Document:

Exhibit 10.23

RELYPSA, INC.

EMPLOYMENT AGREEMENT

This Employment Agreement (the “Agreement”) is made and entered into by and between Stephen D. Harrison, M.A., Ph.D. (“Executive”) and Relypsa, Inc. (the “Company”) (together referred to herein as the “Parties”), effective as of December 15, 2014 (the “Effective Date”).  This Agreement supersedes in its entirety that certain employment letter agreement dated as of November 4, 2014, as revised by that certain employment letter agreement dated as of December 1, 2014 (collectively, the “Prior Agreement”) and any agreement to which the Company is a party with respect to Executive’s employment with the Company, except for the Proprietary Information and Inventions Agreement executed by Executive (the “Confidential Information Agreement”).

R E C I T A L S

A. The Company desires to assure itself of the services of Executive by engaging Executive to perform services under the terms hereof.

B. Executive desires to provide services to the Company on the terms herein provided.

C. The Parties desire to execute this Agreement to supersede in its entirety the Prior Agreement and reflect certain changes to Executive’s employment with the Company effective as of the Effective Date.

D. Certain capitalized terms used in this Agreement are defined in Section 11 below.

In consideration of the foregoing, and for other good and valuable consideration, including the respective covenants and agreements set forth below, the receipt and sufficiency of which are hereby acknowledged, the Parties hereto agree as follows:

1. Employment.

(a) General.  The Company shall employ Executive as a full-time employee of the Company effective as of the Effective Date for the period and in the position set forth in this Section 1, and upon the other terms and conditions herein provided. 

(b) Term of Agreement.  This Agreement shall become effective as of the Effective Date and terminate upon the date that all obligations of the parties hereto with respect to this Agreement have been satisfied.

(c) Position and Duties.  Executive shall have the title of Senior Vice President and Chief Scientific Officer, and shall report to the Chief Executive Officer of the Company.  Executive shall also serve in such other capacity or capacities as the Company may from time to time prescribe.  As a Company employee, Executive will be expected to comply with Company policies.  

(d) Location.  Executive shall perform services for the Company at the Company’s offices located in Redwood City, California or, with the Company’s consent, at any other place at which the Company maintains an office; provided, however, that the Company may from time to time require Executive to travel temporarily to other locations in connection with the Company’s business.

(e) Exclusivity.  During the term of this Agreement, Executive shall devote Executive’s entire working time, attention and energies to the business of the Company and shall not (i) accept any other employment or consultancy or (ii) serve on the board of directors or similar body of any other entity; provided that Executive may engage in civic and not-for-profit activities, so long as such activities, in the aggregate, do not conflict with the interests of the Company or materially interfere with the performance of Executive’s duties to the Company.  Except with the prior written approval of the Board (which the Board may grant or withhold in its sole and absolute discretion), Executive will not, while employed with the Company, or during any period during which Executive is receiving compensation or any other consideration from the Company, engage, directly or indirectly, in any business activity (whether or not pursued for pecuniary advantage) that is or may be competitive with, or that might place Executive in a competing position to, that of the Company or any of its subsidiaries or affiliates and/or any or its affiliates, subsidiaries, or joint ventures currently existing or which shall be established during Executive’s employment by the Company (collectively, “Affiliates”) either directly or indirectly, in any manner or capacity, as adviser, principal, agent, affiliate, promoter, partner, officer, director, employee, stockholder, owner, co-owner, consultant, or member of any association or otherwise, in any phase of the business of developing, manufacturing and 

 

 

marketing of products or services which are in the same field of use or which otherwise compete with the products or services or proposed products or services of the Company and/or any of its Affiliates.  In addition, during Executive’s employment by the Company, Executive agrees not to acquire, assume or participate in, directly or indirectly, any position, investment or interest known by Executive to be adverse or antagonistic to the Company, its business or prospects, financial or otherwise or in any company, person or entity that is, directly or indirectly, in competition with the business of the Company or any of its Affiliates.  Ownership by Executive, as a passive investment, of less than one percent (1%) of the outstanding shares of capital stock of any corporation with one or more classes of its capital stock listed on a national securities exchange or publicly traded on a national securities exchange or in the over-the-counter market shall not constitute breach of this Section 1(e).

2. Compensation and Related Matters.

(a) Base Salary.  Executive’s annual base salary (“Base Salary”) will be $385,000, less payroll deductions and all required withholdings, payable in accordance with the Company’s normal payroll practices.  The Board or a committee of the Board shall review Executive’s Base Salary periodically and any adjustments to Executive’s Base Salary, if any, will be made solely at the discretion of the Board or a committee of the Board.  

(b) Bonus.  Executive shall also be eligible for an annual discretionary bonus of 35% of Executive’s then-Base Salary as determined by the Board or a committee of the Board in its sole discretion, based upon the Board’s or a committee of the Board’s evaluation (in its sole discretion) of the achievement of specific individual and/or Company-wide performance goals.  The applicable performance goals shall be established by the Board or a committee of the Board, in their sole discretion, and set out in writing on or before the 90th day of each calendar year.  The annual discretionary bonus, if any, shall be payable, less authorized deductions and required withholdings, no later than March 15th following the end of the applicable calendar year.  The amount of any annual discretionary bonus for which Executive is eligible shall be reviewed by the Board or a committee of the Board from time to time.

(c) Equity Awards.  Subject to approval by the Board or the Compensation Committee of the Board, Executive shall be granted an option to purchase 75,000 shares of the Company’s common stock (the “New Hire Option”).  The New Hire Option shall have a per share exercise price equal to the per share closing trading price of the Company’s common stock on the grant date.  The New Hire Option shall vest and become exercisable as follows: 1/4 of the shares subject to the New Hire Option shall vest and become exercisable on the first anniversary of the Effective Date and 1/48 of the shares subject to the New Hire Option shall vest and become exercisable on each monthly anniversary thereafter, in each case, subject to Executive’s continued service to the Company through the applicable vesting date.  The New Hire Option shall be subject to the terms and conditions of the Company’s 2014 Employment Commencement Incentive Plan and a stock option agreement to be entered into between Executive and the Company.  Executive shall be eligible to receive additional grants of equity awards in the Company’s sole discretion. 

(d) Vacation; Benefits.  Executive shall be entitled to accrue vacation in accordance with Company policy, which as of the Effective Date provides for an accrual of 6.66 hours per pay period, constituting an annual rate of four (4) weeks (160 hours), provided, that once Executive’s accrued vacation balance reaches 240 hours, Executive will cease accruing additional vacation until such accrued balance is reduced below 240 hours.  Accrued vacation may carry over from one year to the next.  Executive shall also be entitled to such other benefits in accordance with Company policy for similarly-situated senior management of the Company.

(e) Business Expenses.  The Company shall reimburse Executive for all reasonable business expenses incurred in the conduct of Executive’s duties hereunder in accordance with the Company’s expense reimbursement policies.

(f) Additional Matters.  Additional matters regarding Executive’s employment with the Company shall be as set forth on an appendix attached hereto.

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3. Termination.

(a) At-Will Employment.  The Company and Executive acknowledge that Executive’s employment is and shall continue to be “at-will,” as defined under applicable law.  This means that it is not for any specified period of time and can be terminated by Executive or by the Company at any time, with or without advance notice, and for any or no particular reason or cause.  It also means that Executive’s job duties, title and responsibility and reporting level, work schedule, compensation and benefits, as well as the Company’s personnel policies and procedures, may be changed with prospective effect, with or without notice, at any time in the sole discretion of the Company.  This “at-will” nature of Executive’s employment shall remain unchanged during Executive’s tenure as an employee and may not be changed, except in an express writing signed by Executive and a duly authorized member of the Board.  If Executive’s employment terminates for any reason, Executive shall not be entitled to any payments, benefits, damages, awards or compensation other than as provided by this Agreement.   

(b) Deemed Resignation.  Upon termination of Executive’s employment for any reason, Executive shall be deemed to have resigned from all offices and directorships, if any, then held with the Company or any of its affiliates, and, at the Company’s request, Executive shall execute such documents as are necessary or desirable to effectuate such resignations.  

4. Obligations upon Termination of Employment.

(a) Executive’s Obligations.

(i) Confidentiality.  While Executive is employed by the Company, and thereafter, Executive shall not directly or indirectly disclose or make available to any person, firm, corporation, association or other entity for any reason or purpose whatsoever, any Confidential Information (as defined below).  Upon termination of Executive’s employment with the Company, all Confidential Information in Executive’s possession that is in written or other tangible form (together with all copies or duplicates thereof, including computer files) shall be returned to the Company and shall not be retained by Executive or furnished to any third party, in any form except as provided herein; provided, however, that Executive shall not be obligated to treat as confidential, or return to the Company copies of any Confidential Information that (i) was publicly known at the time of disclosure to Executive, (ii) becomes publicly known or available thereafter other than by any means in violation of this Agreement or any other duty owed to the Company by any person or entity, or (iii) is lawfully disclosed to Executive by a third party.  For purposes of this Agreement, the term “Confidential Information” shall mean information disclosed to Executive or known by Executive as a consequence of or through his or her relationship with the Company, about the customers, employees, business methods, public relations methods, organization, procedures or finances, including, without limitation, information of or relating to customer lists, of the Company and its affiliates.  In addition, Executive shall continue to be subject to the Confidential Information Agreement.

