Document:

ex_136405.htm

 

 

Exhibit 10.77

 

SETTLEMENT AGREEMENT AND GENERAL RELEASE

 

The parties to this Settlement Agreement and General Release (this “Agreement”), which is dated December 29, 2017 (the “Effective Date”), are Lincoln Park Capital Fund, LLC, an Illinois limited liability company (“Lincoln Park”), and KonaRed Corporation, a Nevada corporation (“KonaRed”). Lincoln Park and KonaRed are each respectively referred to herein as a “Party” and collectively as “the Parties.”

 

WHEREAS, the Parties have entered into the following agreements prior to the Effective Date (collectively, the “Contracts”):

 

a. Purchase Agreement, dated February 3, 2014.

 

b. Registration Rights Agreement, dated as of February 3, 2014.

 

c. Purchase Agreement, dated as of June 16, 2015.

 

d. Amended and Restated Warrant (to purchase 1,136,364 shares - initial exercisability date of January 27, 2014).

 

e. Registration Rights Agreement, dated as of June 16, 2015.

 

f. Securities Purchase Agreement dated August 18, 2015.

 

g. Senior Convertible Note issued August 18, 2015, including its $250,000 principal amount and all accrued interest thereon.

 

h. Securities Purchase Agreement, dated as of November 23, 2015.

 

i. Senior Convertible Note issued November 23, 2015.

 

j. Notes maturities extension letter agreement, dated as of December 6, 2016.

 

k. Warrant exercise and issuance of warrants letter agreement, dated as of May 9, 2017.

 

l. Warrant to purchase 3,750,000 shares of KonaRed common stock, issued on or about August 18, 2015.

 

m. Warrant to purchase 5,000,000 shares of KonaRed common stock, issued on or about November 23, 2015.

 

n. Warrant to purchase 7,000,000 shares of KonaRed common stock, issued on or about December 6, 2016.

 

o. Warrant to purchase 5,000,000 shares of KonaRed common stock, issued on or about May 9, 2017.

 

WHEREAS, the Parties desire to fully and finally settle all claims between them with respect to the Contracts in existence on the Effective Date.

 

NOW, THEREFORE, in consideration of the mutual covenants and conditions contained herein, and for other good and valuable consideration, the sufficiency and receipt of which are hereby

 

 

 

 

 

acknowledged, the Parties agree as follows:

 

1. Payment. In consideration for Lincoln Park’s agreements and releases contained herein, KonaRed hereby agrees to:

 

a. Pay to Lincoln Park $140,034.73 in cash by no later than December 31, 2017. (Such amount shall bear no interest before such due date.)

 

b. Pay to Lincoln Park $23,339.12 in cash in each of the first six (6) calendar months of 2018, in each case by no later than the last day of such respective calendar month. Such payment obligation is evidenced by a new promissory note (the “New Note”), attached hereto as Exhibit A. (Such respective amounts shall bear no interest before such respective due dates.)

 

c. Issue to Lincoln Park eight million (8,000,000) shares of validly-issued, fully-paid, non-assessable, unregistered common stock of KonaRed (the “8 Million Shares,” and together with the New Note, the “Securities”) within three (3) business days after the Effective Date.     

 

2. Release By Lincoln Park. In consideration of the promises and payments provided for in this Agreement, Lincoln Park, for itself and its current, former and future subsidiaries, affiliates, related entities, creditors, fiduciaries, predecessors, successors, officers, directors, managers, members, stockholders, agents, employees, and assigns, hereby fully and forever releases and discharges KonaRed and its current, former and future subsidiaries, affiliates, related entities, creditors, fiduciaries, predecessors, successors, officers, directors, stockholders, agents, employees, and assigns (collectively, “KonaRed Releasees”), with respect to any and all rights, claims, liabilities and causes of action, of every nature, kind and description, absolute or contingent, liquidated or unliquidated, in law, equity or otherwise, which have arisen, occurred or existed at any time before the Effective Date. Without limitation, contract rights are deemed to constitute rights/claims/liabilities for this purpose and accordingly all promissory notes, warrants and other contract rights in existence prior to the Effective Date are hereby entirely surrendered and terminated.

 

However, Lincoln Park does not release (i) any rights to enforce this Agreement; (ii) any claims it is precluded from waiving by operation of law; (iii) any rights it is entitled to as a holder of KonaRed’s common stock; (iv) all rights, claims and liabilities it is entitled under the New Note; (v) its rights to indemnification and payment of defense costs, under applicable law or any indemnification provision contained in any of the Contracts; or (vi) any claims (but not, except as set forth in (ii) and (v) above, under any of the Contracts) that may arise after the Effective Date.

 

3. Release By KonaRed. KonaRed, for itself and its current, former and future subsidiaries, affiliates, related entities, creditors, fiduciaries, predecessors, successors, officers, directors, stockholders, agents, employees, and assigns, hereby fully and forever releases and discharges Lincoln Park and its current, former and future subsidiaries, affiliates, related entities, creditors, fiduciaries, predecessors, successors, officers, directors, managers, members, stockholders, agents, employees, and assigns (collectively, “Lincoln Park Releasees” and together with the KonaRed Releasees, the “Releasees”), with respect to any and all rights, claims, liabilities and causes of action, of every nature, kind and description, absolute or contingent, liquidated or unliquidated, in law, equity or otherwise, which have arisen, occurred or existed at any time before the Effective Date.

 

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However, KonaRed does not release (i) any rights to enforce this Agreement; (ii) any claims it is precluded from waiving by operation of law; or (iii) any claims (but not, except as set forth in (ii) above, under any of the Contracts) that may arise after the Effective Date.

 

4. Waiver of Rights. Lincoln Park expressly waives any and all rights and benefits conferred upon it by Section 1542 of the Civil Code of the State of California, which states as follows:

 

“A general release does not extend to claims which the creditor does not know or suspect to exist in his or her favor at the time of executing the release, which if known by him or her must have materially affected his or her settlement with the debtor.”

 

Lincoln Park agrees that it will not use any substantially similar common law principle or other federal or state statute to defeat the intent of this Section 4, and to that extent it waives any such substantially similar common law principle or other federal or state statute.

 

5.     Release Applies To All Claims. Each Party expressly agrees and understands that the release given by it pursuant to this Agreement applies to all unknown, unsuspected, and unanticipated rights, claims, liabilities, and causes of action which it may have against any of the applicable set of Releasees, and this release shall be fully effective even in the event that either Party hereafter discovers facts in addition to, or different from, those which it now knows or believes to be true.

 

6. No Prior Assignment of Claims. Each Party represents and warrants to the other Party that it has not sold, assigned, conveyed, pledged, encumbered, or otherwise in any way transferred to any person or entity any interest in the rights, claims, liabilities or causes of action it is releasing in this Agreement.

 

7.  Securities Position. Lincoln Park represents and warrants that as of immediately before this Agreement, its holdings of outstanding KonaRed common stock consisted of exactly 1,349,456 shares of KonaRed common stock (including 1,136,364 shares owned of record and 213,092 shares owned beneficially but held in street name). Based on such representation and warranty, KonaRed confirms that Lincoln Park’s ownership of such 1,349,456 shares is expressly excluded from this Agreement and need not be surrendered or forgone in connection with this Agreement.

