EMPLOYMENT AGREEMENT
AGREEMENT made as of October ___, 1997 between THE PRIMA GROUP
INTERNATIONAL, INC. (Employer") and XXXXX X. XXXXXXX, XX. ("Employee").
WITNESSETH:
WHEREAS, the parties hereto desire to provide for the Employee's employment
by Employer.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties agree as follows:
1. Employment.
Employer agrees to employ the Employee and the Employee agrees to enter
into the employ of Employer on the terms and conditions hereafter set forth.
2. Capacity and Duties.
The Employee shall be employed as President and Chief Executive Officer of
Employer and shall perform such duties and have such responsibilities as
normally attributed to a president and chief executive officer of a Delaware
corporation. The Employee shall perform his responsibilities in accordance with
the direction and supervision of the Board of Directors of Employer, and he
shall devote such time, skill, energies, business judgment, knowledge and best
efforts to the business of Employer and the performance of such executive,
administrative and operational duties on behalf of Employer and its affiliates,
appropriate to the offices he holds or shall hold hereunder, as the Board of
Directors of Employer may request. The requirement that the Employee devote his
time to the business of Employer shall not preclude him from undertaking other
business and personal activities that do not, singly or in the aggregate,
materially impair his ability to fulfill his responsibilities under this
Agreement.
3. Term.
The term of the Employee's employment hereunder shall be for the a period
of three (3) years, commencing on the effective date of Employer's Initial
Public Offering ("IPO") and ending on the date prior to the third anniversary of
the date thereof, unless such term is terminated earlier by or pursuant to
Section 8. In addition, the term of Employee's employment shall commence (a)
only after Employee has received confirmation that a director and officer
liability policy satisfactory to Employee is in full force and effect and that
said policy covers Employee; and (b) the Compensation Committee of Employer,
consisting of at least two independent directors, shall approve this Agreement.
The term of employment shall be automatically renewed for successive one-year
terms, unless written notice of termination is given by either
party not less than ninety (90) days prior to the end of the initial three-year,
or the then current one-year, term.
4. Compensation.
(a) Salary. Employer shall pay or cause to be paid to the Employee a salary
of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000) per year, payable in equal
semi-monthly installments (the "Base Salary"). The Base Salary shall be
increased each year on the anniversary of the effective date of this Agreement
in line with increases in the cost of living for the immediately proceeding
twelve (12) months. However, in no event shall such increase be less than the
percentage increase in the "Consumer Price Index - United States Average for the
Urban Wage Earners and Clerical Workers - All Items", as published by the United
States Department of Labor (Bureau of Labor Statistics) for the immediately
preceding twelve (12) months. In addition, Base Salary shall be reviewed prior
to each anniversary date of this Agreement by the Board of Directors of
Employer.
(b) Bonus. For each fiscal year during the term of this Agreement,
beginning with the fiscal year ending December 31, 1998, Employee shall receive
a bonus payable at the discretion of the Board of Directors, or any committee
thereof, based upon operational, financial and stock market performance of
Employer.
(c) Non-Competition Payment. As consideration for the covenants of Employee
in section 9 of this Agreement, Employer shall pay to Employee on January 5,
1998, the sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000). The non-vested
portions of this payment shall be subject to forfeiture if Employee voluntarily
terminates this Agreement prior to the expiration of the initial term. One-third
of the payment will vest on the effectiveness of the term of this Agreement. The
remaining one-third portions of the payment will vest on the first and second
anniversaries of the effectiveness of this Agreement, respectively.
5. Expenses. Employer shall reimburse Employee, to the extent not otherwise
paid for by Employer or one of its affiliates, for reasonable and necessary
out-of-pocket expenses, including, without limitation, entertainment, travel and
similar expenses incurred by him in performing the duties set forth in Section 2
hereof. Employee shall present an itemized account of such expenses, supported
by such documentation as is required under the Internal Revenue Code of 1986, as
amended, to support the deductibility of such expenses for federal income tax
purposes.
