Document:

Exhibit 10.2

 

EMPLOYMENT AGREEMENT

 (As Amended and Restated, Effective February 1, 2017)

 

THIS EMPLOYMENT AGREEMENT (the “Agreement”) between UCP, Inc., a Delaware corporation (the “Company”), and James M. Pirrello  (the “Executive”) is entered into as of February 1, 2017 (the “Effective Date”), and is an amendment and restatement of the Employment Agreement between the Company and the Executive dated January 15, 2016.  In consideration of the covenants contained herein, the parties agree as follows:

 

1.            Employment.  The term of Executive’s employment by the Company under this Agreement, as amended and restated as set forth herein, will begin on the Effective Date, and will continue until February 1, 2020, unless earlier terminated pursuant to Section 4 hereof; provided, however, that on each monthly anniversary of the Effective Date, the Agreement shall automatically be extended for one additional month unless either the Company or  Executive shall have terminated this automatic extension provision by written notice to the other party at least 60 days prior to the automatic extension date.  The term of employment in effect from time to time hereunder is hereinafter called the “Employment Period.”  Subject to the terms of this Agreement, Executive’s employment is at will, which means that either Executive or the Company may terminate this relationship with or without Cause or notice.

 

2.            Position and Duties.   (a)   Position.  During the Employment Period, Executive shall serve as the Chief Financial Officer and Treasurer of the Company and shall report to the Chief Executive Officer and have the normal duties, responsibilities and authority of an executive serving in such positions, subject to the direction of the Board of Directors of the Company (the “Board”).  Upon the termination of Executive’s service for any reason, unless otherwise determined by the Board, Executive shall be deemed to have resigned from any positions held at the Company or any of its subsidiaries or affiliates voluntarily, without any further required action by Executive, as of the cessation of Executive’s services, and Executive, at the Board’s request, shall execute any documents deemed in the discretion of the Company to be reasonably necessary to reflect his resignation(s).

 

(b)            Duties.  During the Employment Period, Executive shall devote his full business time and efforts to the business and affairs of the Company and its subsidiaries.  Notwithstanding the foregoing, during his employment, Executive may devote reasonable time to the supervision of his personal investments and activities involving professional, charitable, community, educational, religious and similar types of organizations, speaking engagements, membership on the boards of directors of other organizations, and other types of activities, to the extent that such other activities are not competitive with the Company or otherwise conflict with the business of the Company or Executive’s duties hereunder; provided, however, that before Executive agrees to serve on the board of directors of any for-profit company (whether publicly or privately held), Executive will obtain the approval of the Audit Committee of the Board (or such other committee to which the Board may subsequently delegate this responsibility).

 

3.            Compensation and Benefits.  (a)   Base Salary.  As compensation for Executive’s performance of Executive’s duties hereunder, Company shall pay to Executive an initial Base Salary of $400,000 per year, payable in accordance with the normal payroll practices of the Company, less required deductions for state and federal withholding tax, social security and all 

other employment taxes and payroll deductions. The Base Salary shall be reviewed for increases by the Chief Executive Officer in good faith, based upon Executive’s performance, not less often than annually.  The term “Base Salary” shall refer to the Base Salary as so increased by the Chief Executive Officer or the Board.

 

(b)       Annual Incentive Compensation.  During the Employment Period, Executive shall be eligible to receive an annual cash incentive bonus determined by the Compensation Committee of the Board (the “Committee”) in its sole discretion, as a percentage of Executive’s Base Salary, with a target bonus of not less than 50% of Executive’s Base Salary, and based upon Executive’s and/or the Company’s achievement of annual performance goals or objectives established by the Committee, in its sole discretion. Payment of any annual cash incentive bonus earned shall be made on or before March 15th of each calendar year immediately following the year in which such compensation is earned.

 

(c)       Other Benefits.

 

(i)        Savings and Retirement Plans.  Executive shall be entitled to participate in all qualified and non-qualified savings and retirement plans applicable generally to other senior executives of the Company, in accordance with the terms of the plans, as may be amended from time to time.

 

(ii)       Welfare Benefit Plans.  Executive and/or his eligible dependents shall be eligible to participate in and shall receive all benefits under the Company’s welfare benefit plans and programs applicable generally to other senior executives of the Company, in accordance with the terms of the plans, as may be amended from time to time.

 

(iii)           Vacation.  Executive shall be entitled to paid vacation time consistent with the applicable policies of the Company as in effect from time to time, including a maximum accrual cap for unused vacation pay, but in any event no less than a vacation benefit accrual rate of five weeks per year.

 

(iv)        Fringe Benefits.  During the Employment Period, (1) the Company may provide Executive with a Company car in accordance with the applicable policies and procedures of the Company as in effect from time to time, or provide Executive with a car allowance of $1,000 per month on terms which are generally applicable to other senior executives of the Company and (2) Executive shall be entitled to such additional fringe benefits as may be available generally to other senior executives of the Company.

 

(v)        Business Expenses.  Subject to Section 17, Executive shall be reimbursed for all reasonable travel and other expenses incurred in the performance of Executive’s duties on behalf of the Company.