 

8.   Entire Agreement. This Agreement contains the entire understanding and agreement between the Parties hereto with respect to the matters referred to herein and supersedes any and all prior and contemporaneous commitments, undertakings and agreements, whether written or oral, with regard to the subject matter of this Agreement. The Parties further acknowledge and agree that parol evidence shall not be required to interpret the intent of the Parties. No other representations, warranties, covenants, undertakings, commitments, promises or other prior or contemporary agreements, whether oral or written, respecting such matters, which are not specifically incorporated herein, shall be deemed in any way to exist or bind any of the Parties. The Parties acknowledge that each Party has not relied, in deciding whether to enter into this Agreement on this Agreement’s expressly stated terms and conditions, on any representations, warranties, covenants, undertakings, commitments, promises or agreements, which are not expressly set forth within this Agreement.

 

9. Facilitation. Each Party hereto agrees to execute and perform such other documents and acts as are reasonably required in order to facilitate the terms of this Agreement, and the intent thereof, and to cooperate in good faith in order to effectuate the provisions of this Agreement.

 

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10. This Agreement Is Reasonable. The Parties acknowledge that this Agreement is reasonable, valid, and enforceable.

 

11. Waiver, Amendment, and Modification of Agreement. The Parties agree that no waiver, amendment, or modification of any of the terms and/or conditions of this Agreement shall be effective unless in writing and signed by the persons affected by the waiver, amendment, or modification. No waiver of any term, condition or default of any term of this Agreement shall be construed as a waiver of any other term, condition or default.

 

12. Counterparts. This Agreement may be signed in counterparts and said counterparts shall be treated as though signed as one document. Delivery of signed counterparts electronically (e.g., by .pdf attachment to email) shall be deemed valid delivery for all purposes.

 

13. Attorneys’ Fees and Costs. Each Party shall be responsible for all of its own legal fees and costs, including but not limited to those incurred in connection with the negotiation, preparation and entering into of this Agreement. In the event of any legal, arbitration or administrative proceedings after the date of this Agreement with respect to any claim covered by the release provisions of this Agreement, or with respect to enforcement or interpretation of this Agreement, if a Party hereto is the prevailing Party, it shall be entitled to recover its reasonable attorneys’ fees and costs.

 

14. California Law. This Agreement and its terms shall be governed by and construed under California law, without regard to conflict-of-law principles.

 

15. Representation by Counsel; No Coercion. Each of Lincoln Park and KonaRed hereby acknowledge, represent, and warrant that it has, in connection with this Agreement and all matters, claims and disputes within the scope of this Agreement, been represented by, consulted with and advised by qualified and competent legal counsel, before the execution of this Agreement. Each Party confirms that it has read this Agreement carefully, and understands the import and substance of each and all of the terms set forth in this Agreement. Each Party understands and agrees that if any of the facts or matters upon which it now relies in making this Agreement hereafter prove to be otherwise, this Agreement will nonetheless remain in full force and effect. Each Party is entering this Agreement voluntarily, without any coercion, and based upon such Party’s own judgment.

 

16. No Presumption from Drafting. Given that the Parties have had the opportunity to draft, review, and edit the language of this Agreement with the assistance and advice of counsel, no presumption for or against either Party arising out of drafting all or any part of this Agreement shall be applied in any action or proceeding involving this Agreement. Accordingly, the Parties hereby waive the benefit of any federal, state or local law or principle, providing that in cases of uncertainty, language of a contract should be interpreted against the Party who caused the uncertainty to exist. This Agreement is the product of a negotiated, bargained-for exchange of mutual valuable consideration.

 

17. Covenant Not To Sue. Lincoln Park agrees that it shall not initiate, institute, commence, participate in, continue, file, or otherwise prosecute, whether directly or indirectly, or through a third Party, any action, lawsuit, cause of action, arbitration, administrative proceedings, claim, demand, or legal proceedings for or arising out of or relating to any right, claim, etc. released hereby.

 

18. Covenant Not To Assist. Lincoln Park agrees that it shall never recommend, encourage, solicit, assist (including without limitation by disclosing or allowing the disclosure of investigative materials or information contained therein), participate in or cooperate with, whether directly or indirectly, or through a third party, any person in connection with any action, lawsuit, cause of action, arbitration, administrative proceedings, claim, demand, or legal proceedings against KonaRed with regard

 

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to any matter which is similar to and/or which arises out of the same general facts as any right, claim, etc. released hereby.

 

19.     Severability. This Agreement is severable. If any portion(s) of this Agreement is found to be unenforceable, the portion(s) shall be construed in such a manner as will to the maximum extent possible enable such portion(s) to be enforceable, the remaining portions of this Agreement shall be enforced to the maximum extent possible, and the unenforceable portion shall not affect the enforceability of the remaining provisions.

 

20. Effect of Settlement. The Parties each acknowledge and agree (a) that the terms specified in this Agreement are a full and complete compromise of matters involving disputed issues of law and fact; (b) that neither any Party’s agreement to these terms nor any Party’s statement made during the negotiations for this Agreement shall be considered, nor shall they be, admissions by any Party hereto; and (c) that no past or present wrongdoing shall be implied or claimed on the part of the Parties to this Agreement.

 

21. No Admissions by Parties. Nothing contained in this Agreement is intended to, or shall be deemed or construed to, be an admission by any Party hereto, for any wrongdoing or liability whatsoever. For avoidance of doubt: this Agreement shall not be construed as an admission by KonaRed of any improper, wrongful or unlawful actions, or any wrongdoing against Lincoln Park, and KonaRed specifically denies and disclaims any liability to or wrongful acts against Lincoln Park on the part of KonaRed or any KonaRed Releasees.

 

22. No Rush Toward Agreement. Lincoln Park acknowledges that it executes this Agreement having had sufficient time within which to consider its terms.

 

23. Securities-Law Matters.     

 

a. Lincoln Park represents that it is an accredited investor as defined in Rule 501(a) of Regulation D promulgated under the Securities Act of 1933 (the “Securities Act”).

 

b. Lincoln Park represents that it is acquiring the Securities for its own account for investment only and not view a view to any distribution thereof which would be violative of the Securities Act or any other federal or state securities law.

 

c. Lincoln Park represents that it:

 

i. has had an opportunity to review KonaRed’s filings made with the Securities and Exchange Commission,

 

ii. has had an opportunity to ask questions and receive answers from the officers of KonaRed as necessary to make a deliberate and informed decision as to whether to enter into this Agreement on the terms provided in this Agreement, including without limitation questions and answers regarding the capitalization, business, properties, prospects and financial condition of KonaRed,

 

iii. has reviewed the merits and risks of the transaction contemplated by this Agreement,

 

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iv. has requested, received and reviewed from KonaRed all information which Lincoln Park considers would be material to Lincoln Park’s investment decision, and

 

v. has been advised to, and given the opportunity to, consult with independent legal and financial counsel of Lincoln Park’s own choosing with respect to this Agreement;

 

and accordingly Lincoln Park believes it has received all information it considers necessary or appropriate for deciding whether to enter into this Agreement and (among other things) surrender its warrants and acquire the Securities.

 

d. Lincoln Park understands the significant risks of investment in the Securities.

 

e. Lincoln Park understands that the Securities will be characterized as “restricted securities” under the federal securities laws, inasmuch as they are being acquired from KonaRed in a transaction not involving a public offering, and that under such laws and applicable regulations such Securities may not be resold without registration under the Securities Act, except in certain limited circumstances. In this connection, Lincoln Park represents that it is familiar with Rule 144 promulgated under the Securities Act, and understands the resale limitations imposed thereby and by the Securities Act. Lincoln Park acknowledges that KonaRed has no obligation to register or qualify the Securities for resale or to cause any elements of Rule 144 resale eligibility to be satisfied.

