Document:

ex_134652.htm

Exhibit 10.7

 

EMPLOYMENT AGREEMENT

 

This Employment Agreement (the “Employment Agreement”) is made and entered into as of January 30, 2017, with an effective date and commencement date of May 1st, 2016 (the “Effective Date” or the “Commencement Date”), by and between Acacia Diversified Holdings, Inc., a Texas corporation (the “Company”), and Richard K. Pertile (the “Executive”). Notwithstanding any other usage of the term “Company” within this Employment Agreement, each and every instance of that term is intended, through any and all expansions or further illustrations or lack thereof within this Employment Agreement and any addendums, exhibits or notices thereto, shall be construed to mean Acacia Diversified Holdings, Inc. (including any subsequent name changes associated therewith), all its subsidiaries (whether wholly or partially owned), and any and all other assets and holdings of the Company and any of its subsidiaries whether named or not named, including but not limited to the capital stock and all assets owned by and/or associated with each of those entities, as that term shall be used in conjunction with but not limited to all matters relating to this Employment Agreement. The Company and the Executive are referred to collectively herein as the "Parties," and individually as a "Party."

 

Recitals

WHEREAS, the Board of Directors of the Company (the "Board") has determined that it is in the best interests of the Company and its shareholders to assure that the Company will have the continued employment and dedication of the Executive; and

 

WHEREAS, the Board has further determined that it is desirable to provide the Executive with compensation and benefits terms which adequately compensate the Executive for the services he renders to the Company, and, to ensure that such compensation and benefits are consistent with those of like executives of other public companies.

 

NOW, THEREFORE, in consideration of the mutual covenants and agreements contained herein, and with reference to the above recitals, the Parties hereby agree as follows:

 

ARTICLE 1

TERM OF EMPLOYMENT

 

1.1 TERM OF EMPLOYMENT. The Company hereby employs the Executive as an employee, advisor, and/or consultant of the Company (an “Employee”), and the Executive hereby accepts such Employment by the Company, for a period (as such period may be extended, the “Term”) commencing on the Commencement Date and expiring on the first to occur of (a) the termination of the Executive’s Employment pursuant to Article 6, or (b) December 31, 2019 (the “Termination Date”). Provided that if the Executive’s Employment has not previously been terminated pursuant to Article 6, the Executive’s Employment pursuant to this Employment Agreement shall automatically renew on one occasion for an additional one (1) year period unless either Party notifies the other Party in writing of its desire not to renew the Executive’s Employment under this Employment Agreement no later than one-hundred twenty (120) days prior to the Termination Date (a “Non-Renewal Notice”). If the Company delivers the Non-Renewal Notice and the Executive does not terminate his Employment prior to the end of the Term, then such non-renewal shall be deemed to be a termination by the Company of the Executive’s Employment without Cause (as defined below) as of immediately prior to the expiration of the Term, and Section 6.2 shall govern such termination. If the Executive delivers the Non-Renewal Notice and the Company does not terminate the Executive’s Employment prior to the end of the Term, then such non-renewal shall be deemed to be a termination by the Executive of his Employment without Good Reason (as defined below) as of immediately prior to the expiration of the Term, and Section 6.4 shall govern such termination.

 

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If the Term has been automatically extended for the additional one year period as set forth above and thereafter the Term of this Employment Agreement expires by its terms at the end of the Term without the Company having proffered a new employment agreement to the Executive to extend his term of Employment upon terms and conditions at least as favorable to the Executive as the most favorable he received under this Employment Agreement during the Term (including salary and benefits as well as authority, functions, services, rights and privileges as are commensurate with the Executive’s position as the Employee as set forth herein), the Company shall pay to the Executive a severance payment equal to (5) times the Executive’s Annual Salary as set forth herein.

 

ARTICLE 2

DUTIES AND OBLIGATIONS; BOARD APPOINTMENT

 

2.1 DUTIES. During the Term, the Executive shall: (i) be employed from the Commencement Date forward as Employee of the Company in the capacity of an employee, advisor, and/or consultant or such other office as to which he shall agree to accept in the stead hereof, and shall, commencing on the Commencement Date; (i) During the Employment Period, Executive shall serve as President and Chief Executive Officer of the Company and shall have the normal duties, responsibilities, functions and authority of such position, subject to the powers set forth in the Bylaws of the Company and by the Board to expand or limit such duties, responsibilities, functions and authority commensurate with a Chief Executive Officer position.  (ii) Executive shall report to the Board and shall devote his best efforts to the business and affairs of the Company and its Subsidiaries. Executive shall perform his duties, functions and responsibilities to the Company to the best of his abilities in a diligent, trustworthy, businesslike and efficient manner. Executive will conduct his primary business activities from within the Company's principal place of business, currently in the Clearwater, Florida area, other than while Executive is engaged in business travel for the Company.; (iii) devote such other business time, attention and energies to the business of the Company as he shall deem appropriate; and, (iv) act in accordance with the policies of the Company in effect as of the Commencement Date.

 

2.2 RESTRICTIONS. Except as provided in Section 7.2(i), the Executive covenants and agrees that, while actually employed by the Company, he shall not engage in any other business duties or pursuits or directly render any services of a business or commercial nature to any other Person or business that is in direct competition with the Company in the same or similar businesses of the Company for compensation without the prior written consent of the Board. The expenditure of (i) reasonable amounts of time for educational, charitable, or professional activities, activities in a business not in competition with the Company; (ii) investment in, or ownership of another firm or business not in direct competition with the Company in the same or similar businesses of the Company; (iii) service as a director on other boards; or, (iv) other similar causes shall not be deemed a breach of this Employment Agreement if those activities do not materially interfere with the services to be provided by Employee under the terms of this Employment Agreement, and such activities by Executive shall not require the prior written consent of the Board of the Company. Notwithstanding anything herein contained to the contrary, this Employment Agreement shall not be construed to prohibit the Executive from making personal investments or conducting personal business, financial or legal affairs or other personal matters if those activities do not materially interfere with his services hereunder.

 

2.3 BOARD APPOINTMENT. Concurrently with the inception of this Employment Agreement and thereafter, the Board shall appoint the Executive to the Board of Directors if Executive shall not already be a sitting member of the Board and wants to continue to serve as a Board Member. For a Term of five years and any partial term in addition to the full term(s) during those five years beginning with the Commencement Date established in “Recitals” to this Employment Agreement, the Executive will be recommended for continuous service on the Board by the Board and/or the Board’s Corporate Governance and Nominations Committee and shall be placed on the ballot and recommended for nomination to re-election by the Company’s stockholders consistent with and subject to the Company’s certificate of incorporation and By-laws, applicable law and rules of any stock exchange on which the Company’s shares are listed, and the Board of Directors shall consistently move to have Executive elected or appointed to the Board

 

 

 

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ARTICLE 3

COMPENSATION

 

3.1 Base Salary.  The Executive shall receive an annual base salary of $195,000 from the Effective Date through December 31, 2019 (the “Base Salary”). The Compensation Committee of the Board may review the Executive's salary and total cash compensation within one hundred twenty (120) days of the end of each of the Company’s fiscal years during the Employment Period to determine what, if any, increases shall be made thereto.  The base salary payable to the Executive in any given year is hereafter referred to as the "Annual Base Salary." Any increase in the Annual Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.  The term “Annual Base Salary,” as used in this Agreement, shall refer to the Annual Base Salary with any increases.  Executive shall be entitled to an automatic annual increase to the base salary in the amount not less than $10,000 on the first day of each succeeding calendar year beginning January 1, 2018. The Annual Base Salary shall in all instances be payable in twenty-four (24) equal bi-monthly installments.

 

Annual Bonus and Option Plans.  The Executive shall also be eligible to participate in any applicable Company bonus plan or program, stock option, restricted stock or other plan or program in effect immediately prior to the Effective Date, or put into effect by the Board at any time after the Effective Date or the Amendment Effective Date.  Notwithstanding the foregoing, the Executive shall be eligible to receive the following as of the Effective Date: (i) an Annual Bonus in the amount to be determined by the Compensation Committee, but in no event less than 35% of the annual base salary. This Annual Bonus is payable in January of each calendar year and calculated on the base salary of the previous year; (ii) paid membership in one airline lounge club such as the American Airlines Admirals Club or such other club as shall be specified by the executive during each year of the Employment Agreement; and, (iii) An automobile allowance, in lieu of being provided with a Company-owned vehicle for your business use, in the amount of $1,000 per month. In addition, the Company will provide Mr. Pertile with a fuel credit card for his business activities relating to that vehicle and will reimburse him for expenses relating to oil changes, repairs, tires, brakes and any other maintenance necessary, and full coverage insurance therefor.

 

3.2 WITHHOLDING. The Company shall deduct or withhold from the compensation due to the Executive hereunder any and all sums required for federal income and employee social security taxes and all state or local income taxes now applicable or that may be enacted and become applicable during the Term.

 

3.3 CHANGE OF CONTROL. Notwithstanding Article 1, in the event of a Change of Control (as defined in Section 3.6) of the Company (a) during the Term while the Executive remains employed by the Company, or (b) at any time during the six (6) month period following the termination of the Executive’s Employment with the Company (other than for Cause or without Good Reason), the Company shall pay to the Executive, concurrently with the consummation of such Change of Control, a lump sum amount equal to five (5) times the Executive’s Annual Salary during the Term prior to the Change in Control) (the “Severance Compensation”); provided, that the Company’s obligation to pay the Severance Compensation shall be conditioned on the following: if the Executive is employed by the Company at the time of the Change of Control and the Person or Group (each as defined in Section 3.6.) that acquires the Company requests that the Executive continue as an employee of the Company, the successor entity, or any of their respective affiliates on substantially the same (or better, from the Executive’s perspective) terms relating to salary, bonus, and benefits as contained in this Employment Agreement, the Executive MAY, at his sole option, agree to continue such Employment for a period of ninety (90) days from the date of the Change of Control or such lesser period of time as the Person or Group shall request. If the Executive’s Employment with the Company is terminated pursuant to Section 6.2 on or after the date Executive becomes entitled to receive the Severance Compensation, then notwithstanding anything set forth in Section 6.2, the Company shall not be required to make any payments to the Executive pursuant to Section 6.2(a), other than continuing to provide all

 

