Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
(e) Executive Officer Employment Agreements
On December 29, 2022, ToughBuilt Industries, Inc. (the "
Company
") entered into new employment agreements with each of Michael Panosian, the
Company's Chief Executive Officer, President, and Chairman of the Board of
Directors (the "
Panosian Employment Agreement
"), Martin Galstyan, the Company's Chief Financial Officer (the "
Galstyan Employment Agreement
"), Zareh Khachatoorian, the Company's Chief Operating Officer, and Secretary
(the "
Khachatoorian Employment Agreement
"), and Josh Keeler, as the Company's Chief Design Officer (the "
Keeler Employment Agreement
"), and together with the Panosian Employment Agreement, the Galstyan Employment
Agreement, the Khachatoorian Employment Agreement, and the Keeler Employment
Agreement, the "
Employment Agreements
"). The Employment Agreements are effective as of January 1, 2023 (the "
Effective Date
") and are at-will employment by and between the Company and the employees.
The material terms of the Employment Agreements are summarized below. Each of
the foregoing summaries do not purport to be complete and are qualified, in
their entirety, by the full text of the Employment Agreements, copies of which
are attached to this Current Report on Form 8-K as Exhibits 10.1 - 10.4.
Panosian Employment Agreement
The Panosian Employment Agreement provides that Mr. Panosian will serve as the
Company's Chief Executive Officer, President, and Chair of the Company's Board
for a term beginning on the Effective Date, and ending on December 29, 2025 (the
"
Initial Term
"), with automatic one (1) year extensions unless notice not to renew is given
by either party at least 90 days prior to the relevant end date.
Pursuant to the Panosian Employment Agreement, Mr. Panosian will be entitled to:
(i) an annual base salary of $650,000, which may be increased annually at the
sole discretion of the Board; (ii) a potential annual target bonus of up to
$350,000 payable in cash, which may be granted in the discretion of, and in an
amount determined by the Compensation Committee and approved by the Board; (iii)
a grant of 540,000 incentive stock options, pursuant to the Company's 2022
Equity Incentive Plan, as amended (the "
2022 Plan
") and also be eligible to receive annual long-term incentive awards from time
to time under the 2022 Plan; (iv) participate in the Company's health insurance
plan offered to its employees; (v) participate in the Company's 401(k) Plan; and
(vi) reimbursement for all reasonable business expenses, including a $1,000
monthly automobile allowance. Any incentive-based compensation or award that Mr.
Panosian receives will be subject to clawback by the Company as may be required
by applicable law or, if applicable, any stock exchange listing requirement and
on such basis as the Company determines.
In the event the Company terminates Mr. Panosian without "Cause" (as defined
below) at any time with 90 days prior written notice, or Mr. Panosian resigns
for "Good Reason" (as defined below), Mr. Panosian will be entitled to the
following, provided that he executes a general waiver and release of claims: (i)
an amount equal to 1.5 times the average of his base salary if terminated during
the Initial Term, or an amount equal to 1 times the average of his then base
salary; (ii) monthly payments for up to 12 months (and 18 months, if terminated
during the Initial Term) of COBRA premiums for continued group health, dental
and vision coverage; and (iii) the immediate vesting of all long-term incentive
awards, that utilize time-based vesting.
In the event of Mr. Panosian's termination by the Company with Cause or Mr.
Panosian's resignation without "Good Reason, Mr. Panosian will be only be
entitled to accrued and unpaid compensation and wages accrued prior to such
date.
If, within one year following a "Change of Control" (as defined below) of the
Company, Mr. Panosian's employment is terminated involuntarily by the Company
other than for Cause, death, or disability or by Mr. Panosian pursuant to a
voluntary termination for Good Reason, and Mr. Panosian executes and does not
revoke a general release of claims against the Company and its affiliates in a
form acceptable to the Company, then the Company shall, in addition to any other
earned but unpaid base salary and vacation pay due through the date of such
termination, provide the Mr. Panosian (i) an amount equal to two times his then
prevailing base salary; (ii) immediate vesting of all incentive awards; (ii)
monthly payments for up to 18 months of COBRA premiums for continued group
health, dental and vision coverage.
The Panosian Employment Agreement contains restrictive covenants prohibiting Mr.
Panosian from disclosing the Company's confidential information at any time, and
has executed a Proprietary Information, Inventions Assignment and Non-Disclosure
Agreement.
The foregoing description is not a complete description of the Panosian
Employment Agreement and is qualified in its entirety by reference to the full
text of the Panosian Employment Agreement, a copy of which is attached hereto as
Exhibit 10.1 and incorporated by reference in this Item 5.02.