 

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4.            Termination of Employment.   (a)  The Employment Period shall end upon the first to occur of: (i) the expiration of the term of this Agreement pursuant to Section 1 hereof; (ii) termination of Executive’s employment by the Company on account of Executive’s having become unable (as determined by the Board in good faith) to regularly perform his duties or any of his essential functions or duties by reason of illness or incapacity, with or without reasonable accommodation if required, for a period of more than six consecutive months (“Termination for Disability”); (iii) termination of Executive’s employment by the Company for Cause (as defined in Exhibit A attached hereto) (“Termination for Cause”); (iv) termination of  Executive’s employment by the Company other than a Termination for Disability or a Termination for Cause (“Termination Without Cause”); (v) Executive’s death; (vi) termination of Executive’s employment by Executive for Good Reason (as defined in Exhibit A attached hereto) (“Termination for Good Reason”); or (vii) termination of Executive’s employment by Executive for any reason other than Good Reason.

 

(b)            If the Employment Period ends for any reason set forth in Section 4(a), except as otherwise provided in this Section 4, Executive shall cease to have any rights to salary, bonus (if any) or benefits hereunder, other than (i) payment of unpaid Base Salary through and including the date of termination or resignation (which in the case of a termination by the Company shall be paid on the final day of employment, and in the case of a resignation shall be paid within seventy-two hours after the termination of the employment relationship), (ii) Executive’s business expenses that are reimbursable pursuant to Section 3(d) but have not been reimbursed by the Company as of the date of termination, (iii) Executive’s annual bonus for the fiscal year immediately preceding the fiscal year in which the date of termination occurs, if such bonus has been determined and awarded by the Company in its discretion and not been paid as of the date of termination, (iv) any accrued vacation pay to the extent not theretofore paid, and (v) any other amounts or benefits required to be paid or provided by law or under any plan, program, policy or practice of the Company (“Accrued Compensation and Benefits”).

 

(c)            If the Employment Period ends on account of Termination Without Cause or Termination for Good Reason, Executive shall receive a severance payment (the “Severance Payment”) in an amount equal to one times the sum of (A) Executive’s Base Salary at the time of termination (or, in the event of a Termination for Good Reason, the Base Salary prior to the event constituting Good Reason if such Base Salary is higher than the Base Salary at the time of termination) plus (B) Executive’s target annual bonus for the year in which Executive’s employment terminates.  In addition, if the Employment Period ends on account of death, Termination Without Cause, Termination for Good Reason or Termination for Disability, the Company shall pay Executive after such termination of employment (or to Executive’s family in the event of his death), on a monthly basis, an amount equal to the monthly amount of the Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”) continuation coverage premium for such month, at the same level and cost to Executive (or Executive’s family in the event of his death) as immediately preceding the date of termination, under the Company group medical plan in which Executive participated immediately preceding the date of termination, less the amount of Executive’s portion of such monthly premium as in effect immediately preceding the date of termination, until the earlier of (A) 12 months after the date of termination; and (B) the date on which Executive and his family have obtained other substantially similar healthcare coverage or become entitled to Medicare coverage.  Subject to Section 17, the Severance 

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Payment shall be paid in a lump sum payment on the sixtieth day following the termination date.  As a condition to Executive’s receipt of the post-employment payments and benefits set forth in this Section 4(c), Executive must execute, return, not rescind and comply with a commercially reasonable written release agreement in a form prescribed by the Company (the “Release”).

 

(d)            If, during the two year period following a Change in Control (as defined in Exhibit A attached hereto), Executive’s employment is terminated due to a Termination Without Cause or a Termination for Good Reason, Executive shall receive the benefits set forth in Section 4(c), except that (1) in lieu of the Severance Payment described in Section 4(c), Executive shall receive two times the sum of (A) Executive’s Base Salary at the time of such termination or Change in Control, whichever Base Salary level is greater, plus (B) the average of Executive’s annual bonuses for the three most recently completed years prior to Executive’s termination of employment or Change in Control, whichever average is greater or, if Executive has not been employed for at least three full years, the average of Executive’s annual bonuses for all completed years prior to Executive’s termination of employment or Change in Control, whichever is greater (the “CIC Severance Payment”).  Subject to Section 17, the CIC Severance Payment shall be paid in a lump sum payment on the sixtieth day following the termination date.    As a condition to Executive’s receipt of the post-employment payments and benefits set forth in this Section 4(d), Executive must execute, return, not rescind and comply with a Release.

 

(e)            Notwithstanding the foregoing, if the payment required to be paid under Section 4(d), when considered either alone or with other payments paid or imputed to Executive (the “Total Payments”) from the Company that would be deemed “excess parachute payments” under Section 280G(b)(1) of the Internal Revenue Code of 1986, as amended (the “Code”), is determined by the Company, with the assistance of a nationally recognized accounting firm acceptable to Executive, to be a “parachute payment” under Section 280G(b)(2) of the Code, then the Total Payments shall be automatically reduced to an amount equal to $1.00 less than three times (3x) the “base amount” (as defined in Section 280G(3) of the Code) (the “Reduced Amount”); provided, however, such reduction shall not apply if the sum of (A) the Total Payments  less (B) the amount of excise tax payable by the Executive under Section 4999 of the Code with respect to the Total Payments, is greater than the Reduced Amount.  Any such reduction shall occur in the following order:  (i)  by eliminating the acceleration of vesting of any stock options for which the exercise price exceeds the fair market value (and if there is more than one option award so outstanding, then the acceleration of the vesting of the most “under water” option shall be reduced first, and so-on); (ii)  by reducing the CIC Severance Payment and any other cash payments not subject to Section 409A of the Code;  (iii) by reducing any benefit continuation payments (and if there be more than one such payment, by reducing the payments in reverse order, with the payments made the earliest being reduced first); (iv), by reducing any cash payments that are subject to Section 409A of the Code (and if there be more than one such payment, by reducing the payments in reverse order, with the payments made the earliest being reduced first); (v) by reducing the payments of any restricted stock, restricted stock units, performance awards or similar equity-based awards that have been awarded to Executive by the Company that are subject to performance-based vesting (and if there be more than one such award held by Executive, by reducing the awards in the reverse order of the date of their award, with the most-recently awarded reduced first and the oldest award reduced last); (vi) by reducing the payments of any restricted stock, restricted stock units, performance awards or similar equity-based awards that have been awarded to Executive by the Company that are subject to 

