Document:

aljj-ex103_6.htm

 

Exhibit 10.3

 

FIRST AMENDMENT TO EMPLOYMENT AGREEMENT 

THIS FIRST AMENDMENT TO EMPLOYMENT AGREEMENT (this “Amendment”) is made and entered into on December 29, 2017, by and between Floors-N-More, LLC, a Nevada limited liability company (the “Company”) and Steven Chesin (the “Executive”), and shall become effective on January 1, 2018. 

WHEREAS, the Executive and the Company previously entered into that certain Employment Agreement (the “Employment Agreement”) dated as of April 14, 2014; 

WHEREAS, the Company is the wholly owned subsidiary of ALJ Regional Holdings, Inc. (the “Parent”); and

WHEREAS, the Compensation, Nominating and Corporate Governance Committee of the Board of Directors of the Parent and the Executive believe it is in the best interests of the Company to amend the Employment Agreement in the manner reflected herein. 

NOW THEREFORE, in consideration of the continuing mutual covenants and agreements set forth herein and in the Employment Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: 

	
1.
	
Section 1.1—Employment, Duties shall be amended and restated in its entirety to read and provide as follows:

The Company hereby employs the Executive for the Term (as defined in Section 2.1), to render exclusive and full-time services to the Company as the President and Chief Executive Officer of the Company, or in such other executive position as may be mutually agreed upon by the Board of Directors (including the Compensation, Nominating and Corporate Governance Committee thereof, the “Board”) of ALJ Regional Holdings, Inc. (the “Parent”) and the Executive, and to perform such other duties consistent with such position or as may be assigned to the Executive by the Board. 

	
2.
	
Section 2.1—Term of Employment shall be amended and restated in its entirety to read and provide as follows:

 

The term of the Executive’s employment under this Employment Agreement (the “Term”) shall commence on January 1, 2018 (the “Effective Date”), and shall continue until January 1, 2019, subject to earlier termination pursuant to Section 4.  Notwithstanding the foregoing, both the Company and the Executive agree that the Executive’s employment is “at will” and may be terminated by either the Company or the Executive at any time and for any reason; provided, however, that upon certain terminations of employment, the Executive may be entitled to severance as is specified in Section 4.4 below.

	
3.
	
Section 3.2—Incentive Compensation shall be amended and restated in its entirety to read and provide as follows:

Commencing with the 2018 calendar year, the Executive shall be eligible to earn a bonus with respect to such calendar year ending during the Term computed in accordance with the provisions hereafter (an “Annual Bonus”).  The Annual Bonus, if any, shall be equal to the sum of (i) five percent (5%) of the Pre-Bonus Earnings in excess of one million five hundred thousand dollars ($1,500,000) but not more than five million dollars ($5,000,000) and (ii) two and half percent (2.5%) of the Pre-Bonus Earnings in excess of five million dollars ($5,000,000) for such year. The “Pre-Bonus Earnings” amount shall equal the EBITDA (as defined below) of the Company before any bonus amount owed to the Executive but after all other bonus amounts.

 

 

An Annual Bonus, if earned in accordance with this Agreement, shall be paid no later than the fifteenth day of the third month following the year with respect to which such bonus was earned, provided that, except as otherwise specifically provided for in this Agreement (including, without limitation, Sections 4.1, 4.2 and 4.4), as a condition precedent to any bonus entitlement the Executive must remain in employment with the Company at the time that the Annual Bonus is paid. Notwithstanding the foregoing, to the extent that Section 162(m) of the Internal Revenue Code of 1986, as amended (the “Code”), may be applicable, such Annual Bonus shall be subject to, and contingent upon, such shareholder approval as is necessary to cause the Annual Bonus to qualify as “performance-based compensation” under Section 162(m) of the Code and the regulations promulgated thereunder as well as any other required approvals.

Notwithstanding anything to the contrary contained herein, if the Board or any other relevant committee or person, including the Executive Chairman of Parent, determines that any restatement, revision or change requires a change in the calculation of EBITDA for any particular fiscal year of the Company, the Board may require reimbursement from the Executive of any excess Annual Bonus paid to the Executive as a result of the recalculated EBITDA for such particular fiscal year of the Company.