(ii) Non-Solicitation.  In addition to each Executive’s obligations under the Confidential Information Agreement, Executive shall not for a period of one (1) year following Executive’s termination of employment for any reason, either on Executive’s own account or jointly with or as a manager, agent, officer, employee, consultant, partner, joint venturer, owner or stockholder or otherwise on behalf of any other person, firm or corporation, directly or indirectly solicit or attempt to solicit away from the Company any of its officers or employees or offer employment to any person who is an officer or employee of the Company; provided, however, that a general advertisement to which an employee of the Company responds shall in no event be deemed to result in a breach of this Section 4(a).  Executive also agrees not to harass or disparage the Company or its employees, clients, directors or agents or divert or attempt to divert any actual or potential business of the Company.

(iii) Survival of Provisions.  The provisions of this Section 4(a) shall survive the termination or expiration of the applicable Executive’s employment with the Company and shall be fully enforceable thereafter.  If it is determined by a court of competent jurisdiction in any state that any restriction in this Section 4(a) is excessive in duration or scope or is unreasonable or unenforceable under the laws of that state, it is the intention of the parties that such restriction may be modified or amended by the court to render it enforceable to the maximum extent permitted by the law of that state.

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(b) Payments of Accrued Obligations upon Termination of Employment.  Upon a termination of Executive’s employment for any reason, Executive (or Executive’s estate or legal representative, as applicable) shall be entitled to receive, within ten (10) days after the date Executive terminates employment with the Company (or such earlier date as may be required by applicable law): (i) any portion of Executive’s annual base salary earned through Executive’s termination date not theretofore paid, (ii) any expenses owed to Executive under Section 2(e) above, (iii) any accrued but unused vacation pay owed to Executive pursuant to Section 2(d) above, and (iv) any amount arising from Executive’s participation in, or benefits under, any employee benefit plans, programs or arrangements under Section 2(d) above, which amounts shall be payable in accordance with the terms and conditions of such employee benefit plans, programs or arrangements

(c) Severance Payments upon a Covered Termination Other Than During a Change in Control Period.  If Executive experiences a Covered Termination at any time other than during a Change in Control Period, and if Executive executes and fails to revoke during any applicable revocation period a general release of all claims against the Company and its affiliates in a form acceptable to the Company (a “Release of Claims”) within sixty (60) days, or such shorter period of time specified by the Company, following such Covered Termination, then in addition to any accrued obligations payable under Section 4(b) above, the Company shall provide Executive with the following:

(i) Severance.  Executive shall be entitled to receive an amount equal to nine (9) months (the “Severance Period”) of Executive’s then-existing base salary in effect as of Executive’s termination date, less applicable withholdings, and payable in substantially equal installments in accordance with the Company’s standard payroll procedures with the first such installment to commence on the first regular payroll date following the date of Executive’s Release of Claims becomes effective and irrevocable and inclusive of any installments that would have been made had the Release of Claims been effective on the date of such Covered Termination. 

(ii) Continued Healthcare.  The Company shall notify Executive of any right to continue group health plan coverage sponsored by the Company or an affiliate of the Company immediately prior to Executive’s date of termination pursuant to the provisions of the Consolidated Omnibus Budget Reconciliation Act of 1985, as amended (“COBRA”).  If Executive elects to receive such continued healthcare coverage, the Company shall directly pay, or reimburse Executive for, the premium for Executive and Executive’ s covered dependents, less the amount of Executive’s monthly premium contributions for such coverage prior to termination, for the period commencing on the first day of the first full calendar month following the date the Release of Claims becomes effective and irrevocable through the earlier of (i) the last day of the ninth (9th) full calendar month following the date the Release of Claims becomes effective and irrevocable and (ii) the date Executive and Executive’s covered dependents, if any, become eligible for healthcare coverage under another employer’s plan(s).  Executive shall notify the Company immediately if Executive becomes covered by a group health plan of a subsequent employer.  After the Company ceases to pay premiums pursuant to this Section 4(c)(ii), Executive may, if eligible, elect to continue healthcare coverage at Executive’s expense in accordance the provisions of COBRA.

(d) Severance Payments upon a Covered Termination During a Change in Control Period.  If Executive experiences a Covered Termination during a Change in Control Period, and if Executive executes and fails to revoke during any applicable revocation period a Release of Claims within sixty (60) days, or such shorter period of time specified by the Company, following such Covered Termination, then in addition to any accrued obligations payable under Section 4(b) above, the Company shall provide Executive with the following:

(i) Severance.  Executive shall be entitled to receive an amount equal to (i) twelve (12) months of Executive’s then-existing annual base salary in effect as of Executive’s termination date plus (ii) Executive’s target annual bonus award, pro-rated based on the total number of days elapsed in the calendar year as of the termination date, but only if, as of the date of Executive’s termination of employment, the Company and Executive were “on target” to achieve all applicable performance goals for such annual bonus as determined by the Board or a committee of the Board in their sole discretion.  Such amount will be subject to applicable withholdings and payable in a single lump sum cash payment on the first regular payroll date following the date the Release of Claims becomes effective and irrevocable.

(ii) Equity Awards.  Each outstanding equity award, including, without limitation, each stock option and restricted stock award, held by Executive shall automatically become vested and, if applicable, exercisable and any forfeiture restrictions or rights of repurchase thereon shall immediately lapse, in each case, with respect to one hundred percent (100%) of the then-unvested shares subject to such outstanding award effective as of immediately prior to such termination date.

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(iii) Continued Healthcare.  The Company shall notify Executive of any right to continue group health plan coverage sponsored by the Company or an affiliate of the Company immediately prior to Executive’s date of termination pursuant to the provisions of COBRA.  If Executive elects to receive such continued healthcare coverage, the Company shall directly pay, or reimburse Executive for, the premium for Executive and Executive’ s covered dependents, less the amount of Executive’s monthly premium contributions for such coverage prior to termination, for the period commencing on the first day of the first full calendar month following the date the Release of Claims becomes effective and irrevocable through the earlier of (i) the last day of the twelfth (12th) full calendar month anniversary following the date Release of Claims becomes effective and irrevocable and (ii) the date Executive and Executive’s covered dependents, if any, become eligible for healthcare coverage under another employer’s plan(s).  Executive shall notify the Company immediately if Executive becomes covered by a group health plan of a subsequent employer.  After the Company ceases to pay premiums pursuant to this Section 4(d)(iii), Executive may, if eligible, elect to continue healthcare coverage at Executive’s expense in accordance the provisions of COBRA.

(e) No Other Severance.  The provisions of this Section 4 shall supersede in their entirety any severance payment or other arrangement provided by the Company, including, without limitation, the Prior Agreement and any severance plan of the Company. 

(f) No Requirement to Mitigate; Survival.  Executive shall not be required to mitigate the amount of any payment provided for under this Agreement by seeking other employment or in any other manner.  Notwithstanding anything to the contrary in this Agreement, the termination of Executive’s employment shall not impair the rights or obligations of any party

(g) Certain Reductions.  The Company shall reduce Executive’s severance benefits under this Agreement, in whole or in part, by any other severance benefits, pay in lieu of notice, or other similar benefits payable to Executive by the Company in connection with Executive’s termination, including but not limited to payments or benefits pursuant to (i) any applicable legal requirement, including, without limitation, the Worker Adjustment and Retraining Notification Act, or (ii) any Company policy or practice providing for Executive to remain on the payroll without being in active service for a limited period of time after being given notice of the termination of Executive’s employment.  The benefits provided under this Agreement are intended to satisfy, to the greatest extent possible, any and all statutory obligations that may arise out of Executive’s termination of employment.  Such reductions shall be applied on a retroactive basis, with severance benefits previously paid being recharacterized as payments pursuant to the Company's statutory obligation.

5. Limitation on Payments. Notwithstanding anything in this Agreement to the contrary, if any payment or distribution Executive would receive pursuant to this Agreement or otherwise (“Payment”) would (a) constitute a “parachute payment” within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the “Code”), and (b) but for this sentence, be subject to the excise tax imposed by Section 4999 of the Code (the “Excise Tax”), then the Company shall cause to be determined, before any amounts of the Payment are paid to Executive, which of the following alternative forms of payment would maximize Executive’s after-tax proceeds: (i) payment in full of the entire amount of the Payment (a “Full Payment”), or (ii) payment of only a part of the Payment so that Executive receives that largest Payment possible without being subject to the Excise Tax (a “Reduced Payment”), whichever of the foregoing amounts, taking into account the applicable federal, state and local income taxes and the Excise Tax (all computed at the highest marginal rate, net of the maximum reduction in federal income taxes which could be obtained from a deduction of such state and local taxes), results in Executive’s receipt, on an after-tax basis, of the greater amount of the Payment, notwithstanding that all or some portion the Payment may be subject to the Excise Tax.  