 

f. Lincoln Park understands that KonaRed is in the process of “going dark” (terminating its common stock’s registration under the Securities Exchange Act of 1934 and suspending its reporting obligations under the Securities Exchange Act of 1934 and the Securities Act), and that going dark will negatively affect the liquidity of the 8 Million Shares.

 

g. Lincoln Park understands that KonaRed has made no assurances that a liquid public market now exists, or that that a liquid public market (or any public market) will exist in the future, for the 8 Million Shares.

 

h. Lincoln Park represents that neither (i) Lincoln Park, (ii) any of Lincoln Park’s directors, executive officers or managers, nor (iii) any person that would be deemed a beneficial owner of the Securities (in accordance with Rule 506(d) under the Securities Act) is subject to any of the “bad actor” disqualifications described in Rule 506(d)(1)(i) through (viii) under the Securities Act.

 

i. Lincoln Park represents that neither Lincoln Park, nor any of its officers, employees, agents, directors, members or managers has engaged the services of a broker, investment banker or finder in connection with this Agreement or the Securities or agreed to pay any commission, fee or other remuneration to any third party in connection therewith.

 

j. Lincoln Park acknowledges that it is against the law to purchase or sell securities on the basis of material non-public information unless one’s counterparty possesses the same material non-public information.

 

24. Representations and Warranties of KonaRed. KonaRed hereby represents and warrants that:

 

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a. KonaRed is a duly incorporated and validly existing corporation under the laws of the State of Nevada;

 

b. (i) KonaRed has the requisite corporate power and authority to enter into and perform its obligations under this Agreement and the New Note and to issue the Securities in accordance with the terms hereof, (ii) the execution and delivery of the Agreement and the New Note by KonaRed and the consummation by it of the transactions contemplated hereby and thereby, including without limitation, the issuance of the Securities, have been duly authorized by the KonaRed’s Board of Directors and no further consent or authorization is required by the KonaRed, its Board of Directors or its stockholders, (iii) this Agreement and the New Note have been duly executed and delivered by KonaRed and (iv) this Agreement and the New Note each constitutes, the valid and binding obligations of KonaRed enforceable against KonaRed in accordance with their terms, except as such enforceability may be limited by general principles of equity or applicable bankruptcy, insolvency, reorganization, moratorium, liquidation or similar laws relating to, or affecting generally, the enforcement of creditors' rights and remedies.

 

c.  Upon issuance and payment therefor in accordance with the terms and conditions of this Agreement, the 8 Million Shares shall be validly issued, fully paid and nonassessable and free from all taxes, liens, charges, restrictions (other than a customary restricted-securities securities-law legend), rights of first refusal and preemptive rights with respect to the issue thereof, with the holders being entitled to all rights accorded to a holder of KonaRed common stock.  

 

c. Neither the execution, delivery or performance of this Agreement nor the authorization or issuance of the Securities has constituted or resulted in, or will constitute or result in, a default or violation in any material respect by KonaRed of any law or regulation or any term or provision of KonaRed’s Articles of Incorporation or Bylaws or any contract to which KonaRed is a party.

 

IN WITNESS WHEREOF, the Parties hereto have executed and delivered this Settlement Agreement and General Release.

 

	 	
			KONARED CORPORATION

			 

			By: /s/ Kyle Redfield                                           

			Kyle Redfield, Chief Executive Officer

			 

			 

			 

			LINCOLN PARK CAPITAL FUND, LLC

			By: Lincoln Park Capital Partners, LLC

			By: Rockledge Capital Corporation

			 

			By: /s/ Josh Scheinfeld                                         

			Josh Scheinfeld, President

			 

			

 

 

 

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EXHIBIT A

 

FORM OF NEW NOTE

 

 

PROMISSORY NOTE

 

THE ISSUANCE AND SALE OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR APPLICABLE STATE SECURITIES LAWS. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD, TRANSFERRED OR ASSIGNED (I) IN THE ABSENCE OF (A) AN EFFECTIVE REGISTRATION STATEMENT FOR THE SECURITIES UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) AN OPINION OF COUNSEL TO THE HOLDER (IF REQUESTED BY THE COMPANY), IN A FORM REASONABLY ACCEPTABLE TO THE COMPANY, THAT REGISTRATION IS NOT REQUIRED UNDER SAID ACT OR (II) UNLESS SOLD OR ELIGIBLE TO BE SOLD PURSUANT TO RULE 144 OR RULE 144A UNDER SAID ACT. NOTWITHSTANDING THE FOREGOING, THE SECURITIES MAY BE PLEDGED IN CONNECTION WITH A BONA FIDE MARGIN ACCOUNT OR OTHER LOAN OR FINANCING ARRANGEMENT SECURED BY THE SECURITIES. ANY TRANSFEREE OF THIS NOTE SHOULD CAREFULLY REVIEW THE TERMS OF THIS NOTE.   

 

KONARED CORPORATION

 

PROMISSORY NOTE

 

	
			Issuance Date:  December [ ], 2017

				
			Original Principal Amount: $140,034.72

			

 

FOR VALUE RECEIVED, KONARED CORPORATION, a Nevada corporation (the “Company”), hereby promises to pay to the order of LINCOLN PARK CAPITAL FUND, LLC or its registered assigns (“Holder”) the amount set out above as the original principal amount (as reduced pursuant to the terms hereof pursuant to redemption or otherwise, the “Principal”) when due, whether upon the Maturity Date (as defined below), acceleration, redemption or otherwise (in each case in accordance with the terms hereof). This promissory note (this “Note”, including all promissory notes issued in exchange, transfer or replacement hereof, collectively, the “Notes”) is issued pursuant to the Settlement Agreement (as defined below) on the Issuance Date.

 

1.             PAYMENTS OF PRINCIPAL. On or before each of January 31, 2018, February 28, 2018, March 31, 2018, April 30, 2018, May 31, 2018 and the Maturity Date, the Company shall pay to the Holder $23,339.12 in cash.

 

2.             INTEREST. This Note shall not accrue interest.

 

3.            RIGHTS UPON EVENT OF DEFAULT.

 

(a)           Event of Default.  Each of the following events shall constitute an “Event of Default”:

  

(i)          the Company’s failure to pay to the Holder any amount of Principal, Late Charges or other amounts when and as due under this Note, except, in the case of a failure to pay Principal and Late Charges when and as due, in which case only if such failure remains uncured for a period of at least five (5) calendar days after written notice to the Company of such default;

 

(ii)         the occurrence of any default under, redemption of or acceleration prior to maturity of any (i) indebtedness, liabilities and other obligations of the Company or with respect to which the Company is a guarantor, whether outstanding on the Issuance Date or hereafter created, to banks, insurance companies or other lenders or thrifts engaged in the business of lending money,

 

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whether or not secured and (ii) any deferrals, renewals or extensions or any debentures, notes or other evidence of indebtedness issued in exchange for such indebtedness, only if such acceleration or redemption obligation remains in effect for a period of five (5) calendar days following the occurrence thereof;

 

(iii)        bankruptcy, insolvency, reorganization or liquidation proceedings or other proceedings for the relief of debtors shall be instituted by or against the Company or any Subsidiary and, if instituted against the Company or any Subsidiary by a third party, shall not be dismissed within forty-five (45) days of their initiation;

 

