LETTER AGREEMENT DATED NOVEMBER 10, 2006 BETWEEN THE COMPANY AND BRADLEY E. SPARKS, CHIEF EXECUTIVE OFFICER, PRESIDENT AND A MEMBER OF THE BOARD OF DIRECTORS.
Published on February 23, 2009
Visualant
Incorporated
500
Union Street, Suite 406
Seattle,
Washington 98101
November
10, 2006
Mr.
Bradley E. Sparks
5320 West
Mercer Way
Mercer
Island, WA 98040
Dear Mr.
Sparks:
On behalf
of Visualant Incorporated (the "Company"), I am pleased to offer you the
position of Chief Executive Officer, President, and a member of the Board of
Directors of the Company commencing as of the Start Date indicated at the end of
this offer. Your employment is subject to the following
terms:
1. Compensation.
a. Base
Salary. In this exempt
position, you will earn a salary of Twenty Thousand Dollars ($20,000) per month,
which is equivalent to $240,000.00 on an annualized basis (the “Base
Salary”). Payment of your Base Salary hereunder shall be made in
accordance with the relevant Company policies in effect from time to time,
including normal payroll practices, and shall be subject to all applicable
employment and withholding taxes. The Company will review your Base
Salary on a yearly basis.
b. Incentive
Compensation. You will be
eligible to earn an annual incentive bonus in accordance with the bonus policy
adopted by the Company for its senior executives.
2. Employee
Benefits. The Company will provide you with the opportunity to
participate in the standard benefits plans as may be available to other senior
executives of the Company from time to time, subject to any eligibility
requirements imposed by such plans. You will be subject to the
Company's standard vacation policy for its executive officers.
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3. Equity
Award.
a. Stock
Options. In connection
with and upon the commencement of your employment, the Board of Directors has
approved a grant of stock options (the "Options") to you to purchase One Million
(1,000,000) shares of the Company's common stock under the Company’s Combined
Incentive and Non-Qualified Stock Option Plan (the “Stock Option Plan”)
at an
exercise price of $0.75 per share. The Options will have a term of
five (5) years and will vest over a period of forty-two (42) months in
accordance with the following vesting schedule: 25% of the shares
covered by the Options will vest on the 6-month anniversary of the Start Date of
your employment (which shall also be the option grant date), and an additional
25% will vest on each of the three successive 12-month periods following the
6-month anniversary date in accordance with the Stock Option
Plan. Vesting will, of course, depend on your continued employment
with the Company. The Options will be a combination of incentive and
non-qualified stock options (in each calendar year the first 133,333 vested
options will be incentive stock options and the remainder of the vested options
will be non-qualified/non-statutory stock options), and will be subject to the
terms and conditions of the Stock Option Agreement to be entered into between
you and the Company in the form attached hereto.
b. Acceleration
Benefit. If the Company is subject to the consummation of any
merger or consolidation of the Company with or into another corporation, or to
the consummation of any sale, lease, exchange or other transfer in one
transaction or a series of related transactions of all or substantially all of
the Company’s assets or securities to a majority-owned subsidiary corporation
(together, defined as a “Corporate Transaction”), and if your employment is
terminated without Cause (as defined in Section 9.b. below, provided, however,
that “Cause” shall include any breach of this letter agreement), and other than
as a result of your death or disability, or you voluntarily terminate your
employment for Good Reason (defined in Section 9.c. below, provided,
however, that “Good Reason” shall include any breach of this letter agreement by
the Company), then you will receive the benefits set forth in sections 9.a.i,
9.a.ii, 9.a.iii and 9.d., below, provided, however, that you execute the
Company’s standard form of release of all claims agreement.
4. Employment
Conditions.
a. Confidentiality
Agreement; Policies. Employment with
the Company is contingent upon: (a) the execution and delivery to the Company’s
Chairman, of the Company's Confidential Information Invention Assignment,
Non-Solicitation and Arbitration Agreement, and (b) your
acknowledgment of and agreement with the Company's corporate policies, codes and
procedures as in effect at the time of your hire.
b. Right to
Work. For purposes of
federal immigration laws, you will be required to provide to the Company
documentary evidence of your identity and eligibility for employment in the
United States upon request.
c. Verification
of Information. This offer of
employment also is contingent upon the successful verification of the
information you provided to the Company during your application process, as well
as a general background check performed by the Company to confirm your
suitability for employment. By accepting this offer of employment,
you warrant that all information provided by you is true and correct to the best
of your knowledge, and you expressly release the
Company from any claim or cause of action arising out of the Company's
verification of such information.
