Document:

CROWN BANK

 

 

6600
FRANCE AVENUE SOUTH, SUITE 125

EDINA. MINNESOTA 55435

 

 

MODIFICATION/AMENDMENT

 

ProUroCare Medical, Inc

Loan #4060026

 

 

 

January 23, 2013

 

The above referenced loan originally dated January 11, 2006
in the original amount of $1,200,000.00, which may have been amended and restated from time to time is further modified and/or
amended as follows:

 

 

The maturity date has been
changed to February 15, 2013.

 

All other terms and conditions of this note remain the same.
By signing below, you agree with the modifications and/or amendments outlined above.

  

 

	Crown Bank	 	ProUroCare Medical, Inc.
	 	 	 
	 	 	 
	/s/ Kevin Howk	 	/s/Richard B. Thon
	Kevin Howk	 	Richard Thon, CFO
	President	 	 
	 	 	 

 

952-285-5800 (PHONE) 952-285-5900 (FAX)
CROWN-BANK.COMEMPLOYMENT
AGREEMENT

 

THIS EMPLOYMENT
AGREEMENT (this “Agreement”) is made and entered into as of January 4 , 2013 (the “Effective Date”)
by and between Kyle Guse, an individual (“Employee”), and Atossa Genetics, Inc. a Delaware corporation, having
its principal office at 1616 Eastlake Ave., E, Suite 510, Seattle, WA 98102 (the “Company”, and collectively
with Employee referred to herein as the “Parties,” and individually, as a “Party”).

 

RECITALS

 

Whereas, the
Company is engaged in the commercialization of a patented, FDA approved non-invasive test for the detection of pre-cancerous conditions
that may lead to breast cancer;

 

Whereas, the
Company has not yet completed development of its infrastructure and is in need of capital, management, infrastructure, accounting
and various other critical elements including management and negotiations with sophisticated corporate entities and organizations;
and

 

Whereas, Employee
desires to be employed by Company and Company desires to employ the Employee on the terms provided herein;

 

AGREEMENT

 

NOW, THEREFORE,
in consideration of the mutual promises and agreements contained herein, the Parties agree as follows:

 

1.             Employment.
The Company hereby hires and employs Employee as of the Effective Date as Chief Financial Officer, General Counsel and Secretary
of the Company and Employee hereby accepts such employment with the Company on the terms and conditions set forth herein.

 

2.             Term
& Position.

 

(a)Employment
Term. Employee’s employment will be “at-will,” meaning that either Employee or the Company can terminate
the employment relationship at any time, with or without Cause, subject to the terms and conditions set forth in Section 7 of
this Agreement. The term of Employee’s employment hereunder is referred to herein as the “Employment Term.”

 

(b)Position.
During the Employment Term, Employee shall be the Chief Financial Officer, General Counsel and Secretary of the Company.

 

3.             Duties
and Responsibilities. Employee shall serve the Company diligently and faithfully in the performance of his duties on the Company’s
behalf, which shall include duties and responsibilities as the Company may from time to time reasonably prescribe consistent with
the duties and responsibilities of the Chief Financial Officer, General Counsel and Secretary of the Company. Employee shall report
to the Chief Executive Officer and the Board of Directors, which shall be responsible for strategy and tactics and for setting
corporate goals during the Employment Term, as and if appropriate.

 

4.             Compensation.
For services to be rendered to the Company pursuant to this Agreement, Employee shall be entitled to receive the following cash
and equity compensation:

 

(a)Base
Salary. Employee shall be entitled to an initial base salary of $225,000 per year, payable biweekly in accordance with the
Company’s normal payroll practices.

 

    	 

    	 

    
 

(b)Annual
Bonus. Employee shall be eligible to receive an annual cash performance bonus in an amount of up to 40% of his then-current
base salary, subject to the achievement of goals established annually prospectively by the Compensation Committee of the board.

 

(c)Signing
Bonus. Employee shall be paid a one-time signing bonus equal to $50,000 and a one-time relocation payment of $15,000, both
subject to any required tax withholdings and both of which shall be paid in the payroll cycle following the Company successfully
raising at least $3,000,000 in gross proceeds from the sale of securities in one or more financing transactions (a “Qualified
Financing”), but only if the Qualified Financing is completed within twelve (12) months from the Effective Date.