For the purposes of this Agreement, “EBITDA” means for any fiscal year of the Company, consolidated operating income for such fiscal year of the Company plus, without duplication and to the extent reflected as a charge in the statement of such operating income for such fiscal year, the sum of (i) depreciation and amortization expense (excluding amounts of prepaid incentives under customer contracts), (ii) any extraordinary non-cash expenses or losses, (iii) all restructuring costs (as defined under U.S. generally accepted accounting principles (“GAAP”)), (iv) fees paid to the Company’s external advisors in connection with acquisitions for the business (whether or not consummated) and (v) effects of changes in accounting policy and GAAP, in the case of clauses (i) through (iii) above, solely with respect to the Company, and minus without duplication and to the extent included in the statement of such operating income for such period, the sum of (a) any extraordinary or non-recurring non-cash income or gains (including, whether or not otherwise includable as a separate item in the statement of such operating income for such period, gains on the sales of assets outside of the ordinary course of business), (b) effects of changes in accounting policy and GAAP, and (c) any cash payments made during such period in respect of items described in clause (ii) above subsequent to the fiscal quarter in which the relevant non-cash expenses or losses were reflected as a charge in the statement of operating income, in the case of clauses (a) through (c) above, solely with respect to the Company, all as determined on a consolidated basis, all of the foregoing to be determined by the Board or any other relevant committee or person, including the Executive Chairman of the Parent.

	
4.
	
The fourth sentence in Section 3.5—Paid Time Off is hereby deleted in its entirety.

	
5.
	
Section 3.6—Benefits is hereby amended by inserting the following sentences immediately after the first sentence of such section:

In addition, during the Term, the Company shall pay for (i) the Executive’s key man life insurance premiums, which the Company shall be the sole beneficiary of any such key man life insurance policy, and neither the Executive nor the heirs or personal representatives of the Executive shall have any interest in or to any proceeds associated with such policy; and (ii) the premiums for a one million dollar ($1,000,000) life insurance policy for the Executive, provided that the Executive shall be responsible for all tax related expenses associated with such policy.    

	
6.
	
The second sentence in Section 4.1—Death shall be amended and restated in its entirety to read and provide as follows:

The Company shall pay to the Executive’s estate: (i) any Base Salary earned but not paid; (ii) a pro-rated Annual Bonus for the year in which the Executive dies, based on the number of days of the fiscal year worked by the Executive, which pro-rated Annual Bonus will be paid at the time and in the 

 

 

manner such Annual Bonus would have been paid to the Executive had he not died; and (iii) an Annual Bonus for the year prior to the year in which the Executive dies if at the time of death the Executive has otherwise earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus would have been paid to the Executive had he not died.

	
7.
	
The second sentence in Section 4.2—Disability shall be amended and restated in its entirety to read and provide as follows:

If the Company elects to terminate the Agreement by reason of Disability, the Company shall pay to the Executive promptly after the notice of termination: (i) any Base Salary earned but not paid, (ii) a pro-rated Annual Bonus for the year in which the Executive is terminated, based on the number of days of the fiscal year worked by the Executive until the date of the notice of termination, which pro-rated Annual Bonus will be paid at the time and in the manner such Annual Bonus would have been paid to Executive had he not been terminated, and (iii) an Annual Bonus for the year prior to the year in which the Executive is terminated if at the time of termination the Executive has otherwise earned an Annual Bonus payment for such prior year and has not yet been paid such Annual Bonus, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus would have been paid to the Executive had he not been terminated, in each case less any other benefits payable to the Executive under any disability plan provided for hereunder or otherwise furnished to the Executive by the Company.

	
8.
	