6. Benefits and Vacations.
(a) Stock Option Plan. Employer shall establish a Stock Incentive Plan for
key employees and directors of Employer and its subsidiaries in the form of
EXHIBIT "A". Upon the effective date of Employee's employment, Employee shall
receive options to acquire
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ONE HUNDRED THOUSAND (100,000) shares of Employer's Common Stock. These options
shall vest in three (3) installments of 30,000, 30,000 and 40,000 shares on the
first, second and third anniversary of the effective date, respectively. The
exercise price for the installments shall be 120%, 130% and 140%, respectively,
of the public offering price of the IPO. The options shall have a term of ten
years (five years if Employee is a ten percent (10%) shareholder and the option
is an incentive stock option as defined under Section 422 of the Internal
Revenue Code) from vesting and shall survive termination or expiration of this
Agreement. If this Agreement is terminated for cause as defined herein, then
those options vested at the time of such termination will be exercisable for a
period of six months after termination and all other options granted to Employee
will be cancelled immediately.
(b) Insurance.
(i) Major Medical, Health and Dental. Employer shall provide group
coverage for Employee, and such dependents as Employee shall select,
with respect to major medical, health and dental expenses. Employer
shall pay one hundred percent (100%) of premiums with respect to such
coverage.
(ii) Disability. Employer shall provide group disability,
accidental death and dismemberment, and life insurance coverage for
Employee, with Employer paying one hundred percent (100%) of the
related premiums.
(iii) Additional Term Insurance. Employee shall be provided
additional term life insurance in the principal amount of $1,000,000,
payable to such beneficiaries as selected by Employee. At the
termination of this Agreement, Employee shall be given the right to
assume the policy and pay the premiums due thereunder.
(c) Automobile Allowance. Employee shall receive an automobile allowance of
$1,500 per month during the term of this Agreement.
(d) Vacation. The Employee shall be entitled to six (6) weeks annual paid
vacation during each year of this Agreement. Employee shall also be entitled to
the same paid holidays, sick and personal time as are available to all other
employees in accordance with the policies of Employer.
(e) Withholding. The Employee acknowledges that certain payments provided
for herein are subject to withholding and other taxes.
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7. Indemnification.
(a) Notwithstanding the termination of Employee's employment under Section
8 of this Agreement, it is confirmed that, with respect to all periods during
which Employee shall be employed by Employer, (i) Employer shall indemnify and
reimburse expenses to the fullest extent permitted by the indemnification and
reimbursement provisions of Employer's Certificate of Incorporation and By-Laws
in effect as of the date of this Agreement, provided that such coverage is not
prohibited under the provisions of the applicable General Corporation Law; and
(ii) Employer shall use its best efforts to maintain in effect it's Directors'
and Officers' Indemnification Insurance policies (under which Employee shall be
deemed an "insured" to the fullest extent provided in such policy) and to
purchase substitute policies in form and content substantially similar to those
presently in force during all periods under which Employee may remain liable
under any applicable statute of limitations. Upon request, Employer shall
promptly provide Employee with copies of all such policies and any notice of
cancellation of them.
(b) In addition to the foregoing, as authorized by the Employer's
Certificate of Incorporation and By-Laws in effect as of the date of this
Agreement, the Employer further agrees, to the extent not prohibited by the
applicable General Corporation Law, to defend Employee by legal counsel
reasonably acceptable to Employee in any threatened or pending action, suit or
proceeding as to which Employee may be entitled to indemnification under this
Agreement. In this regard, payment in advance by the Employer of all expenses
incurred or to be incurred by Employee in defending or investigating each and
every such action, suit or proceeding which has been instituted and is pending
on the date of this Agreement or which shall subsequently be instituted is
authorized by the Board of Directors of the Employer, and Employee agrees to
repay such advanced amounts in the event it is ultimately determined that
Employee is not entitled to be indemnified by the Employer as authorized under
its Certificate of Incorporation and By-Laws, and the applicable General
Corporation Law. As regards any decision to advance expenses as to any action,
suit or proceeding not already referred to in this subparagraph, Employee will
be given the same consideration in the reaching of any such decision as shall be
given to any person who is a director or officer of Employer at the time of such
decision.
(c) Employer further agrees to notify Employee of all threatened or pending
actions, suits, or other proceedings by or against Employer to which Employee is
named a party, and to filed in connection with it, and shall otherwise keep
Employee reasonably informed of the status of such actions and any offers of
settlement.