 

(d)
Equity. The Company will grant to Employee an option (the “Option”) to purchase 500,000 shares of
common stock at an exercise price per share equal to the fair market value per share on the date the Option is granted, as determined
by the Board of Directors or committee thereof. That portion of the Option that would not qualify as an ISO will be granted as
an “inducement” award outside of the Company’s 2010 Stock Option and Incentive Plan (the “Plan”),
but will be subject in all respects as if granted under the Plan. The Option will vest with respect to 25% of the underlying shares
(or 125,000 shares), on the first anniversary of the Effective Date, and then with respect to the remaining shares in equal quarterly
installments over the next three years, so long as Employee remains employed with the Company during that time.

 

(e)Change
in Control. If, within 12 months following the consummation of a Change in Control (as defined below), Employee’s employment
is terminated without Cause or Employee resigns for Good Reason (a “Change of Control Termination”), then in
such case, Employee shall be entitled to receive the severance payments and benefits set forth in Section 7(b) of this Agreement.
For purposes hereof, a “Change in Control” shall mean:

 

(i)
merger or consolidation in which (A) the Company is a constituent party or (B) a Subsidiary of the Company is a constituent
party and the Company issues shares of its capital stock pursuant to such merger or consolidation, in each case except any such
merger or consolidation involving the Company or a Subsidiary in which the shares of capital stock of the Company outstanding
immediately prior to such merger or consolidation continue to represent, or are converted into or exchanged for shares of capital
stock that represent, immediately following such merger or consolidation, at least a majority, by voting power, of the capital
stock of (1) the surviving or resulting corporation or (2) if the surviving or resulting corporation is a wholly owned subsidiary
of another corporation immediately following such merger or consolidation, the parent corporation of such surviving or resulting
corporation; or

 

(ii)
the sale, lease, transfer, exclusive license or other disposition, in a single transaction or series of related transactions,
by the Company or any Subsidiary of all or substantially all the assets of the Company and its Subsidiaries taken as a whole,
except where such sale, lease, transfer, exclusive license or other disposition is to a wholly-owned subsidiary of the Company.

 

5.             Fringe
Benefits. During the Employment Term, the Company agrees to make available the following fringe benefits to Employee in accordance
with the policies and plans adopted by the Company; said fringe benefits shall be no less favorable to the Employee than those
provided to other key employees and officers of the Company.

 

    	 

    	 

    
 

(a)
Expenses. Employee shall be expected to incur various business expenses and other out-of-pocket expenses customarily
incurred by persons holding like positions, including but not limited to traveling, entertainment and similar expenses incurred
by Employee in the performance of Employee’s services for the benefit of the Company. Company shall reimburse Employee for
all reasonable business expenses incurred or paid by Employee upon presentation of documentation reasonably acceptable to the
Company and subject to any reimbursement policy adopted by the Company.

 

(b)
Health Insurance. Participation in health, hospitalization, disability, dental and other insurance plans that the Company
may have in effect for other executives, all of which shall be paid for by the Company with contribution by the Employee as set
for the other executives, as and if appropriate.

 

(c)
Vacation. Employee shall be entitled to four weeks of paid vacation per year for each full year of employment and pro
rata for each partial year. Vacation time not taken during a calendar year is not accrued to the next calendar year.

 

6.             Termination.
Either the Company or Employee may terminate Employee’s employment by the Company, with or without “Cause”
or “Good Reason” (as such terms are defined below), in its or his sole discretion, upon ten (10) days’
prior written notice of termination or the payment of 10 days’ salary in lieu of such notice. In addition, Employee’s
employment by the Company shall terminate upon the death or Disability (as defined below) of Employee. For purposes of this Agreement,
in the case of a termination of Employee’s employment hereunder, the following terms shall have the following meanings:

 

(a)
“Good Reason” shall mean the Employee has complied with the Good Reason Process (as defined below) following
the occurrence of any of the following events: (i) a material diminution in Employee’s responsibilities, authority or duties
at the Company that constitutes a demotion,(ii) a material diminution in Employee’s base salary (other than a general reduction
applicable to all executive employees of the Company), (iii) relocation of Employee’s principal place of work more than
50 miles from the location as of the Effective Date, or (iv) a change in either the Chief Executive Officer position or a majority
of the Board of Directors, in either case within 12 months following the consummation of a Change of Control (each, a “Good
Reason Condition”).