The first sentence in Section 4.4—Termination by Company without Cause or by the Executive for Good Reason shall be amended and restated in its entirety to read and provide as follows:

If the Executive’s employment is terminated prior to the end of the Term by the Company without Cause (other than by reason of death or Disability) or by the Executive for Good Reason (as defined below), the Executive shall receive (i) any Base Salary earned but not paid and (ii) as severance pay,(a) one-times Base Salary, which shall be payable in substantially equal installments for the 12-month period following the Executive’s termination of employment (the “Severance Period”) and in accordance with the Company’s normal payroll practices, (b) continuation for the Severance Period of group health plan benefits to the extent authorized by and consistent with 29 U.S.C. § 1161 et seq. (commonly known as “COBRA”), with the cost of the regular premium for such benefits paid in full by the Company (provided that the Company shall not be required to pay any portion of the premium if such payment would result in additional taxes imposed on the Company), (c) an Annual Bonus for the year in which termination occurred (which, for the avoidance of doubt, shall not be pro-rated and shall be based on the entire year) if the Executive would have been otherwise entitled to receive such bonus hereunder had the Executive been employed at the time such Annual Bonus is normally paid, which Annual Bonus will be paid at the time and in the manner such Annual Bonus would have been paid to the Executive had the Executive not been terminated, and (d) an Annual Bonus for the year prior to the year in which the Executive is so terminated if, at the time of termination, the Executive has otherwise earned an Annual Bonus payment for such prior year and has not yet been paid such bonus due to such termination, which prior year Annual Bonus will be paid at the time and in the manner such prior year Annual Bonus would have been paid to the Executive had such Executive not been terminated.

	
9.
	
The last sentence in Section 5.2 shall be amended and restated in its entirety to read and provide as follows:

The “Restricted Period” is that period commencing on the Effective Date, continuing during the Term and for any period the Executive is employed by the Company after the Term (including after expiration of this Agreement) and continuing through, and expiring on the expiration of the Severance Period, if any, in the event the Executive’s employment is terminated by the Company or any successor without Cause or by the Executive for Good Reason. 

 

 

	
10.
	
The address for Shearman & Sterling LLP in Section 8—Notices is hereby deleted and replaced with the following:

 

1460 El Camino Real, 2nd Floor

Menlo Park, CA  94025

	
11.
	
All other provisions of the Employment Agreement shall remain in full force and effect.

 

 

[Signature Page Follows]

 

 

IN WITNESS WHEREOF, the parties have executed this Amendment to the Employment Agreement on December 29, 2017. 

 

		
	
FLOORS-N-MORE, LLC

	
 
	
 

	
 
	
 

	
By:
	
 /s/ T. Robert Christ

	
Name:
	
T. Robert Christ

	
Title:
	
Chief Financial Officer

	
 
	
 

	
 
	
 

	
 
	
 

	
EXECUTIVE

	
 
	
 

	
 
	
 /s/ Steven Chesin

	
 
	
Steven Chesinex_107835.htm

Exhibit 10.1

 

PROMISSORY NOTE

 

	
			$200,000.00

				
			 

				
			March 8, 2018

			

 

                             FOR VALUE RECEIVED, ZERO GRAVITY SOLUTIONS, INC., a Nevada corporation, its successors and assigns (“Maker”), here-by promises to pay to the order of Michael T. Smith, or his successors or assigns located at 19503 Roseto Way, Naples, Florida 34110 (“Payee”), the principal amount of TWO HUNDRED THOUSAND DOLLARS ($200,000.00), together with interest on the principal balance outstanding hereunder, from (and including) the date hereof until (but not including) the date of payment, at the interest rate specified below, in accordance with the following terms and conditions:

 

	 	
			1.

				
			Stated Interest Rate. Except as provided in Section 2 below, the unpaid principal balance from day to day outstanding hereunder shall bear interest at a rate per annum equal to ten percent (10%) per annum (the “Stated Interest Rate”) calculated on the basis of the actual days elapsed but computed as if each year consisted of 360 days.

			

 

	 	
			2.

				
			Payments. All unpaid principal and any accrued but unpaid interest thereon and all other amounts payable hereunder shall be due and payable on March 7, 2020.

			

 

	 	
			3.

				
			Interest Payments. Interest shall accrue at the Stated Interest Rate beginning on the date hereof on the unpaid principal amount of this Note and shall be payable to Payee quarterly in cash. Each such payment shall be made within 15 calendar days from the end of the applicable calendar quarter.