(iv)         the commencement by the Company or any Subsidiary of a voluntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or of any other case or proceeding to be adjudicated a bankrupt or insolvent, or the consent by it to the entry of a decree, order, judgment or other similar document in respect of the Company or any Subsidiary in an involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or to the commencement of any bankruptcy or insolvency case or proceeding against it, or the filing by it of a petition or answer or consent seeking reorganization or relief under any applicable federal, state or foreign law, or the consent by it to the filing of such petition or to the appointment of or taking possession by a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or the making by it of an assignment for the benefit of creditors, or the execution of a composition of debts, or the occurrence of any other similar federal, state or foreign proceeding, or the admission by it in writing of its inability to pay its debts generally as they become due, the taking of corporate action by the Company or any Subsidiary in furtherance of any such action or the taking of any action by any Person to commence a Uniform Commercial Code foreclosure sale or any other similar action under federal, state or foreign law; or

 

(v)        the entry by a court of (i) a decree, order, judgment or other similar document in respect of the Company or any Subsidiary of a voluntary or involuntary case or proceeding under any applicable federal, state or foreign bankruptcy, insolvency, reorganization or other similar law or (ii) a decree, order, judgment or other similar document adjudging the Company or any Subsidiary as bankrupt or insolvent, or approving as properly filed a petition seeking liquidation, reorganization, arrangement, adjustment or composition of or in respect of the Company or any Subsidiary under any applicable federal, state or foreign law or (iii) a decree, order, judgment or other similar document appointing a custodian, receiver, liquidator, assignee, trustee, sequestrator or other similar official of the Company or any Subsidiary or of any substantial part of its property, or ordering the winding up or liquidation of its affairs, and the continuance of any such decree, order, judgment or other similar document or any such other decree, order, judgment or other similar document unstayed and in effect for a period of thirty (30) consecutive days.

 

(b)           Notice of an Event of Default; Redemption Right. Upon the occurrence of an Event of Default with respect to this Note, the Company shall within one (1) Business Day deliver written notice thereof via facsimile and overnight courier (with next day delivery specified) to the Holder. Upon the occurrence of the Event of Default this Note shall accelerate and all Principal shall become due and payable.

 

4.           AMENDING THE TERMS OF THIS NOTE.  The prior written consent of the Holder shall be required for any change or amendment to this Note.

 

5.           TRANSFER.  This Note may be offered, sold, assigned or transferred by the Holder without the consent of the Company.

 

6.           REISSUANCE OF THIS NOTE. If this Note is to be transferred, the Holder shall surrender this Note to the Company, whereupon the Company will forthwith issue and deliver upon the order of the Holder a new Note, registered as the Holder may request, representing the outstanding Principal being transferred by the Holder

 

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and, if less than the entire outstanding Principal is being transferred, a new Note to the Holder representing the outstanding Principal not being transferred.

   

7.           PAYMENT OF COLLECTION, ENFORCEMENT AND OTHER COSTS.  If (a) this Note is placed in the hands of an attorney for collection or enforcement or is collected or enforced through any legal proceeding or the Holder otherwise takes action to collect amounts due under this Note or to enforce the provisions of this Note or (b) there occurs any bankruptcy, reorganization, receivership of the Company or other proceedings affecting Company creditors’ rights and involving a claim under this Note, then the Company shall pay the costs incurred by the Holder for such collection, enforcement or action or in connection with such bankruptcy, reorganization, receivership or other proceeding, including, without limitation, attorneys’ fees and disbursements. The Company expressly acknowledges and agrees that no amounts due under this Note shall be affected, or limited, by the fact that the purchase price paid for this Note was less than the original Principal amount hereof.

 

8.           CONSTRUCTION; HEADINGS.  This Note shall be deemed to be jointly drafted by the Company and the Holder and shall not be construed against any Person as the drafter hereof. The headings of this Note are for convenience of reference and shall not form part of, or affect the interpretation of, this Note.

 

9.           FAILURE OR INDULGENCE NOT WAIVER. No failure or delay on the part of the Holder in the exercise of any power, right or privilege hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such power, right or privilege preclude other or further exercise thereof or of any other right, power or privilege. No waiver shall be effective unless it is in writing and signed by an authorized representative of the waiving party.

 

10.           NOTICES; CURRENCY; PAYMENTS.

 

(a)           Notices. Whenever notice is required to be given under this Note, unless otherwise provided herein, such notice shall be deemed effectively given:  (a) upon personal delivery to the party to be notified, (b) when sent by confirmed telex or facsimile if sent during normal business hours of the recipient; if not, then on the next Business Day, (c) five (5) Business Days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one (1) day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt.  All communications shall be sent to (a) in the case of the Company, to KonaRed Corporation, 1101 Via Callejon #200, San Clemente, CA 92673, Telephone Number (808) 212-1553, Fax: (808) 442-9922, Attention: Shaun Roberts or John Dawe, with a copy (which shall not constitute notice) to [Sichenzia Ross Friedman Ference LLP, 61 Broadway, 32nd Floor, New York, New York 10006, Telephone Number (212) 930-9700, Fax (212) 930-9725, Attention: Gregory Sichenzia, Esq.], and (b) in the case of the Investor, to Lincoln Park Capital Fund, LLC, 440 North Wells, Suite 410, Chicago, IL 60654, Telephone Number: (312) 822-9300, Fax: (312) 822-9301, Attention: Rick Vogel, with a copy (which shall not constitute notice) to K&L Gates, LLP, Southeast Financial Center, 200 S. Biscayne Blvd., Suite 3900, Miami, FL 33131, Telephone Number (305) 539-3306, Fax: (305) 358-7095, Attention: Clayton Parker, Esq. The Company shall provide the Holder with prompt written notice of all actions taken pursuant to this Note, including in reasonable detail a description of such action and the reason therefore.

 

(b)           Currency.  All dollar amounts referred to in this Note are in United States Dollars (“U.S. Dollars”), and all amounts owing under this Note shall be paid in U.S. Dollars.

  

(c)           Payments. Whenever any payment of cash is to be made by the Company to any Person pursuant to this Note, unless otherwise expressly set forth herein, such payment shall be made in lawful money of the United States of America by a certified check drawn on the account of the Company and sent via overnight courier service to such Person at such address as previously provided to the Company in writing, provided that the Holder may elect to receive a payment of cash via wire transfer of immediately available funds by providing the Company with prior written notice setting out such request and the Holder’s wire transfer instructions. Whenever any amount expressed to be due by the terms of this Note is due on any day which is not a Business Day, the same shall instead be due on the next succeeding day which is a Business Day. Any amount of Principal which is not paid when due shall result in a late charge being incurred and payable by the Company in an amount equal to interest on

 

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such amount at the rate of eighteen percent (18%) per annum from the date such amount was due until the same is paid in full (“Late Charge”).

 

11.           CANCELLATION. After all Principal, Late Charges and other amounts at any time owed on this Note have been paid in full, this Note shall automatically be deemed canceled, shall be surrendered to the Company for cancellation and shall not be reissued.

 

12.           WAIVER OF NOTICE.  To the extent permitted by law, the Company hereby irrevocably waives demand, notice, presentment, protest and all other demands and notices in connection with the delivery, acceptance, performance, default or enforcement of this Note.