 

(b)“Good
Reason Process” means that (i) Employee reasonably determines in good faith that a Good Reason Condition has occurred,
(ii) Employee notifies the Company in writing of the occurrence of the Good Reason Condition within 60 days after the first occurrence
of such condition; (iii) Employee cooperates in good faith with the Company’s efforts, for a period not less than 30 days
following such notice (the “Cure Period”), to remedy the Good Reason Condition; (iv) notwithstanding such efforts,
the Good Reason Condition continues to exist; and (v) Employee terminates his employment within 60 days after the end of the Cure
Period. If the Company cures the Good Reason Condition during the Cure Period, Good Reason will be deemed not to have occurred.

 

(c)“Cause”
shall mean: (i) Employee’s willful and repeated failure reasonably to perform his duties hereunder or to comply with any
reasonable and proper direction given by the Board if such failure of performance or compliance is not cured within thirty (30)
days following receipt by Employee of written notice from the Company containing a description of such failures and non-compliance
and a demand for immediate cure thereof; (B) Employee being found guilty in a criminal court of an offense involving moral turpitude;
(C) Employee’s commission of any material act of fraud or theft against the Company; or (D) Employee’s material violation
of any of the material terms, covenants, representations or warranties contained in this Agreement if such violation is not cured
within thirty (30) days following receipt by Employee of written notice from the Company containing a description of the violation
and a demand for immediate cure thereof.

 

    	 

    	 

    

 

(d)“Disability”
shall mean total and permanent disability as defined in Section 22(e)(3) of the Code.

 

7.              Severance.

 

(a)Termination
Absent a Change of Control. Subject to Section 6 hereof, if (i) the Company terminates the employment of Employee without
Cause, or (ii) Employee terminates his employment for Good Reason, then Employee shall be entitled to receive all of his accrued
and then-unpaid base salary, any bonus cash compensation earned by Employee through the effective date of termination (determined
at the maximum annual rate for bonus cash compensation provided for above but on a pro-rated basis for the portion of the fiscal
year that shall have elapsed when the termination occurs). In addition, subject to Employee’s execution and non-revocation
of an agreement containing a release of any and all legal claims and other termination-related provisions in a form acceptable
to the Company (the “Separation Agreement”), Employee shall be entitled to receive upon such termination an
additional cash payment in the amount of twelve (12) months of such base salary (the “Severance Payment”).
The Company shall pay the Severance Payment in substantially equal installments over six (6) months (the “Severance Benefits
Period”) in accordance with the Company’s standard payroll practice, in arrears beginning on the first payroll
date that occurs following the thirtieth (30th) day after the date on which Employee’s employment with the Company terminates;
provided, that prior to such date, the Separation Agreement becomes effective. Solely for purposes of Section 409A of the Code,
each installment of the Severance Payment will be considered a separate payment. Additionally, the vesting of outstanding equity
awards issued to the Employee shall, concurrent with such termination of service, accelerate with respect to one-half (50%) of
the unvested portion of all outstanding equity awards. Notwithstanding the foregoing, the Company shall not be required to pay
any severance pay for any period following the effective date of termination of Employee’s employment hereunder if Employee
shall have materially violated the provisions of Sections 3, 8, 10 or 11 of this Agreement and such violation is not cured within
thirty (30) days following receipt of written notice from the Company containing a description of the violation and a demand for
immediate cure.

 

(b)Termination
Following Change of Control. In the event of a Change of Control Termination, and subject to Employee’s execution and
non-revocation of a Separation Agreement, Employee shall be entitled to receive two times the Severance Payment (the “Change
of Control Termination Payment”). The Company shall pay the Change of Control Severance Payment within two business days
following the expiration of any application revocation periods under the Separation Agreement. Additionally, the vesting of all
outstanding equity awards issued to the Employee shall, concurrent with the Change of Control Termination, shall immediately accelerate
so that such awards shall be fully vested and exercisable.