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payments and benefits to Executive to the extent set forth in Section 6.2(a). If the Executive’s Employment with the Company is terminated pursuant to Section 6.2 before the Executive becomes entitled to the Severance Compensation, then notwithstanding the foregoing, the Executive shall continue to receive all amounts due pursuant to Section 6.2 and he shall not be entitled to receive any payments under this Section 3.3. In the event of any proposed, threatened, or actual Change of Control of the Company, the Company shall immediately notify the Executive of same, and the Executive shall immediately become a creditor of the Company and shall promptly thereafter be granted a first lien ahead of all other creditors, secured or unsecured, on all the assets of the Company such that none of the assets of the Company may be sold, bartered, leased, transferred, consolidated, collateralized or otherwise disposed of without the prior written consent of Executive, and the Company shall immediately evidence its collective indebtedness or potential indebtedness to Executive on the balance sheets as an account payable and shall give Executive a security interest in the Company and its assets until any obligations, liabilities or potential liabilities to Executive that may result from a Change of Control and/or other existing obligations of the Company to Executive are fully paid with reasonable interest and Executive shall deliver a written release from any further indebtedness or obligations under the terms of this Employment Agreement.  Executive’s right to a lien hereunder shall not be abridged as a result of the Company’s failure to promptly notify him of issues relating to Change of Control or any of the Company’s obligations hereunder. Executive shall have the exclusive right to assign or transfer his right, title and interest in any lien(s) incurred hereunder to any other Party or Parties as he shall in his sole discretion deem appropriate or fitting for his own purposes, and any assignee, holder, or holders thereof shall continue to enjoy the benefit of said lien and the status as the primary and first lienholder of the assets attributed thereto.  Executive may, at his sole and exclusive option, waive any of the rights or responsibilities related to this Section 3.3 for such period or periods as he shall see fit, but shall not be obligated to make or continue any such waiver as a result of having granted the waiver on one or more occasions for any reason or for any period or periods of time.  No obligations of the Company to the Executive shall be abridged as the result of any waiver given or not given by Executive under this Section 3.3.  In exchange for the execution and delivery of this Employment Agreement to Executive and for the continued performance of the Company under the terms and conditions hereof, Executive agrees to withhold any claim it may have or claim to have against the Company with regard to any Change of Control under the terms of his prior Employment Agreement.  As such, Executive shall, upon execution by the Parties of this Employment Agreement, withdraw his current Lien against the assets of the Company perfected on form UCC-1.  This action shall in no way alter the terms and conditions of this Employment Agreement or reduce the obligations of the Company to the Executive hereunder.

 

3.4 DEFINITION OF CHANGE OF CONTROL. For purposes of this Employment Agreement “Change of Control” means the threatened, proposed, or actual occurrence of any of the following: (i) the actual, proposed or threatened sale, lease, transfer, conveyance or other disposition (other than by way of any underwritten public offering registered under the Securities Act of 1933 (“Public Offering”) or any offering of securities under Rule 144A promulgated under the Securities Act of 1933 (“Rule 144A Offering”) in one or a series of related or unrelated transactions, of 45% or more of the current assets of the Company (including one or a series of related or unrelated transactions of 45% or more of the current assets of any subsidiary or business holding wholly or principally owned, individually or collectively, by the Company) as shown on the most recent balance sheet of the Company as total current assets (the “Total Current Assets”) by any individual, corporation, limited liability company, partnership, or other entity (each, a “Person”) or group of Persons acting together, or any Company employee pension or benefits plan (each a “Group”); (ii) the actual, proposed, or threatened consummation of any transactions (including any stock or asset purchase, sale, acquisition, disposition, liquidation, merger, consolidation or reorganization, but not including any Public Offering or Rule 144A Offering) the result of which is that any Person or Group (other than any underwriter temporarily holding securities pursuant to a Public Offering), becomes the beneficial owners of more than forty five percent (45%) of the aggregate voting power of all classes of stock of the Company or any of its subsidiaries or holdings; or (iii) the first day on which any Person or Group in one or a series of related or unrelated transactions acts or seeks to gain a disposition through any other means, including but not limited to any action through the courts or otherwise, of 45% or more of the Total Current Assets of the Company or 45% or more of the current assets of any subsidiary or business holding wholly or principally owned, individually or collectively, by the Company, or 45% of the aggregate voting power of all classes of stock of the Company or any of its subsidiaries or holdings; or (iv) the first day on which a majority of the members of the Board of the Company or any of its subsidiaries or holdings are not individuals who were nominated for election or elected

 

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to the Board with the approval of two-thirds of the members of the Board just prior to the time of such nomination or election, including but not limited to any such transaction designed or proposed to promulgate any such change. Any Change of Control relating to any transactions concomitant with the execution of the Asset Purchase Agreement of any future date herewith by and between the Company and the MariJ Agricultural, Inc. shall not serve to trigger any actions under this Section 3.6, providing that any subsequent actions following the Effective Date of the Asset Purchase Agreement are subject to the terms hereof.

 

ARTICLE 4

EMPLOYEE BENEFITS

 

4.1 VACATION. The Executive shall be immediately entitled to four (4) weeks of paid vacation in accordance with his Annual Salary for 2017 and for each full calendar year of his Employment hereunder thereafter. To the extent accrued vacation time is unused in any given year, it may be carried over in accordance with the policies of the Company then in effect. Other than in respect of 2017, vacation days shall accrue in accordance with the Company’s policies. Notwithstanding anything to the contrary, however, the Executive shall not be entitled to carry over any unused vacation for a period exceeding three (3) years.

 

4.2 OTHER BENEFITS.  The executive shall be eligible to receive such other benefits as the Company may from time to time see fit to provide.

 

ARTICLE 5

BUSINESS OPERATING EXPENSE STIPEND TO OPERATE OCALA OFFICE LOCATION

 

5.1 OPERATING STIPEND FOR BUSINESS OPERATING EXPENSES.  In order to reduce the burden on the Company, the Company’s board of directors has approved and will paid certain costs and expenses relate to the operation of the Clearwater home located at 113 Windward Isle, Clearwater, Florida. (the “Clearwater Beach Location”) This home, office and storage area location is occupied by the company's Armored car and other assets and is used for meetings and company guests.  This Stipend will remain in effect for the remainder of the calendar year 2018 and through the duration of this Employment agreement or until all company assets are removed. The Company has, prior to “effective date”, provided Executive with payments for certain expenses which are more or less anticipated to be incurred by the Executive as required to fund the Company’s basic business operations at the Clearwater Beach Location (the “2018 Operating Stipend”).

 

Beginning with January 1, 2017 and continuing monthly thereafter until December 31, 2019 the Company shall pay directly to the Executive a similar annual Operating Stipend (the “Annual Operating Stipend”) as an offset to expenses anticipated to be incurred by the Executive during the Term.  The Annual Operating Stipend shall be paid to Executive in the fixed amount of $1,000 per month due on or before the 1st day of each month, or as equal monthly payments of $1,000 beginning January 30th of each calendar month during the Term.

 

In exchange for receipt of the Annual Operating Stipend, Executive agrees to pay its own routine minor business costs and expenses (the “Routine Minor Business Expenses”) relating to Executive’s conduct of business in the Clearwater Beach Location as defined herein below.  For purposes of this Employment Agreement:

 

i.           Routine Minor Business Expenses shall include:  costs and expenses related to local usage expenses; insurance, and security as required for office and/or storage facilities: telephone, Smart TV and Internet expenses;

 

ii.          Routine Minor Business Expenses shall not include: Electric, Heat, and Water costs and expenses related to Trash service, postage and shipping expenses for non-routine tasks such as mailings required to be sent to recipients; Annual Salary of Executive under the terms of this Employment Agreement; other business or travel expenses of Executive approved by the Company’s management; capital expenditures made at the direction of and on behalf of the Company, bank service fees, and other

 

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expenses not included in Section 5.1(i).  The Company reserves the right to approve in advance any costs and expenses not considered as Routine Minor Business Expenses as set forth in Section 5.1(i).

 

The Parties hereto expressly acknowledge and agree that any and all amounts paid by the Company to the Executive in and for 2017 as income, 2017 Operating Stipend, or otherwise, including but not limited to those amounts approved by the board of directors prior to execution of the Employment Agreement, shall not be altered, revised, rescinded, or charged back to Executive for any reason nor shall any such amounts so paid to Executive serve as an offset to any future amounts due and owing to Executive under the terms of this Employment Agreement or otherwise for any reason whatsoever.

 

5.2 EXECUTIVE’S RESPONSIBILITY FOR TAXES.  Executive shall be issued an IRS form 1099 each year reflecting all amounts paid to him under this Section 5.1, and shall be responsible for any income taxes which may relate thereto.

 

ARTICLE 6

TERMINATION OF EMPLOYMENT

 

6.1 TERMINATION FOR CAUSE. The Company may, during the Term, upon notice to the Executive, terminate the Executive’s Employment under this Employment Agreement and discharge the Executive for Cause (as defined below) and, in such event, except as set forth in the proviso to this Section 6.1, neither Party shall have any rights or obligations under Article 2, Sections 3.1, or Articles 4 and 5; provided, however, that (a) the Company shall pay the Executive any amount due and owing as of the termination date pursuant to Section 3.1 and Articles 4 and 5 (subject, in each case, to Section 3.2), and (b) the remaining provisions of this Employment Agreement shall remain in full force and effect in accordance with their terms. As used herein, the term “Cause” shall refer to the termination of the Executive’s Employment as a result of any one or more of the following: (i) any conviction of, or pleading of nolo contendre by, the Executive for any felony relating to the willful and knowing disregard of the law in intentionally committing acts detrimental to the Company other than the Cannabis related business of the company; (ii) any willful and knowing misconduct of the Executive with intent which has a materially injurious effect on the business of the Company; (iii) the willful and knowing gross dishonesty of the Executive with intent which has a materially injurious effect on the business of the Company; and (iv) a willful and material failure to consistently discharge his duties under this Employment Agreement which failure continues for thirty (30) days following written notice from the Company detailing the area or areas of such failure, other than such failure resulting from his Disability (as defined below); provided, that clause (iv) above shall be deemed to be deleted from this Employment Agreement and shall have no force or effect concurrently with the consummation of a Change of Control. For purposes of this Section 6.1, no act or failure to act, on the part of the Executive, shall be considered “willful” if it is done, or omitted to be done, by the Executive in good faith or with reasonable belief that his action or omission was in the best interest of the Company. The Executive shall have the opportunity to cure any such acts or omissions (other than clause (i) above) within thirty (30) days of the Executive’s receipt of a notice from the Company finding that, in the good faith opinion of the Company, the Executive is guilty of acts constituting “Cause.”