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time-based vesting (and if there be more than one such award held by Executive, by reducing the awards in the reverse order of the date of their award, with the most-recently awarded reduced first and the oldest award reduced last); and (vii) by reducing the acceleration of vesting of any stock options that are not described in (i), above.

 

5.        Confidential Information.  Executive acknowledges that the information, observations and data obtained by him while employed by the Company pursuant to this Agreement, as well as those obtained by him while employed by the Company or any of its subsidiaries prior to the date of this Agreement, concerning the business or affairs of the Company or any of its subsidiaries (“Confidential Information”) are the property of the Company or such subsidiary. Therefore, Executive agrees that during the Employment Period and for three years thereafter that he shall not disclose to any unauthorized person or use for his own account any Confidential Information without the prior written consent of the Board unless and except to the extent that such Confidential Information becomes generally known to and available for use by the public other than as a result of Executive’s acts or omissions to act. Executive shall deliver to the Company at the termination of the Employment Period, or at any other time the Company may request, all memoranda, notes, plans, records, reports, computer tapes and software and other documents and data (and copies thereof) relating to the Confidential Information or the business of the Company or any of its subsidiaries or affiliates which he may then possess or have under his control.

 

6.        Enforcement.  Because the services of Executive are unique and Executive has access to confidential information of the Company, the parties hereto agree that the Company would be damaged irreparably in the event the provisions of Section 5 hereof were not performed in accordance with its terms or were otherwise breached and that money damages would be an inadequate remedy for any such nonperformance or breach. Therefore, the Company or its successors or assigns shall be entitled, in addition to other rights and remedies existing in their favor, to an injunction or injunctions to prevent any breach or threatened breach of any of such provisions and to enforce such provisions specifically (without posting a bond or other security).

 

7.        Indemnification and Insurance.  The Company shall indemnify Executive to the full extent provided for in its corporate Bylaws and to the maximum extent that the Company indemnifies any of its other directors and senior executive officers, and he will be entitled to the protection of any insurance policies the Company may elect to maintain generally for the benefit of its directors and senior executive officers against all costs, charges, liabilities and expenses incurred or sustained by him in connection with any action, suit or proceeding to which he may be made a party by reason of his being or having been a director, officer or employee of the Company or any of its affiliates or his serving or having served any other enterprise, plan or trust as a director, officer, employee or fiduciary at the request of the Company or any of its affiliates (other than any dispute, claim or controversy arising under or relating to this Agreement (except for this Section 7)).  The Company will enter into an indemnification agreement with the Executive in the standard form that it has or will adopt for the benefit of its other directors and senior executive officers.

 

8.            Reimbursement of Expenses.  If any contest or dispute shall arise under this Agreement involving termination of the Executive’s employment with the Company or involving the failure or refusal of the Company to perform fully in accordance with the terms hereof, the Company 

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shall reimburse the Executive, on a current basis and in accordance with Section 17, for all legal fees and expenses, if any, incurred by the Executive in connection with such contest or dispute, together with interest in an amount equal to the U.S. Prime Rate as published in the “Money Rates” section of The Wall Street Journal, but in no event higher than the maximum legal rate permissible under applicable law, such interest to accrue from the date the Company receives the Executive’s statement for such fees and expenses through the date of payment thereof; provided, however, that in the event the resolution of any such contest or dispute includes a finding denying, in total, the Executive’s claims in such contest or dispute, the Executive shall be required to reimburse the Company, over a period of 12 months from the date of such resolution, for all sums advanced to the Executive pursuant to this Section 8.

 

9.            Survival.  Sections 5, 6, 7, 8 and 17 hereof shall survive and continue in full force and effect in accordance with their respective terms, notwithstanding any termination of the Employment Period.

 

10.          Notices.  Any notice provided for in this Agreement shall be in writing and shall be either personally delivered, or sent by certified mail, return receipt requested, postage prepaid, addressed (a) if to Executive, to his last known address shown on the payroll records of the Company, and if to the Company, to UCP, Inc., 99 Almaden, Suite 400  San Jose, CA 95113 attention:  Chairman of the Compensation Committee of the Board of Directors, with a copy to the General Counsel of the Company at the same address, or (b) to such other address as either party shall have furnished to the other in accordance with this Section 10.

 

11.          Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under applicable law or rule in any jurisdiction, such invalidity, illegality or unenforceability shall not affect any other provision or any other jurisdiction, but this Agreement shall be reformed, construed and enforced in such jurisdiction as if such invalid, illegal or unenforceable provision had never been contained herein.

 

12.          Entire Agreement. This Agreement constitutes the entire agreement and understanding between the parties with respect to the subject matter hereof and supersedes and preempts any prior understandings, agreements or representations by or between the parties, written or oral, which may have related in any manner to the subject matter hereof.