 

13.           GOVERNING LAW.  This Note shall be construed and enforced in accordance with, and all questions concerning the construction, validity, interpretation and performance of this Note shall be governed by, the internal laws of the State of Illinois, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of Illinois or any other jurisdictions) that would cause the application of the laws of any jurisdictions other than the State of Illinois. The Company hereby irrevocably submits to the exclusive jurisdiction of the state and federal courts sitting in the State of Illinois, County of Cook, for the adjudication of any dispute hereunder or in connection herewith or with any transaction contemplated hereby or discussed herein, and hereby irrevocably waives, and agrees not to assert in any suit, action or proceeding, any claim that it is not personally subject to the jurisdiction of any such court, that such suit, action or proceeding is brought in an inconvenient forum or that the venue of such suit, action or proceeding is improper.  Each party hereby irrevocably waives personal service of process and consents to process being served in any such suit, action or proceeding by mailing a copy thereof by certified mail, return receipt requested, postage prepaid to such party at the address for such notices to it under this Agreement and agrees that such service shall constitute good and sufficient service of process and notice thereof.  In the event that any provision of this Note is invalid or unenforceable under any applicable statute or rule of law, then such provision shall be deemed inoperative to the extent that it may conflict therewith and shall be deemed modified to conform with such statute or rule of law.  Any such provision which may prove invalid or unenforceable under any law shall not affect the validity or enforceability of any other provision of this Note. THE COMPANY HEREBY IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO, AND AGREES NOT TO REQUEST, A JURY TRIAL FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION WITH OR ARISING OUT OF THIS NOTE OR ANY TRANSACTION CONTEMPLATED HEREBY.

 

14.         MAXIMUM PAYMENTS.  Nothing contained herein shall be deemed to establish or require the payment of a rate of interest or other charges in excess of the maximum permitted by applicable law.  In the event that the rate of interest required to be paid or other charges hereunder exceed the maximum permitted by such law, any payments in excess of such maximum shall be credited against amounts owed by the Company to the Holder and thus refunded to the Company.

 

15.         CERTAIN DEFINITIONS.  For purposes of this Note, the following terms shall have the following meanings:

 

(a)            “Business Day” means any day other than Saturday, Sunday or other day on which commercial banks in The City of New York are authorized or required by law to remain closed.

 

(b)           “Maturity Date” shall mean June 30, 2018 provided, however, the Maturity Date may be extended at the option of the Holder in the event that, and for so long as, an Event of Default shall have occurred and be continuing or any event shall have occurred and be continuing that with the passage of time and the failure to cure would result in an Event of Default.

 

(c)           “Person” means an individual, a limited liability company, a partnership, a joint venture, a corporation, a trust, an unincorporated organization, any other entity or a government or any department or agency thereof.

 

4

 

 

 

(d)           “Settlement Agreement” means that certain Settlement Agreement and Release, dated as of the Issuance Date, by and between the Company and the Holder pursuant to which, among other things, the Company issued this Note.

 

(e)           “Subsidiary” means any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by the Company and/or any of its other Subsidiaries.

 

 

 

 

5

 

 

IN WITNESS WHEREOF, the Company has caused this Note to be duly executed as of the Issuance Date set out above.

 

 

	
			 

				
			KONARED CORPORATION

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By:

				 	
			 

			
	
			 

				
			Name:

				 	
			 

			
	
			 

				
			Title:

				 	
			 

			

 

 

 

 

 

 

 

 

Promissory Note - Signature PageExhibit 10.23

 

EMPLOYMENT AND NONCOMPETITION AGREEMENT

This Employment and Noncompetition Agreement (the "Agreement") is entered into as of November 1, 2018, by and between U.S. XPRESS, INC., a Nevada corporation (the “Company”) and MATTHEW HERNDON, an individual (the “Employee”).

NOW, THEREFORE, in consideration of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company and the Employee hereby agree as follows:

ARTICLE I

EMPLOYMENT AND TERM

Section 1.1.            Employment Duties.  The Company hereby agrees to employ the Employee, and the Employee hereby accepts employment with the Company, upon the terms set forth in this Agreement.  The Employee shall serve as the Company’s Chief Operating Officer. During the Term (as defined in Section 1.2 hereof), the Employee shall devote substantially all of his working time, attention, skill, and reasonable best efforts to the performance of his duties hereunder in a manner which will faithfully and diligently further the business and interests of the Company.  Employee shall report directly to Eric Fuller, Chief Executive Officer of U.S. Xpress Enterprises, Inc., or his successor.  Employee shall have such duties, authority, and responsibility as shall be determined from time to time by the Chief Executive Officer.  In the event Employee is promoted during the term of this Agreement, the Agreement shall remain in effect.  In the event Employee is demoted during the term of this Agreement, the parties shall in good faith negotiate any needed changes to the Agreement.  The Employee agrees to abide by the rules, regulations, instructions, personnel practices, and polices of the Company and any changes therein which may be adopted from time to time by the Company and of which Employee has received notice.

Section 1.2.          Term.  This Agreement shall be effective on November 5, 2018 (the “Effective Date”) and shall continue until the fifth anniversary thereof (the “Original Term”), unless earlier terminated as provided in Article III hereof, provided that, on such fifth anniversary of the Effective Date and each annual anniversary thereafter (such date and each annual anniversary thereof, a "Renewal Date"), the Agreement shall be deemed to be automatically extended, upon the same terms and conditions, for successive periods of one year, unless either party provides written notice of its intention not to extend the term of the Agreement at least 90 days prior to the applicable Renewal Date.   The duration of this Agreement is referred to herein as the “Employment Term”.

ARTICLE II

COMPENSATION

Section 2.1.          Base Salary.  Subject to Section 3.2 hereof, the Company shall pay the Employee a weekly salary of $6,250.00 ($325,000.00 annualized) for the Employment Term, subject to increases at the discretion of the Company (the “Base Salary”).  Such Base Salary shall be paid at such times and in such increments as are consistent with the Company’s regular payroll practices for other comparable full-time employees of the Company.

 

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Section 2.2.           Benefits and Perquisites.

(a)         General Benefits.            Subject to the terms of the applicable benefit plan documents, during the Term of this Agreement, the Company shall provide the Employee with such health and welfare plans, retirement savings plan, and other benefits as are generally provided by the Company to other similarly situated executives of the Company.  including, but not limited to, all benefits available under the Company’s Xpre$$avings 401(k) Plan, Section 125 Cafeteria Plan, Section 105 Plan, Non-Qualified Deferred Compensation Plan, and such other employee benefit plans as may be adopted from time to time.

(b)         Executive Benefits.         The Company shall reimburses the Employee the cost for such major medical, dental and vision plans as elected by the Employee under the Company’s Section 125 Plan, shall provide to Employee a car allowance in the amount of $300 biweekly, and shall pay the cost of executive disability insurance on behalf of the Employee.  All of the benefits described herein shall be taxed as required by IRS regulations.

Section 2.3.           Bonus Plan.

(a)       Profit Sharing Plan.       Employee shall be eligible to participate in the U.S. Xpress Annual Short Term Incentive Profit Sharing Plan (the “Profit Sharing Plan”), or such other incentive plan as may be adopted from time to time, at the Executive Level.  Subject to the approval of the Compensation Committee of the Board of Directors of the Company (the “Compensation Committee”), the target cash bonus applicable to Employee shall be 70% of Employee’s Base Salary, subject to the Company meeting defined goals as outlined in the Profit Sharing Plan.  Any payout under such Profit Sharing Plan made in the first quarter of 2019 for Company performance in 2018 shall be pro-rated for that portion of the year 2018 worked by Employee for the Company.

(b)      Sign On Bonus.             Employee shall receive a cash sign-on bonus in the amount of $270,000, payable on the first full pay period of his employment.   In the event Employee voluntarily terminates his employment or is terminated by the Company under Section 3.1(b) hereof, Employee agrees to repay the sign-on bonus in full within 90 days of such termination.