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5. No
Conflicting Obligations. You understand
and agree that by accepting this offer of employment, you represent to the
Company that your performance will not breach any other agreement to which you
are a party and that you have not, and will not during the term of your
employment with the Company, enter into any oral or written agreement in
conflict with any of the provisions of this letter or the Company's
policies. You are not to bring with you to the Company, or use or
disclose to any person associated with the Company, any confidential or
proprietary information belonging to any former employer or other person or
entity with respect to which you owe an obligation of confidentiality under any
agreement or otherwise. The Company does not need and will not use
such information, and we will assist you in any way possible to preserve and
protect the confidentiality of proprietary information belonging to third
parties. Also, we expect you to abide by any obligations to refrain
from soliciting any person employed by or otherwise associated with any former
employer and suggest that you refrain from having any contact with such persons
until such time as any non-solicitation obligation expires.
6. General
Obligations. As an employee,
you will be expected to adhere to the Company's standards of professionalism,
loyalty, integrity, honesty, reliability and respect for all. In
addition, you shall acknowledge, agree to, and comply with all of the Company's
corporate policies, codes and procedures as in effect at the time of your hire
and as modified or introduced from time to time. The Company does not
permit, and will not tolerate, the unlawful discrimination or harassment of any
employees, consultants, or related third parties on the basis of sex, race,
color, religion, age, national origin or ancestry, marital status, veteran
status, mental or physical disability or medical condition, sexual orientation,
pregnancy, childbirth or related medical condition, or any other status
protected by applicable law.
7. At-Will
Employment. Your employment
with the Company will be on an "at will" basis, meaning that either you or the
Company may terminate your employment at any time for any reason or no reason,
without further obligation or liability except as provided herein and in the
Stock Option Plan and Confidentiality Agreement. The Company also
reserves the right to modify or amend the terms of your employment at any time
for any reason. This policy of at-will employment is the entire
agreement as to the duration of your employment and may only be modified in an
express written agreement signed by the Chairman of the Board of
Directors.
8. Outside
Activities. During the time
you are employed by the Company, you agree that you will not engage in any other
employment, consulting or other business activity without the prior written
consent of the Company, it being understood that: (a) you may undertake civic,
charitable and other similar duties as long as, in the opinion of the Company's
Board of Directors, they do not interfere with the performance of your duties
hereunder; and (b) you may serve on the board of directors of two other public
or private companies as long as doing so, in the opinion of the Company's Board
of Directors, does not give rise to a conflict of interest with the
Company. While you render services to the Company, you also will not
assist any person or entity (i) in competing with the Company, (ii) in preparing
to compete with the Company, or (iii) in soliciting or hiring any employees or
consultants of the Company.
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9. Termination and Severance
Benefits.
a. General
Terms. Without in any
way limiting the Company's policy of at-will employment, if your employment is
terminated by the Company without Cause (as defined in Section 9.b. below), and
other than as a result of your death or disability, or you voluntarily terminate
your employment for Good Reason (as defined in Section 9.c. below), the Company
will offer certain severance benefits to you as set forth in Sections 9.a.(i)
and 9.a.(ii). As a condition to your receipt of such benefits, you
are required to comply with your continuing obligations (including the return of
any Company property), resign from all positions you hold with the Company, and
execute the Company's standard form of release agreement releasing any claims
you may have against the Company.
(i) Cash
Payments. The Company will
provide you with severance equal to100% of your then-current annualized Base
Salary paid out on a pro rata basis in accordance with the Company's regular
payroll schedule over the year following the effective date of your termination;
provided, however, that in the case of your termination for Good Reason under
Section 9.c.(v), such payment will be made in a lump sum on or as soon as
practicable after the effective date of termination.
(ii) Accelerated
Options. The vesting of the Option will accelerate as to the
number of shares that would otherwise have vested and been exercisable as of the
date that is twelve (12) months from the date of termination; provided, however,
that in the event of acceleration as the result of a Corporate Transaction, the
Options will vest immediately before the consummation of the Corporate
Transaction.
(iii) Continued
Benefits. As further
consideration, you will continue to receive all benefits specified in Section 2
of this letter agreement to the maximum extent allowed by the Company's benefit
plans, for a period not to exceed twelve (12) months following the effective
date of your termination. If you elect continued group medical
insurance coverage pursuant to COBRA, the Company will reimburse you for the
applicable premiums (less any premium contributions payable by employees at the
time) for you and your eligible dependents for the first twelve
(12) months of such coverage, up to a maximum of ten thousand dollars
($10,000) in the aggregate.
b. Definition
of Cause. The Company may
terminate your employment and this agreement at any time for “Cause” immediately
upon written notice to you. As used herein, the term “Cause” shall
mean that you have: (i) been convicted of a felony involving moral turpitude,
controlled substances, securities law violations, antitrust laws, tax or
financial reporting, or physical violence or a single act of fraud, or
embezzlement; or (ii) violated any material written Company policy or rules of
the Company, unless cured by you within thirty (30) days following written
notice to you of such violation; or (iii) repeatedly failed to perform your
duties as CEO and President of the Company, or refused to follow the reasonable
written directions given by the Company’s Chairman or the Board from time to
time, or breached any covenant or obligation under this agreement or other
agreement with the Company, unless cured by you within thirty (30) days
following written notice to you of such breach or failure; or (iv) engaged in
any illegal conduct which adversely affects the reputation of the
Company. Notwithstanding anything to the contrary, “Cause” shall not
mean any act or omission believed by you in good faith to have been in, or not
opposed to, the best interest of the Company (without intent to personally gain, directly or indirectly, a
profit or advantage to which you were not legally entitled).