Keeler Employment Agreement
The Keeler Employment Agreement provides that Mr. Keeler will serve as the
Company's Chief Design Officer for a term beginning on the Effective Date, and
ending on December 29, 2025 (the "
Initial Term
"), with automatic one (1) year extensions unless notice not to renew is given
by either party at least 90 days prior to the relevant end date.
Pursuant to the Keeler Employment Agreement, Mr. Keeler will be entitled to: (i)
an annual base salary of $475,000, which may be increased annually at the sole
discretion of the Board; (ii) a potential annual target bonus of up to $150,000
payable in cash, which may be granted in the discretion of, and in an amount
determined by the Compensation Committee and approved by the Board; (iii) a
grant of 360,000 incentive stock options, pursuant to the Company's 2022 Plan,
and also be eligible to receive annual long-term incentive awards from time to
time under the 2022 Plan; (iv) participate in the Company's health insurance
plan offered to its employees; (v) participate in the Company's 401(k) Plan; and
(vi) reimbursement for all reasonable business expenses, including a $750
monthly automobile allowance. Any incentive-based compensation or award that Mr.
Keeler receives will be subject to clawback by the Company as may be required by
applicable law or, if applicable, any stock exchange listing requirement and on
such basis as the Company determines.
In the event the Company terminates Mr. Keeler without "Cause" (as defined
below) with 90 days prior written notice, or Mr. Keeler resigns for "Good
Reason" (as defined below), Mr. Keeler will be entitled to the following,
provided that he executes a general waiver and release of claims: (i) an amount
equal to 1.5 times the average of his base salary if terminated during the
Initial Term, or an amount equal to 1 times the average of his then base salary;
(ii) ) monthly payments for up to 12 months (and 18 months, if terminated during
the Initial Term) of COBRA premiums for continued group health, dental and
vision coverage; and (iii) the immediate vesting of all incentive awards, that
utilize time-based vesting. If Mr. Keeler's employment is terminated by the
Company following a "Change of Control" (as defined below) of the Company, Mr.
Keeler will be entitled to: (iv) an amount equal to 2 times his then prevailing
base salary; (v) immediate vesting of all incentive awards; (vi) monthly
payments for up to 18 months of COBRA premiums for continued group health,
dental and vision coverage, and will be entitled to the benefits described in
clauses (iv), (v) and (vi) above.
In the event of Mr. Keeler's termination by the Company with Cause or Mr.
Keeler's resignation without Good Reason, Mr. Keeler shall be only be entitled
to accrued and unpaid compensation and wages accrued prior to such date.
If, within one year following a "Change of Control" (as defined below) of the
Company, Mr. Keeler's employment is terminated involuntarily by the Company
other than for Cause, death, or disability or by Mr. Keeler pursuant to a
voluntary termination for Good Reason, and Mr. Keeler executes and does not
revoke a general release of claims against the Company and its affiliates in a
form acceptable to the Company, then the Company shall, in addition to any other
earned but unpaid base salary and vacation pay due through the date of such
termination, provide the Mr. Keeler (i) an amount equal to two times his then
prevailing base salary; (ii) immediate vesting of all incentive awards; (ii)
monthly payments for up to 18 months of COBRA premiums for continued group
health, dental and vision coverage.
The Keeler Employment Agreement contains restrictive covenants prohibiting Mr.
Keeler from disclosing the Company's confidential information at any time, and
has executed a Proprietary Information, Inventions Assignment and Non-Disclosure
Agreement.
The foregoing description is not a complete description of the Keeler Employment
Agreement and is qualified in its entirety by reference to the full text of the
Keeler Employment Agreement, a copy of which is attached hereto as Exhibit 10.2
and incorporated by reference in this Item 5.02.
Galstyan Employment Agreement
The Galstyan Employment Agreement provides that Mr. Galstyan will serve as the
Company's Chief Financial Officer for a term beginning on the Effective Date,
and ending on December 29, 2025 (the "I
nitial Term
"), with automatic one (1) year extensions unless notice not to renew is given
by either party at least 90 days prior to the relevant end date.
