to enjoin the Executive from breaching the
provisions of Section 8 and/or Section 9.

 

(b) Any action arising from or under this Agreement must be commenced only in
the appropriate state or federal court located in Broward County, Florida. The
Executive and the Company irrevocably and unconditionally submit to the
exclusive jurisdiction of such courts and agree to take any and all future
action necessary to submit to the jurisdiction of such courts. The Executive and
the Company irrevocably waive any objection that they now have or hereafter may
have to the laying of venue of any suit, action or proceeding brought in any
such court and further irrevocably waive any claim that any such suit, action or
proceeding brought in any such court has been brought in an inconvenient forum.
Final judgment against the Executive or the Company in any such suit shall be
conclusive and may be enforced in other jurisdictions by suit on the judgment, a
certified or true copy of which shall be conclusive evidence of the fact and the
amount of any liability of the Executive or the Company therein described, or by
appropriate proceedings under any applicable treaty or otherwise.

 

11. Conflicts of Interest. While employed by the Company, the Executive shall
not, unless approved by the Compensation Committee, directly or indirectly:

 

(a) participate as an individual in any way in the benefits of transactions with
any of the Company’s suppliers, vendors, or subjects, including, without
limitation, having a financial interest in the Company’s suppliers, vendors, or
subjects, or making loans to, or receiving loans, from, the Company’s suppliers,
vendors, or subjects;

 

(b) realize a personal gain or advantage from a transaction in which the Company
has an interest or use information obtained in connection with the Executive’s
employment with the Company for the Executive’s personal advantage or gain; or

 

(c) accept any offer to serve as an officer, director, partner, consultant,
manager with, or to be employed in a professional, medical, technical, or
managerial capacity by, a person or entity which does business with the Company.

 

(d) Notwithstanding the preceding, the Company acknowledges that the Executive
has a passive investment in Liquid Sciences LLC, a supplier to the Company and
that such investment shall not be a breach of this Section 11.

 

 

   

 

12. Inventions, Ideas, Processes, and Designs. All inventions, ideas, processes,
programs, software, and designs (including all improvements) directly related to
the Company’s business (i) conceived or made by the Executive during the course
of his employment with the Company (whether or not actually conceived during
regular business hours) and for a period of six months subsequent to the
termination (whether by expiration of the Term or otherwise) of such employment
with the Company, and (ii) related to the business of the Company, shall be
disclosed in writing promptly to the Company and shall be the sole and exclusive
property of the Company, and the Executive hereby assigns any such inventions to
the Company. An invention, idea, process, program, software, or design
(including an improvement) shall be deemed directly related to the business of
the Company if (a) it was made with the Company’s funds, personnel, equipment,
supplies, facilities, or Confidential Information, (b) results from work
performed by the Executive for the Company, or (c) pertains to the current
business or demonstrably anticipated research or development work of the
Company. The Executive shall cooperate with the Company and its attorneys in the
preparation of patent and copyright applications for such developments and, upon
request, shall promptly assign all such inventions, ideas, processes, and
designs to the Company. The decision to file for patent or copyright protection
or to maintain such development as a trade secret, or otherwise, shall be in the
sole discretion of the Company, and the Executive shall be bound by such
decision. The Executive hereby irrevocably assigns to the Company, for no
additional consideration, the Executive’s entire right, title and interest in
and to all work product and intellectual property rights, including the right to
sue, counterclaim and recover for all past, present and future infringement,
misappropriation or dilution thereof, and all rights corresponding thereto
throughout the world. Nothing contained in this Agreement shall be construed to
reduce or limit the Company’s rights, title or interest in any work product or
intellectual property rights so as to be less in any respect than the Company
would have had in the absence of this Agreement. If applicable, the Executive
shall provide as a schedule to this Agreement, a complete list of all
inventions, ideas, processes, and designs, if any, patented or unpatented,
copyrighted or otherwise, or non-copyrighted, including a brief description,
which he made or conceived prior to his employment with the Company and which
therefore are excluded from the scope of this Agreement. References to the
Company in this Section 12 shall include the Company, its subsidiaries and
affiliates.