 

    	 

    	 

    
 

8.              Noncompetition
and Non-Solicitation Commitment. Employee hereby agrees as follows:

 

(a)Agreement
Not to Compete. Employee hereby covenants, and agrees that, during the Employment Term and for a period of six (6) months
thereafter (the “Non-Compete Period”), he shall not within the United States directly or indirectly in any
manner or capacity (whether alone or as a partner, joint venturer, stockholder or investor, creditor, principal, agent, advisor,
employee, officer, director, licensor, licensee, salesman, broker or representative, for any “Person” (defined
as any individual, corporation (including any non-profit corporation), general, limited or limited liability partnership, limited
liability company, joint venture, estate, trust, association, organization, or other entity or governmental body), or through
any agency or by any other means whatsoever) engage in the Business of the Company or any Subsidiary, except for on behalf of
the Company or its affiliates. For purposes of the foregoing, the “Business of the Company,” from time to time means
the Company’s business as is described in Part I, Item 1 (“Description of Business”) of the Company’s
then most recent Annual Report on Form 10-K filed with the United States Securities and Exchange Commission, and the term “Subsidiary”
means a corporation or other entity that is at least majority owned, directly or indirectly, by the Company.

 

(b)
No Interference. Employee shall not take any action to interfere with the relationships between the Company and its
Affiliates, on the one hand, and their customers on the other, during the Non-Compete Period.

 

(c)Indirect
Competition. Employee further agrees that, during the Non-Compete Period, he shall not, directly or indirectly, assist or
encourage any other Person in carrying out, directly or indirectly, any activity that would be prohibited by the foregoing provisions
of this Section 8 if such activity were carried out by Employee.

 

(d)
No Solicitation. Employee agrees that during the Non-Compete Period, he will not, directly or indirectly, on behalf
of himself or any other Person, solicit the hiring of or hire, on any basis, any Person employed by the Company or its Affiliates
at the time of such solicitation.

 

9.              Reasonable
Restriction; Limits on Enforcement.

 

(a)
The parties hereto agree that the restrictions on the activities and business of Employee provided for in this Agreement,
and the duration and territorial scope thereof, are, under all circumstances, reasonable and necessary to safeguard the interests
of the Company and its Affiliates and to protect the goodwill acquired pursuant thereto.

 

(b)
If any court of competent jurisdiction shall refuse to enforce any or all of the provisions hereof because the time limit
applicable thereto is deemed unreasonable, it is expressly understood and agreed that such provisions shall not be void, but that
for the purpose of such proceedings and in such jurisdiction such time limitation shall be deemed to be reduced to the extent
necessary to permit enforcement of such provisions.

 

(c)
If any court of competent jurisdiction shall refuse to enforce any or all of the provisions hereof because they are more extensive
(whether as to geographical area, scope of business or otherwise) than is deemed reasonable, it is expressly understood and agreed
that such provisions shall not be void, but that for the purpose of such proceedings and in such jurisdiction, the restrictions
contained herein (whether as to geographic area, scope of business or otherwise) shall be deemed to be reduced to the extent necessary
to permit enforcement of such provisions.

 

    	 

    	 

    
 

(d)
The existence of any claim or cause of action by Employee or any other Person against the Company or its Affiliates shall
not constitute a defense to the enforcement of any provision hereof.

 

(e)
Employee expressly stipulates and agrees that this Agreement shall be construed in a manner which renders its provisions valid
and enforceable to the maximum extent (not exceeding its express terms) permissible under applicable law.

 

10.            Confidential
Information.

 

(a)
For purposes of this Section 10, the term “Confidential Information” means, in addition to its meaning
under applicable law, information which is not generally known in the Company’s industry and which is proprietary to the
Company and which is subject to efforts by the Company to maintain its confidentiality, including (i) trade secret information
about the Company, its customers and its products, and (ii) information relating to the business of the Company as conducted at
any time within the previous five (5) years or anticipated to be conducted by the Company, and to any of its past, current or
anticipated products, including, without limitation, information about the Company’s purchasing, accounting, marketing,
selling, or servicing. “Confidential Information” shall not include information that is, or thereafter by legal means
becomes, lawfully available from public sources or any information that is required by a law or any competent administrative agency
or judicial authority to be disclosed, or the disclosure of which is otherwise reasonably necessary or appropriate in connection
with performance by Employee of his duties under this Agreement.