 

6.2 TERMINATION WITHOUT CAUSE OR GOOD REASON. Subject to Section 6.4, the Board acting for the Company shall have the right, at any time in its sole discretion, to terminate the Executive’s Employment under this Employment Agreement without Cause upon not less than thirty (30) days prior written notice to the Executive. The term “Termination without Cause” shall mean the termination by the Company of the Executive’s Employment for any reason other than those expressly set forth in Section 6.1, or no reason at all, and shall also mean the Executive’s decision to terminate his Employment under this Employment Agreement (and he hereby has such right) by reason of any act, decision or omission by the Company or the Board that: (A) materially modifies, reduces, changes, or restricts the Executive’s salary, bonus opportunities, options or other compensation benefits or perquisites, or the Executive’s authority, functions, services, rights, and privileges as, or commensurate with the Executive’s position as the Employee of the Company as described in Section 2.1; (B) relocates the Executive without his consent from certain of the Company’s offices located at or near 13575 58th St. North, Clearwater , FL  33760 to any other location in excess of twenty-five (25) miles beyond the geographic limits of Clearwater, FL;

 

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(C) deprives the Executive of his titles and positions of Employee except by promotion or increase to higher office that he shall accept; (D) if prior to the expiration of the Term results in the Company proffering a new employment agreement to the Executive in order to extend the Term and the terms and conditions of such agreement (i) as they relate to the Executive’s salary, bonus opportunity and benefits (assuming the Executive qualifies for such benefits) are not at least as favorable to the Executive as the most favorable salary, bonus opportunity and benefits payable to the Executive in any year during the Term or (ii) change the Executive’s authority, functions, services, rights and privileges as, or commensurate with the Executive’s position as the Employee as set forth in this Employment Agreement; or (E) involves or results in any failure by the Company to comply with any provision of this Employment Agreement, other than an isolated, insubstantial and inadvertent failure not occurring in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Executive (each a “Good Reason”). In the event the Company or the Executive shall exercise the termination right granted pursuant to this Section 6.2, then except as set forth in the proviso below, neither Party shall have any rights or obligations under Article 1, Article 2, Sections 3.1, or Articles 4 and 5; provided, however, that the Company shall pay to the Executive (a) an amount equal to five (5) times the Executive’s Annual Salary (determined as the Executive’s highest Annual Salary during the Term prior to such termination) and shall continue to provide all benefits that were made available to Executive while the Executive was employed by the Company (or if not allowable under the Company’s then existing policies their substantial equivalents) in accordance with Articles 3, 4 and 5 at the time they would have been paid had the Executive remained an employee for a period of twenty four (24) months after the effective date of the termination (subject in each case to Section 3.2), except that the Company shall not be required to provide such benefits to the extent that, during such twenty four (24) month period, the Executive receives substantially similar (or better, from the Executive’s perspective) benefits from a new employer, and (b) any amount due and owing as of the termination date pursuant to Articles 3, 4, and 5 (subject, in each case, to Section 3.2), and the remaining provisions of this Employment Agreement shall remain in full force and effect in accordance with their terms. The Executive shall inform the Company of any other benefits the Executive is receiving where the Company would have a right to reduce the benefits it is providing to the Executive. After the provision of the benefits during the two-year period following such termination as described above, the Executive will be entitled to COBRA or Medicare rights as provided by applicable law. The amounts payable pursuant to this Section 6.2 shall be in payment for the services rendered by the Executive pursuant to this Employment Agreement during the Term.

 

6.3 TERMINATION FOR DEATH OR DISABILITY. The Executive’s Employment shall terminate automatically upon the Executive’s death during the Term pursuant to Section 6.6.  If the Company determines in good faith that the Disability (as defined below) of the Executive has occurred during the Term, it shall give written notice to the Executive of its intention to terminate his Employment. In such event, the Executive’s Employment with the Company shall terminate effective on the 30th day after receipt of such notice by the Executive, provided that, within the thirty (30) days after such receipt, the Executive shall not have returned to full-time performance of his duties. For purposes of this Employment Agreement, “Disability” shall mean the inability of the Executive to perform his duties to the Company on account of physical or mental illness or incapacity for a period of one-hundred twenty (120) consecutive calendar days, or for a period of one hundred eighty (180) total calendar days, whether or not consecutive, during any three hundred sixty-five (365) day period.

 

6.4 TERMINATION WITHOUT GOOD REASON. Anything in this Employment Agreement to the contrary notwithstanding, during the Term the Executive shall have the right, in his sole discretion, to terminate his Employment under this Employment Agreement without Good Reason upon not less than thirty (30) days prior written notice to the Company, and in such event, neither Party shall have any rights or obligations under Article 2, Section 3.1, or Articles 4 and 5; provided, however, that (a) the Company shall pay the Executive any amount due and owing as of the termination date pursuant to Section 3.1 and Articles 4 and 5 (subject, in each case, to Section 3.2), and (b) the remaining provisions of this Employment Agreement shall remain in full force and effect in accordance with their terms.

 

 

 

 

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ARTICLE 7

RESTRICTIVE COVENANTS

 

7.1 COVENANT NOT TO DISCLOSE CONFIDENTIAL INFORMATION. During the Term and following termination of Executive’s Employment under this Employment Agreement, the Executive agrees that, without the Company’s prior written consent, he will not use or disclose to any person, firm, association, partnership, entity or corporation, any material confidential information concerning: (i) the business, operations or internal structure of the Company or any division or part thereof; (ii) the customers of the Company or any division or part thereof; (iii) the financial condition of the Company or any division or part thereof; and (iv) other material confidential information pertaining to the Company or any division or part thereof, including without limitation, trade secrets, computer programs, software, intellectual property, proprietary information, technical data, marketing analyses and studies, operating procedures, customer and/or inventory lists, or the existence or nature of any of the Company’s agreements or agreements of any division thereof; provided, however, that the Executive shall be entitled to disclose such information: (a) to the extent the same shall have otherwise become or is required to become publicly available (unless made publicly available by the Executive); (b) during the course of or in connection with any actual or potential litigation, arbitration, or other proceeding based upon or in connection with the subject matter of this Modified Agreement; (c) as may be necessary or appropriate to conduct his duties hereunder, provided the Executive is acting or believing himself to act in good faith and in the best interest of the Company; (d) as may be required by law or judicial process; or (e) if the information is generally known to personnel in the Executive’s trade or business.

 

7.2 COVENANT NOT TO COMPETE. The Executive acknowledges that he has established and will continue to establish favorable relations with the customers, clients and accounts of the Company and will have access to trade secrets of the Company. Therefore, in consideration of such relations to further protect trade secrets, directly or indirectly, of the Company, the Executive agrees that at all times during his Employment with the Company through the date of termination of the Executive’s Employment, the Executive will not, directly or indirectly, without the express written consent of the Board:

 

(i) own or have any interest in or act as an officer, director, partner, principal, employee, agent, representative, consultant or independent contractor of, or in any way assist in, any business which is engaged directly in any business directly competitive with the Company in those markets and/or products lines in which the Company competes within 50 miles of the address of the principal place of business of the parent Company or any or its wholly-owned operating subsidiaries at any time during the Term, or become associated with or render services to any person, firm, corporation or other entity so engaged (“Competitive Businesses”); provided, however, that the Executive may own without the express written consent of the Company not more than four and nine-tenths percent (4.9%) of the issued and outstanding securities of any company or enterprise whose securities are listed on a national securities exchange or actively traded in the over the counter market; provided, further, however that once the Term has terminated the Executive may work for, have an interest in, render services to or assist any business or Competitive Business without violating this Section 7.2;

 

(ii) solicit clients, customers or accounts of the Company for, on behalf of or otherwise related to any such Competitive Businesses;

 

(iii) solicit any person who is in the employ or service of the Company to leave such employ or service for employment with or service to the Executive, an affiliate of the Executive or any third Party.

 

In the event that the Company shall merge with, be acquired by, or generally be absorbed into any other business or institution, the Executive’s continued performance on behalf of such other business or institution shall not constitute a violation of Executive’s duties to the Company under Article 7 or other provisions of this   Employment Agreement.

 

 

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Notwithstanding the foregoing, if any court determines that the covenant not to compete, or any part thereof, is unenforceable because of the duration of such provision or the geographic area or scope covered thereby, such court shall have the power to reduce the duration, area or scope of such provision to the extent necessary to make the provision enforceable and, in its reduced form, such provision shall then be enforceable and shall be enforced. The Company shall pay and be solely responsible for any attorney’s fees, expenses, costs and court or arbitration costs incurred by the Executive in any matter or dispute between the Executive and the Company which pertains to this Article 7 if the Executive prevails in the contest in whole or in part.

 

7.3 SPECIFIC PERFORMANCE. Recognizing that irreparable damage will result to the Company in the event of the breach of any of the foregoing covenants and assurances by the Executive contained in Sections 7.1 and 7.2, and that the Company’s remedies at law for any such breach may be inadequate, the Company and its successors and assigns, in addition to such other remedies which may be available to them, shall, upon making a sufficient showing under applicable law, be entitled to an injunction to be issued by any court of competent jurisdiction ordering compliance with this Employment Agreement or enjoining and restraining the Executive from the continuation of such breach. The obligations of the Executive and rights of the Company pursuant to this Article 7 shall survive the termination of the Executive’s Employment under this Employment Agreement. The covenants and obligations of the Executive set forth in this Article 7 are in addition to and not in lieu of or exclusive of any other obligations and duties the Executive owes to the Company.

 

ARTICLE 8

GENERAL PROVISIONS

 

8.1 HEIRS OF EXECUTIVE. For purposes of this Employment Agreement, the term Executive shall also mean the designated heirs of Executive and/or the estate of Executive (collectively the “Heirs”). In the event Executive, shall become deceased or disabled, the Heirs of Executive shall in his stead be paid all Compensations and Obligations due under this Employment Agreement for the full term hereof in the same manner as if Executive were still living.

 

8.2 FINAL AGREEMENT. This Employment Agreement is intended to be the final, complete and exclusive agreement between the Parties relating to the Employment of the Executive by the Company and all prior or contemporaneous understandings, representations and statements, oral or written, are merged herein. No modification, waiver, amendment, discharge or change of this Employment Agreement shall be valid unless the same is in writing and signed by the Party against which the enforcement thereof is or may be sought.

 

8.3 NO WAIVER. No waiver, by conduct or otherwise, by any Party of any term, provision, or condition of this Employment Agreement, shall be deemed or construed as a further or continuing waiver of any such term, provision, or condition nor as a waiver of a similar or dissimilar condition or provision at the same time or at any prior or subsequent time.

 

8.4 RIGHTS CUMULATIVE. The rights under this Employment Agreement, or by law or equity, shall be cumulative and may be exercised at any time and from time to time. No failure by any Party to exercise, and no delay in exercising, any rights shall be construed or deemed to be a waiver thereof, nor shall any single or partial exercise by any Party preclude any other or future exercise thereof or the exercise of any other right.