 

13.          Successors and Assigns. This Agreement shall inure to the benefit of and be enforceable by Executive and his heirs, executors and personal representatives, and the Company and its successors and assigns. Any successor or assignee of the Company shall assume the liabilities of the Company hereunder.

 

14.          Governing Law.  This Agreement shall be governed by the internal laws (as opposed to the conflicts of law provisions) of the State of California.

 

15.          Amendment and Waiver.  The provisions of this Agreement may be amended or waived only with the prior written consent of the Company and Executive, and no course of 

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conduct or failure or delay in enforcing the provisions of this Agreement shall affect the validity, binding effect or enforceability of this Agreement.

 

16.          Withholding.  All payments and benefits under this Agreement are subject to withholding of all applicable taxes.

 

17.          Code Section 409A.  This Agreement is intended to comply with the requirements of Section 409A of the Code, and shall be interpreted and construed consistently with such intent.  The payments to Executive pursuant to this Agreement are also intended to be exempt from Section 409A of the Code to the maximum extent possible, under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purposes, each payment to Executive under this Agreement shall be considered a separate payment.    In the event the terms of this Agreement would subject Executive to taxes or penalties under Section 409A of the Code (“409A Penalties”), the Company and Executive shall cooperate diligently to amend the terms of the Agreement to avoid such 409A Penalties, to the extent possible; provided that in no event shall the Company be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement.  To the extent any amounts under this Agreement are payable by reference to Executive’s “termination of employment” such term and similar terms shall be deemed to refer to Executive’s “separation from service,” within the meaning of Section 409A of the Code.  Notwithstanding any other provision in this Agreement, to the extent any  payments hereunder constitutes nonqualified deferred compensation, within the meaning of Section 409A, and Executive is a specified employee (within the meaning of Section 409A of the Code) as of the date of Executive’s separation from service, each such payment that is payable upon Executive’s separation from service and would have been paid prior to the six-month anniversary of  Executive’s separation from service, shall be delayed until the earlier to occur of (i) the first day of the seventh month following Executive’s separation from service or (ii) the date of Executive’s death.  Any reimbursement payable to Executive pursuant to this Agreement shall be conditioned on the submission by Executive of all expense reports reasonably required by Employer under any applicable expense reimbursement policy, and shall be paid to Executive within 30 days following receipt of such expense reports, but in no event later than the last day of the calendar year following the calendar year in which Executive incurred the reimbursable expense.  Any amount of expenses eligible for reimbursement, or in-kind benefit provided, during a calendar year shall not affect the amount of expenses eligible for reimbursement, or in-kind benefit to be provided, during any other calendar year.  The right to any reimbursement or in-kind benefit pursuant to this Agreement shall not be subject to liquidation or exchange for any other benefit.

 

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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first written above.

 

	 	
UCP, INC.

	 
	 	 	 	 
	
 

	
By: 

	/s/ Dustin L. Bogue	 
	 	 	Name: Dustin L. Bogue	 
	 	 	Title:   Chief Executive Officer	 
	 	 	 	 

 

	 	
EXECUTIVE:

	 
	 	 	 	 
	
 

	
By: 

	/s/ James M. Pirrello	 
	 	 	James M. Pirrello	 

 

 

 

 

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EXHIBIT A

 

DEFINITIONS

 

 

“Cause” shall mean the occurrence of any of the following conditions:

 

(i)            any act or omission that constitutes a material breach by Executive of any of his material obligations under this Agreement, after a written demand for substantial performance is delivered to Executive by the Board that specifically identifies the manner in which the Board believes that Executive has materially breached such obligations and Executive’s failure to cure such alleged breach not later than 30 days following his receipt of such notice;

 

(ii)           conviction or plea of guilty to a charge of commission of a felony;

 

(iii)          the commission of dishonest, fraudulent or deceptive acts or practices in connection with Executive’s employment that are materially injurious to the Company, monetarily or otherwise; or

 

(iv)          Executive's ongoing willful refusal to follow the proper and lawful directions of the Board after a written demand for substantial performance is delivered to Executive by the Board that specifically identifies the manner in which the Board believes that Executive has refused to follow its instructions and Executive’s failure to cure such refusal not later than 30 days following his receipt of such notice.

 

For purposes of this definition, no act, or failure to act, on the part of Executive shall be considered “willful” unless it is done, or omitted to be done, by Executive in bad faith or without reasonable belief that Executive’s action or omission was in the best interests of the Company.  Any act, or failure to act, based upon (A) authority given pursuant to a resolution duly adopted by the Board or (B) the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by Executive in good faith and in the best interests of the Company.  The cessation of employment of Executive shall not be deemed to be for Cause unless and until there shall have been delivered to Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-quarters of the entire membership of the Board (excluding Executive, if Executive is a member of the Board) at a meeting of the Board called and held for such purpose (after reasonable notice is provided to Executive and Executive is given an opportunity, together with counsel for Executive, to be heard before the Board), finding that, in the good faith opinion of the Board, the conditions set forth in clauses (i), (ii), (iii) or (iv) above have been satisfied, and specifying the particulars thereof in detail.

 

“Change in Control”  shall mean, except as otherwise provided below, the occurrence of a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company.  In determining whether an event shall be considered a “change in the ownership,” a “change in the effective control” or a “change in the ownership of a substantial portion of the assets” of the Company, the following provisions shall apply:

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(i)            A “change in the ownership” of the Company shall occur on the date on which any one person, or more than one person acting as a group, acquires ownership of stock of the Company that, together with stock held by such person or group, constitutes more than 50% of the total fair market value or total voting power of the stock of the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(v).  If a person or group is considered either to own more than 50% of the total fair market value or total voting power of the stock of the Company, or to have effective control of the Company within the meaning of clause (ii) of this definition, and such person or group acquires additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the ownership” of the Company.