 

(b)
Employee shall not, either during the term of this Agreement or for a period one (1) year following the expiration or termination
of this Agreement, use Confidential Information for any purpose other than the performance of his duties and responsibilities
under this Agreement or disclose any Confidential Information to any Person not employed by the Company except with the prior
written authorization of the Company or as may be necessary for Employee to perform his duties hereunder and shall exercise prudence
and the same degree of care taken by the Company to safeguard and protect, and to prevent the unauthorized disclosure of, all
such Confidential Information.

 

(c)
Upon expiration or termination of this Agreement, Employee shall turn over to a designated representative of the Company all
property in Employee’s possession and custody and belonging to the Company and all tangible embodiments of Confidential
Information. Employee shall not retain any copies or reproductions of correspondence, memoranda, reports, notebooks, drawings,
photographs or other documents relating in any way to the affairs of the Company and containing Confidential Information which
came into Employee’s possession at any time during the term of this Agreement.

 

11.            Inventions
and Innovations. Employee agrees to communicate to the Company, promptly and fully, and to assign to the Company, all inventions,
trade secrets, and technical or business innovations, and all worldwide intellectual property rights therein, developed or conceived
solely by Employee, or jointly with others, while employed by the Company, which were developed on the time of the Company or
in reliance on Confidential Information. Employee further agrees to execute all necessary papers and otherwise to assist the Company,
at the Company’s sole expense, to obtain patents or other legal protection as the Company deems fit, and to assist in perfecting
in the Company all rights granted to it hereunder. Both the Company and Employee intend that all original works of authorship
created by Employee while working in the employ of the Company will be works for hire within the meaning of applicable copyright
laws and will be the sole and exclusive property of the Company.

 

    	 

    	 

    
 

12.           
Third Party Beneficiaries. Employee acknowledges and agrees that the covenants contained in Sections 8 through 11 hereof
are expressly intended to benefit the Company and all of its Affiliates, and that for purposes of such sections the term “Company”
shall include all of Company’s Affiliates.

 

13.           
Survival. The covenants and agreements of the Employee set forth in Sections 8 through 12 shall remain in effect and survive
the termination of this Agreement for the respective periods set forth therein.

 

14.           
Waiver. No waiver of any term, condition or covenant of this Agreement shall be deemed to be a waiver of subsequent breaches
of the same or other terms, covenants or conditions hereof.

 

15.           
Amendment. This Agreement may not be amended, altered or modified except by a written agreement between the parties hereto.

 

16.           
Assignability. Employee may not assign this Agreement to any third party for whatever purpose without the express written
consent of the Company, other than as specifically authorized herein. The Company may not assign this Agreement to any third party
without the express written consent of Employee except by operation of law, or through merger, liquidation, recapitalization or
sale of all or substantially all of the assets of the Company, provided that the Company may assign this Agreement at any time
to an Affiliate of the Company.

 

17.           
Invalidity. In the event part or any portion of this Agreement is determined in a legally binding manner to be invalid
and unenforceable, the parties agree that this Agreement as so construed shall remain in force and effect between them and applied
as if the offending part or portion did not comprise an element hereof.

 

18.           
Severability. If any particular provision of this Agreement shall be determined to be invalid or unenforceable, the parties
expressly authorize the court or other tribunal making such a determination to edit the invalid or unenforceable provision to
allow this Agreement, and the provisions thereof, to be valid and enforceable to the fullest extent allowed by applicable law.

 

19.           
Entire Agreement. This Agreement contains the entire agreement of the parties relative to the subject matter of this Agreement
and there is no provision, condition or understanding relative to the employment of Employee outside this Agreement.

 

20.           
Notices. Any notice required to be given hereunder shall be duly and properly given, effective as of the date of mailing,
if mailed postage prepaid to either party at the addresses set forth below, or to such other address as such party may subsequently
notify to the other.