Section 2.4.          Equity Compensation.

(a)          Omnibus Plan.          The Employee shall be eligible to participate in the U.S. Xpress Enterprises, Inc. 2018 Omnibus Incentive Plan, at such times and in such amounts as are approved by the Compensation Committee.

(b)         Sign On Equity.        As of the Effective Date of this Agreement, Employee shall be granted a number of the Company’s Class A Restricted Stock Shares that is equal to, as of the Effective Date, Employee’s annualized Base Salary, which shares shall vest over a period of five years pursuant to the terms set forth in a separate award agreement.

 

 

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Section 2.5.          Vacation; Paid Time-Off. During the Employment Term, the Employee will be entitled to take such paid vacation and other time off on a basis that is at least as favorable as that provided to other similarly situated executives of the Company. The Employee shall receive other paid time-off in accordance with the Company's policies for executive officers, as such policies may exist from time to time.

Section 2.6.          Deductions. The Company may withhold from any salary or benefits payable or otherwise conferred by this Agreement all federal, state, city, or other taxes as shall be required pursuant to any federal, state, city or other laws or regulations.

Section 2.7.          Relocation Expenses.  In the event that the Employee relocates at the request of the Company, the Company shall pay, or reimburse the Employee for, the reasonable relocation expenses incurred by the Employee in accordance with the terms of the Company’s relocation policy, including but not limited to a rental allowance of up to $1,500 per month for a maximum of six months for temporary housing.

Section  2.8.          Reimbursement of Expenses.     The Company shall pay or reimburse the Employee for all reasonable travel and other expenses incurred or paid by him during the Employment Term in connection with the performance of duties under this Agreement, in accordance with the Company’s reimbursement policies and upon submission of satisfactory evidence thereof.

Section 2.9.          Indemnification.  Regarding Employee’s status as an officer, director, employee and/or representative of the Company or its affiliates, the Company shall provide Employee with the same indemnification and expense advancement rights provided to all officers.

Section 2.10.          SEC Filings and Clawback Provisions.

(a)       Consent to Filings.  Employee acknowledges that the terms of his employment may result in him being a Named Executive Officer of the Company’s publicly-traded parent, U.S. Xpress Enterprises, Inc., for purposes of filings with the Securities and Exchange Commission and/or the New York Stock Exchange.  In such event, Employee acknowledges that the Company may be required or elect to file with the SEC certain terms of his employment, including but not limited to, the terms of this Agreement, the amount of his salary, bonus and equity awards which he may receive, his title and any changes thereto, and his termination or separation from employment and the terms thereof.  Employee hereby consents to such disclosures.  Employee further agrees to cooperate with the Company in notifying the Company of any purchases or sales of stock in the Company and the filing of any necessary disclosures.

(b)        Clawback.          Notwithstanding any other provisions in this Agreement to the contrary, any incentive-based compensation, or any other compensation, paid to the Employee 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).

 

 

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ARTICLE III

TERMINATION OF EMPLOYMENT

Section 3.1.          Employment Termination.

(a)          Death or Disability.  In the event the Employee dies or becomes disabled during the Term, his employment hereunder shall automatically terminate.  For the purpose of this Agreement, “disability” or “disabled” shall mean a good faith determination of a medical doctor selected by the Company and the Employee that the Employee is unable to perform his duties under this Agreement due to physical or mental illness or disease or for other causes beyond the Employee’s control and such period of inability continues for sixty (60) consecutive days or ninety (90) days in any twelve (12) month period.

(b)          By the Company for Cause.  The Company may terminate the Employee’s employment hereunder at any time for “Cause”.  For purposes of this Agreement, "Cause" shall mean:

	
i.

	
the Employee's willful engagement in dishonesty, illegal conduct, or gross misconduct, which is, in each case, injurious to the Company or its affiliates;

	
ii.

	
The Employee’s falsification of the accounts, embezzlement of funds or other assets, or other similar fraud or dishonesty, whether or not related to the Executive's employment with the Company;

	
iii.  

	
Any material breach of this Agreement (it being expressly understood that any violation of the covenants or obligations contained in Articles IV and V hereof shall be deemed a material breach hereof) which, if capable of cure, is not cured within ten (10) days of receipt by the Employee of written notice of such breach;

	
iv.

	
Conviction of, or entry of a plea of guilty or nolo contendere to charges of, any crime involving moral turpitude (defined pursuant to Tennessee Law as a crime involving obscenity, crimes of a sexual nature, or crimes punishable by death or more than one year of imprisonment (it being understood that, for instance, violation of a motor vehicle code does not constitute such crime)) or crimes of dishonesty;

	
v.

	
Conviction of, or entry of a plea of guilty or nolo contendere to charges of, any felony or other crime which has or may have a materially adverse effect on the Employee’s ability to carry out his/her duties under this Agreement or on the reputation or business activities of the Company or its affiliates;

	
vi.

	
Actions or failures to act constituting negligence by the Employee in the performance of his/her duties hereunder or failure by the Employee to perform his/her duties hereunder, each after the Employee has not cured such actions or failure to act within thirty (30) days after written request by the Chief Executive Officer or other member of executive management to do so;

 

 

 

 

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vii.

	
The Employee’s breach of a fiduciary duty owed to the Company, its shareholders, or any of its affiliates involving duty of care, duty of loyalty, corporate opportunity, or similar doctrines as determined in good faith by the Chief Executive Officer or other member of executive management to;

	
viii.

	
The Employee's willful unauthorized disclosure of Confidential Information (as defined in Article V hereof); and

	
ix.

	
Any disparagement of the Company, its affiliates, or their officers or directors.

For purposes of this provision, no act or failure to act on the part of the Employee shall be considered "willful" unless it is done, or omitted to be done, by the Employee in bad faith or without reasonable belief that the Employee's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Employee in good faith and in the best interests of the Company.

(c)          At the Election of the Company without Cause.  The Company may terminate the Employee’s employment hereunder without Cause at any time upon ten (10) days prior written notice to the Employee.  At its election, the Company may continue the Employee’s Base Salary for a period of ten (10) days following termination of his employment in lieu of such notice.

Section 3.2.          Effect of Termination.

(a)          Termination for Death or Disability.  If the Employee’s employment is terminated by death or because of disability pursuant to Section 3.1(a) hereof, the Company shall pay to the estate of the Employee or to the Employee, as the case may be, the Base Salary accrued under this Agreement prior to the Termination Date.  In the event of Employee’s employment is terminated as the result of a disability, the Company shall pay the Employee his Base Salary for the lesser of sixty (60) days after the date of which termination due to disability occurs or the earliest date Employee is eligible for long-term disability benefits under the Company’s Long Term Executive Disability Plan.

(b)          Termination for Cause or at the Election of the Employee.  In the event that the Employee’s employment is terminated by the Company for Cause pursuant to Section 3.1(b) hereof or at the election of the Employee, the Company shall pay to the Employee the salary accrued under this Agreement through the last day of his actual employment by the Company.

(c)          Termination at the Election of the Company without Cause.  In the event that the Company terminates the Employee without Cause pursuant to Section 3.1(c) hereof, and subject to the Employee’s compliance with Articles IV and V of this Agreement and his execution of a release of claims in favor of the Company, the Company shall continue to pay the Employee the Base Salary he was earning at the time of termination through the first anniversary of the termination date.

 

 

 

 

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(d)          Survival.  Notwithstanding termination of this Agreement as provided in this Article III hereof, the rights and obligations of the Employee and the Company under Articles IV and V of this Agreement shall survive termination.