 

13. Indebtedness. If, during the course of the Executive’s employment under this
Agreement, the Executive becomes indebted to the Company for any reason, the
Company may, if it so elects, and if permitted by applicable law, set off any
sum due to the Company from the Executive and collect any remaining balance from
the Executive unless the Executive has entered into a written agreement with the
Company.

 

14. Assignability. The rights and obligations of the Company under this
Agreement shall inure to the benefit of and be binding upon the successors and
assigns of the Company, provided that such successor or assign shall acquire all
or substantially all of the securities or assets and business of the Company.
The Executive’s obligations hereunder may not be assigned or alienated and any
attempt to do so by the Executive will be void.

 

 

   

 

15. Severability.

 

(a) The Executive expressly agrees that the character, duration and geographical
scope of the non-competition provisions set forth in this Agreement are
reasonable in light of the circumstances as they exist on the date hereof.
Should a decision, however, be made at a later date by a court of competent
jurisdiction that the character, duration or geographical scope of such
provisions is unreasonable, then it is the intention and the agreement of the
Executive and the Company that this Agreement shall be construed by the court in
such a manner as to impose only those restrictions on the Executive’s conduct
that are reasonable in the light of the circumstances and as are necessary to
assure to the Company the benefits of this Agreement. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate covenants deemed
included herein because taken together they are more extensive than necessary to
assure to the Company the intended benefits of this Agreement, it is expressly
understood and agreed by the parties hereto that the provisions of this
Agreement that, if eliminated, would permit the remaining separate provisions to
be enforced in such proceeding shall be deemed eliminated, for the purposes of
such proceeding, from this Agreement.

 

(b) If any provision of this Agreement otherwise is deemed to be invalid or
unenforceable or is prohibited by the laws of the state or jurisdiction where it
is to be performed, this Agreement shall be considered divisible as to such
provision and such provision shall be inoperative in such state or jurisdiction
and shall not be part of the consideration moving from either of the parties to
the other. The remaining provisions of this Agreement shall be valid and binding
and of like effect as though such provisions were not included.

 

16. Notices and Addresses. All notices, offers, acceptance and any other acts
under this Agreement (except payment) shall be in writing, and shall be
sufficiently given if delivered to the addressees in person, by FedEx or similar
receipted delivery, or next business day delivery to the addresses detailed
below (or to such other address, as either of them, by notice to the other may
designate from time to time), or by e-mail delivery (in which event a copy shall
immediately be sent by FedEx or similar receipted delivery), as follows:

 

To the Company:   Gregory Brauser     President     Vapor Corp.     3001 Griffin
Road     Dania Beach, FL 33312     Email: gbrauser@vpco.com       With a copy
to:   Nason, Yeager, Gerson White & Lioce, P.A.     Attn: Michael Harris, Esq.  
  1645 Palm Beach Lakes Blvd., Suite 1200     West Palm Beach, Florida 33410    
Email: mharris@nasonyeager.com       To the Executive:   Jeffrey Holman     3001
Griffin Road     Dania Beach, FL 33312     Email: jholman@vpco.com

 

17. Counterparts. This Agreement may be executed in one or more counterparts,
each of which shall be deemed an original but all of which together shall
constitute one and the same instrument. The execution of this Agreement may be
by actual or facsimile signature.

 

18. Attorneys’ Fees. In the event that there is any controversy or claim arising
out of or relating to this Agreement, or to the interpretation, breach or
enforcement thereof, and any action or proceeding is commenced to enforce the
provisions of this Agreement, the prevailing party shall be entitled to
reasonable attorneys’ fees, costs and expenses (including such fees and costs on
appeal).

 

 

   

 

19. Governing Law. This Agreement shall be governed or interpreted according to
the internal laws of the State of Delaware without regard to choice of law
considerations and all claims relating to or arising out of this Agreement, or
the breach thereof, whether sounding in contract, tort, or otherwise, shall also
be governed by the laws of the State of Delaware without regard to choice of law
considerations.

 

20. Entire Agreement. This Agreement constitutes the entire Agreement between
the parties and supersedes all prior oral and written agreements between the
parties hereto with respect to the subject matter hereof. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated
orally, except by a statement in writing signed by the party or parties against
which enforcement or the change, waiver discharge or termination is sought.