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(d) Employee agrees to notify Employer of all threatened or pending
actions, suits, or other proceedings against Employee in any capacity as an
employee of Employer.
8. Termination.
Notwithstanding Section 3, the term of the Employee's employment hereunder
shall terminate on the earliest of the (i) termination date provided for under
Section 3 or (ii) under any of the paragraphs of this Section 8.
(a) Death. In the event of the Employee's death, the Employee's employment
shall terminate automatically, effective as of the date of death, and Employer
shall pay to his estate the salary that otherwise would have been paid to the
Employee pursuant to Section 4(a) up to the end of the fiscal quarter in which
he died.
(b) Disability. If the Employee, due to physical or mental illness, shall
be disabled to perform the essential functions of his employment hereunder, with
or without reasonable accommodation, (a "disability"), then either the Employee
or Employer may by notice terminate the Employee's employment under this
Agreement effective as of a date 30 days after the date such notice is given.
Employee shall continue to receive all compensation payable under Section 4 for
a period of six (6) months after the date such notice is given; provided,
however, that it shall be reduced by the amount of any disability or similar
benefits to which he is entitled, notwithstanding anything contained elsewhere
in this Agreement to the contrary.
(c) By Employer for Cause. The Employee's employment may be terminated
effective immediately by Employer for "cause" by notice of termination to the
Employee. "Cause" for such termination shall be limited to convictions of a
felony, malfeasance in office or a material breach by the Employee of the
covenants contained in this Agreement, which breach continues for 30 days
following receipt of written notice given by Employer's Board of Directors
specifying the breach and requesting that the Employee correct the same.
(d) Compensation Upon Termination. Except as provided in Sections 8(a) and
8(b), Employee shall receive compensation upon termination as follows: in the
event that Employer terminates Employee's Employment under this Agreement other
than for cause as provided in Section 8(c), Employee shall be entitled to
receive the full amount of his salary and benefits provided for in Section 6 for
the remaining term of this Agreement, and any stock options or shares under
stock bonus programs held by Employee shall become and remain exercisable or
vested for a period of the remaining term of this Agreement or for one (1) full
year, whichever is longer.
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(e) Termination by Employee.
(i) If Employee shall voluntarily resign from employment by Employer prior
to the expiration of this Agreement, any compensation payable to Employee under
Section 4 shall be prorated through the date of termination.
(ii) If the Board of Directors or any designee thereof prohibits Employee
from issuing press releases or making public filings that Employee reasonably
believes to be required under federal or state law and if Employee has received
advice of counsel engaged by him confirming his belief, then Employee shall have
the right to terminate this Agreement. Upon such termination, Employer shall pay
to Employee the compensation payable to Employee under Section 4 and shall
provide the Employee the benefits required under Section 6, for a period one
year from the date of termination. Employer shall pay the amount prescribed in
this sub-paragraph (ii) in cash on the date of termination.
9. Exclusivity. Employee shall devote his best efforts to the performance of
his duties under this Agreement. Employee agrees that all information which he
obtains in the course of his employment is the property of Employer and agrees
that he will not discuss any such information or use any such information for
the benefit of himself or any person or entity other than Employer at any time
during or after his employment. During the period of one (1) year after
termination of employment of Employee hereunder, Employee agrees that he will
not engage in employment or business activities which are reasonably deemed to
be competitive to Employer and its business. The foregoing restriction shall not
apply if Employer elects to terminate this Agreement without cause and Employee
elects not to receive any further cash compensation as provided under the terms
of this Agreement. The parties hereto, recognizing that irreparable injury will
result to Employer, its business and property in the event of a breach of this
Agreement by Employee, and that employment is based primarily upon this
Agreement, it is agreed that in such event Employer shall be entitled, in
addition to any other remedies and damages available, to an injunction to
restrain the violation thereof by Employee, his partners, agents, servants,
employers, and Employees, and all persons acting for or with him. The Employee
represents and admits that in the event of the termination of his employment for
any cause whatsoever, his experiences and capabilities are such that he can
obtain employment in business engaged in other lines and/or of a different
nature, and that the enforcement of a remedy by way of injunction will not
prevent him from earning a livelihood.