 

8.5 NOTICE. Except as otherwise provided in this Employment Agreement, any notice, approval, consent, waiver or other communication required or permitted to be given or to be served upon any person in connection with this Employment Agreement shall be in writing. Such notice shall be personally served, sent by email with hard copied being sent certified mail to recipient or cable, or sent prepaid by either registered or certified mail with return receipt requested or Federal Express and shall be deemed given (i) if personally served or by Federal Express, when delivered to the person to whom such notice is addressed, (ii) if given by fax or cable, when sent, or (iii) if given by mail, or email, two (2) business days following deposit in the United States mail. Any notice given by fax, email or cable shall be confirmed in writing, by overnight mail or Federal Express within forty-eight (48) hours after being sent. Such notices shall be addressed to the Party to whom such notice is to be given at the Party’s address set forth below or as such Party shall from time to time otherwise direct.

 

 

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If to the Company:

 

Acacia Diversified Holdings, Inc.

Attn: Kim Edwards

13575 58th Street North - #138

Clearwater, FL  33760

Email: Kim@marijinc.com

 

With a copy to:

 

Law Office of Clifford J. Hunt, PA

Clifford Hunt

8200 Seminole Blvd

Seminole, Florida 33772

cjh@huntlawgrp.copm

 

If to the Executive:

 

Richard M. Pertile

2810 Phillippe Parkway

Safety Harbor, FL 34695

rpertile@tampabay.rr.com

 

8.6 SUCCESSORS. The terms and conditions of this Employment Agreement shall inure to the benefit of and be binding upon the successors, Heirs, and assigns of the Parties hereto.

 

8.7 GOVERNING LAW. This Employment Agreement shall be construed and enforced in accordance with the laws of the State of Florida, without giving effect to the principles of conflict of laws thereof.

 

8.8 COUNTERPARTS. This Employment Agreement may be executed in any number of counterparts, each of which shall be deemed an original, but all of which shall constitute one instrument. The Parties agree that facsimile copies of signatures shall be deemed originals for all purposes hereof and that a Party may produce such copies, without the need to produce original signatures, to prove the existence of this Employment Agreement in any proceeding brought hereunder.

 

8.9 SEVERABILITY. The provisions of this Employment Agreement are agreed to be severable, and if any provision, or application thereof, is held invalid or unenforceable, then such holding shall not affect any other provision or application.

 

8.10 CONSTRUCTION. As used herein, and as the circumstances require, the plural term shall include the singular, the singular shall include the plural, the neuter term shall include the masculine and feminine genders, and the feminine term shall include the neuter and the masculine genders.

 

8.11 ARBITRATION. Except as otherwise provided in Section 7.3 hereof, any controversy or claim arising out of, or related to, this Employment Agreement, or the breach thereof, shall be settled by binding arbitration in the City of Clearwater, Florida or in the City of Tampa, Florida (at the Executive’s election), in accordance with the employment arbitration rules then in effect of the American Arbitration Association including the right to discovery,

 

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and the arbitrator’s decision shall be binding and final, and judgment upon the award rendered may be entered in any court having jurisdiction thereof. Each Party hereto shall pay its or their own expenses incident to the negotiation, preparation and resolution of any controversy or claim arising out of, or related to, this Employment Agreement, or the breach thereof; provided, however, the Company shall pay and be solely responsible for any attorneys’ fees and expenses and court or arbitration costs incurred by the Executive as a result of a claim brought by either the Executive or the Company alleging that the other Party breached or otherwise failed to perform this Employment Agreement or any provision hereof to be performed by the other Party if the Executive prevails in the contest in whole or in part.

 

8.12 NO MITIGATION OR OFFSET. The Executive shall not have any duty to seek other employment or to reduce any amounts or benefits payable to him under Section 1.1 or Article 6, and no such amounts or benefits shall be reduced or withheld, on account of any compensation received by the Executive from any other employment or other source except as specifically provided in Section 1.1 and Section 6.2 with respect to Annual Salary, Operating Stipend, or other compensations or benefits. The Company shall not have the right to offset any amount owed to it against payments due to the Executive under Section 1.1, Section 3.5 or Article 6 (other than as expressly provided therein) except that all such payments shall be subject to Section 3.3.

 

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

 

For ACACIA DIVERSIFIED HOLDINGS, INC.

   A Texas corporation

 

 

By: /s/: Gary Roberts                                             

Name; Gary Roberts Director / Employee Committee

Title:  Executive

 

 

By:/s/: Neil Gholson                                    

Name; Neil Gholson Director / Employee Committee

Title:  Executive

 

 

By: /s/: Kim Edwards                                             

Name: Kim Edwards

Title:  Vice President / COO

 

 

By: /s/: Richard K. Pertile                                    

Name:  Richard K. Pertile / Employee

Title: President / CEO

 

 

 

11ex_134862.htm

 

Exhibit 10.8

 

COMMON STOCK PURCHASE AGREEMENT

 

This common stock purchase agreement is entered into as of February 1, 2019 (this “Agreement”), by and between ACACIA DIVERSIFIED HOLDINGS, INC., a Texas corporation (the “Company”), and TRITON FUNDS LP, a Delaware limited partnership (the “Investor”).

 

WHEREAS, the parties desire that, upon the terms and subject to the conditions contained herein, the Investor shall purchase, from time to time, as provided herein, and the Company shall issue and sell One Million Dollars ($1,000,000) of the Company’s Common Stock (as defined below);

 

NOW, THEREFORE, the parties hereto agree as follows:

 

ARTICLE I     

CERTAIN DEFINITIONS

 

Section 1.1     DEFINED TERMS. As used in this Agreement, the following terms shall have the following meanings specified or indicated (such meanings to be equally applicable to both the singular and plural forms of the terms defined):

 

“Agreement” shall have the meaning specified in the preamble hereof.

 

“Bankruptcy Law” means Title 11, U.S. Code, or any similar federal or state law for the relief of debtors.

 

“Business Day” shall mean a day on which the Principal Market shall be open for business.

 

“Claim Notice” shall have the meaning specified in Section 9.3(a).

 

“Clearing Costs” shall mean all of the Investor’s broker and Transfer Agent fees, excluding commissions.

 

“Clearing Date” shall be the date on which the Investor receives the Purchase Notice Shares as DWAC Shares in its brokerage account.

 

“Closing” shall mean one of the closings of a purchase and sale of shares of Common Stock pursuant to Section 2.3.

 

“Closing Date” shall mean the date that is no later than one (1) Business Day after the Clearing Date.

 

“Commitment Amount” shall mean One Million Dollars ($1,000,000).

 

“Commitment Period” shall mean the period commencing on the Execution Date and ending on the earlier of (i) the date on which the Investor shall have purchased Purchase Notice Shares pursuant to this Agreement equal to the Commitment Amount, (ii) the Expiration Date, (iii) September 30, 2019, or (iv) written notice of termination by the Company to the Investor upon a material breach of this Agreement by Investor.

 

 

 

 

 

“Common Stock” shall mean the Company’s common stock, $0.001 value per share, and any shares of any other class of common stock whether now or hereafter authorized, having the right to participate in the distribution of dividends (as and when declared) and assets (upon liquidation of the Company).

 

“Common Stock Equivalents” means any securities of the Company or the Subsidiaries which would entitle the holder thereof to acquire at any time Common Stock, including, without limitation, any debt, preferred stock, right, option, warrant or other instrument that is at any time convertible into or exercisable or exchangeable for, or otherwise entitles the holder thereof to receive, Common Stock.

 

“Company” shall have the meaning specified in the preamble to this Agreement.

 

“Custodian” means any receiver, trustee, assignee, liquidator or similar official under any Bankruptcy Law.

 

“Damages” shall mean any loss, claim, damage, liability, cost and expense (including, without limitation, reasonable attorneys’ fees and disbursements and costs and expenses of expert witnesses and investigation).

 

“Delay Fee” shall mean 75,000 shares of Common Stock, issued by the Company to TRITON FUNDS LLC.

 

“Dispute Period” shall have the meaning specified in Section 9.3(a).

 

“DTC” shall mean The Depository Trust Company, or any successor performing substantially the same function for the Company.

 

“DTC/FAST Program” shall mean the DTC’s Fast Automated Securities Transfer Program.

 

“DWAC” shall mean Deposit Withdrawal at Custodian as defined by the DTC.

 

“DWAC Eligible” shall mean that (a) the Common Stock is eligible at DTC for full services pursuant to DTC’s Operational Arrangements, including, without limitation, transfer through DTC’s DWAC system, (b) the Company has been approved (without revocation) by the DTC’s underwriting department, (c) the Transfer Agent is approved as an agent in the DTC/FAST Program, (d) the Purchase Notice Shares are otherwise eligible for delivery via DWAC, and (e) the Transfer Agent does not have a policy prohibiting or limiting delivery of the Purchase Notice Shares, as applicable, via DWAC.

 

“DWAC Shares” means shares of Common Stock that are (i) issued in electronic form, (ii) freely tradable and transferable and without restriction on resale and (iii) timely credited by the Company to the Investor’s or its designee’s specified DWAC account with DTC under the DTC/FAST Program, or any similar program hereafter adopted by DTC performing substantially the same function.

 

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“Exchange Act” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder.

 

“Exchange Cap” shall have the meaning set forth in Section 7.1(c).

 

“Execution Date” shall mean the date of this Agreement.

 

“Expiration Date” shall mean one hundred eighty (180) Business Days after the Registration Statement has been declared effective.

 

“FINRA” shall mean the Financial Industry Regulatory Authority, Inc.

 

“Indemnified Party” shall have the meaning specified in Section 9.2.

 

“Indemnifying Party” shall have the meaning specified in Section 9.2.

 

“Indemnity Notice” shall have the meaning specified in Section 9.3(e).

 

“Investment Amount” shall mean the Purchase Notice Shares referenced in the Purchase Notice multiplied by the Purchase Price.

 

“Investor” shall have the meaning specified in the preamble to this Agreement.

 

“Lien” means a lien, charge, pledge, security interest, encumbrance, right of first refusal, preemptive right or other restriction.

 

“Material Adverse Effect” shall mean any effect on the business, operations, properties, or financial condition of the Company and the Subsidiaries that is material and adverse to the Company and the Subsidiaries and/or any condition, circumstance, or situation that would prohibit or otherwise materially interfere with the ability of the Company to enter into and perform its obligations under any Transaction Document.

 

“Person” shall mean an individual, a corporation, a partnership, an association, a trust or other entity or organization, including a government or political subdivision or an agency or instrumentality thereof.

 

“Principal Market” shall mean any of the national exchanges (i.e. NYSE, NYSE AMEX, Nasdaq), or principal quotation systems (i.e. OTCQX, OTCQB, OTC Pink, the OTC Bulletin Board), or other principal exchange or recognized quotation system which is at the time the principal trading platform or market for the Common Stock.