 

(ii)            A “change in the effective control” of the Company shall occur on either of the following dates:

 

(A)  The date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the Company possessing 30% or more of the total voting power of the stock of the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vi).  If a person or group is considered to possess 30% or more of the total voting power of the stock of the Company, and such person or group acquires additional stock of the Company, the acquisition of additional stock by such person or group shall not be considered to cause a “change in the effective control” of the Company; or

 

(B)  The date on which a majority of the members of the Board is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the Board before the date of the appointment or election, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vi).

 

(iii)            A “change in the ownership of a substantial portion of the assets” of the Company shall occur on the date on which any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the Company that have a total gross fair market value equal to or more than 40% of the total gross fair market value of all of the assets of the Company immediately before such acquisition or acquisitions, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vii).  A transfer of assets shall not be treated as a “change in the ownership of a substantial portion of the assets” when such transfer is made to an entity that is controlled by the shareholders of the Company, as determined in accordance with Treasury Regulation § 1.409A-3(i)(5)(vii)(B).

 

Notwithstanding the occurrence of any of the foregoing events, an initial public offering or any bona fide primary or secondary public offering following the occurrence of an initial public offering shall not constitute a Change in Control.

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“Good Reason” shall mean any of the following actions, if taken without the express written consent of Executive:   (i) a material diminution in Executive’s Base Salary, short-term incentive opportunity, long-term incentive opportunity or employee benefits; (ii) a material diminution in Executive’s authority, duties or responsibilities; (iii) requiring Executive to move his place of employment more than 50 miles from his place of employment prior to such move or (iv) a material breach by the Company of this Agreement.  Executive’s employment with the Company may be terminated for Good Reason if (A) Executive provides written notice to Company of the occurrence of the Good Reason event (as described above) within 90 days after Executive has knowledge of the circumstances constituting Good Reason, which notice shall specifically identify the circumstances which Executive believes constitute Good Reason, (B) Company fails to correct the circumstances constituting “Good Reason” within 30 days after such notice; and (C) Executive resigns within six months after the initial existence of such circumstances.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11Exhibit 4.1

 

THIS NOTE AND THE COMMON STOCK
ISSUABLE UPON CONVERSION OF THIS NOTE HAVE NOT BEEN AND WILL NOT BE REGISTERED WITH THE UNITED STATES SECURITIES AND EXCHANGE COMMISSION
OR THE SECURITIES COMMISSION OF ANY STATE PURSUANT TO AN EXEMPTION FROM REGISTRATION PROVIDED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, AND THE RULES AND REGULATIONS PROMULGATED THEREUNDER (THE "1933 ACT”)

 

US $230,000.00

 

PROPANC HEALTH GROUP CORPORATION

8% CONVERTIBLE REDEEMABLE JUNIOR SUBORDINATED
NOTE

DUE JANUARY 27, 2018

 

FOR VALUE RECEIVED,
Propanc Health Group Corp. (the “Company”) promises to pay to the order of EAGLE EQUITIES, LLC and its authorized successors
and Permitted Assigns, defined below, ("Holder"), the aggregate principal face amount of Two Hundred Thousand
Dollars exactly (U.S. $230,000.00) on January 27, 2018 ("Maturity Date") and to pay interest on the principal
amount outstanding hereunder at the rate of 8% per annum commencing on January 27, 2017. The interest will be paid to the Holder
in whose name this Note is registered on the records of the Company regarding registration and transfers of this Note. The principal
of, and interest on, this Note are payable at 91 Shelton Ave, Suite 107, New Haven, CT 06511, initially, and if changed, last appearing
on the records of the Company as designated in writing by the Holder hereof from time to time. The Company will pay each interest
payment and the outstanding principal due upon this Note before or on the Maturity Date, less any amounts required by law to be
deducted or withheld, to the Holder of this Note by check or wire transfer addressed to such Holder at the last address appearing
on the records of the Company. The forwarding of such check or wire transfer shall constitute a payment of outstanding principal
hereunder and shall satisfy and discharge the liability for principal on this Note to the extent of the sum represented by such
check or wire transfer. Interest shall be payable in Common Stock (as defined below) pursuant to paragraph 4(b) herein. Permitted
Assigns means any Holder assignment, transfer or sale of all or a portion of this Note accompanied by an Opinion of Counsel as
provided for in Section 2(f) of the Securities Purchase Agreement by and between the Holder and the Company dated as of January
27, 2016 (the “Securities Purchase Agreement”).

 

	 	 
	Initials	 

 

     

     

    

 

The Holder, for itself
and its successors and assigns, agrees that this Note, and the payment of amounts due hereunder, are junior to and subordinate
in all respects to the existing debt of the Company pursuant to that certain 5% Original Issue Discount Senior Secured Convertible
Debenture with an original issue date of October 28, 2015 (the “2015 Debenture”), and the 5% Original Issue Discount
Senior Secured Convertible Debenture with an original issue date of September 13, 2016 (the “2016 Debenture”), in each
case issued by the Company to Delafield Investments Limited (“Delafield”), as amended, modified, supplemented, restated,
refinanced or replaced from time to time. Notwithstanding anything to contrary in the Securities Purchase Agreement or this Note,
no payment pursuant to this Note will occur until such time as the 2015 and Debenture and 2016 Debenture have been fully repaid.
Any delay in the payment hereunder as a result of this subordination will not trigger any right to rescind, penalty or event of
default hereunder.