10. Representation by the Employee.
The Employee hereby represents and warrants to Employer that the execution
of this Agreement and the performance of his duties and obligations hereunder
will not breach or be in conflict with any other agreement to which he is a
party or by which he is bound
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and that he is not now subject to any covenant against competition or similar
covenant that would affect the performance of his duties hereunder.
11. No Assignment.
This Agreement is personal and shall in no way be subject to assignment,
except by Employer incident to the sale of all or substantially all of its
business (whether by asset sale, stock sale or merger). Any attempt by one party
to assign this Agreement in any other circumstances without the prior written
consent of the other party shall be null and void.
12. Additional Payment.
For purposes of this Agreement, a "Change in Control of the Company" shall
mean a change in control of a nature that would be required to be reported in
response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities and Exchange Act of 1934 (the "1934 Act"), provided that without
limitation, such a change in control shall be deemed to have occurred if (a) any
"person" or "group" (as such terms are used in Sections 13(d) and 14(d) of the
1934 Act), other than the shareholders of Employer immediately prior to the
effective date of the IPO, is or becomes the "beneficial owner" (as defined in
Rule 13d-3 under the 1934 Act), directly or indirectly, of securities of the
Company representing 25% or more of the combined voting power of the Company's
then outstanding securities, or (b) individuals who at the time of the effective
date of the IPO constitute the Board of Directors cease for any reason to
constitute at least a majority thereof, unless the election of each Director who
was not a Director at the beginning of such period has been approved in advance
by Directors representing at least two thirds of the Directors then in office
who were Directors at the beginning of the period. If after a "Change in Control
of the Company" has occurred, Employee is terminated other than for cause or the
term of employment is not renewed, then Employee shall receive on the date of
termination, in lieu of all other cash compensation payable under this
Agreement, a payment equal to three times all compensation earned by Employee in
the last twelve month period prior to termination or nonrenewal in collectible
funds.
13. Enforceability.
If any portion or provision of this Agreement shall to any extent be
declared illegal or unenforceable by a duly authorized court of competent
jurisdiction, then the remainder of this Agreement, or the application of such
portion or provision in circumstances other than those as to which it is so
declared illegal or unenforceable, shall not be affected thereby, and each
portion and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
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14. Notices.
All notices and other communications required or permitted to be given
hereunder shall be given by delivering the same in hand or by mailing the same
by certified or registered mail, return receipt requested, postage prepaid, as
follows:
if to Employer, to:
The PRIMA Group International, Inc.
000 X. Xxxxxx Xxxxx Xxxx, Xxx. 000
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
if to the Employee, to:
Xx. Xxxxx X. Xxxxxxx, Xx.
0000 Xxxxxxxxx Xxxx
Xxxxxxxxx, Xxxxx Xxxxxxxx 00000
(or to such other address as either party shall have furnished to the other by
like notice).
A notice shall be effective as of the date of such delivery or mailing, as the
case may be.
15. Entire Agreement.
This Agreement constitutes the only agreement and understanding between
Employer and the Employee in relation to the subject of the Employee's
employment by Employer; and there are no promises, representations, conditions,
provisions or terms related thereto other than those set forth herein. This
Agreement super-sedes all previous understandings, agreements and
representations, written or oral, between Employer and the Employee regarding
the Employee's employment by Employer.
16. Governing Law.
This contract shall be construed under and be governed in all respects by
the internal laws, and not the laws pertaining to choice or conflicts of laws,
of the State of North Carolina.
17. Waiver; Amendment.
No waiver in any instance by either party of any provision of this
Agreement shall be deemed a waiver by such party of such provision in any other
instance or a waiver of any other provision hereunder in any instance. This
Agreement cannot be amended, supplemented or otherwise modified except in a
writing signed by Employer, and by the Employee (so long as he shall be employed
by Employer).
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
The PRIMA Group International, Inc.
By:_______________________________
Name:_____________________________
Title:____________________________
__________________________________(SEAL)
Xxxxx X. Xxxxxxx, Xx.
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