 

    	 

    	 

    
 

	If to Employee:	Kyle Guse
	 	321 High School Road NE STE D3 PMB 171 
	 	Bainbridge Island, WA 98110-2648
	 	 
	 	 
	If to Company:	Atossa Genetics, Inc.
	 	Attn: Chief Executive Officer
	 	4105 E. Madison Street, Suite 320
	 	Seattle, WA 98112

 

21.           
Governing Law. This Agreement shall be governed by and construed under the internal laws of the State of Washington, without
regard to the principles of comity and/or the applicable conflicts of laws of any state that would result in the application of
any laws other than the State of Washington.

 

22.           
Jurisdiction & Arbitration. The validity, performance and interpretation of the Agreement shall be governed by the
laws of the State Washington, without regard to its conflicts of law rules. Any dispute or claim arising under or with respect
to this Agreement, which is incapable of resolution, will be resolved by arbitration before one (1) arbitrator in Seattle, Washington,
in accordance with the Rules for Commercial Arbitration of the American Arbitration Association ("AAA"). The
appointing agency shall be the AAA and the arbitrator shall apply Washington State law to both interpret this Agreement and fashion
an award.

 

23.           
Tax Matters.

 

(a)
The parties intend that this Agreement be administered in accordance with Section 409A of the Code. To the extent that any
provision of this Agreement is ambiguous as to its compliance with, or exemption from, Section 409A of the Code, the provision
will be read in such a manner so that all payments hereunder either comply with, or are exempt from, Section 409A of the Code.
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 of the Code and all related rules and regulations in order to preserve the payments and benefits provided
hereunder without additional cost to either party. The Company makes no representation or warranty and will have no liability
to Employee or any other person if any provisions of this Agreement are determined to constitute deferred compensation subject
to Section 409A of the Code but do not satisfy an exemption from, or the conditions of, such Section.

 

(b)
Anything in this Agreement to the contrary notwithstanding, if at the time of Employee’s “separation from service”
within the meaning of Section 409A of the Code, the Company determines that Employee is a “specified employee” within
the meaning of Section 409A(a)(2)(B)(i) of the Code, then to the extent any payment or benefit that Employee becomes entitled
to under this Agreement on account of his separation from service would be considered deferred compensation subject to the 20
percent additional tax imposed pursuant to Section 409A(a) of the Code 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 (A)
six months and one day after Employee’s separation from service or (B) Employee’s death. If any such delayed cash
payment is 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 this provision, and the balance of the installments
will be payable in accordance with their original schedule.

 

    	 

    	 

    
 

(c)
To the extent that any payment or benefit described in this Agreement constitutes “non-qualified deferred compensation”
under Section 409A of the Code, and to the extent that such payment or benefit is payable upon Employee’s termination of
employment, then such payments or benefits shall be payable only upon Employee’s “separation from service.”
The determination of whether and when a separation from service has occurred shall be made in accordance with the presumptions
set forth in Treasury Regulation Section 1.409A 1(h).

 

(d)
All in-kind benefits provided and expenses eligible for reimbursement under this Agreement shall be provided by the Company
or incurred by Employee during the time periods set forth in this Agreement. All reimbursements shall be paid as soon as administratively
practicable, but in no event shall any reimbursement be paid after the last day of the taxable year following the taxable year
in which the expense was incurred. The amount of in-kind benefits provided or reimbursable expenses incurred in one taxable year
shall not affect the in-kind benefits to be provided or the expenses eligible for reimbursement in any other taxable year. Such
right to reimbursement or in-kind benefits is not subject to liquidation or exchange for another benefit.

 

24.           
Counterparts and Electronic Signatures. This Agreement may be executed in two or more counterparts and by facsimile or
any electronic means, each of which shall be deemed an original but all of which together shall constitute one and the same Agreement.

 

[SIGNATURE PAGE
FOLLOWS]

 

    	 

    	 

    

 

IN WITNESS WHEREOF, the parties
have executed this Agreement as of January 4, 2013.

 

	COMPANY:	 	EMPLOYEE:
	 	 	 
	Atossa Genetics,
    Inc.	 	 
	 	 	 
	By:	/s/ Steven C. Quay	 	By:	/s/ Kyle Guse
	 	Steven C. Quay	 	 	Kyle Guse
	 	Chief Executive Officer and President	 	 

[SIGNATURE PAGE
TO EMPLOYMENT AGREEMENT]

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