 

“Purchase Notice” shall mean a written notice from Investor, substantially in the form of Exhibit A hereto, to Company setting forth the Purchase Notice Shares which the Investor intends to require Company to sell pursuant to the terms of this Agreement.

 

“Purchase Notice Shares” shall mean all shares of Common Stock issued, or that the Company shall be entitled to issue, per applicable Purchase Notice in accordance with the terms and conditions of this Agreement.

 

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“Purchase Price” shall mean 85% of the average of the Two lowest closing prices of the Common Stock the five Business Days prior to a Purchase Notice.

 

“Registration Statement” shall have the meaning specified in Section 6.3.

 

“Regulation D” shall mean Regulation D promulgated under the Securities Act.

 

“Rule 144” shall mean Rule 144 under the Securities Act or any similar provision then in force under the Securities Act.

 

“SEC” shall mean the United States Securities and Exchange Commission.

 

“SEC Documents” shall have the meaning specified in Section 4.5.

 

“Securities” mean the Purchase Notice Shares.

 

“Securities Act” shall mean the Securities Act of 1933, as amended.

 

“Subsidiary” means any Person the Company wholly-owns or controls, or in which the Company, directly or indirectly, owns a majority of the voting stock or similar voting interest, in each case that would be disclosable pursuant to Item 601(b)(21) of Regulation S-K promulgated under the Securities Act.

 

“Third Party Claim” shall have the meaning specified in Section 9.3(a).

 

“Transaction Documents” shall mean this Agreement and all schedules and exhibits hereto and thereto.

 

“Transfer Agent” shall mean the current transfer agent of the Company, and any successor transfer agent of the Company.

 

ARTICLE II     

PURCHASE AND SALE OF COMMON STOCK

 

Section 2.1     PURCHASE NOTICES. Upon the terms and conditions set forth herein (including, without limitation, the provisions of Article VII), the Investor shall have the right, but not the obligation, to direct the Company, by its delivery to the Company of a Purchase Notice from time to time, to purchase Purchase Notice Shares provided that the amount of Purchase Notice Shares shall not exceed the Beneficial Ownership Limitation set forth in Section 7.1(g).

 

Section 2.2     MECHANICS.

 

(a)     PURCHASE NOTICE. At any time and from time to time during the Commitment Period, except as provided in this Agreement, the Investor may deliver a Purchase Notice to Company, subject to satisfaction of the conditions set forth in Section 7.2 and otherwise provided herein. The Company shall deliver the Purchase Notice Shares as DWAC Shares to the Investor immediately upon receipt of the Purchase Notice.

 

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(b)     DATE OF DELIVERY OF PURCHASE NOTICE. A Purchase Notice shall be deemed delivered on (i) the Business Day it is received by email by the Investor if such notice is received on or prior to 8:00 p.m. New York time or (ii) the immediately succeeding Business Day if it is received by email after 8:00 p.m. New York time on a Business Day or at any time on a day which is not a Business Day.

 

Section 2.3     CLOSINGS.

 

(a)     CLOSING. The Closing of a Purchase Notice shall occur no later than one (1) Business Day following the Clearing Date, whereby the Investor, shall deliver the Investment Amount (minus the Clearing Costs), by wire transfer of immediately available funds to an account designated by the Company.

 

(b)     EXPIRATION DATE. If, by the day after the Expiration Date, the Investor has invested less than the Commitment Amount, pursuant to this Agreement, Investor shall within one (1) Business Day transfer to the Company the amount representing the difference between the Commitment Amount and the amount the Investor has already paid to the Company. The Purchase Price for this amount shall be 85% of the average of the Two lowest closing prices of the Common Stock for the previous five Business Days, (ii) the Company shall immediately deliver the Purchase Notice Shares as DWAC Shares to the Investor, and (iii) the Investor shall immediately wire to the Company the Purchase Price multiplied by the lessor of the Beneficial Ownership Limitation or the remaining Commitment Amount.

 

ARTICLE III     

REPRESENTATIONS AND WARRANTIES OF INVESTOR

 

The Investor represents and warrants to the Company that:

 

Section 3.1     INTENT. The Investor is entering into this Agreement for its own account and the Investor has no present arrangement (whether or not legally binding) at any time to sell the Securities to or through any Person in violation of the Securities Act or any applicable state securities laws; provided, however, that the Investor reserves the right to dispose of the Securities at any time in accordance with federal and state securities laws applicable to such disposition.

 

Section 3.2     NO LEGAL ADVICE FROM THE COMPANY. The Investor acknowledges that it has had the opportunity to review this Agreement and the transactions contemplated by this Agreement with its own legal counsel and investment and tax advisors. The Investor is relying solely on such counsel and advisors and not on any statements or representations of the Company or any of its representatives or agents for legal, tax or investment advice with respect to this investment, the transactions contemplated by this Agreement or the securities laws of any jurisdiction.

 

Section 3.3     ACCREDITED INVESTOR. The Investor is an accredited investor as defined in Rule 501(a)(3) of Regulation D, and the Investor has such experience in business and financial matters that it is capable of evaluating the merits and risks of an investment in the Securities. The Investor acknowledges that an investment in the Securities is speculative and involves a high degree of risk.

 

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Section 3.4     AUTHORITY. The Investor has the requisite power and authority to enter into and perform its obligations under the Transaction Documents and to consummate the transactions contemplated hereby and thereby. The execution and delivery of the Transaction Documents and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary action and no further consent or authorization of the Investor is required. The Transaction Documents to which it is a party has been duly executed by the Investor, and when delivered by the Investor in accordance with the terms hereof, will constitute the valid and binding obligation of the Investor enforceable against it in accordance with its terms, subject to applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

 

Section 3.5     NOT AN AFFILIATE. The Investor is not an officer, director or “affiliate” (as that term is defined in Rule 405 of the Securities Act) of the Company.

 

Section 3.6     ORGANIZATION AND STANDING. The Investor is an entity duly incorporated or formed, validly existing and in good standing under the laws of the jurisdiction of its incorporation or formation with full right, corporate, partnership, limited liability company or similar power and authority to enter into and to consummate the transactions contemplated by the Transaction Documents.

 

Section 3.7     ABSENCE OF CONFLICTS. The execution and delivery of the Transaction Documents, and the consummation of the transactions contemplated hereby and thereby and compliance with the requirements hereof and thereof, will not (a) violate any law, rule, regulation, order, writ, judgment, injunction, decree or award binding on the Investor, (b) violate any provision of any indenture, instrument or agreement to which the Investor is a party or is subject, or by which the Investor or any of its assets is bound, or conflict with or constitute a material default thereunder, (c) result in the creation or imposition of any lien pursuant to the terms of any such indenture, instrument or agreement, or constitute a breach of any fiduciary duty owed by the Investor to any third party, or (d) require the approval of any third-party (that has not been obtained) pursuant to any material contract, instrument, agreement, relationship or legal obligation to which the Investor is subject or to which any of its assets, operations or management may be subject.

 

Section 3.8     DISCLOSURE; ACCESS TO INFORMATION. The Investor had an opportunity to review copies of the SEC Documents filed on behalf of the Company and has had access to all publicly available information with respect to the Company.

 

Section 3.9     MANNER OF SALE. At no time was the Investor presented with or solicited by or through any leaflet, public promotional meeting, television advertisement or any other form of general solicitation or advertising.

 

ARTICLE IV     

REPRESENTATIONS AND WARRANTIES OF THE COMPANY

 

The Company represents and warrants to the Investor that, except as disclosed in the SEC Documents or except as set forth in the disclosure schedules hereto:

 

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Section 4.1     ORGANIZATION OF THE COMPANY. The Company and each of the Subsidiaries is an entity duly incorporated or otherwise organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, with the requisite power and authority to own and use its properties and assets and to carry on its business as currently conducted. Neither the Company nor any Subsidiary is in violation nor default of any of the provisions of its respective certificate or articles of incorporation, bylaws or other organizational or charter documents. Each of the Company and the Subsidiaries is duly qualified to conduct business and is in good standing as a foreign corporation or other entity in each jurisdiction in which the nature of the business conducted or property owned by it makes such qualification necessary, except where the failure to be so qualified or in good standing, as the case may be, could not have or reasonably be expected to result in a Material Adverse Effect and no proceeding has been instituted in any such jurisdiction revoking, limiting or curtailing or seeking to revoke, limit or curtail such power and authority or qualification.

 

Section 4.2     AUTHORITY. The Company has the requisite corporate power and authority to enter into and perform its obligations under the Transaction Documents. The execution and delivery of the Transaction Documents by the Company and the consummation by it of the transactions contemplated hereby and thereby have been duly authorized by all necessary corporate action and no further consent or authorization of the Company or its Board of Directors or stockholders is required. The Transaction Documents have been duly executed and delivered by the Company and constitutes a valid and binding obligation of the Company enforceable against the Company in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, or similar laws relating to, or affecting generally the enforcement of, creditors’ rights and remedies or by other equitable principles of general application.

 

Section 4.3     CAPITALIZATION. As of the date hereof, the authorized capital stock of the Company consists of 150,000,000 shares of Common Stock, par value of $0.001 per share, of which approximately 21,663,625 shares of Common Stock are issued and outstanding. Except as set forth on Schedule 4.3, the Company has not issued any capital stock since its most recently filed periodic report under the Exchange Act, other than pursuant to the exercise of employee stock options under the Company’s stock option plans, the issuance of shares of Common Stock to employees pursuant to the Company’s employee stock purchase plans and pursuant to the conversion and/or exercise of Common Stock Equivalents outstanding as of the date of the most recently filed periodic report under the Exchange Act. No Person has any right of first refusal, preemptive right, right of participation, or any similar right to participate in the transactions contemplated by the Transaction Documents. Except as set forth on Schedule 4.3 and except as a result of the purchase and sale of the Securities, there are no outstanding options, warrants, scrip rights to subscribe to, calls or commitments of any character whatsoever relating to, or securities, rights or obligations convertible into or exercisable or exchangeable for, or giving any Person any right to subscribe for or acquire any shares of Common Stock, or contracts, commitments, understandings or arrangements by which the Company or any Subsidiary is or may become bound to issue additional shares of Common Stock or Common Stock Equivalents. The issuance and sale of the Securities will not obligate the Company to issue shares of Common Stock or other securities to any Person (other than the Investor) and will not result in a right of any holder of Company securities to adjust the exercise, conversion, exchange or reset price under any of such securities. There are no stockholders agreements, voting agreements or other similar agreements

 

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with respect to the Company’s capital stock to which the Company is a party or, to the knowledge of the Company, between or among any of the Company’s stockholders.