(a) If a Reduced Payment is made pursuant to this Section 5, (i) the Payment shall be paid only to the extent permitted under the Reduced Payment alternative, and Executive shall have no rights to any additional payments and/or benefits constituting the Payment, and (ii) reduction in payments and/or benefits will occur in the following order: (1) reduction of cash payments; (2) cancellation of accelerated vesting of equity awards other than stock options; (3) cancellation of accelerated vesting of stock options; and (4) reduction of other benefits payable to Executive.  In the event that acceleration of compensation from Executive’s equity awards is to be reduced, such acceleration of vesting shall be canceled in the reverse order of the date of grant.

(b) The independent registered public accounting firm engaged by the Company for general audit purposes as of the day prior to the effective date of the Change in Control shall make all determinations required to be made under this Section 5.  If the independent registered public accounting firm so engaged by the Company is serving as accountant or auditor for the individual, group or entity effecting the Change in Control, the Company shall appoint a nationally recognized independent registered public accounting firm to make the determinations required hereunder.  The Company shall bear all expenses with respect to the determinations by such independent registered public accounting firm required to be made hereunder.

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(c) The independent registered public accounting firm engaged to make the determinations hereunder shall provide its calculations, together with detailed supporting documentation, to the Company and Executive within 15 calendar days after the date on which Executive’s right to a Payment is triggered (if requested at that time by the Company or Executive) or such other time as requested by the Company or Executive.  If the independent registered public accounting firm determines that no Excise Tax is payable with respect to a Payment, either before or after the application of the Reduced Amount, it shall furnish the Company and Executive with an opinion reasonably acceptable to Executive that no Excise Tax will be imposed with respect to such Payment.  Any good faith determinations of the accounting firm made hereunder shall be final, binding and conclusive upon the Company and Executive.

6. Successors.

(a) Company’s Successors.  Any successor to the Company (whether direct or indirect and whether by purchase, merger, consolidation, liquidation or otherwise) to all or substantially all of the Company’s business and/or assets shall assume the obligations under this Agreement and agree expressly to perform the obligations under this Agreement in the same manner and to the same extent as the Company would be required to perform such obligations in the absence of a succession.  For all purposes under this Agreement, the term “Company” shall include any successor to the Company’s business and/or assets which executes and delivers the assumption agreement described in this Section 6(a) or which becomes bound by the terms of this Agreement by operation of law.

(b) Executive’s Successors.  The terms of this Agreement and all rights of Executive hereunder shall inure to the benefit of, and be enforceable by, Executive’s personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees.

7. Notices.  Notices and all other communications contemplated by this Agreement shall be in writing and shall be deemed to have been duly given when personally delivered or one day following mailing via Federal Express or similar overnight courier service.  In the case of Executive, mailed notices shall be addressed to Executive at Executive’s home address that the Company has on file for Executive.  In the case of the Company, mailed notices shall be addressed to its corporate headquarters, and all notices shall be directed to the attention of the General Counsel of the Company.

8. Dispute Resolution.  To ensure the timely and economical resolution of disputes that arise in connection with this Agreement, Executive and the Company agree that any and all disputes, claims, or causes of action arising from or relating to the enforcement, breach, performance or interpretation of this Agreement, Executive’s employment, or the termination of Executive’s employment, shall be resolved to the fullest extent permitted by law by final, binding and confidential arbitration, by a single arbitrator, in San Mateo County, California, conducted by Judicial Arbitration and Mediation Services, Inc. (“JAMS”) under the applicable JAMS employment rules.  By agreeing to this arbitration procedure, both Executive and the Company waive the right to resolve any such dispute through a trial by jury or judge or administrative proceeding.  The arbitrator shall:  (i) have the authority to compel adequate discovery for the resolution of the dispute and to award such relief as would otherwise be permitted by law; and (ii) issue a written arbitration decision, to include the arbitrator’s essential findings and conclusions and a statement of the award.  The arbitrator shall be authorized to award any or all remedies that Executive or the Company would be entitled to seek in a court of law.  The Company shall pay all JAMS’ arbitration fees in excess of the amount of court fees that would be required if the dispute were decided in a court of law.  Nothing in this Agreement is intended to prevent either Executive or the Company from obtaining injunctive relief in court to prevent irreparable harm pending the conclusion of any such arbitration.  Notwithstanding the foregoing, Executive and the Company each have the right to resolve any issue or dispute over intellectual property rights by Court action instead of arbitration.

9. Miscellaneous Provisions.

(a) Withholdings and Offsets.  The Company shall be entitled to withhold from any amounts payable under this Agreement any federal, state, local or foreign withholding or other taxes or charges which the Company is required to withhold. The Company shall be entitled to rely on an opinion of counsel if any questions as to the amount or requirement of withholding shall arise.  If Executive is indebted to the Company at his or her termination date, the Company reserves the right to offset any severance payments under this Agreement by the amount of such indebtedness.

(b) Waiver.  No provision of this Agreement shall be modified, waived or discharged unless the modification, waiver or discharge is agreed to in writing and signed by Executive and by an authorized officer of the Company (other than Executive).  No waiver by either party of any breach of, or of compliance with, any condition or provision of this Agreement by the other party shall be considered a waiver of any other condition or provision or of the same condition or provision at another time.

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(c) Whole Agreement.  This Agreement, including any appendix attached hereto, and the Confidential Information Agreement represent the entire understanding of the parties hereto with respect to the subject matter hereof and supersede all prior arrangements and understandings regarding same, including, without limitation, any severance plan of the Company’s, the Prior Agreement, and any accelerated vesting provisions of Executive’s equity award agreements.  Executive agrees and acknowledges that this Agreement supersedes and replaces in its entirety the Prior Agreement.  

(d) Amendment.  This Agreement cannot be amended or modified except by a written agreement signed by Executive and the Chief Executive Officer of the Company.

(e) Choice of Law.  The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of California.

(f) Severability.  The finding by a court of competent jurisdiction of the unenforceability, invalidity or illegality of any provision of this Agreement shall not render any other provision of this Agreement unenforceable, invalid or illegal.  Such court shall have the authority to modify or replace the invalid or unenforceable term or provision with a valid and enforceable term or provision which most accurately represents the intention of the parties hereto with respect to the invalid or unenforceable term or provision.

(g) Interpretation; Construction.  The headings set forth in this Agreement are for convenience of reference only and shall not be used in interpreting this Agreement.  This Agreement has been drafted by legal counsel representing the Company, but Executive has been encouraged to consult with, and has consulted with, Executive’s own independent counsel and tax advisors with respect to the terms of this Agreement.  The parties hereto acknowledge that each party hereto and its counsel has reviewed and revised, or had an opportunity to review and revise, this Agreement, and any rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement.

(h) Representations; Warranties.  Executive represents and warrants that Executive is not restricted or prohibited, contractually or otherwise, from entering into and performing each of the terms and covenants contained in this Agreement, and that Executive’s execution and performance of this Agreement will not violate or breach any other agreements between Executive and any other person or entity and that Executive has not engaged in any act or omission that could be reasonably expected to result in or lead to an event constituting “Cause” for purposes of this Agreement.

(i) Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which together will constitute one and the same instrument.

(j) Eligibility.  As required by applicable law, this offer and Agreement are subject to satisfactory proof of Executive’s right to work in the United States of America.

10. Section 409A.  The intent of the parties is that the payments and benefits under this Agreement comply with or be exempt from Section 409A of the Code and the Department of Treasury regulations and other interpretive guidance issued thereunder, including without limitation any such regulations or other guidance that may be issued after the Effective Date, (“Section 409A”) and, accordingly, to the maximum extent permitted, this Agreement shall be interpreted to be in compliance therewith.  If the Company determines that any provision of this Agreement would cause Executive to incur any additional tax or interest under Section 409A (with specificity as to the reason therefor), the Company and Executive shall take commercially reasonable efforts to reform such provision to try to comply with or be exempt from Section 409A through good faith modifications to the minimum extent reasonably appropriate to conform with Section 409A, provided that any such modifications shall not increase the cost or liability to the Company.  To the extent that any provision hereof is modified in order to comply with or be exempt from Section 409A, such modification shall be made in good faith and shall, to the maximum extent reasonably possible, maintain the original intent and economic benefit to Executive and the Company of the applicable provision without violating the provisions of Section 409A.

(a) Separation from Service.  Notwithstanding any provision to the contrary in this Agreement, no amount deemed deferred compensation subject to Section 409A of the Code shall be payable pursuant to Section 4 unless Executive’s termination of employment constitutes a “separation from service” with the Company within the meaning of Section 409A (“Separation from Service”) and, except as provided under Section 10(b) of this Agreement, any such amount shall not be paid, or in the case of installments, commence payment, until the sixtieth (60th) day following Executive’s Separation from Service.  Any installment payments that would have been made to Executive during the sixty (60) day period immediately following Executive’s Separation 

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from Service but for the preceding sentence shall be paid to Executive on the sixtieth (60th) day following Executive’s Separation from Service and the remaining payments shall be made as provided in this Agreement.

