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