 

Section 4.4     LISTING AND MAINTENANCE REQUIREMENTS. The Common Stock is registered pursuant to Section 12(b) or 12(g) of the Exchange Act, and the Company has taken no action designed to, or which to its knowledge is likely to have the effect of, terminating the registration of the Common Stock under the Exchange Act nor has the Company received any notification that the SEC is contemplating terminating such registration. The Company has not, in the twelve (12) months preceding the date hereof, received notice from the Principal Market on which the Common Stock is or has been listed or quoted to the effect that the Company is not in compliance with the listing or maintenance requirements of such Principal Market. The Company is and has no reason to believe that it will not in the foreseeable future continue to be, in compliance with all such listing and maintenance requirements.

 

Section 4.5     SEC DOCUMENTS; DISCLOSURE. Except as set forth on Schedule 4.5, the Company has filed all reports, schedules, forms, statements and other documents required to be filed by the Company under the Securities Act and the Exchange Act, including pursuant to Section 13(a) or 15(d) thereof, for the one (1) year preceding the date hereof (or such shorter period as the Company was required by law or regulation to file such material) (the foregoing materials, including the exhibits thereto and documents incorporated by reference therein, being collectively referred to herein as the “SEC Documents”) on a timely basis or has received a valid extension of such time of filing and has filed any such SEC Documents prior to the expiration of any such extension. As of their respective dates, the SEC Documents complied in all material respects with the requirements of the Securities Act and the Exchange Act, as applicable, and other federal laws, rules and regulations applicable to such SEC Documents, and none of the SEC Documents when filed contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading. The financial statements of the Company included in the SEC Documents comply as to form and substance in all material respects with applicable accounting requirements and the published rules and regulations of the SEC or other applicable rules and regulations with respect thereto. Such financial statements have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the periods involved (except (a) as may be otherwise indicated in such financial statements or the notes thereto or (b) in the case of unaudited interim statements, to the extent they may not include footnotes or may be condensed or summary statements) and fairly present in all material respects the financial position of the Company as of the dates thereof and the results of operations and cash flows for the periods then ended (subject, in the case of unaudited statements, to normal, immaterial, year-end audit adjustments). Except with respect to the material terms and conditions of the transactions contemplated by the Transaction Documents, the Company confirms that neither it nor any other Person acting on its behalf has provided the Investor or its agents or counsel with any information that it believes constitutes or might constitute material, non-public information. The Company understands and confirms that the Investor will rely on the foregoing representation in effecting transactions in securities of the Company.

 

Section 4.6     VALID ISSUANCES. The Securities are duly authorized and, when issued and paid for in accordance with the applicable Transaction Documents, will be duly

 

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and validly issued, fully paid, and non-assessable, free and clear of all Liens imposed by the Company other than restrictions on transfer provided for in the Transaction Documents.

 

Section 4.7     NO CONFLICTS. The execution, delivery and performance of the Transaction Documents by the Company and the consummation by the Company of the transactions contemplated hereby and thereby, including, without limitation, the issuance of the Purchase Notice Shares, do not and will not: (a) result in a violation of the Company’s or any Subsidiary’s certificate or articles of incorporation, by-laws or other organizational or charter documents, (b) conflict with, or constitute a material default (or an event that with notice or lapse of time or both would become a material default) under, result in the creation of any Lien upon any of the properties or assets of the Company or any Subsidiary, or give to others any rights of termination, amendment, acceleration or cancellation of, any agreement, indenture, instrument or any “lock-up” or similar provision of any underwriting or similar agreement to which the Company or any Subsidiary is a party, or (c) result in a violation of any federal, state or local law, rule, regulation, order, judgment or decree (including federal and state securities laws and regulations) applicable to the Company or any Subsidiary or by which any property or asset of the Company or any Subsidiary is bound or affected (except for such conflicts, defaults, terminations, amendments, accelerations, cancellations and violations as would not, individually or in the aggregate, have a Material Adverse Effect) nor is the Company otherwise in violation of, conflict with or in default under any of the foregoing. The business of the Company is not being conducted in violation of any law, ordinance or regulation of any governmental entity, except for possible violations that either singly or in the aggregate do not and will not have a Material Adverse Effect. The Company is not required under federal, state or local law, rule or regulation to obtain any consent, authorization or order of, or make any filing or registration with, any court or governmental agency in order for it to execute, deliver or perform any of its obligations under the Transaction Documents (other than any SEC, FINRA or state securities filings that may be required to be made by the Company subsequent to any Closing or any registration statement that may be filed pursuant hereto); provided that, for purposes of the representation made in this sentence, the Company is assuming and relying upon the accuracy of the relevant representations and agreements of Investor herein.

 

Section 4.8     NO MATERIAL ADVERSE CHANGE. No event has occurred that would have a Material Adverse Effect on the Company that has not been disclosed in subsequent SEC filings.

 

Section 4.9     LITIGATION AND OTHER PROCEEDINGS. Except as disclosed in the SEC Documents or as set forth on Schedule 4.9, there are no actions, suits, investigations, inquiries or proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company, any Subsidiary or any of their respective properties, nor has the Company received any written or oral notice of any such action, suit, proceeding, inquiry or investigation, which would have a Material Adverse Effect. No judgment, order, writ, injunction or decree or award has been issued by or, to the knowledge of the Company, requested of any court, arbitrator or governmental agency which would have a Material Adverse Effect. There has not been, and to the knowledge of the Company, there is not pending or contemplated, any investigation by the SEC involving the Company, any Subsidiary or any current or former director or officer of the Company or any Subsidiary.

 

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Section 4.10     REGISTRATION RIGHTS. Except as set forth on Schedule 4.10, no Person (other than the Investor) has any right to cause the Company to effect the registration under the Securities Act of any securities of the Company or any Subsidiary.

 

ARTICLE V     

COVENANTS OF INVESTOR

 

Section 5.1     COMPLIANCE WITH LAW; TRADING IN SECURITIES. The Investor’s trading activities with respect to shares of Common Stock will be in compliance with all applicable state and federal securities laws and regulations and the rules and regulations of FINRA and the Principal Market.

 

ARTICLE VI     

COVENANTS OF THE COMPANY

 

Section 6.1     LISTING OF COMMON STOCK. The Company shall promptly secure the listing of all of the Purchase Notice Shares to be issued to the Investor hereunder on the Principal Market (subject to official notice of issuance) and shall use commercially reasonable best efforts to maintain, so long as any shares of Common Stock shall be so listed, the listing of all such Purchase Notice Shares from time to time issuable hereunder. The Company shall use its commercially reasonable efforts to continue the listing and trading of the Common Stock on the Principal Market (including, without limitation, maintaining sufficient net tangible assets) and will comply in all respects with the Company’s reporting, filing and other obligations under the bylaws or rules of FINRA and the Principal Market.

 

Section 6.2     FILING OF CURRENT REPORT AND REGISTRATION STATEMENT. The Company agrees that it shall file a Current Report on Form 8-K, including the Transaction Documents as exhibits thereto, with the SEC within the time required by the Exchange Act, relating to the transactions contemplated by, and describing the material terms and conditions of, the Transaction Documents (the “Current Report”). The Company shall permit the Investor to review and comment upon the final pre-filing draft version of the Current Report at least two (2) Business Days prior to its filing with the SEC, and the Company shall give reasonable consideration to all such comments. The Investor shall use its reasonable best efforts to comment upon the final pre-filing draft version of the Current Report within one (1) Business Day from the date the Investor receives it from the Company. The Company shall also file with the SEC, within thirty (30) calendar days from the date hereof, a new registration statement (the “Registration Statement”) covering only the resale of the Purchase Notice Shares and any other shares as directed by the Investor. The Company will immediately issue the Investor the Delay Fee if the Registration Statement is not filed within sixty (60) calendar days from the date hereof.

 

ARTICLE VII     

CONDITIONS TO DELIVERY OF

PURCHASE NOTICE AND CONDITIONS TO CLOSING

 

Section 7.1     CONDITIONS PRECEDENT TO THE RIGHT OF THE COMPANY TO ISSUE AND SELL PURCHASE NOTICE SHARES. The right of the Company

 

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to issue and sell the Purchase Notice Shares to the Investor is subject to the satisfaction of each of the conditions set forth below:

 

(a)     ACCURACY OF INVESTOR’S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Investor shall be true and correct in all material respects as of the date of this Agreement and as of the date of each Closing as though made at each such time.

 

(b)     PERFORMANCE BY INVESTOR. Investor shall have performed, satisfied and complied in all respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Investor at or prior to such Closing.

 

(c)     PRINCIPAL MARKET REGULATION. The Company shall not issue any Purchase Notice Shares, and the Investor shall not have the right to receive any Purchase Notice Shares, if the issuance of such Purchase Notice Shares would exceed the aggregate number of shares of Common Stock which the Company may issue without breaching the Company’s obligations under the rules or regulations of the Principal Market (the “Exchange Cap”).

 

Section 7.2     CONDITIONS PRECEDENT TO THE OBLIGATION OF INVESTOR TO PURCHASE PURCHASE NOTICE SHARES. The obligation of the Investor hereunder to purchase Purchase Notice Shares is subject to the satisfaction of each of the following conditions:

 

(a)     EFFECTIVE REGISTRATION STATEMENT. The Registration Statement, and any amendment or supplement thereto, shall remain effective for the resale by the Investor of the Purchase Notice Shares and (i) neither the Company nor the Investor shall have received notice that the SEC has issued or intends to issue a stop order with respect to such Registration Statement or that the SEC otherwise has suspended or withdrawn the effectiveness of such Registration Statement, either temporarily or permanently, or intends or has threatened to do so and (ii) no other suspension of the use of, or withdrawal of the effectiveness of, such Registration Statement or related prospectus shall exist.

 

(b)     ACCURACY OF THE COMPANY’S REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company shall be true and correct in all material respects as of the date of this Agreement and as of the date of each Closing (except for representations and warranties specifically made as of a particular date).

 

(c)     PERFORMANCE BY THE COMPANY. The Company shall have performed, satisfied and complied in all material respects with all covenants, agreements and conditions required by this Agreement to be performed, satisfied or complied with by the Company.

 

(d)     NO INJUNCTION. No statute, rule, regulation, executive order, decree, ruling or injunction shall have been enacted, entered, promulgated or adopted by any court or governmental authority of competent jurisdiction that prohibits or directly and materially adversely affects any of the transactions contemplated by the Transaction Documents, and no

 

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proceeding shall have been commenced that may have the effect of prohibiting or materially adversely affecting any of the transactions contemplated by the Transaction Documents.

 

(e)     ADVERSE CHANGES. Since the date of filing of the Company’s most recent SEC Document, no event that had or is reasonably likely to have a Material Adverse Effect has occurred.