 

This Note is subject
to the following additional provisions:

 

1.           This
Note is exchangeable for an equal aggregate principal amount of Notes of different authorized denominations, as requested by the
Holder surrendering the same. No service charge will be made for such registration or transfer or exchange, except that Holder
shall pay any tax or other governmental charges payable in connection therewith. To the extent that Holder subsequently transfers,
assigns, sells or exchanges any of the multiple lesser denomination notes, Holder acknowledges that it will provide the Company
with Opinions of Counsel as provided for in Section 2(f) of the Securities Purchase Agreement (“Opinions of Counsel”).

 

2.           The
Company shall be entitled to withhold from all payments any amounts required to be withheld under applicable laws.

 

3.           This
Note may be transferred or exchanged only in compliance with the Securities Act of 1933, as amended ("Act"), applicable
state securities laws and Sections 2(f) and 5(f) of the Securities Purchase Agreement. Any attempted transfer to a non-qualifying
party shall be treated by the Company as void. Prior to due presentment for transfer of this Note, the Company and any agent of
the Company may treat the person in whose name this Note is duly registered on the Company's records as the owner hereof for all
other purposes, whether or not this Note be overdue, and neither the Company nor any such agent shall be affected or bound by notice
to the contrary. Any Holder of this Note electing to exercise the right of conversion set forth in Section 4(a) hereof, in addition
to the requirements set forth in Section 4(a), and any prequalified prospective transferee of this Note, also is required to give
the Company written confirmation that this Note is being converted ("Notice of Conversion") in the form annexed
hereto as Exhibit A. The date of receipt (including receipt by telecopy) of such Notice of Conversion shall be the Conversion
Date. All notices of conversion will be accompanied by an Opinion of Counsel.

 

	 	 
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    	 	2	 

     

    

 

4.           (a)          The
Holder of this Note is entitled, at its option, at any time, to convert all or any amount of the principal face amount of this
Note then outstanding into shares of the Company's common stock (the "Common Stock") at a price ("Conversion
Price") for each share of Common Stock equal to 60% of the lowest closing bid price of the Common
Stock as reported on the National Quotations Bureau OTC Markets exchange which the Company’s shares are traded or any exchange
upon which the Common Stock may be traded in the future ("Exchange"), for the ten
prior trading days including the day upon which a Notice of Conversion is received by the Company (provided such Notice
of Conversion is delivered together with an Opinion of Counsel, by fax or other electronic method of communication to the Company
after 4 P.M. Eastern Standard or Daylight Savings Time if the Holder wishes to include the same day closing price). For purposes
of the above calculations, a day shall not be considered a trading day if there was no trading volume for the Company’s Common
Stock for that particular day. If the shares have not been delivered within 3 business days, the Notice of Conversion may be rescinded.
Such conversion shall be effectuated by the Company delivering the shares of Common Stock to the Holder within 3 business days
of receipt by the Company of the Notice of Conversion. Accrued, but unpaid interest shall be subject to conversion. No fractional
shares or scrip representing fractions of shares will be issued on conversion, but the number of shares issuable shall be rounded
to the nearest whole share. To the extent the Conversion Price
of the Company’s Common Stock closes below the par value per share, the Company will take all steps necessary to solicit
the consent of the stockholders to reduce the par value to the lowest value possible under law. The Company agrees to honor all
conversions submitted pending this increase. In the event the Company experiences a DTC “Chill” on its shares, the
conversion price shall be decreased to 50% instead of 60% while that “Chill” is in effect. If the Company fails
to maintain the share reserve at the 4x discount of the note 60 days after the issuance of the note, the conversion discount
shall be increased by 10%. In no event shall the Holder be allowed to effect a conversion if such conversion, along with all other
shares of Company Common Stock beneficially owned by the Holder and its affiliates would exceed 4.99% of the outstanding shares
of the Common Stock of the Company (which may be increased up to 9.9% upon 60 days’ prior written notice by the Investor).

 

(b)         Interest
on any unpaid principal balance of this Note shall be paid at the rate of 8% per annum. Interest shall be paid by the Company in
Common Stock ("Interest Shares"). Holder may, at any time, send in a Notice of Conversion to the Company for Interest
Shares based on the formula provided in Section 4(a) above. The dollar amount converted into Interest Shares shall be all or a
portion of the accrued interest calculated on the unpaid principal balance of this Note to the date of such notice.

 

(c)         The
Note may be prepaid with the following penalties: (i) if the note is prepaid within 60 days of the issuance date, then at 130%
of the face amount plus any accrued interest; (ii) if the note is prepaid after 60 days after the issuance date but less than 121
days after the issuance date, then at 140% of the face amount plus any accrued interest and (iii) if the note is prepaid after
120 days after the issuance date but less than 180 days after the issuance date, then at 150% of the face amount plus any accrued
interest. This Note may not be prepaid after the 180th day. Such redemption must be closed and funded within 3 days
of giving notice of redemption of the right to redeem shall be null and void.

