Item 1.01 Entry into a Material Definitive Agreement.
The Company entered into an employment agreement
(the “Employment Agreement”) with Vince Pugliese, dated effective March 1, 2019, pursuant to which Mr. Pugliese will
serve as the President and Chief Operating Officer of the Company for an initial term of three years, unless terminated earlier
in accordance with the agreement. This Employment Agreement replaces the prior employment agreement entered into with Mr. Pugliese
dated October 12, 2015, and amended on February 11, 2016 and December 20, 2016.
As consideration for these services, the Employment
Agreement provides Mr. Pugliese with the following compensation and benefits:
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An
annual base salary of $240,000, with a minimum 5-10% increase on each anniversary date, contingent upon achieving performance
objectives set by the chief executive officer and the board of directors.
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Annual
cash performance bonus opportunity as determined by the chief executive officer and the board of directors, with a target of 50-100%
of annual salary.
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Annual
stock grant opportunity in an amount determined by the board of directors.
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Certain
other employee benefits and perquisites, including paid vacation days, reimbursement of necessary and reasonable travel, participation
in health and welfare benefits, housing, and use of company provided computer, cell phone and car.
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Mr. Pugliese’s Employment
Agreement provides that, in the event that his employment is terminated by the Company without “cause” (as defined
in his Employment Agreement ) or if Mr. Pugliese resigns for “good reason” (as defined in his Employment Agreement
), he will be entitled to (i) retain all stock options previously granted, which will vest immediately and be exercisable over
a 10 year period; and (ii) receive any benefits then owed or accrued along with 18 months of base salary and any unreimbursed expenses
incurred by him. All amounts will be paid on the termination date. In the event that Mr. Pugliese’s employment is terminated
by the Company for “cause” (as defined in his Employment Agreement), or if Mr. Pugliese resigned without “good
reasons” (as defined in his Employment Agreement ), he will be entitled to (i) receive any unpaid base salary and benefits
then owed or accrued and any unreimbursed expenses incurred by him through the termination date, and (ii) retain all vested stock
options or grants which will be exercisable over a 10 year period. All unvested stock options or grants will terminate. In the
event of a change of control (as defined in his Employment Agreement ), Mr. Pugliese will be entitled to receive a change of control
payment equal to two times his current minimum base salary upon the closing of the change of control transaction and all unvested
stock options or grants will vest in full. Upon the closing of such a change of control transaction and the payments mentioned
above, the Employment Agreement will terminate.
The foregoing discussion
is qualified in its entirety by reference to the Employment Agreement attached hereto as Exhibit 10.3.
On February 13, 2019, C-Bond
Systems, Inc., (the “Company”) entered into a Securities Purchase Agreement (the “February SPA”) with Power
Up Lending Group Ltd., (“Power Up”), pursuant to which the Company issued a convertible promissory note (the “Note
I”) for an aggregate principal amount of $66,000 to Power Up, for which it received $52,000. On March 4, 2019, the
Company entered into another Securities Purchase Agreement (the “March SPA”, and together with the February SPA, the
“SPAs”) with Power Up, pursuant to which the Company issued a convertible promissory note (the “Note II”
and together with Note I, the “Notes”) for an aggregate principal amount of $63,600 to Power Up, for which it received
$50,000.
Note I bears
interest at 12% per annum and Note II bears interest at 5% per annum, with Note I becoming due and payable on February 13,
2020 and Note II becoming due and payable on March 4, 2020. In accordance with the SPAs and the Notes, Power Up, after
six months from the date of the Note, will have the right to convert any amount outstanding under the Note into shares of the
Company’s common stock at a price equal to 81% of the average of the lowest two closing bid prices of the common stock
for the 10 prior trading days. The Company may prepay the Notes at any time prior to their six-month anniversaries, subject
to pre-payment charges as detailed in the Notes.
The SPAs and Notes contain
customary representations, warranties and covenants, including certain restrictions on the Company’s ability to sell, lease
or otherwise dispose of any significant portion of its assets. Power Up also has the right of first refusal with respect to any
future equity (or debt with an equity component) offerings of less than $100,000 conducted by the Company until the six month anniversary
of the Note. The SPAs and the Notes also provide for certain events of default, including, among other things, payment defaults,
breaches of representations and warranties, bankruptcy or insolvency proceedings, delinquency in periodic report filings with the
Securities and Exchange Commission, and cross default with other agreements. Upon the occurrence of an event of default, Power
Up may declare the outstanding obligations due and payable at significant applicable default rates and take such other actions
as set forth in the Notes.
The discussion herein regarding
the SPAs and the Notes is qualified in its entirety by reference to the February SPA, the March SPA, the Note I and the Note II,
attached hereto as Exhibits 10.1, 10.2, 4.1 and 4.2, respectively.