Section 3.3.          Cooperation. The parties agree that certain matters in which the Employee will be involved during the Employment Term may necessitate the Employee's cooperation in the future. Accordingly, following the termination of the Employee's employment for any reason, to the extent reasonably requested by the Company, the Employee shall cooperate with the Company in connection with matters arising out of the Employee's service to the Company; provided that, the Company shall make reasonable efforts to minimize disruption of the Employee's other activities.

ARTICLES IV

NONCOMPETITION AND NONSOLICITATION

Section 4.1.          Covenant Not to Compete and Nonsolicitation Covenant.  As an inducement for the Company to enter into this Agreement, the Employee agrees to the following covenants (the “Restrictive Covenants”), whose terms are set forth below:

(a)          Covenant Not to Compete.  During the Noncompete Term, as defined below, the Employee shall not without prior written approval of the Company, directly or indirectly, own, manage, operate, finance, control, invest, engage, or participate in the ownership, management, operation, financing, or control of any business providing freight transportation services (dedicated or otherwise) by use of dry van trailer equipment or freight containers, either over-the-road or via intermodal service, directly or through any brokerage, logistics, leasing, or other indirect arrangement (including the engagement of independent contractors) in the United States of America; nor shall the Employee be employed by, associated with, or in any manner connected with, lend his name or any similar name to, lend his credit to, render services of any nature for, or provide advice or consultation to such business.

(b)          Nonsolicitation Covenant.  During the Noncompete Term as defined below, the Employee shall not without prior written approval of the Company, directly or indirectly, (i)  whether for his own account or for the account of any other person (other than the Company and its affiliates), solicit business of the same or similar type being carried on by the Company or any of its affiliates from any person or entity that is or was a customer of the Company or any of its affiliates during the Term of this Agreement or during the Noncompete Term; (ii) whether for his own account or the account of any other person (other than the Company and its affiliates), solicit, employ, or otherwise engage as an employee, independent contractor, or otherwise any person who is or was during the Noncompete Term an employee or independent contractor of the Company or any of its affiliates or in any manner induce or attempt to induce any employee or independent contractor of the Company or any of its affiliates to terminate his employment or contract with the Company or any such affiliate; or (iii) disparage the Company or any of its affiliates, shareholders, directors, officers, employees, or agents.

 

 

 

 

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(c)          Limited Exception.  Notwithstanding anything to the contrary above, this Section 4.1 shall not prohibit the ownership by the Employee of up to (but not more than) five percent (5%) of the publicly traded securities of any business specified in Section 4.1(a) or 4.1(b) above (but without otherwise participating in the activities of such business).

Section 4.2.          Duration of Restrictive Covenants.  The restrictions contained in Section 4.1 shall apply to Employee from the date hereof to the later of: (a) the first anniversary of the expiration of the Term of this Agreement; (b) the first anniversary of Employee’s termination pursuant to Section 3.1(b) or (c); or (c) the first anniversary of Employee’s termination at the election of the Employee (the “Noncompete Term”).  The Noncompete Term shall be extended by the length of any period during which Employee is in breach of the terms of Section 4.1.

Section 4.3.          Consideration for Restrictive Covenants.  In addition to the consideration to be received by the Employee during the Term of this Agreement and in exchange for the continuous performance of his obligations under Sections 4.1(a) and 4.1(b), upon expiration of the Term, upon Employee’s termination without Cause, the payment by the Company of the payments outlined in Section 3.2(c) shall be considered adequate consideration for the Restrictive Covenants.  In the event Employee is terminated for Cause pursuant to Section 3.1(b) or in the event Employee elects to terminate his employment, consideration received from the Effective Date of this Agreement shall be considered adequate for the Restrictive Covenants and Employee shall not be entitled to any additional consideration.  The Employee acknowledges that such consideration constitutes sufficient and adequate consideration for the Employee’s agreement to the Restrictive Covenants.  The Employee further acknowledges that, given the nationwide character of the Company’s business, the Restrictive Covenants and their geographic area and duration are reasonable.

Section 4.4.          Enforceability.  If any of the Restrictive Covenants is found by any court of competent jurisdiction to be unenforceable because it extends for too long a period of time, over too great a range of activities, or in too broad a geographic area, it shall be interpreted to extend only over the maximum period of time, range of activities, or geographic area as to which it may be enforceable.

Section 4.5.          Specific Performance.  The Restrictive Covenants are necessary for the protection of the business and goodwill of the Company and are considered by the Employee to be reasonable to accomplish such purpose.  The Employee agrees and acknowledges that any breach of the Restrictive Covenants would cause the Company immediate, substantial and irreparable damage for which monetary damages will not be an adequate remedy.  In the event of any such breach, in addition to such other remedies which may be available in law, the Company shall have the right to seek specific performance, injunction, or any other equitable relief in any court having jurisdiction over such claim without the necessity of showing any actual damage or posting any bond or furnishing any other security, and that the specific enforcement of the provisions of this Agreement will not diminish Employee’s ability to earn a livelihood or create or impose on Employee any undue hardship.  If the Company prevails in a proceeding to remedy a breach under the Restrictive Covenants, the Company shall be entitled to receive its reasonable attorneys’ fees, expert witness fees, and out-of-pocket costs incurred in connection with such proceeding, in addition to any other relief they may be granted.

 

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ARTICLE V

CONFIDENTIAL INFORMATION

Section 5.1.          Confidential Information. The Employee understands and acknowledges that during the Employment Term, he will have access to and learn about Confidential Information, as defined below.  The Employee understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Employee first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Employee's breach of this Agreement or breach by those acting in concert with the Employee or on the Employee's behalf.

Section 5.2.          Definition.  For purposes of this Agreement, "Confidential Information" includes, but is not limited to, all information not generally known to the public, in spoken, printed, electronic or any other form or medium, relating directly or indirectly to: business processes, practices, methods, policies, plans, publications, documents, research, operations, services, strategies, techniques, agreements, contracts, terms of agreements, transactions, potential transactions, negotiations, pending negotiations, trade secrets, computer programs, computer software, applications, operating systems, software design, web design, databases, manuals, records, articles, systems, vendor information, financial information, results, accounting information, accounting records, legal information, marketing information, advertising information, pricing information, credit information, design information, payroll information, staffing information, personnel information, employee lists, supplier lists, vendor lists, developments, reports, internal controls, security procedures, graphics, drawings, sketches, market studies, sales information, revenue, costs, formulae, notes, communications, algorithms, product plans, designs, styles, models, ideas, specifications, customer information, and customer lists of the Company or its businesses or any existing or prospective customer, supplier, investor or other associated third party, or of any other person or entity that has entrusted information to the Company in confidence.

The Employee understands that the above list is not exhaustive, and that Confidential Information also includes other information that is marked or otherwise identified as confidential or proprietary, or that would otherwise appear to a reasonable person to be confidential or proprietary in the context and circumstances in which the information is known or used.

The Employee understands and agrees that Confidential Information includes information developed by him in the course of his employment by the Company as if the Company furnished the same Confidential Information to the Employee in the first instance. Confidential Information shall not include information that is generally available to and known by the public at the time of disclosure to the Employee, provided that, such disclosure is through no direct or indirect fault of the Employee or person(s) acting on the Employee's behalf.