(b) Specified Employee.  Notwithstanding any provision to the contrary in this Agreement, if Executive is deemed at the time of his or her separation from service to be a “specified employee” for purposes of Section 409A(a)(2)(B)(i) of the Code, to the extent delayed commencement of any portion of the benefits to which Executive is entitled under this Agreement is required in order to avoid a prohibited distribution under Section 409A(a)(2)(B)(i) of the Code, such portion of Executive’s benefits shall not be provided to Executive prior to the earlier of (a) the expiration of the six (6)-month period measured from the date of Executive’s Separation from Service or (b) the date of Executive’s death.  Upon the first business day following the expiration of the applicable Code Section 409A(a)(2)(B)(i) period, all payments deferred pursuant to this Section 10(b) shall be paid in a lump sum to Executive, and any remaining payments due under this Agreement shall be paid as otherwise provided herein.

(c) Expense Reimbursements.  To the extent that any reimbursements payable pursuant to this Agreement are subject to the provisions of Section 409A, any such reimbursements payable to Executive pursuant to this Agreement shall be paid to Executive no later than December 31 of the year following the year in which the expense was incurred, the amount of expenses reimbursed in one year shall not affect the amount eligible for reimbursement in any subsequent year, and Executive’s right to reimbursement under this Agreement will not be subject to liquidation or exchange for another benefit.

(d) Installments.  For purposes of Section 409A (including, without limitation, for purposes of Treasury Regulation Section 1.409A-2(b)(2)(iii)), Executive’s right to receive any installment payments under this Agreement shall be treated as a right to receive a series of separate payments and, accordingly, each such installment payment shall at all times be considered a separate and distinct payment.

11. Definition of Terms.  The following terms referred to in this Agreement shall have the following meanings:

(a) Cause.  “Cause” means the occurrence of any of the following events, as determined by the Board or a committee designated by the Board, in its sole discretion: (i) Executive’s commission of any felony or any crime involving fraud, dishonesty, or moral turpitude under the laws of the United States or any state thereof; (ii) Executive’s attempted commission of, or participation in, a fraud or act of dishonesty against the Company; (iii) Executive’s intentional, material violation of any contract or agreement between Executive and the Company or of any statutory duty owed to the Company; (iv) Executive’s unauthorized use or disclosure of the Company’s confidential information or trade secrets; or (v) Executive’s gross misconduct. The determination whether a termination is for “Cause” under the foregoing definition shall be made by the Company in its sole discretion.

(b) Change in Control.  “Change in Control” means the occurrence, in a single transaction or in a series of related transactions, of any one or more of the following events (excluding in any case transactions in which the Company or its successors issues securities to investors primarily for capital raising purposes): (i) the acquisition by a third party of securities of the Company representing more than fifty percent (50%) of the combined voting power of the Company’s then-outstanding securities other than by virtue of a merger, consolidation or similar transaction, (ii) a merger, consolidation or similar transaction following which the stockholders of the Company immediately prior thereto do not own at least fifty percent (50%) of the combined outstanding voting power of the surviving entity (or that entity’s parent) in such merger, consolidation or similar transaction; (iii) the dissolution or liquidation of the Company; or (iv) the sale, lease, exclusive license or other disposition of all or substantially all of the assets of the Company.  Notwithstanding the foregoing, a “Change in Control” must also constitute a “change in control event” as defined in Treasury Regulation §1.409A-3(i)(5).

(c) Change in Control Period.  “Change in Control Period” means the twelve (12) month period of time commencing upon the effective date of a Change in Control.

(d) Covered Termination.  “Covered Termination” shall mean the termination of Executive’s employment by the Company other than for Cause or by Executive for Good Reason.

(e) Good Reason.  “Good Reason” means Executive’s resignation from all positions he or she then holds with the Company if (i) (A) there is a material diminution in Executive’s duties and responsibilities with the Company; provided, however, that a change in title or reporting relationship will not constitute Good Reason; (B) there is a material reduction of Executive’s base salary; provided, however, that a material reduction in Executive’s base salary pursuant to a salary reduction program affecting all or substantially all of the employees of the Company and that does not adversely affect Executive to a greater extent than other similarly situated employees shall not constitute Good Reason; or (C) Executive is required to relocate Executive’s primary work location to a 

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facility or location that would increase Executive’s one-way commute distance by more than twenty-five (25) miles from Executive’s primary work location as of immediately prior to such change, (ii) Executive provides written notice outlining such conditions, acts or omissions to the Company within thirty (30) days immediately following such material change or reduction, (iii) such material change or reduction is not remedied by the Company within thirty (30) days following the Company’s receipt of such written notice and (iv) Executive’s resignation is effective not later than thirty (30) days after the expiration of such thirty (30) day cure period.

(Signature page follows)

 

 

 

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IN WITNESS WHEREOF, each of the parties has executed this Agreement, in the case of the Company by its duly authorized officer, as of the Effective Date.

 

	
RELYPSA, INC.

	
 

	
By:
	
 
	
/s/ John A. Orwin

	
Title:
	
 
	
President and CEO

 

	
EXECUTIVE

	
 

	
/s/ Stephen D. Harrison

	
Name:
	
 
	
Stephen D. Harrison

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Signature Page to Employment AgreementExhibit 10.3

 

AMENDED AND RESTATED

EXECUTIVE EMPLOYMENT AGREEMENT

 

THIS AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT (the “Agreement”) is entered into as of January 1, 2015, by and between James L. Pokluda,
III (the “Executive”) and Houston Wire & Cable Company, a Delaware corporation (the “Company”).

 

WHEREAS, Executive
is currently an elected director of the Company and holds the position of President and Chief Executive Officer; and

 

WHEREAS, the
Company currently employs Executive pursuant to a certain Executive Employment Agreement dated as of January 1, 2012 (the “Prior
Agreement”); and

 

WHEREAS, the
Company and Executive desire to amend the Prior Agreement as herein set forth to reflect certain mutually agreed changes to the
terms and conditions thereof; and

 

WHEREAS, for
their mutual convenience, the Company and Executive desire to restate the Prior Agreement, as so amended, in its entirety.

 

NOW, THEREFORE,
for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:

 

1.Capacities
and Duties.

 

1.1Title.
The Executive hereby continues to be employed in the capacity of President and Chief Executive Officer of the Company and of HWC
Wire & Cable Company. The Executive shall report directly to the Board of Directors of the Company (the “Board”)
and shall be subject to its supervision, control and direction. The Executive will at all times abide by the Company’s personnel
policies in effect from time to time and will faithfully, industriously and to the best of the Executive’s ability, experience
and talents perform all of the duties that may be required of and from the Executive by the Board pursuant to the express and implied
terms hereof, consistent with the Executive’s status as the President and Chief Executive Officer of the Company and HWC
Wire & Cable Company.

 

1.2Exclusive
Services. During the Term, the Executive agrees to devote his best efforts and full business time to rendering services to
the Company. The Executive is specifically restricted from being employed by any other company, other than a Subsidiary or an Affiliate
(each as defined below) of the Company, while employed by the Company pursuant to this Agreement; provided that the Executive’s
service on boards of directors of other companies in accordance with the Company’s Corporate Governance Principles, or on
boards of any civic, charitable, education or professional organizations, shall not be considered employment in violation of this
Section 1.2.

 

1.3Election
as Director. The Company shall use its best efforts to cause the Executive to remain elected as a member of the Company’s
Board of Directors during the term of this Agreement. The Company and the Executive have entered into an indemnification agreement
substantially similar to the form of agreement the Company has with the other members of the Board of Directors.

 

    	 

    	 	 	 

    

 

2.Term.
The term of this Agreement (the “Term”) shall commence as of the date hereof and, unless terminated earlier as herein
provided, shall end on December 31, 2016, provided that on December 31, 2016 and each December 31 thereafter (each such December
31, an “Expiration Date”), the Term shall automatically and without any action by either party be extended for an additional
period of one year, unless at least one year prior to any Expiration Date either party notifies the other of its election not to
extend the Term, in which case the Term shall end on such Expiration Date, unless terminated earlier as herein provided.

 

3.Compensation
and Benefits. For the Executive’s services performed during the Term of this Agreement, the Company agrees to pay
or provide the Executive with the following:

 

3.1Salary.
An annual base salary (“Base Salary”) of $430,000, to be paid according to the Company’s general payroll practices
as in effect from time to time. The Executive’s Base Salary will be subject to annual reviews and increases (but not decreases)
as approved by the Board and the Compensation Committee of the Board.