Pursuant to the Galstyan Employment Agreement, Mr. Galstyan will be entitled to:
(i) an annual base salary of $300,000, which may be increased annually at the
sole discretion of the Board; (ii) a potential annual target bonus of up to
$150,000 payable in cash, which may be granted in the discretion of, and in an
amount determined by the Compensation Committee and approved by the Board; (iii)
a grant of 112,500 incentive stock options, pursuant to the Company's 2022 Plan,
and also be eligible to receive annual long-term incentive awards from time to
time under the 2022 Plan; (iv) participate in the Company's health insurance
plan offered to its employees; (v) participate in the Company's 401(k) Plan; and
(vi) reimbursement for all reasonable business expenses, including a $500
monthly automobile allowance. Any incentive-based compensation or award that Mr.
Galstyan receives will be subject to clawback by the Company as may be required
by applicable law or, if applicable, any stock exchange listing requirement and
on such basis as the Company determines.
In the event the Company terminates Mr. Galstyan without "Cause" (as defined
below), or Mr. Galstyan resigns for "Good Reason" (as defined below), Mr.
Galstyan will be entitled to the following, provided that he executes a general
waiver and release of claim and does not revoke the release: (i) an amount equal
to 6 months of his then base salary; (ii) monthly payments for up to 6 months of
COBRA premiums for continued group health, dental and vision coverage, unless
Mr. Galstyan starts receiving coverage under his subsequent employment; and
(iii) continuation of his vesting schedule per the 2022 Plan, with three months
for exercise of any vested option(s). If Mr. Galstyan's employment is terminated
by the Company following a "Change of Control" (as defined below) of the
Company, Mr. Galstyan will be entitled to: (iv) an amount equal to 1 times his
then prevailing base salary; (v) immediate vesting of all incentive awards; (vi)
monthly payments for up to 12 months of COBRA premiums for continued group
health, dental and vision coverage, and will be entitled to the benefits
described in clauses (iv), (v) and (vi) above.
In the event of Mr. Galstyan's termination with Cause or Mr. Galstyan's
resignation without Good Reason, Mr. Galstyan shall be only be entitled to
accrued and unpaid compensation and wages accrued prior to such date.
If, within one year following a "Change of Control" (as defined below) of the
Company, Mr. Galstyan's employment is terminated involuntarily by the Company
other than for Cause, death, or disability or by Mr. Galstyan pursuant to a
voluntary termination for Good Reason, and Mr. Galstyan executes and does not
revoke a general release of claims against the Company and its affiliates in a
form acceptable to the Company, then the Company shall, in addition to any other
earned but unpaid base salary and vacation pay due through the date of such
termination, provide the Mr. Galstyan (i) an amount equal to two times his then
prevailing base salary; (ii) immediate vesting of all incentive awards; (ii)
monthly payments for up to 12 months of COBRA premiums for continued group
health, dental and vision coverage.
The Galstyan Employment Agreement contains restrictive covenants prohibiting Mr.
Galstyan from disclosing the Company's confidential information at any time, and
has executed a Proprietary Information, Inventions Assignment and Non-Disclosure
Agreement.
The foregoing description is not a complete description of the Galstyan
Employment Agreement and is qualified in its entirety by reference to the full
text of the Galstyan Employment Agreement, a copy of which is attached hereto as
Exhibit 10.3 and incorporated by reference in this Item 5.02.
Khachatoorian Employment Agreement
The Khachatoorian Employment Agreement provides that Mr. Khachatoorian will
serve as the Company's Chief Operating Officer and Secretary for a term
beginning on the Effective Date, and ending on December 29, 2025 (the "
Initial Term
"), with automatic one (1) year extensions unless notice not to renew is given
by either party at least 90 days prior to the relevant end date.
Pursuant to the Khachatoorian Employment Agreement, Mr. Khachatoorian will be
entitled to: (i) an annual base salary of $300,000, which may be increased
annually at the sole discretion of the Board; (ii) a potential annual target
bonus of up to $150,000 payable in cash, which may be granted in the discretion
of, and in an amount determined by the Compensation Committee and approved by
the Board; (iii) a grant of 112,500 incentive stock options, pursuant to the
Company's 2022 Plan, and also be eligible to receive annual long-term incentive
. . .
Item 9.01 Financial Statement and Exhibits.
(d) Exhibits.
Exhibit No. Description
10.1 Executive Employment Agreement, dated December 29, 20022, between
ToughBuilt Industries, Inc., and Michael Panosian
10.2 Executive Employment Agreement, dated December 29, 2022, between
ToughBuilt Industries, Inc., and Josh Keeler
10.3 Executive Employment Agreement, dated December 29, 2022, between
ToughBuilt Industries, Inc., and Martin Galstyan
10.4 Executive Employment Agreement, dated December 29, 2022, between
ToughBuilt Industries, Inc., and Zareh Khachatoorian
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