			

 

	 	
			4.

				
			Prepayment. Maker may prepay all or any portion of the interest and the unpaid principal balance of this Note at any time, or from time to time; however, Payee shall receive minimum interest equivalent to one year at the Stated Interest Rate calculated using the principal balance as of the origination date.

			

 

	 	
			5.

				
			Application and Place of payments. Payments received by Payee with respect to the indebtedness evidenced hereby shall be applied in such order and manner as Payee in its sole and absolute discretion may elect. Unless Payee otherwise elects, payments received by Payee shall be applied first to accrued and unpaid interest, next to the principal balance then outstanding hereunder, and the remainder to Additional Sums (as hereinafter defined) or other costs or added charges provided for in this Note. Payments hereunder shall be made at the address for Payee first set forth above or at such other address as Pay e may specify to Maker in writing.

			

 

	 	
			6.

				
			Events of Default; Acceleration. The occurrence of any one or more of the following events shall constitute an “Event of Default” hereunder, and upon such Event of Default, the entire principal balance outstanding hereunder, together with all accrued interest and other amounts payable hereunder, at the election of Payee, shall become immediately due and payable, without any notice to Maker, provided that in the case of any of the Events of Default in paragraphs (b), (c) or (d) below, the remainder of the debt evidenced hereby shall automatically become due and payable, without presentment, demand, protest or any other notice of any kind, all of which are hereby expressly waived by Maker: 

			

 

	 	
			a.

				
			Nonpayment of principal, interest, or other amounts when the same shall become due and payable hereunder, and Maker does not cure such failure to pay within three days after the date such payment is due; or

			

	 	
			b.

				
			The failure of Maker to comply with any provision of this Note; or

			

	 	
			c.

				
			The dissolution, winding-up liquidation or termination of the existence of Maker or the sale or disposition of substantially all of the assets of Maker’s business; or

			

	 	
			d.

				
			The making by Maker of an assignment for the benefit of its creditors; or

			

	 	
			e.

				
			The appointment of a receiver for Maker or the involuntary filing against Maker, which is not stayed or dismissed within 30 days of filing, or the voluntary filing by Maker of a petition of bankruptcy.

			

 

	 	
			7.

				
			Contracted For Interest.

			

 

	 	
			a.

				
			Maker agrees to pay an effective contracted for rate of interest equal to the rate of interest resulting from all interest payable as provided in this Note, plus the additional rate of interest resulting from the Additional Sums. The Additional Sums shall consist of all fees, charges, goods, things in action, or any other sums or things of value (other than interest payables as provided in this Note) paid or payable by Maker, pursuant to this Note, that may be deemed to be interest for the purpose of any law of the state of Florida that may limit the maximum amount of interest to be charged with respect to this lending transaction. The Additional Sums shall be deemed to be interested for the purposes of any such law only.

			

 

 

 

 

	 	
			b.

				
			Maker understands and believes that this transaction complies with the usury laws of the state of Florida; however, if any interest or other charges in connection with this transaction are ever determined to exceed the maximum amount permitted by law, then Maker agrees that (i) the amount of interest or charges payable pursuant to this transaction shall be reduced to the maximum amount permitted by law; and (ii) any excess amount previously collected from Maker in connection with this transaction, which exceeded the maximum amount permitted by law, will be credited against the principal balance then outstanding hereunder. If the outstanding principal balance hereunder has been paid in full, the excess amount paid will be refunded to Maker.

			

 

	 	
			8.

				
			Costs of Collection. Maker agrees to pay all costs of collection, including, without limitation, attorney’s fees, whether or not suit is filed, and all costs of suit and preparation for suit (whether at trial or appellate level), in the event any payment of principal, interest, or other amount is not paid when bankruptcy law (or any similar state or federal law) in connection with the obligations evidenced hereby. In the event of any court proceeding, court costs and attorneys’ fees shall be set by the court and not by the jury and shall be included in any judgment obtained by Payee.