 

3.2Incentive
Compensation Program. The Company shall pay the Executive an annual bonus (“Incentive Bonus”) of up to 75% of his
Base Salary for each full fiscal year of the Company in which the Executive is employed by the Company, based upon achievement
of a series of performance targets for such fiscal year as described in this Section 3.2. The targets will correspond to an Incentive
Bonus equal to 10%, 25%, 50% and 75% of the Executive’s Base Salary for that fiscal year. If the Company does not meet the
performance target for the 10% level, no Incentive Bonus will be paid for the fiscal year. If the Company performs at a level that
is between two of the performance targets, the Incentive Bonus shall be a percentage of the Executive’s Base Salary for that
fiscal year calculated on a straight line basis between the percentages that would apply at those two targets. As used in this
Section 3.2, “Base Salary” means the rate of Base Salary in effect for a majority of that fiscal year (or, if no Base
Salary rate was in effect for a majority of such fiscal year, then a rate equal to the actual Base Salary paid for that fiscal
year). No later than 60 days after the beginning of each fiscal year, the Board (or the Compensation Committee) and the Executive
shall mutually agree upon the performance targets for such fiscal year, which performance targets will be consistent with the Company’s
business plan approved by the Board for such fiscal year. Except as provided for in this Agreement, the Company shall not be obligated
to pay any Incentive Bonus for any fiscal year unless the Executive is employed by the Company at the end of that fiscal year.
The Executive shall be paid the Incentive Bonus by March 15 of the year following the fiscal year to which the Bonus relates, provided
that if the audit of the Company and its Subsidiaries is not completed by such date, payment shall be made within 60 days following
the completion of the audit, but no later than December 31 of such year.

 

3.3Stock Plan.
The Executive will participate in the Company’s 2006 Stock Plan (including any amended or successor plan, the “Stock
Plan”). The Executive will be eligible to receive awards of stock options, restricted stock and/or restricted stock units
during the Term in accordance with the Company’s regular annual grant procedures.

 

3.4Benefits.
The Executive shall be entitled to receive all benefits of employment generally available to the Company’s other executive
employees when and as such benefits, if any, become available and the Executive becomes eligible for them, including any medical,
dental, life and disability insurance benefits, paid time off benefits, long-term incentive plan, stock option plan, pension plan
and/or profit-sharing plan; provided that the Executive shall not participate in the Senior Management Bonus Program. The Company
has the right to amend or terminate any such benefit plans or programs. The Executive shall be insured under the Company’s
director and officer indemnification policy.

 

    	-2-

    	 	 	 

    

 

3.5Vacation.
The Executive shall be entitled to four weeks of paid vacation each year during the Term, which shall accrue each January 1 during
the Term. The Executive will use his reasonable efforts to schedule vacation periods to minimize disruption of the Company’s
business.

 

3.6Vehicle Allowance.
The Executive shall be entitled to participate in the Company’s automobile policy as it applies to executive employees.

 

3.7Reimbursement
of Expenses. The Company shall reimburse the Executive for up to $5,000 in legal expenses incurred in connection with the review
and negotiation of this Agreement. The Company shall also reimburse the Executive for any reasonable business expenses incurred
by the Executive in the ordinary course of the Company’s business in accordance with the Company’s reimbursement policies
then in effect. These expenses shall be substantiated by invoices and receipts, to be submitted by the Executive within 30 days
after incurrence, and reimbursement shall be made by the Company within 60 days following its receipt of all necessary documentation
with respect to such expenses.

 

4.Termination
of Employment.

 

4.1For Cause
or Other than for Good Reason or Disability. If, prior to the expiration of the Term, the Company terminates the Executive’s
employment for Cause or the Executive terminates his employment for any reason other than Good Reason or Disability, the Company
shall pay the Executive the unpaid Base Salary earned by the Executive through the date of termination and any vacation pay, expense
reimbursements and other cash entitlements accrued by the Executive that are payable pursuant to the Company’s policies as
of such date. Such payment shall be made within 30 days of termination or earlier if required by law. All unexercised stock options
and all outstanding restricted stock or restricted stock units and other equity incentive compensation awards previously granted
to the Executive shall be exercisable or forfeited, as the case may be, in accordance with the applicable agreement or award between
the Company and the Executive.

 

4.2Without Cause
or for Good Reason or Disability. If, prior to the expiration of the Term, the Company terminates the Executive’s employment
without Cause, the Executive terminates his employment for Good Reason or the Executive’s employment terminates due to Disability,
the Executive shall be entitled to receive:

 

(a)The
cash amounts described in Section 4.1 above.

 

(b)Continuation
of the Executive’s Base Salary as then in effect for the 24-month period beginning on the date of such termination of employment,
payable in accordance with the Company’s payroll policy then in effect.

 

(c)Two
payments, each equal to the amount of the Incentive Bonus paid to the Executive for the most recently completed fiscal year, the
first paid at the same time bonuses for the fiscal year in which termination occurs are paid by the Company to other executive
employees and the second paid at the same time bonuses for the subsequent fiscal year are paid by the Company to other executive
employees.

 

    	-3-

    	 	 	 

    

 

(d)Continuation
of medical benefits under the Company’s group health plan as in effect from time to time for the Executive and his spouse
and covered dependents for 36 months. Coverage during the first 18 months is subject to the Executive’s timely payment of
premiums at active employee rates for such coverage and shall be concurrent with coverage under Title I, Part 6 of the Employee
Retirement Income Security Act of 1974 (“COBRA”), provided that the Executive timely elects COBRA continuation coverage,
and provided, further, that if such premium subsidization results in adverse tax consequences for the Company or the Executive,
the Executive shall pay the entire premium for such coverage and the Company shall reimburse the Executive monthly, on an after-tax
basis, for the cost of such coverage in excess of the active employee premium. Coverage for the remainder of the 36-month continuation
period is subject to the Executive’s payment of the entire premium for such coverage. The medical benefits provided under
this Section shall terminate at such time that the Executive and his spouse and covered dependents become eligible for medical
benefits under any other benefit plan or policy to the extent not prohibited by COBRA.

 

(e)If
the effective date of termination of the Executive’s employment occurs before December 31, 2017, then on such effective date
(a) the stock options granted on December 20, 2011 with respect to 64,330 shares of the Company’s common stock, which will
vest 50% on December 31, 2016 and 50% on December 31, 2017, and (b) the 26,576 shares of restricted stock granted on December 20,
2011, which will vest 50% on December 31, 2016 and 50% on December 31, 2017 each shall vest as to a number of shares equal to the
sum of (i) and (ii), where (i) is the product of (A) the total number of shares subject to unvested awards that would vest on December
31, 2016, if any, and (B) a fraction, the numerator of which is the number of days in the period beginning January 1, 2012
through the effective date of termination of employment, and the denominator of which is the number of days in the period beginning
January 1, 2012 through December 31, 2016 and (ii) is the product of (A) the total number of shares subject to unvested awards
that would vest on December 31, 2017 and (B) a fraction, the numerator of which is the number of days in the period beginning January
1, 2012 through the effective date of termination of employment, and the denominator of which is the number of days in the period
beginning January 1, 2012 through December 31, 2017. All other unexercised stock options, outstanding restricted stock or restricted
stock units and equity incentive compensation awards granted to the Executive shall be exercisable or forfeited, as the case may
be, in accordance with the applicable agreement or award between the Company and the Executive.

 

4.3Death.
If prior to the expiration of the Term the Executive’s employment terminates due to his death, the Executive’s estate
shall be entitled to receive:

 

(a)The
cash amounts described in Section 4.1 above.

 

(b)A
prorata payment of the Incentive Bonus that would have been earned by the Executive had he remained employed through the end of
the fiscal year in which the termination occurs (determined on the basis of the number of days of employment during such fiscal
year), paid at the same time bonuses for such fiscal year are paid by the Company to other executive employees.

 

    	-4-

    	 	 	 

    

 

(c)Continuation
of medical benefits under the Company’s group health plan as in effect from time to time for the Executive’s surviving
spouse and covered dependents for 36 months pursuant to COBRA. Coverage during the first 18 months is subject to the beneficiaries’
timely payment of premiums at active employee rates for such coverage, provided that the beneficiary timely elects COBRA continuation
coverage, and provided, further, that if such premium subsidization results in adverse tax consequences for the Company or the
beneficiary, the beneficiary shall pay the entire premium for such coverage and the Company shall reimburse the beneficiary monthly,
on an after-tax basis, for the cost of such coverage in excess of the active employee premium. Coverage for the remainder of the
36-month continuation period is subject to the beneficiaries’ payment of the entire premium for such coverage. The medical
benefits provided under this Section shall terminate at such time that the Executive’s surviving spouse and covered dependents
become eligible for medical benefits under any other benefit plan or policy to the extent not prohibited by COBRA.

 

(d)All
unexercised stock options and all unpaid restricted stock or restricted stock units and other equity incentive compensation awards
previously granted to the Executive shall be exercisable or forfeited, as the case may be, in accordance with the applicable agreement
or award between the Company and the Executive.