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c. Good
Reason. You may end your
employment and terminate this agreement at any time, with or without “Good
Reason” (as defined herein), subject to giving thirty (30) days written notice
of said resignation or termination to the Board of Directors or the Chairman of
the Company. For purposes of this Agreement, “Good Reason” shall mean
any of the following:
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(i)
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A
material breach of this agreement by the Company which is not cured within
thirty (30) days after receipt of written notice of such breach from you
to the Company, identifying the specific
breach;
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(ii)
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A
change in your status, title, position or responsibilities (including
reporting responsibilities) that, in your reasonable judgment, represents
a substantial reduction in the status, title, position or responsibilities
as in effect immediately prior thereto; the assignment to you of any
duties or responsibilities that, in your reasonable judgment, are
inconsistent with such status, title, position or responsibilities or any
removal of you from or failure to reappoint or reelect you to any of such
positions, except in connection with the termination of your employment
for Cause, for Disability or as a result of your death, or by you other
than for Good Reason;
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(iii)
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Any
requirement that you relocate, without your consent, your principal
residence from the Seattle, Washington, metropolitan
area;
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(iv)
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The
relocation, without your consent, of your primary place of work to a
location which is more than thirty-five (35) highway miles from your
designated location on your Start
Date;
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(v)
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The
failure of the Company to obtain a satisfactory agreement from any
successor company to assume and perform the Company’s obligations under
this agreement:
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(vi)
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A
reduction in your annual base salary,
or
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(vii)
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Any
purported termination of your employment or service for Cause by the
Company that does not comply with the terms of the
Agreement.
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d. Excise
Tax Liability. In the event that it is determined that any
payment, distribution or benefit of any type to or for the benefit of you made
by the Company, by any of its affiliates, by any person who acquires ownership
or effective control of ownership of a substantial portion of the Company’s
assets (within the meaning of section 280G of the Internal Revenue Code of 1986,
as amended (the “IRC”) and the regulations thereunder) or by any affiliate of
such person, whether paid or payable or distributed or distributable or
otherwise made available pursuant to the terms of an employment agreement or
otherwise, including the accelerated
vesting of stock options or other equity-based awards (the “Total Payments”),
would be subject to the excise tax imposed by section 4999 of the IRC or any
interest or penalties with respect to such excise tax (such excise tax, together
with any such interest or penalties, are collectively referred to as the “Excise
Tax”), then you shall be entitled to receive an additional payment (an “Excise
Tax Restoration Payment”) in an amount that shall fund the payment by you of any
Excise Tax on the Total Payments as well as all income taxes imposed on the
Excise Tax Restoration Payment, any Excise Tax imposed on the Excise Tax
Restoration Payment and any interest or penalties imposed with respect to taxes
on the Excise Tax Restoration or any Excise Tax. The Excise Tax
Restoration Payment shall be calculated applying the then highest marginal tax
rates.
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10. Termination
for Cause. Upon termination
of your employment by the Company for Cause (as defined in Section 9 above), the
Company shall be under no further obligation to you, except to pay all accrued
but unpaid Base Salary and accrued vacation time to you up to the effective date
of your termination of employment.
11. Surrender
of Records and Property. Upon termination of your employment
with the Company for any reason, you shall promptly deliver to the Company all
records, manuals, books, blank forms, documents, letters, memoranda, notes,
notebooks, reports, data, tables, calculations or copies thereof, which are the
property of the Company and which relate in any way to the business, products,
practices or techniques of the Company, and all other property, trade secrets
and confidential information of the Company, including, but not limited to, all
documents which in whole or in part contain any trade secrets or confidential
information of the Company, which in any of these cases are in your possession
or under your control.
We are
delighted to be able to extend you this offer and look forward to working with
you. To indicate your acceptance of the Company's offer, please sign
this letter in the space provided below and return it to me. The
Company requests that you begin work in this new position on November 10, 2006
(your “Start Date”). This letter, together with the Confidentiality
Agreement, sets forth the terms of your employment with the Company and
supersedes any prior representations or agreements, whether written or
oral. This letter will be governed by the laws of the State of
Washington. This letter may not be modified or amended except by a
written agreement, signed by the Chairman of the Board of
Directors.
| Very truly yours, | |||
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Visualant
Incorporated
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/s/ Ronald P. Erickson | |
| Ronald P. Erickson, Chairman |
ACCEPTED
AND AGREED TO:
/s/
Bradley E. Sparks
Bradley
E. Sparks
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