 

	 	 
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    	 	3	 

     

    

 

(d)         Upon
(i) a transfer of all or substantially all of the assets of the Company to any person in a single transaction or series of related
transactions, (ii) a reclassification, capital reorganization (excluding an increase in authorized capital) or other change or
exchange of outstanding shares of the Common Stock, other than a forward or reverse stock split or stock dividend, or (iii) any
consolidation or merger of the Company with or into another person or entity in which the Company is not the surviving entity (other
than a merger which is effected solely to change the jurisdiction of incorporation of the Company and results in a reclassification,
conversion or exchange of outstanding shares of Common Stock solely into shares of Common Stock) (each of items (i), (ii) and (iii)
being referred to as a "Sale Event"), then, in each case, the Company shall, upon request of the Holder, redeem this
Note in cash for 150% of the principal amount, plus accrued but unpaid interest through the date of redemption, or at the election
of the Holder, such Holder may convert the unpaid principal amount of this Note (together with the amount of accrued but unpaid
interest) into shares of Common Stock immediately prior to such Sale Event at the Conversion Price.

 

(e)         In
case of any Sale Event (not to include a sale of all or substantially all of the Company’s assets) in connection with which
this Note is not redeemed or converted, the Company shall cause effective provision to be made so that the Holder of this Note
shall have the right thereafter, by converting this Note, to purchase or convert this Note into the kind and number of shares of
stock or other securities or property (including cash) receivable upon such reclassification, capital reorganization or other change,
consolidation or merger by a holder of the number of shares of Common Stock that could have been purchased upon exercise of the
Note and at the same Conversion Price, as defined in this Note, immediately prior to such Sale Event. The foregoing provisions
shall similarly apply to successive Sale Events. If the consideration received by the holders of Common Stock is other than cash,
the value shall be as determined by the Board of Directors of the Company or successor person or entity acting in good faith.

 

5.           No
provision of this Note shall alter or impair the obligation of the Company, which is absolute and unconditional, to pay the principal
of, and interest on, this Note at the time, place, and rate, and in the form, herein prescribed.

 

6.           The
Company hereby expressly waives demand and presentment for payment, notice of non-payment, protest, notice of protest, notice of
dishonor, notice of acceleration or intent to accelerate, and diligence in taking any action to collect amounts called for hereunder
and shall be directly and primarily liable for the payment of all sums owing and to be owing hereto.

 

7.           The
Company agrees to pay all costs and expenses, including reasonable attorneys' fees and expenses, which may be incurred by the Holder
in collecting any amount due under this Note.

 

8.           If
one or more of the following described "Events of Default" shall occur:

 

(a)         The
Company shall default in the payment of principal or interest on this Note or any other note issued to the Holder by the Company;
or

 

(b)         Any
of the representations or warranties made by the Company herein or in any certificate or financial or other written statements
heretofore or hereafter furnished by or on behalf of the Company in connection with the execution and delivery of this Note, or
the Securities Purchase Agreement under which this note was issued shall be false or misleading in any respect; or

 

	 	 
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    	 	4	 

     

    

 

(c)         The
Company shall fail to perform or observe, in any respect, any covenant, term, provision, condition, agreement or obligation of
the Company under this Note or any other note issued to the Holder; or

 

(d)         The
Company shall (1) become insolvent (which does not include a “going concern opinion); (2) admit in writing its inability
to pay its debts generally as they mature; (3) make an assignment for the benefit of creditors or commence proceedings for its
dissolution; (4) apply for or consent to the appointment of a trustee, liquidator or receiver for its or for a substantial part
of its property or business; (5) file a petition for bankruptcy relief, consent to the filing of such petition or have filed against
it an involuntary petition for bankruptcy relief, all under federal or state laws as applicable; or

 

(e)         A
trustee, liquidator or receiver shall be appointed for the Company or for a substantial part of its property or business without
its consent and shall not be discharged within sixty (60) days after such appointment; or

 

(f)          Any
governmental agency or any court of competent jurisdiction at the instance of any governmental agency shall assume custody or control
of the whole or any substantial portion of the properties or assets of the Company; or

 

(g)         One
or more money judgments, writs or warrants of attachment, or similar process, in excess of two hundred fifty thousand dollars ($250,000)
in the aggregate, shall be entered or filed against the Company or any of its properties or other assets and shall remain unpaid,
unvacated, unbonded or unstayed for a period of fifteen (15) days or in any event later than five (5) days prior to the date of
any proposed sale thereunder; or

 

(h)         The
Company has defaulted on or breached any term of any other note of similar debt instrument into which the Company has entered and
failed to cure such default within the appropriate grace period; or

 

(i)          The
Company shall have its Common Stock delisted from an exchange (including the OTC Markets exchange) or, if the Common Stock trades
on an exchange, then trading in the Common Stock shall be suspended for more than 10 consecutive days or ceases to file its 1934
act reports with the SEC;

 

(j)          The Company shall not deliver
to the Holder the Common Stock pursuant to paragraph 4 herein without restrictive legend within 3 business days of its receipt
of a Notice of Conversion which includes an Opinion of Counsel expressing an opinion which supports the removal of a restrictive
legend; or

 

(k)         The Company shall not replenish
the reserve set forth in Section 12, within 3 business days of the request of the Holder.

 

	 	 
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    	 	5	 

     

    

 

(l)          The
Company shall be delinquent in its periodic report filings with the Securities and Exchange Commission; or

 

(m)        The
Company shall cause to lose the “bid” price for its stock in a market (including the OTC marketplace or other exchange).