 

 

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Section 5.3.          Company Creation and Use of Confidential Information.          The Employee understands and acknowledges that the Company has invested, and continues to invest, substantial time, money, and specialized knowledge into developing its resources, developing its information technology, developing its operational and load planning platform, policies and procedures, creating a customer base, generating customer and potential customer lists, training its employees, and improving its offerings in the field of trucking and logistics. The Employee understands and acknowledges that as a result of these efforts, the Company has created, and continues to use and create Confidential Information. This Confidential Information provides the Company with a competitive advantage over others in the marketplace.

Section 5.4.          Disclosure and Use Restrictions.  The Employee agrees and covenants: (i) to treat all Confidential Information as strictly confidential; (ii) not to directly or indirectly disclose, publish, communicate, or make available Confidential Information, or allow it to be disclosed, published, communicated, or made available, in whole or part, to any entity or person whatsoever (including other employees of the Company) not having a need to know and authority to know and use the Confidential Information in connection with the business of the Company and, in any event, not to anyone outside of the direct employ of the Company except as required in the performance of the Employee's authorized employment duties to the Company or with the prior consent of the Chief Executive Officer acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent); and (iii) not to access or use any Confidential Information, and not to copy any documents, records, files, media, or other resources containing any Confidential Information, or remove any such documents, records, files, media, or other resources from the premises or control of the Company, except as required in the performance of the Employee's authorized employment duties to the Company or with the prior consent of the Chief Executive Officer acting on behalf of the Company in each instance (and then, such disclosure shall be made only within the limits and to the extent of such duties or consent). Nothing herein shall be construed to prevent disclosure of Confidential Information as may be required by applicable law or regulation, or pursuant to the valid order of a court of competent jurisdiction or an authorized government agency, provided that the disclosure does not exceed the extent of disclosure required by such law, regulation, or order. The Employee shall promptly provide written notice of any such order to the Corporate General Counsel.

Section 5.5          Duration of Obligations.  The Employee understands and acknowledges that his obligations under this Agreement with regard to any particular Confidential Information shall commence immediately upon the Employee first having access to such Confidential Information (whether before or after he begins employment by the Company) and shall continue during and after his employment by the Company until such time as such Confidential Information has become public knowledge other than as a result of the Employee's breach of this Agreement or breach by those acting in concert with the Employee or on the Employee's behalf.

ARTICLE VI

MISCELLANEOUS

Section 6.1.          Entire Agreement.  This Agreement contains the entire understanding of the parties with respect to the matters contained herein and supersedes all previous commitments, agreements, and understanding between the parties with respect to such matters.  There are no oral understandings, terms, or conditions, and no party has relied upon any representation, express or implied, not contained in this Agreement.

 

 

 

 

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Section 6.2.          Amendments.   This Agreement may not be amended in any respect whatsoever, nor may any provision hereof be waived by any party, except by a further agreement, in writing, fully executed by each of the parties.

Section 6.3.          Successors.          This Agreement shall be binding upon and inure to the benefit of the parties and to their respective heirs, personal representatives, successors and assigns, executors and/or administrators; provided, that (a) the Employee may not assign his rights hereunder (except by will or the laws of descent)  without the prior written consent of the Company and (b) the Company may not assign its rights hereunder without the prior written consent of the Employee which will not be unreasonably withheld, provided, however, that the Company may assign this Agreement without the consent of the Employee in connection with any sale or reorganization of the Company.

Section 6.4.          Publicity.          The Employee hereby irrevocably consents to any and all uses and displays, by U.S. Xpress or the Company and its agents, representatives and licensees, of the Employee's name, voice, likeness, image, appearance, and biographical information in, on or in connection with any pictures, photographs, audio and video recordings, digital images, websites, television programs and advertising, other advertising and publicity, sales and marketing brochures, books, magazines, other publications, CDs, DVDs, tapes, and all other printed and electronic forms and media throughout the world, at any time during or after the period of his employment by the Company, for all legitimate commercial and business purposes of the Company ("Permitted Uses") without further consent from or royalty, payment, or other compensation to the Employee. The Employee hereby forever waives and releases U.S. Xpress and the Company and their directors, officers, employees, and agents from any and all claims, actions, damages, losses, costs, expenses, and liability of any kind, arising under any legal or equitable theory whatsoever at any time during or after the period of his employment by U.S. Xpress or the Company, arising directly or indirectly from U.S. Xpress’s, the Company's and their agents', representatives', and licensees' exercise of their rights in connection with any Permitted Uses.

Section 6.5.          Captions.  The captions of this Agreement are for convenience and reference only and in no way define, describe, extend, or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement.

Section 6.6.          Notice.    Any notice or communication must be in writing and given by depositing the same in the United States mail, addressed to the party to be notified, postage prepaid and registered or certified with return receipt requested, or by delivering the same by hand delivery (including by a nationally recognized overnight carrier) or by deposit with a reputable overnight courier.  Such notice shall be deemed received on the date on which it is delivered, three (3) business days after deposit in the United States mail as set forth above, or the next business day after deposit with a reputable overnight courier.  For purposes of notice, the addresses of the parties shall be:

 

 

 

 

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If to the Employee:           Matthew Herndon

18380 Columbine Rd

Fayetteville, AR 72704

  

If to the Company:           U.S. Xpress Enterprises, Inc.

4080 Jenkins Road

Chattanooga, TN 37421

Attention:  Corporate General Counsel

Any party may change its address for notice by written notice given to the other party in accordance with Section 6.6.

Section 6.7.         Counterparts.  This Agreement may be executed simultaneously in any number of counterparts, via facsimile or otherwise, each of which counterparts when so executed and delivered shall be taken to be an original, but such counterparts shall together constitute one and the same document.

Section 6.8.          Severability.  If any provision of this Agreement is held illegal, invalid or unenforceable, such illegality, invalidity, or unenforceability shall not affect any other provision hereof.  Such provision and the remainder of this Agreement shall, in such circumstances, be modified to the extent necessary to render enforceable the remaining provisions hereof.

Section 6.9.         Applicable Law.  This Agreement shall be governed by, construed and enforced in accordance with the laws of the State of Tennessee, without regard to principles of comity or conflicts of laws provisions of any jurisdiction.

Section 6.10.        Construction.  The language contained in this Agreement shall be deemed to be approved by both parties hereto and no rule of strict construction shall be applied against any party.  Unless otherwise expressly provided, the words “hereof” and “hereunder” and similar references refer to this Agreement in its entirety and not to any specific part hereof.

Section 6.11.         Genders.  Any reference to the masculine gender shall be deemed to include feminine and neutral genders, and vice versa, and any reference to the singular shall include the plural, and vice versa, unless the context otherwise requires.

Section 6.12.         Right to Offset.  The Company may exercise a right of offset at any time and from time to time against any amount payable under this Agreement to the extent the Employee is indebted to the Company or any of its affiliates.

Section 6.13.          Waiver.  The failure of either party to insist upon strict performance of any of the terms or conditions of this Agreement shall not constitute a waiver of any of its rights hereunder.

IN WITNESS WHEREOF, the parties hereto have caused this Employment and Noncompetition Agreement to be duly executed as of the date first set forth above.

 

 

 

 

 

Herndon Employment Agreement

 

Page 11 of 12

	
THE EMPLOYEE:

	 	 	
U.S. XPRESS ENTERPRISES, INC.

	 	 	 	 
	/s/ Matthew Herndon	 	
By:

	/s/ Eric Fuller
	
Matthew Herndon

	 	 	
Eric Fuller

	 	 	 	
Chief Executive Officer

 

 

 

Herndon Employment Agreement

Page 12 of 12

 

 

Back to Form 10-K

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