 

21. Section and Paragraph Headings. The section and paragraph headings in this
Agreement are for reference purposes only and shall not affect the meaning or
interpretation of this Agreement.

 

22. Investigations/Clawbacks.

 

(a) In the event the Executive or the Company is the subject of an investigation
(whether criminal, civil, or administrative) involving possible violations of
the United States federal securities laws by the Executive, the Compensation
Committee or the Board may, in its sole discretion, direct the Company to
withhold any and all payments to the Executive (whether compensation or
otherwise) which would have otherwise been made pursuant to this Agreement or
otherwise would have been paid or payable by the Company, which the Compensation
Committee or the Board believes, in its sole discretion, may or could be
considered an “extraordinary payment” and therefore at risk and potentially
subject to, the provisions of Section 1103 of the Sarbanes-Oxley Act of 2002
(including, but not limited to, any severance payments made to the Executive
upon termination of employment). The withholding of any payment shall be until
such time as the investigation is concluded, without charges having been brought
or until the successful conclusion of any legal proceedings brought in
connection with such amounts as directed by the Compensation Committee or the
Board to be withheld with or without the accruing of interest (and if with
interest the rate thereof). Except by an admission of wrongdoing or the final
adjudication by a court or administrative agency finding the Executive liable
for or guilty of violating any of the federal securities laws, rules or
regulations, the Compensation Committee or the Board shall pay to the Executive
such compensation or other payments. Notwithstanding the exclusion caused by the
first clause of the prior sentence, the Executive shall receive such payments if
provided for by a court or other administrative order.

 

(b) Notwithstanding any other provisions in this Agreement to the contrary, any
incentive-based compensation, or any other compensation, paid to the Executive
pursuant to this Agreement or any other agreement or arrangement with the
Company which is subject to recovery under any law, government regulation or
stock exchange listing requirement, will be subject to such deductions and
clawback as may be required to be made pursuant to such law, government
regulation or stock exchange listing requirement (or any policy adopted by the
Company pursuant to any such law, government regulation or stock exchange
listing requirement).

 

23. Section 409A Compliance.

 

(a) This Agreement is intended to comply with Section 409A of the Internal
Revenue Code of 1986, as amended (“Section 409A”), or an exemption thereunder.
This Agreement shall be construed and administered in accordance with Section
409A. Notwithstanding any other provision of this Agreement to the contrary,
payments provided under this Agreement may only be made upon an event and in a
manner that complies with Section 409A or an applicable exemption. Any payments
under this Agreement that may be excluded from Section 409A either as separation
pay due to an involuntary separation from service (including a voluntary
separation from service for good reason that is considered an involuntary
separation for purposes of the separation pay exception under Treasury
Regulation 1.409A-1(n)(2)) or as a short-term deferral shall be excluded from
Section 409A to the maximum extent possible. For purposes of Section 409A, each
installment payment provided under this Agreement shall be treated as a separate
payment. Any payments to be made under this Agreement upon a termination of
employment shall only be made if such termination of employment constitutes a
“separation from service” under Section 409A. Notwithstanding the foregoing, the
Company makes no representations that the payments and benefits provided under
this Agreement comply with Section 409A and in no event shall the Company be
liable for all or any portion of any taxes, penalties, interest, or other
expenses that may be incurred by the Executive on account of non-compliance with
Section 409A.

 

 

   

 

(b) Notwithstanding any other provision of this Agreement, if at the time of the
Executive’s termination of employment, the Executive is a “specified employee”,
determined in accordance with Section 409A, any payments and benefits provided
under this Agreement that constitute “nonqualified deferred compensation”
subject to Section 409A (e.g., payments and benefits that do not qualify as a
short-term deferral or as a separation pay exception) that are provided to the
Executive on account of the Executive’s separation from service shall not be
paid until the first payroll date to occur following the six-month anniversary
of the Executive’s termination date (“Specified Employee Payment Date”). The
aggregate amount of any payments that would otherwise have been made during such
six-month period shall be paid in a lump sum on the Specified Employee Payment
Date without interest and thereafter, any remaining payments shall be paid
without delay in accordance with their original schedule. If the Executive dies
during the six-month period, any delayed payments shall be paid to the
Executive’s estate in a lump sum upon the Executive’s death.