 

(f)     NO SUSPENSION OF TRADING IN OR DELISTING OF COMMON STOCK. The trading of the Common Stock shall not have been suspended by the SEC, the Principal Market or FINRA, or otherwise halted for any reason, and the Common Stock shall have been approved for listing or quotation on and shall not have been delisted from the Principal Market. In the event of a suspension, delisting, or halting for any reason, of the trading of the Common Stock, as contemplated by this Section 7.2(f), the Investor shall have the right to return to the Company any amount of Purchase Notice Shares associated with such Purchase Notice, and the Investment Amount with respect to such Purchase Notice shall be reduced accordingly.

 

(g)     BENEFICIAL OWNERSHIP LIMITATION. The number of Purchase Notice Shares then to be purchased by the Investor shall not exceed the number of such shares that, when aggregated with all other shares of Common Stock then owned by the Investor beneficially or deemed beneficially owned by the Investor, would result in the Investor owning more than the Beneficial Ownership Limitation (as defined below), as determined in accordance with Section 16 of the Exchange Act and the regulations promulgated thereunder. For purposes of this Section 7.2(g), in the event that the amount of Common Stock outstanding is greater on a Closing Date than on the date upon which the Purchase Notice associated with such Closing Date is given, the amount of Common Stock outstanding on such issuance of a Purchase Notice shall govern for purposes of determining whether the Investor, when aggregating all purchases of Common Stock made pursuant to this Agreement, would own more than the Beneficial Ownership Limitation following such Closing Date. The “Beneficial Ownership Limitation” shall be 9.99% of the number of shares of the Common Stock outstanding immediately prior to the issuance of shares of Common Stock issuable pursuant to a Purchase Notice.

 

(h)     PRINCIPAL MARKET REGULATION. The issuance of the Purchase Notice Shares shall not exceed the Exchange Cap.

 

(i)     NO KNOWLEDGE. The Company shall have no knowledge of any event more likely than not to have the effect of causing the Registration Statement to be suspended or otherwise ineffective (which event is more likely than not to occur within the fifteen (15) Business Days following the Business Day on which such Purchase Notice is deemed delivered).

 

(j)     NO VIOLATION OF SHAREHOLDER APPROVAL REQUIREMENT. The issuance of the Purchase Notice Shares shall not violate the shareholder approval requirements of the Principal Market.

 

(k)     DWAC ELIGIBLE. The Common Stock must be DWAC Eligible and not subject to a “DTC chill”.

 

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(l)     SEC DOCUMENTS. All reports, schedules, registrations, forms, statements, information and other documents required to have been filed by the Company with the SEC pursuant to the reporting requirements of the Exchange Act shall have been filed with the SEC within the applicable time periods prescribed for such filings under the Exchange Act.

 

ARTICLE VIII     

LEGENDS

 

Section 8.1     NO RESTRICTIVE STOCK LEGEND. No restrictive stock legend shall be placed on the share certificates representing the Purchase Notice Shares.

 

Section 8.2     INVESTOR’S COMPLIANCE. Nothing in this Article VIII shall affect in any way the Investor’s obligations hereunder to comply with all applicable securities laws upon the sale of the Common Stock.

 

ARTICLE IX     

NOTICES; INDEMNIFICATION

 

Section 9.1     NOTICES. All notices, demands, requests, consents, approvals, and other communications required or permitted hereunder shall be in writing and, unless otherwise specified herein, shall be (a) personally served, (b) deposited in the mail, registered or certified, return receipt requested, postage prepaid, (c) delivered by reputable air courier service with charges prepaid, or (d) transmitted by hand delivery, telegram, or email as a PDF, addressed as set forth below or to such other address as such party shall have specified most recently by written notice given in accordance herewith. Any notice or other communication required or permitted to be given hereunder shall be deemed effective (i) upon hand delivery or delivery by email at the address designated below (if delivered on a business day during normal business hours where such notice is to be received), or the first business day following such delivery (if delivered other than on a business day during normal business hours where such notice is to be received) or (ii) on the second business day following the date of mailing by express courier service or on the fifth business day after deposited in the mail, in each case, fully prepaid, addressed to such address, or upon actual receipt of such mailing, whichever shall first occur.

 

The addresses for such communications shall be:

 

If to the Company: 

 

If to the Investor:

 

TRITON FUNDS LLC

1262 Prospect Street

La Jolla, CA 92037

Email: tritonfunds@tritonfunds.com

 

Either party hereto may from time to time change its address or email for notices under this Section 9.1 by giving at least ten (10) days’ prior written notice of such changed address to the other party hereto.

 

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Section 9.2     INDEMNIFICATION. Each party (an “Indemnifying Party”) agrees to indemnify and hold harmless the other party along with its officers, directors, employees, and authorized agents, and each Person or entity, if any, who controls such party within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act (an “Indemnified Party”) from and against any Damages, joint or several, and any action in respect thereof to which the Indemnified Party becomes subject to, resulting from, arising out of or relating to (i) any misrepresentation, breach of warranty or nonfulfillment of or failure to perform any covenant or agreement on the part of the Indemnifying Party contained in this Agreement, (ii) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or any post-effective amendment thereof or supplement thereto, or the omission or alleged omission therefrom of a material fact required to be stated therein or necessary to make the statements therein not misleading, (iii) any untrue statement or alleged untrue statement of a material fact contained in any preliminary prospectus or contained in the final prospectus (as amended or supplemented, if the Company files any amendment thereof or supplement thereto with the SEC) or the omission or alleged omission to state therein any material fact necessary to make the statements made therein, in the light of the circumstances under which the statements therein were made, not misleading, or (iv) any violation or alleged violation by the Company of the Securities Act, the Exchange Act, any state securities law or any rule or regulation under the Securities Act, the Exchange Act or any state securities law, as such Damages are incurred, except to the extent such Damages result primarily from the Indemnified Party’s failure to perform any covenant or agreement contained in this Agreement or the Indemnified Party’s negligence, recklessness or bad faith in performing its obligations under this Agreement; provided, however, that the foregoing indemnity agreement shall not apply to any Damages of an Indemnified Party to the extent, but only to the extent, arising out of or based upon any untrue statement or alleged untrue statement or omission or alleged omission made by an Indemnifying Party in reliance upon and in conformity with written information furnished to the Indemnifying Party by the Indemnified Party expressly for use in the Registration Statement, any post-effective amendment thereof or supplement thereto, or any preliminary prospectus or final prospectus (as amended or supplemented).

 

Section 9.3     METHOD OF ASSERTING INDEMNIFICATION CLAIMS. All claims for indemnification by any Indemnified Party under Section 9.2 shall be asserted and resolved as follows:

 

(a)     In the event any claim or demand in respect of which an Indemnified Party might seek indemnity under Section 9.2 is asserted against or sought to be collected from such Indemnified Party by a Person other than a party hereto or an affiliate thereof (a “Third Party Claim”), the Indemnified Party shall deliver a written notification, enclosing a copy of all papers served, if any, and specifying the nature of and basis for such Third Party Claim and for the Indemnified Party’s claim for indemnification that is being asserted under any provision of Section 9.2 against an Indemnifying Party, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such Third Party Claim (a “Claim Notice”) with reasonable promptness to the Indemnifying Party. If the Indemnified Party fails to provide the Claim Notice with reasonable promptness after the Indemnified Party receives notice of such Third Party Claim, the Indemnifying Party shall not be obligated to indemnify the Indemnified Party with respect to such Third Party Claim to the extent that the Indemnifying Party’s ability to defend has been prejudiced by such failure of the Indemnified Party. The Indemnifying Party shall notify the Indemnified Party as soon as practicable within the period

 

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ending thirty (30) calendar days following receipt by the Indemnifying Party of either a Claim Notice or an Indemnity Notice (as defined below) (the “Dispute Period”) whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party under Section 9.2 and whether the Indemnifying Party desires, at its sole cost and expense, to defend the Indemnified Party against such Third Party Claim.

 

(i)     If the Indemnifying Party notifies the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Indemnified Party with respect to the Third Party Claim pursuant to this Section 9.3(a), then the Indemnifying Party shall have the right to defend, with counsel reasonably satisfactory to the Indemnified Party, at the sole cost and expense of the Indemnifying Party, such Third Party Claim by all appropriate proceedings, which proceedings shall be vigorously and diligently prosecuted by the Indemnifying Party to a final conclusion or will be settled at the discretion of the Indemnifying Party (but only with the consent of the Indemnified Party in the case of any settlement that provides for any relief other than the payment of monetary damages or that provides for the payment of monetary damages as to which the Indemnified Party shall not be indemnified in full pursuant to Section 9.2). The Indemnifying Party shall have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that the Indemnified Party may, at the sole cost and expense of the Indemnified Party, at any time prior to the Indemnifying Party’s delivery of the notice referred to in the first sentence of this clause (i), file any motion, answer or other pleadings or take any other action that the Indemnified Party reasonably believes to be necessary or appropriate to protect its interests; and provided, further, that if requested by the Indemnifying Party, the Indemnified Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnifying Party in contesting any Third Party Claim that the Indemnifying Party elects to contest. The Indemnified Party may participate in, but not control, any defense or settlement of any Third Party Claim controlled by the Indemnifying Party pursuant to this clause (i), and except as provided in the preceding sentence, the Indemnified Party shall bear its own costs and expenses with respect to such participation. Notwithstanding the foregoing, the Indemnified Party may take over the control of the defense or settlement of a Third Party Claim at any time if it irrevocably waives its right to indemnity under Section 9.2 with respect to such Third Party Claim.

 

(ii)     If the Indemnifying Party fails to notify the Indemnified Party within the Dispute Period that the Indemnifying Party desires to defend the Third Party Claim pursuant to Section 9.3(a), or if the Indemnifying Party gives such notice but fails to prosecute vigorously and diligently or settle the Third Party Claim, or if the Indemnifying Party fails to give any notice whatsoever within the Dispute Period, then the Indemnified Party shall have the right to defend, at the sole cost and expense of the Indemnifying Party, the Third Party Claim by all appropriate proceedings, which proceedings shall be prosecuted by the Indemnified Party in a reasonable manner and in good faith or will be settled at the discretion of the Indemnified Party(with the consent of the Indemnifying Party, which consent will not be unreasonably withheld). The Indemnified Party will have full control of such defense and proceedings, including any compromise or settlement thereof; provided, however, that if requested by the Indemnified Party, the Indemnifying Party will, at the sole cost and expense of the Indemnifying Party, provide reasonable cooperation to the Indemnified Party and its counsel in contesting any Third Party Claim which the Indemnified Party is contesting. Notwithstanding the foregoing provisions of this clause (ii), if the Indemnifying Party has notified the Indemnified Party within the Dispute Period

 

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that the Indemnifying Party disputes its liability or the amount of its liability hereunder to the Indemnified Party with respect to such Third Party Claim and if such dispute is resolved in favor of the Indemnifying Party in the manner provided in clause (iii) below, the Indemnifying Party will not be required to bear the costs and expenses of the Indemnified Party’s defense pursuant to this clause (ii) or of the Indemnifying Party’s participation therein at the Indemnified Party’s request, and the Indemnified Party shall reimburse the Indemnifying Party in full for all reasonable costs and expenses incurred by the Indemnifying Party in connection with such litigation. The Indemnifying Party may participate in, but not control, any defense or settlement controlled by the Indemnified Party pursuant to this clause (ii), and the Indemnifying Party shall bear its own costs and expenses with respect to such participation.