 

4.4Without Cause
or for Good Reason following a Change in Control. If, prior to the expiration of the Term and within two years following a
Change in Control, the Company terminates the Executive’s employment without Cause (other than for Disability) or the Executive
terminates his employment for Good Reason, the Executive shall be entitled to receive:

 

(a)Within
ten days after the date of termination, a lump-sum payment equal to the sum of:

 

(i)The
cash amounts described in Section 4.1 above;

 

(ii)Two
times the Executive’s Base Salary as then in effect; and

 

(iii)Two
times the amount of the Incentive Bonus paid to the Executive for the most recently completed fiscal year.

 

(b)Continuation
of medical benefits under the Company’s group health plan as in effect from time to time for the Executive and his spouse
and covered dependents for 36 months. Coverage during the first 18 months is subject to the Executive’s timely payment of
premiums at active employee rates for such coverage and shall be concurrent with coverage under COBRA, provided that the Executive
timely elects COBRA continuation coverage, and provided, further, that if such premium subsidization results in adverse tax consequences
for the Company or the Executive, the Executive shall pay the entire premium for such coverage and the Company shall reimburse
the Executive monthly, on an after-tax basis, for the cost of such coverage in excess of the active employee premium. Coverage
for the remainder of the 36-month continuation period is subject to the Executive’s payment of the entire premium for such
coverage. The medical benefits provided under this Section shall terminate at such time that the Executive and his spouse and covered
dependents become eligible for medical benefits under any other benefit plan or policy to the extent not prohibited by COBRA.

 

    	-5-

    	 	 	 

    

 

(c)All
unexercised stock options, outstanding unpaid restricted stock or restricted stock units and equity incentive compensation awards
previously granted to the Executive shall be exercisable or paid, as the case may be, in accordance with the applicable agreement
or award between the Company and the Executive. 

 

Notwithstanding the foregoing, in the event
the Change in Control is not a change in ownership or effective control within the meaning of Code Section 409A (as defined in
Section 13 below) and the regulations thereunder, payment of the amounts described in Section 4.4(a)(ii) and 4.4(a)(iii) shall
be paid over the same time frame and in the same manner as the payments described in Section 4.2(b) and 4.2(c), respectively.

 

4.5Entitlement
To Benefits. Notwithstanding any other Section of this Agreement, upon termination of the Executive’s employment, the
Executive shall be entitled to all vested benefits, vested stock-based awards, accrued and unused vacation, return of personal
effects, COBRA rights and other rights that may not be waived or released as a matter of law, in addition to any other sums, benefits,
or rights which are provided for in this Agreement.

 

4.6Release of
Claims. The Executive agrees that, as a condition to receiving benefits under this Section 4, the Executive will execute a
general release of claims in a form provided by the Company on the date of termination of the Executive’s employment.. If
the Executive timely executes the release and does not revoke the release, payments of any continued Base Salary shall begin on
the first payroll period occurring after the 55th day following the Executive’s termination of employment, and the first
payment shall include amounts that would have been paid to the Executive in the interim had employment continued. Any release executed
by the Executive shall contain exceptions to the release for (a) any existing right to indemnification, contribution and a defense,
(b) any directors and officers and general liability insurance coverage of the Executive, (c) the Executive’s rights as a
shareholder, (d) all vested rights of the Executive, (e) the Executive’s right to enforce this Agreement and (f) any rights
which cannot be waived or released as a matter of law.

 

4.7No Offset.
Subject to Section 6, there shall be no offset of any kind to the payment of the severance benefits described in this Section 4.

 

4.8Action
Required to Terminate the Executive. Action by the
affirmative vote of a majority of the members of the Board, other than the Executive, taken at a meeting of the Board or by
written consent of the Board shall be required for the Company to terminate the Executive’s
employment.

 

4.9Internal
Revenue Code Section 280G. If (a) in connection with a Change in Control, the Executive would be or is subject to an excise
tax under Section 4999 of the Internal Revenue Code (an “Excise Tax”) with respect to any cash, benefits or other
property received, or any acceleration of vesting of any benefit or award (the “Change in Control Benefits”), and
(b) (i) the total net after-tax value of the Change in Control Benefits to the Executive (taking into account federal, state and
local income and employment taxes and the Excise Tax) is less than (ii) the total net after-tax value of the Change in
Control Benefits (taking into account federal, state and local income and employment taxes and the Excise Tax) reduced to the
largest amount payable without triggering the imposition of any Excise Tax, then the Change in Control Benefits payable under
this Agreement shall be reduced to the amount described in (b)(ii). No later than 30 days after the date of the Change in Control,
a nationally recognized accounting firm selected by the Company shall make a determination as to whether any Excise Tax would
be reported with respect to the Change in Control Benefits and, if so, the amounts described in each of (b)(i) and (b)(ii) above.
If a reduction to the Change in Control Benefits is necessary, the Executive shall determine the Change in Control Benefits to
be reduced, and the Company shall provide the Executive with such information as is necessary to make such determination. The
Company and the Executive shall furnish to the accounting firm such information and documents as the accounting firm may reasonably
request in order to make a determination under this Section 4.9. The Company shall be responsible for all fees and expenses connected
with the determinations by the accounting firm pursuant to this Section 4.9. The Executive agrees to notify the Company in the
event of any audit or other proceeding by the Internal Revenue Service or any taxing authority in which the Internal Revenue Service
or other taxing authority asserts that any Excise Tax should be assessed against the Executive and to cooperate with the Company
in contesting any such proposed assessment with respect to such Excise Tax.

 

    	-6-

    	 	 	 

    

 

4.10Definitions
of Terms Used in Section 4.

 

(a)Cause.
“Cause” shall exist if there is (i)
a material neglect by the Executive of his assigned duties, which includes any failure to follow the written direction of the
Board or to comply with the Company’s code of ethics or written policies, or repeated refusal by the Executive to perform
his assigned duties, in each case other than by reason of Disability, which continues for 30 days following receipt of written
notice from the Board; (ii) the commission by the Executive of any act of fraud or embezzlement against Company or any
of its Affiliates or the commission of any felony or act involving dishonesty; (iii)
the commission by the Executive of any act of moral turpitude which actually causes financial harm to the Company
or any of its Affiliates; (iv) a material breach by the Executive
of the terms of Section 5.1 of this Agreement or any other confidentiality or non-disclosure agreement of the Executive with the
Company; or (v) the Executive’s commencement of employment with
another company while he is an employee of the Company without the prior consent of the Board.

 

(b)Change
in Control. “Change in Control” shall have the meaning set forth in the Stock Plan, as in effect on the date of
this Agreement.

 

(c)Disability.
“Disability” means, in the sole judgment of the Board, the Executive’s inability to engage in any substantial
gainful activity by reason of any medically-determinable physical or mental impairment which can be expected to result in death
or which has lasted or can be expected to last for a continuous period of not less than 12 months.

 

(d)Good
Reason. “For Good Reason” shall mean voluntary termination of this Agreement by the Executive if, without the
prior consent of the Executive: (a) the Company shall relocate its principal
executive offices to a location outside the Houston, Texas metropolitan area, (b) there is a material reduction by the
Company in the Executive’s responsibilities, duties, authority, title or reporting relationship; or (c) the Company acts
in any way that would materially reduce the Executive’s Base Salary (as defined or subsequently increased pursuant to Section
3.1) or if the Company adversely affects the Executive’s participation in or reduces the Executive’s benefit under
any benefit plan of the Company in which the Executive is participating in a manner that results in a material negative change
to the Executive; provided, however, that termination for Good Reason by the Executive shall not be permitted unless (x) the Executive
has given the Company at least 30 day’s prior written notice that
he has a basis for a termination for Good Reason, which notice shall specify the facts and circumstances constituting Good
Reason, and (y) the Company has not remedied such facts and circumstances constituting Good Reason within such 30-day period.

 

    	-7-

    	 	 	 

    

 

5.Restrictive
Covenants.

 

5.1Confidential
and Proprietary Information. During the Term and for a period of two years following
the date of termination of the Executive’s employment with the Company (except as to trade secrets, which shall not be disclosed
at any time), the Executive acknowledges that he has as of the date of this Agreement, and will continue to have, access to and
use of Confidential and Proprietary Information and agrees that he will not, either directly or indirectly, and he will
not permit any Covered Entity which is Controlled by the Executive to, either directly or indirectly, divulge to any Person or
use any of the Confidential and Proprietary Information, except as required in connection with the performance of the Executive’s
duties to the Company. The Executive and each Covered Entity (and if deceased, his personal representative) shall promptly, following
a request therefor from the Company, return to the Company, without retaining copies, all tangible items
(including electronic data storage devices) which are or which
contain Confidential and Proprietary Information.