 

Then, or at any time thereafter, unless
cured within 5 days, and in each and every such case, unless such Event of Default shall have been waived in writing by the Holder
(which waiver shall not be deemed to be a waiver of any subsequent default) at the option of the Holder and in the Holder's sole
discretion, the Holder may consider this Note immediately due and payable, without presentment, demand, protest or (further) notice
of any kind (other than notice of acceleration), all of which are hereby expressly waived, anything herein or in any note or other
instruments contained to the contrary notwithstanding, and the Holder may immediately, and without expiration of any period of
grace, enforce any and all of the Holder's rights and remedies provided herein or any other rights or remedies afforded by law.
Upon an Event of Default, interest shall accrue at a default interest rate of 24% per annum or, if such rate is usurious or not
permitted by current law, then at the highest rate of interest permitted by law. In the event of a breach of Section 8(j) the parties
agree that damages shall be difficult to determine and agree on liquidated damages in the amount of $250 per day the shares are
not issued beginning on the 4th day after the conversion notice was delivered to the Company. The agreed liquidated
damages shall increase to $500 per day beginning on the 10th day. In the event of a breach of Section 8(m), the parties
agree that damages shall be difficult to determine and hereby agree to an increase of the outstanding principal amounts by 20%
as a liquidated damages payment. In case of a breach of Section 8(i), the parties agree that damages will be difficult to determine
and agree that the outstanding principal due under this Note shall increase by 50% as a liquidated damages payment. If this Note
is not paid at maturity, the outstanding principal due under this Note shall increase by 10%. Further, if a breach of Section 8(l)
occurs or is continuing after the 6-month anniversary of the Note, then the Holder shall be entitled to use the lowest closing
bid price during the delinquency period as a base price for the conversion. For example, if the lowest closing bid price during
the delinquency period is $0.01 per share and the conversion discount is 50% the Holder may elect to convert future conversions
at $0.005 per share.

 

If the Holder shall commence an action
or proceeding to enforce any provisions of this Note, including, without limitation, engaging an attorney, then if the Holder prevails
in such action, the Holder shall be reimbursed by the Company for its attorneys’ fees and other costs and expenses incurred
in the investigation, preparation and prosecution of such action or proceeding.

 

9.           In
case any provision of this Note is held by a court of competent jurisdiction to be excessive in scope or otherwise invalid or unenforceable,
such provision shall be adjusted rather than voided, if possible, so that it is enforceable to the maximum extent possible, and
the validity and enforceability of the remaining provisions of this Note will not in any way be affected or impaired thereby.

 

	 	 
	Initials	 

 

    	 	6	 

     

    

 

10.         Neither
this Note nor any term hereof may be amended, waived, discharged or terminated other than by a written instrument signed by the
Company and the Holder.

 

11.         The
Company represents that it is not a “shell” issuer and that if it previously has been a “shell” issuer
that at least 12 months have passed since the Company has reported Form 10 type information indicating it is no longer a “shell
issuer.

 

12.         The
Company shall issue irrevocable transfer agent instructions reserving 122,666,000 shares of its Common Stock for conversions under
this Note (the “Share Reserve”). Upon full conversion of this Note, any shares remaining in the Share Reserve shall
be cancelled. The company should at all times reserve a minimum of four times the number of shares required if the note would be
fully converted.  The Holder may reasonably request increases from time to time to reserve such amounts. The Company will
instruct its transfer agent to provide the outstanding share information to the Holder in connection with its conversions.

 

13.         The
Company will give the Holder direct notice of any corporate actions, including but not limited to name changes, stock splits, recapitalizations
etc. This notice shall be given to the Holder as soon as possible under law.

 

14.         This
Note shall be governed by and construed in accordance with the laws of New York applicable to contracts made and wholly to be performed
within the State of New York and shall be binding upon the successors and assigns of each party hereto. The Holder and the Company
hereby mutually waive trial by jury and consent to exclusive jurisdiction and venue in the courts of the State of New York or in
the Federal courts sitting in the county or city of New York. This Agreement may be executed in counterparts, and the facsimile
transmission of an executed counterpart to this Agreement shall be effective as an original.

 

	 	 
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    	 	7	 

     

    

 

IN WITNESS WHEREOF,
the Company has caused this Note to be duly executed by an officer thereunto duly authorized.

 

	Dated: __________	 	 
	 	 	 
	 	 	PROPANC HEALTH GROUP CORPORATION
	 	 	 
	 	By:	 
	 	 	 
	 	Title:	 

 

	 	 
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    	 	8	 

     

    

 

EXHIBIT A

 

NOTICE OF CONVERSION

 

(To be Executed by the
Registered Holder in order to Convert the Note)

 

The undersigned hereby
irrevocably elects to convert $___________ of the above Note into _________ Shares of Common Stock of Propanc Health Group Corporation
(“Shares”) according to the conditions set forth in such Note, as of the date written below.

 

If Shares are to be
issued in the name of a person other than the undersigned, the undersigned will pay all transfer and other taxes and charges payable
with respect thereto.

 

	Date of Conversion:	 

	Applicable Conversion Price:	 

	Signature:	 
	 	[Print Name of Holder and Title of Signer]
	 	 

	Address:	 
	 	 

 

	SSN or EIN:	 

	Shares are to be registered in the following name:	 

 

	Name:	 

	Address:	 

	Tel:	 

	Fax:	 

	SSN or EIN:	 

 

Shares are to be sent or delivered to the following account:

 

	Account Name:	 

	Address:	 

 

	 	 
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    	 	9

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