 

(iii)     If the Indemnifying Party notifies the Indemnified Party that it does not dispute its liability or the amount of its liability to the Indemnified Party with respect to the Third Party Claim under Section 9.2 or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes its liability or the amount of its liability to the Indemnified Party with respect to such Third Party Claim, the amount of Damages specified in the Claim Notice shall be conclusively deemed a liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.

 

(b)     In the event any Indemnified Party should have a claim under Section 9.2 against the Indemnifying Party that does not involve a Third Party Claim, the Indemnified Party shall deliver a written notification of a claim for indemnity under Section 9.2 specifying the nature of and basis for such claim, together with the amount or, if not then reasonably ascertainable, the estimated amount, determined in good faith, of such claim (an “Indemnity Notice”) with reasonable promptness to the Indemnifying Party. The failure by any Indemnified Party to give the Indemnity Notice shall not impair such party’s rights hereunder except to the extent that the Indemnifying Party demonstrates that it has been irreparably prejudiced thereby. If the Indemnifying Party notifies the Indemnified Party that it does not dispute the claim or the amount of the claim described in such Indemnity Notice or fails to notify the Indemnified Party within the Dispute Period whether the Indemnifying Party disputes the claim or the amount of the claim described in such Indemnity Notice, the amount of Damages specified in the Indemnity Notice will be conclusively deemed a liability of the Indemnifying Party under Section 9.2 and the Indemnifying Party shall pay the amount of such Damages to the Indemnified Party on demand. If the Indemnifying Party has timely disputed its liability or the amount of its liability with respect to such claim, the Indemnifying Party and the Indemnified Party shall proceed in good faith to negotiate a resolution of such dispute; provided, however, that if the dispute is not resolved within thirty (30) days after the Claim Notice, the Indemnifying Party shall be entitled to institute such legal action as it deems appropriate.

 

(c)     The Indemnifying Party agrees to pay the Indemnified Party, promptly as such expenses are incurred and are due and payable, for any reasonable legal fees or

 

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other reasonable expenses incurred by them in connection with investigating or defending any such Claim.

 

(d)     The indemnity provisions contained herein shall be in addition to (i) any cause of action or similar rights of the Indemnified Party against the Indemnifying Party or others, and (ii) any liabilities the Indemnifying Party may be subject to.

 

ARTICLE X 

MISCELLANEOUS

 

Section 10.1     GOVERNING LAW; JURISDICTION. This Agreement shall be governed by and interpreted in accordance with the laws of the State of California without regard to the principles of conflicts of law. Each of the Company and the Investor hereby submits to the exclusive jurisdiction of the United States federal and state courts located in California, County of Los Angeles, with respect to any dispute arising under the Transaction Documents or the transactions contemplated thereby.

 

Section 10.2     JURY TRIAL WAIVER. The Company and the Investor hereby waive a trial by jury in any action, proceeding or counterclaim brought by either of the parties hereto against the other in respect of any matter arising out of or in connection with the Transaction Documents.

 

Section 10.3     ASSIGNMENT. The Transaction Documents shall be binding upon and inure to the benefit of the Company and the Investor and their respective successors. Neither this Agreement nor any rights of the Investor or the Company hereunder may be assigned by either party to any other Person.

 

Section 10.4     NO THIRD-PARTY BENEFICIARIES. This Agreement is intended for the benefit of the Company and the Investor and their respective successors, and is not for the benefit of, nor may any provision hereof be enforced by, any other Person, except as set forth in Section 9.3.

 

Section 10.5     TERMINATION. The Company may terminate this Agreement at any time by written notice to the Investor in the event of a material breach of this Agreement by the Investor. In addition, this Agreement shall automatically terminate on the earlier of (i) the end of the Commitment Period; (ii) the date that the Company sells and the Investor purchases the Commitment Amount; (iii) the date in which the Registration Statement is no longer effective, or (iv) the date that, pursuant to or within the meaning of any Bankruptcy Law, the Company commences a voluntary case or any Person commences a proceeding against the Company, a Custodian is appointed for the Company or for all or substantially all of its property or the Company makes a general assignment for the benefit of its creditors; provided, however, that the provisions of Articles III, IV, V, VI, IX and the agreements and covenants of the Company and the Investor set forth in Article X shall survive the termination of this Agreement.

 

Section 10.6     ENTIRE AGREEMENT. The Transaction Documents, together with the exhibits and schedules thereto, contain the entire understanding of the Company and the Investor with respect to the matters covered herein and therein and supersede all prior agreements

 

17

 

 

 

and understandings, oral or written, with respect to such matters, which the parties acknowledge have been merged into such documents, exhibits and schedules.

 

Section 10.7     FEES AND EXPENSES. Except as expressly set forth in the Transaction Documents, or any other writing to the contrary, and aside from the Delay Fee and Document Fee, each party shall pay the fees and expenses of its advisers, counsel, accountants and other experts, if any, and all other expenses incurred by such party incident to the negotiation, preparation, execution, delivery and performance of this Agreement. The Company shall pay all Transfer Agent fees (including any fees required for same-day processing of any instruction letter delivered by the Company), stamp taxes and other taxes and duties levied in connection with the delivery of any Securities to the Investor. A document preparation fee of $5,000 will be sent from the Company to the Investor with three (3) business days of signing of the legal documents.

 

Section 10.8     COUNTERPARTS. The Transaction Documents may be executed in multiple counterparts, each of which may be executed by less than all of the parties and shall be deemed to be an original instrument which shall be enforceable against the parties actually executing such counterparts and all of which together shall constitute one and the same instrument. The Transaction Documents may be delivered to the other parties hereto by email of a copy of the Transaction Documents bearing the signature of the parties so delivering this Agreement.

 

Section 10.9     SEVERABILITY. In the event that any provision of this Agreement becomes or is declared by a court of competent jurisdiction to be illegal, unenforceable or void, this Agreement shall continue in full force and effect without said provision; provided that such severability shall be ineffective if it materially changes the economic benefit of this Agreement to any party.

 

Section 10.10     FURTHER ASSURANCES. Each party shall do and perform, or cause to be done and performed, all such further acts and things, and shall execute and deliver all such other agreements, certificates, instruments and documents, as the other party may reasonably request in order to carry out the intent and accomplish the purposes of this Agreement and the consummation of the transactions contemplated hereby.

 

Section 10.11     NO STRICT CONSTRUCTION. The language used in this Agreement will be deemed to be the language chosen by the parties to express their mutual intent, and no rules of strict construction will be applied against any party.

 

Section 10.12     EQUITABLE RELIEF. The Company recognizes that in the event that it fails to perform, observe, or discharge any or all of its obligations under this Agreement, any remedy at law may prove to be inadequate relief to the Investor. The Company therefore agrees that the Investor shall be entitled to temporary and permanent injunctive relief in any such case without the necessity of proving actual damages.

 

Section 10.13     TITLE AND SUBTITLES. The titles and subtitles used in this Agreement are used for the convenience of reference and are not to be considered in construing or interpreting this Agreement.

 

Section 10.14     AMENDMENTS; WAIVERS. No provision of this Agreement may be amended or waived by the parties from and after the date that is one (1) Business Day

 

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immediately preceding the initial filing of the Registration Statement with the SEC. Subject to the immediately preceding sentence, (i) no provision of this Agreement may be amended other than by a written instrument signed by both parties hereto and (ii) no provision of this Agreement may be waived other than in a written instrument signed by the party against whom enforcement of such waiver is sought. No failure or delay 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.

 

Section 10.15     PUBLICITY. The Company and the Investor shall consult with each other in issuing any press releases or otherwise making public statements with respect to the transactions contemplated hereby and no party shall issue any such press release or otherwise make any such public statement, other than as required by law, without the prior written consent of the other parties, which consent shall not be unreasonably withheld or delayed, except that no prior consent shall be required if such disclosure is required by law, in which such case the disclosing party shall provide the other party with prior notice of such public statement. Notwithstanding the foregoing, the Company shall not publicly disclose the name of the Investor without the prior written consent of the Investor, except to the extent required by law. The Investor acknowledges that the Transaction Documents may be deemed to be “material contracts,” as that term is defined by Item 601(b)(10) of Regulation S-K, and that the Company may therefore be required to file such documents as exhibits to reports or registration statements filed under the Securities Act or the Exchange Act. The Investor further agrees that the status of such documents and materials as material contracts shall be determined solely by the Company, in consultation with its counsel.

 

[Signature Page Follows]

 

 

 

 

 

 

IN WITNESS WHEREOF, the parties have caused this Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written.

 

ACACIA DIVERSIFIED HOLDINGS, INC.

 

By: /s/ Richard K. Pertile                                    

Name: Richard K. Pertile

Title: President

 

TRITON FUNDS LP

 

By: /s/ Dmitriy Slobodskiy                                 

Name: Dmitriy Slobodskiy

Title:  Partner

 

 

 

 

 

 

 

 

 

 

 

 

[Signature Page to Agreement]

 

 

 

 

DISCLOSURE SCHEDULES TO

AGREEMENT

 

Schedule 4.3 – Capitalization

 

Schedule 4.5 – SEC Documents

 

Schedule 4.9 – Litigation

 

Schedule 4.10 – Registration Rights

 

 

 

 

 

 

EXHIBIT A

 

FORM OF PURCHASE NOTICE

 

TO: ACACIA DIVERSIFIED HOLDINGS, INC.

 

We refer to the Agreement, dated as of February 1, 2019 (entered into by and between TRITON FUNDS LP and you. Capitalized terms defined in the Agreement shall, unless otherwise defined herein, have the same meaning when used herein.

 

We hereby:

 

1) Give you notice that we require you to sell __________ Purchase Notice Shares; and

 

2) Certify that, as of the date hereof, the conditions set forth in Section 7.2 of the Agreement are satisfied.

 

TRITON FUNDS LP

 

By: _______________________

Name:

Title:

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