 

5.2Non-Competition;
Non-Solicitation; No Disparagement. The Executive acknowledges and agrees that: (i) through his continuing services to the
Company, he will learn valuable trade secrets and other Confidential and Proprietary Information relating to the Company’s
businesses; (ii) the Executive’s services to the Company are unique in nature, and (iii) the Company would be irreparably
damaged if the Executive were to provide services to any Person in violation of the restrictions contained in this Agreement. Accordingly,
as an inducement to the Company to enter into this Agreement, the Executive agrees that except in the Executive’s capacity
as an employee of the Company, neither the Executive nor any Covered Entity shall directly or indirectly, without the prior written
consent of the Company (which may be withheld in its sole discretion), during the Restriction Period:

 

(a)engage
or participate in, anywhere in the Territory (as defined below), as an employee, owner, partner, shareholder, officer, director,
member, manager, advisor, consultant, lender, lessor, agent or (without limitation by the specific enumeration of the foregoing)
otherwise, or permit his name to be used by or render services of any type for, any Competing Business (as defined below) or any
Person developing a Competing Business; provided, however, that nothing in this Agreement shall prevent the Executive from acquiring
or owning, but solely as a passive investment, up to five percent of any class of voting securities registered under the Securities
Exchange Act of 1934, as amended, of any issuer engaged in a Competing Business;

 

(b)take
any action which could reasonably be expected to divert from the Company any opportunity which would be within the scope of the
Company’s business;

 

(c)solicit
or attempt to solicit any Person who is or has been (A) a customer of the Company at any time within one year prior to the date
of termination of the Executive’s employment to purchase any product or service which may be provided by the Company, or
(B) a customer, supplier, licensor, licensee or other business relation conducting business with the Company at any time within
one year prior to the date of termination of the Executive’s employment, to cease doing business with, or to alter or limit
its business relationship with, the Company;

 

    	-8-

    	 	 	 

    

 

(d)solicit,
attempt to solicit, or assist anyone else to solicit any Business Associate (as defined below) to terminate his, her or its association
with the Company;

 

(e)recruit,
solicit, hire or otherwise retain the services of any Business Associate, whether on a full-time basis, part-time basis or otherwise
and whether as an employee, independent contractor, consultant, advisor or in another capacity; or

 

(f)make
(or cause to be made) to any Person any knowingly disparaging, derogatory or other negative statement about the Company or any
of its officers, directors, employees or agents.

 

5.3Protection
of and Rights to Intellectual Property. All Intellectual Property developed by the Executive during the Term shall be the sole
and exclusive property of the Company, without further compensation. Any Intellectual Property based upon Confidential and Proprietary
Information and developed at any time either during or following the Term shall be the property of the Company. The Executive shall
assign to the Company or its designees, the entire right, title and interest in said Intellectual Property. The Executive shall,
at the Company’s request and expense, make applications for domestic or foreign patents, execute all documents necessary
thereto, assist in securing, defending or enforcing any such title and right thereto, and assist the Company in any other claims
or litigation involving said Intellectual Property. Consistent with applicable law, the Company acknowledges that no provision
in this Agreement is intended to require assignment of any of the Executive’s rights in an invention if no equipment, supplies,
facilities, or trade secret information of the Company was used, and the invention was developed entirely on the Executive’s
own time, unless the invention relates to the Business or to the Company’s current or demonstrably anticipated business,
research or development, or the invention results from any work performed by the Executive for the Company.

 

5.4Specific
Performance. The Executive agrees that any violation by him of Sections 5.1, 5.2 or 5.3 of this Agreement would be highly injurious
to the Company and would cause irreparable harm to the Company. By reason of the foregoing, the Executive consents and agrees that
if he violates any provision of Sections 5.1, 5.2 or 5.3 of this Agreement, the Company shall be entitled, in addition to any other
rights and remedies that it may have, to apply to any court of competent jurisdiction in Houston, Texas for specific performance
and/or injunctive or other equitable relief in order to enforce, or prevent any continuing violation of, the provisions of such
Sections 5.1, 5.2 and 5.3. The Executive also recognizes that the territorial, time and scope limitations set forth in Sections
5.1 and 5.2, as applicable, are reasonable and are properly required for the protection of the Company, and, in the event that
any such territorial, time or scope limitation is deemed to be unreasonable by a court of competent jurisdiction, the Company and
the Executive agree, and the Executive submits, to the reduction of any or all of said territorial, time or scope limitations to
such an area, period or scope as said court shall deem reasonable under the circumstances. If such partial enforcement is not possible,
then to the extent permitted by law, the provision shall be deemed severed, and the remaining provisions of this Agreement shall
remain in full force and effect. If any covenant in Section 5.1 or 5.2 is breached, then (to the extent permitted by law) the Restricted
Period with respect to such covenant shall be extended by the number of days during which such breach exists.

 

5.5Impact of
Breach of Section 5 on Certain Payments. The Executive agrees that the payment of any compensation or benefits pursuant to
Section 4.2 or 4.4 is conditioned on the Executive’s compliance with the provisions of Sections 5.1, 5.2 and 5.3.

 

    	-9-

    	 	 	 

    

 

5.6Definitions
of Terms Used in Section 5.

 

(a)Affiliate.
An “Affiliate” of a Person is another Person that Controls, is Controlled by or is under common Control with such first
Person.

 

(b)Business
Associate. “Business Associate” means any employee, representative, consultant or agent of the Company who is acting
in such capacity as of the date hereof or has acted in such capacity at any time within the 12 month period immediately preceding
the date of hire, recruitment, solicitation or retention by the Executive or a Covered Entity.

 

(c)Competing
Business. A “Competing Business” means a business which is, in whole or in part, directly or indirectly, competitive
with the business of the Company as conducted at the time of enforcement of Section 5.2 (if such enforcement occurs prior to the
termination of the Executive’s employment) or at the time of the termination of the Executive’s employment (if enforcement
of Section 5.2 occurs at or following such time) or under development at either such time, as the case may be, and expected to
be introduced or undertaken within one year following such date of enforcement. Without limiting the generality of the foregoing
sentence, the term Competing Business shall include the business of the Company.

 

(d)Confidential
and Proprietary Information. “Confidential and Proprietary Information” means all information and any idea in any
form whatsoever, tangible or intangible, pertaining in any manner to the business of the Company or any Affiliate of the Company,
or to the Company’s clients, consultants or business associates, unless the information is or becomes publicly known
through lawful means (other than disclosure by the Executive, unless such disclosure by the Executive is made in good faith in
the course of performing the Executive’s duties under this Agreement, or with the express written consent of the Board of
Directors).

 

(e)Control.
“Control” means (i) in the case of corporate entities, direct or indirect ownership of more than 50% of the stock or
participating assets entitled to vote for the election of directors; and (ii) in the case of non-corporate entities (such as individuals,
limited liability companies, partnerships or limited partnerships), either (A) direct or indirect ownership of more than fifty
percent 50% of the equity interest or (B) the power to direct the management and policies of the noncorporate entity.

 

(f)Covered
Entity. “Covered Entity” means every Affiliate of the Executive, and every Person in which the Executive has invested
(whether through debt or equity securities), or to which the Executive has contributed any capital or made any advances, or in
which any Affiliate of the Executive has an ownership interest or profit sharing percentage, or a firm from which the Executive
or any Affiliate of the Executive receives or is entitled to receive income, compensation or consulting fees, or in which the Executive
or any Affiliate of the Executive has an interest as a lender (other than solely as a trade creditor for the sale of goods or provision
of services that do not otherwise violate the provisions of this Agreement). The agreements of the Executive contained herein specifically
apply to each Person which is presently a Covered Entity or which becomes a Covered Entity subsequent to the date of this Agreement.
Notwithstanding the foregoing, nothing contained in this Agreement prohibits the Executive or any Affiliate of the Executive from
owning less than five percent of any class of voting securities registered under the Securities Exchange Act of 1934, as amended,
of any issuer, and no such issuer shall be considered a Covered Entity solely by virtue of such ownership or the incidents thereof.
Further notwithstanding anything contained in the foregoing provisions to the contrary, the term “Covered Entity” shall
not include the Company, any Subsidiary of the Company, or any Affiliate of the Company or any such Subsidiary.

 

    	-10-

    	 	 	 

    

 

(g)Engage.
To “engage” in a business means (i) to render services in (or with respect to) the Territory for that business, or
(ii to own, manage, operate or control (or participate in the ownership, management, operation or control of) an enterprise engaged
in that business in (or with respect to) the Territory.

 

(h)Intellectual
Property. “Intellectual Property” means all discoveries, inventions, improvements, computer programs, formulas,
ideas, devices, writings or other intellectual property (including any notes, records, reports, sketches, plans, memoranda and
other tangible information relating to such Intellectual Property), whether or not subject to protection under the patent or copyright
laws, which the Executive shall conceive solely or jointly with others, in the course of, or within the scope of employment, or
which relates directly to the business of the Company or its actual or anticipated research and development, or which was conceived
or created using the Company’s materials or facilities, whether during or after working hours.

 

(i)Person.
“Person” means any individual, partnership, limited partnership, corporation, limited liability company, association,
joint stock company, trust, joint venture, unincorporated organization or any other entity.