 

(c) To the extent required by Section 409A, each reimbursement or in-kind
benefit provided under this Agreement shall be provided in accordance with the
following:

 

(1) the amount of expenses eligible for reimbursement, or in-kind benefits
provided, during each calendar year cannot affect the expenses eligible for
reimbursement, or in-kind benefits to be provided, in any other calendar year;

 

(2) any reimbursement of an eligible expense shall be paid to the Executive on
or before the last day of the calendar year following the calendar year in which
the expense was incurred; and

 

(3) any right to reimbursements or in-kind benefits under this Agreement shall
not be subject to liquidation or exchange for another benefit.

 

(d) In the event the Company determines that the Executive is a “specified
employee” within the meaning of Section 409A(a)(2)(B)(i) of the Code at the time
of the Executive’s separation from service, then to the extent any payment or
benefit that the Executive becomes entitled to under this Agreement on account
of the Executive’s separation from service would be considered deferred
compensation subject to Section 409A as a result of the application of Section
409A(a)(2)(B)(i) of the Code, such payment shall not be payable and such benefit
shall not be provided until the date that is the earlier of (i) six months and
one day after the Executive’s separation from service, or (ii) the Executive’s
death (the “Six Month Delay Rule”).

 

 

   

 

(1) For purposes of this subparagraph, amounts payable under the Agreement
should not provide for a deferral of compensation subject to Section 409A to the
extent provided in Treasury Regulation Section 1.409A-1(b)(4) (e.g., short-term
deferrals), Treasury Regulation Section 1.409A-1(b)(9) (e.g., separation pay
plans, including the exception under subparagraph (iii)), and other applicable
provisions of the Treasury Regulations.

 

(2) To the extent that the Six Month Delay Rule applies to payments otherwise
payable on an installment basis, the first payment shall include a catch-up
payment covering amounts that would otherwise have been paid during the
six-month period but for the application of the Six Month Delay Rule, and the
balance of the installments shall be payable in accordance with their original
schedule.

 

(3) To the extent that the Six Month Delay Rule applies to the provision of
benefits (including, but not limited to, life insurance and medical insurance),
such benefit coverage shall nonetheless be provided to the Executive during the
first six months following his separation from service (the “Six Month Period”),
provided that, during such Six-Month Period, the Executive pays to the Company,
on a monthly basis in advance, an amount equal to the Monthly Cost (as defined
below) of such benefit coverage. The Company shall reimburse the Executive for
any such payments made by the Executive in a lump sum not later than 30 days
following the sixth month anniversary of the Executive’s separation from
service. For purposes of this subparagraph, “Monthly Cost” means the minimum
dollar amount which, if paid by the Executive on a monthly basis in advance,
results in the Executive not being required to recognize any federal income tax
on receipt of the benefit coverage during the Six Month Period.

 

(e) The parties intend that this Agreement will be administered in accordance
with Section 409A. To the extent that any provision of this Agreement is
ambiguous as to its compliance with Section 409A, the provision shall be read in
such a manner so that all payments hereunder comply with Section 409A. The
parties agree that this Agreement may be amended, as reasonably requested by
either party, and as may be necessary to fully comply with Section 409A and all
related rules and regulations in order to preserve the payments and benefits
provided hereunder without additional cost to either party.

 

(f) The Company makes no representation or warranty and shall have no liability
to the Executive or any other person if any provisions of this Agreement are
determined to constitute deferred compensation subject to Section 409A but do
not satisfy an exemption from, or the conditions of, such Section.

 

Signature Page To Follow

 

 

   

 

IN WITNESS WHEREOF, the Company and the Executive have executed this Agreement
as of the date and year first above written.

 

  Vapor Corp.       By: /s/ Gregory Brauser     Gregory Brauser     President

 

  Executive:         /s/ Jeffrey Holman     Jeffrey Holman