			

 

	 	
			9.

				
			No Waiver by Payee. Maker hereby waives presentment, protest, notice of dishonor, and notice of acceleration of maturity. No failure to accelerate the debt evidenced hereby by reason of default hereunder, acceptance of a past-due installment, or other indulgence granted from time to time shall be construed as a novation of this Note or as a waiver of such right of acceleration or of the right of Payee thereafter to insist upon strict compliance with the terms of this Note or to prevent the exercise of such right of acceleration or any other right granted hereunder or by applicable law. No extension of the time for payment of this Note shall operate to release, discharge, modify, change or affect the original liability of Maker under this Note, either in whole or in part, unless Payee agrees otherwise in writing. Maker agrees to continue to remain bound for the payment of principal, interest, and all other sums due under this Note notwithstanding any changes by way of release, surrender, exchange, modification, substitution of, failure to perfect or maintain perfection of any security for this Note. No delay or failure of Payee in exercising any right hereunder shall affect such right, nor shall any single or partial exercise of any right preclude further exercise thereof.

			

 

	 	
			10.

				
			Governing Law. This Note shall be construed in accordance with and governed by the laws of the state of Florida without regard to the choice of the law rules of the state of Florida.

			

 

	 	
			11.

				
			Times of Essence. Time is of the essence of this Note and each and every provision hereof.

			

 

	 	
			12.

				
			Conflicts; Inconsistency. In the event of any conflict or inconsistency between the provisions of this Note and the provisions of any one or more of the other documents executed in connection with this transaction, the provisions of this Note shall govern and control to the extent necessary to resolve such conflict or inconsistency.

			

 

 

	 	
			13.

				
			Amendments. No amendment, modification, change, waiver, release, or discharge hereof and hereunder shall be effective unless evidenced by an instrument in writing and signed by the party against whom enforcement is sought.

			

 

	 	
			14.

				
			Severability. The invalidity of any provision of this Note or portion of a provision shall not affect the validity of any other provision of this Note or the remaining portion of a portion of the applicable provision.

			

 

	 	
			15.

				
			Binding Nature. The provisions of this Note shall be binding upon and inure to the benefit of Maker and Payee and their respective heirs, personal representatives, successors, and assigns, as applicable.

			

 

 

 

 

	 	
			16.

				
			Notices. All notices, requests, demands, and other communications required or permitted under this Note shall be in writing and shall be deemed to have been duly given, made, and received when delivered against receipt, upon receipt requested, addressed as set forth below:

			

 

                        

	 	If to Maker:
	 	 
	 	Zero Gravity Solutions, Inc.
	 	190 NW Spanish River Blvd, Suite 101
	 	Boca Raton, FL 33441
	 	Attention: Harvey Kaye
	 	 
	 	 
	 	If to Payee:
	 	 
	 	Michael T. Smith
	 	19503 Roseto Way
	 	Naples, Florida 34110

                              

Either party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this section for the giving of notice.

 

	 	
			17.

				
			Construction. Maker and Payee participated in the drafting of this Note, and this document was reviewed by the respective legal counsel for Maker and Payee. The normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be applied to the interpretation of this Note. The language of this Note shall be construed as a whole according to its fair meaning. The word “include(s)” No inference in favor of, or against, Maker or Payee shall be drawn from the fact that one party has drafted any portion hereof.

			

 

 

IN WITNESS WHEREOF, Maker has executed this Note as of the date first set forth above.

 

	
			 

				
			ZERO GRAVITY SOLUTIONS, INC.

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			 

				
			 

				
			 

			
	
			 

				
			By: 

				
			/s/ Harvey Kaye

				
			 

			
	
			 

				
			 

				
			Harvey Kaye

				
			 

			
	
			 

				
			Its:

				
			Chairman

				
			 

			
	 	Date:	March 8, 2018	 
	 	 	 	 
	 	 	 	 
	ACCEPTED:	 	 	 
	 	 	 	 
	 	By:	/s/ Michael T. Smith	 
	 	 	Michael T. Smith	 
	 	Date:	March 8, 2018

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