 

(j)Restriction
Period. “Restriction Period” shall mean the period commencing on the date hereof and continuing during the Executive’s
employment with the Company and for a period of one year (two years in the event the Executive is entitled to continuation of Base
Salary under Section 4.2(b)) following the date of termination of the Executive’s employment with the Company.

 

(k)Solicit.
To “solicit” means to encourage or induce, or to take any action that is intended or calculated to encourage or induce,
or which is reasonably likely to result in encouragement or inducement.

 

(l)Subsidiary.
“Subsidiary” shall mean any Person which is Controlled, directly or indirectly, by the Company, including through the
ownership of stock or other interests in one or more other business enterprises which are connected with the Company.

 

(m)Territory.
“Territory” means the United States of America.

 

6.Recoupment.
All incentive compensation paid under this Agreement shall be subject to the Company’s Incentive Compensation Recoupment
Policy, as from time to time in effect.

 

7.Withholding.
The Executive authorizes the Company to make any and all applicable withholdings of federal and state taxes and other items the
Company may be required to deduct, as such items may exist under this Agreement or otherwise from time to time.

 

    	-11-

    	 	 	 

    

 

8.Successors
and Assigns. This Agreement is intended to bind and inure to the benefit of and be enforceable by the Executive, the Company
and their respective heirs, successors and assigns, except that the Executive shall not have any right to assign or otherwise transfer
this Agreement, or any of the Executive’s rights, duties or any other interest herein, to any party without the prior written
consent of the Company, and any such purported assignment shall be null and void.

 

9.Survival
of Rights and Obligations. The rights and obligations of the parties as stated herein shall survive the termination of
this Agreement.

 

10.Entire
Agreement. This Agreement sets forth the parties’ sole and entire agreement regarding the subject matter hereof and
supersedes any and all other agreements, statements and representations of the parties, including but not limited to any employment
agreement or other agreement regarding the Executive’s compensation or terms of employment entered into prior to the date
hereof. Notwithstanding the foregoing, benefits provided under the Company’s employee benefit plans, including any awards
granted under the Stock Plan, will be subject to the terms and conditions of the relevant plans and, where applicable, award agreements.

 

11.Modifications
or Waivers. The terms and provisions of this Agreement may be modified or amended only by a written instrument executed
by each of the parties hereto, and compliance with the terms and provisions hereof may be waived only by a written instrument executed
by each party entitled to the benefits thereof. No failure or delay on the part of any party in exercising any right, power, or
privilege granted hereunder shall constitute a waiver thereof, nor shall any single or partial exercise of any such right, power,
or privilege preclude any other or further exercise thereof or the exercise of any other right, power, or privilege granted hereunder.

 

12.Governing
Law. This Agreement shall be governed pursuant to federal law, as applicable or the laws of the State of Texas, without
giving effect to any choice of law or conflict of law provision or rule that would cause the application of the laws of any jurisdiction
other than the State of Texas.

 

13.Internal
Revenue Code Section 409A. If at the time of the Executive’s termination of employment for reasons other than death
he is a “specified employee” (as such term is defined and determined in accordance with the procedures set forth in
Treas. Reg. §1.409A-1(i)), any amounts payable to the Executive pursuant to this Agreement that are subject to Section 409A
of the Internal Revenue Code (“Code Section 409A”) shall not be paid or commence to be paid until six months following
the Employee’s termination of employment or, if earlier, the Employee’s subsequent death. Each cash payment made pursuant
to Section 4 shall be considered a separate payment for purposes of Code Section 409A. This
Agreement is to be construed and interpreted in a manner consistent with Code Section 409A, and the parties hereto agree to amend
this Agreement as necessary to avoid the imposition of penalty taxes under Code
Section 409A against the Executive. No payment required to be made hereunder shall be accelerated or deferred by the Company or
the Executive in a manner that would subject such payment to any excise tax under Code Section 409A.

 

14.Severability.
If any part, clause or condition of this Agreement is held to be partially or wholly invalid, unenforceable or inoperative for
any reason whatsoever, such shall not affect any other provision or portion hereof, which shall continue to be effective as though
such invalid, unenforceable or inoperative part, clause or condition had not been made. If any provision, or its application to
any Person or circumstance, is held by a court of competent jurisdiction or an arbitrator pursuant to Section 18 hereof to be invalid
or unenforceable, the court or the arbitrator is empowered to and shall modify any such provision so as to be enforceable. All
remaining provisions shall remain valid and enforceable.

 

    	-12-

    	 	 	 

    

 

15.Interpretation.

 

15.1Section
Headings. The section and subsection heading of this Agreement are included for purposes of convenience only, and shall not
affect the construction or interpretation of any of its provisions.

 

15.2Gender and
Number. Whenever required by the context, the singular shall include the plural, the plural shall include the singular, and
the masculine gender shall include the neuter and feminine genders and vice versa.

 

16.Notices.
All notices and other communications under or in connection with this Agreement shall be in writing and shall be deemed given (a)
if delivered personally, upon delivery, (b) if delivered by registered or certified mail (return receipt requested), upon the earlier
of actual delivery or three days after being mailed, (c) if given by overnight courier with receipt acknowledgment requested, the
next business day following the date sent, or (d) if given by telecopy, upon confirmation of transmission by telecopy, in each
case to the parties at the following addresses:

 

	To
    the Company:	Houston Wire &
    Cable Company
	 	10201 North Loop East
	 	Houston, TX  77029
	 	Facsimile:  (713)
    609-2168
	 	Attention:  Chairman
    of the Board
	 	 
	with a copy to:	Schiff Hardin LLP
	 	6600 Sears Tower
	 	Chicago, Illinois  60606
	 	Facsimile:  (312)
    258-5600
	 	Attention:  Robert
    Minkus
	 	 
	To the Executive:	James L. Pokluda III
		At the most recent address
    on file with the Company

 

17.Joint
Preparation. Each of the parties to this Agreement has negotiated it at length, and has had the opportunity to consult
with and be represented by its or his own competent counsel. This Agreement is therefore deemed to have been jointly prepared by
the parties and any uncertainty or ambiguity existing in it shall not be interpreted against any party, but rather shall be interpreted
according to the rules generally governing the interpretation of contracts.

 

18.Mediation
and Arbitration. If
requested by the Company or the Executive, any unresolved controversy or claim arising from or related to this Agreement or breach
hereof shall be resolved by use of mediation initially, and if that fails to resolve the matter, by arbitration. Mediation shall
be in Houston, Texas, before one mediator qualified in mediation of employment matters agreed upon by the parties, or if no agreement
on a mediator is reached, before a mediator chosen according to the American Arbitration Association (“AAA”) National
Rules for the Resolution of Employment Disputes, specifically the Employment Mediation Rules. There shall be only one mediator.
The parties will use best efforts to obtain a mediator and complete the mediation within 30 days from the date of request for
mediation. If the mediation has not been completed within 45 days from the date of request for mediation, any party may, by notice
to all other parties and the AAA, forego mediation and move directly to arbitration under the AAA National Rules for the Resolution
of Employment Disputes; provided, however, that such arbitration shall be before three arbitrators, not one, and shall be in Houston,
Texas. Also, by written agreement signed by the Company and the Executive, the parties hereto may agree to forego mediation, may
make any agreement regarding scheduling of the mediation or the arbitration process, discovery or hearing, which agreement shall
be binding on the mediator or arbitrator, despite any AAA rule to the contrary. In any arbitration, if the Executive is the prevailing
party, the Company shall pay all reasonable attorney’s fees of the Executive, as well as the expenses and administrative
fees related to the arbitration. If the Company is the prevailing party at the arbitration, each party shall pay its own attorney’s
fees and expenses and its share of the administrative fees and expenses related to the arbitration. Notwithstanding the foregoing
provisions of this Section  18, (a) the parties are
not required to arbitrate any issue for which injunctive relief is sought by any party hereto, (b) all parties may seek injunctive
relief in any federal or state court having jurisdiction located in Harris County, Texas, and (c) claims of worker’s compensation
and unemployment compensation shall not be subject to arbitration under this Agreement.

 

    	-13-

    	 	 	 

    

 

19.Cooperation
and Further Actions. The parties agree to perform any and all acts and to execute and deliver any and all documents necessary
or convenient to carry out the terms of this Agreement.

 

20.Counterparts.
This Agreement may be executed in two or more counterparts, including electronically transmitted counterparts, each of which shall
be deemed an original and all of which shall be considered one and the same instrument.

 

[Signature Page Follows]

    	-14-

    	 	 	 

    

 

IN
WITNESS WHEREOF, the parties hereto have executed, or caused their duly authorized representatives to execute, this Agreement
as of the Effective Date.

 

 

 

	 	EXECUTIVE
	 	 	 
	 	 	 
	 	 	 
	 	 	James
    L. Pokluda III
	 	 	 
	 	 	 
	 	HOUSTON WIRE &
    CABLE COMPANY
	 	 	 
	 	 	 
	 	By: 	 
	 	 	William
    H. Sheffield
	 	 	Chairman
    of the Board

 

    	-15-

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