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EXHIBIT 10.9
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and entered into effective
as of September 15, 1997 by and between C3, Inc., a North Carolina company with
its principal office at 0000 Xxxxxxx Xxxxxxxxx, Xxxxx 000, Xxxxxxxxxxx, Xxxxx
Xxxxxxxx, 00000 (the "Company), and Xxxxxx X. XxXxx, an individual currently
residing at _____________________________________________________ ("Employee").
Statement of Purpose
The Company wishes to obtain the services of Employee on the terms and
conditions and with the benefits set forth in this Agreement. Employee desires
to be employed by the Company on such terms and conditions and to receive such
additional consideration as set out herein.
Therefore, in consideration of the mutual covenants contained in this
Agreement, the grant of certain options to purchase common stock of the Company
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the Company and Employee agree as follows:
1. Employment. The Company hereby agrees to employ Employee, and
Employee hereby accepts such employment, on the terms and conditions set forth
in this Agreement.
2. Term of Employment. The term of Employee's employment under this
Agreement shall commence as of the date of this Agreement and shall continue on
and through September 14, 1998. Termination of employment shall be governed by
Paragraph 7 of this Agreement, and unless terminated by either party as provided
in Paragraph 7, this Agreement shall automatically, at the expiration of each
then existing term, renew for successive one year terms.
3. Position and Duties. The Employee shall serve as Vice President of
Marketing of the Company. Employee will, under the direction of the President
and CEO of the Company, faithfully and to the best of his ability perform the
duties as set out on Exhibit A hereto and such additional duties as may be
reasonably assigned by the President and Board of Directors. Employee agrees to
devote his entire working time, energy and skills to the Company while so
employed.
4. Compensation and Benefits. Employee shall receive compensation and
benefits for the services performed for the Company under this Agreement as
follows:
(a) Base Salary. Employee shall receive a base salary of $94,000 per
year, payable in regular and equal monthly installments ("Base
Salary").
(b) Employee Benefits. Employee shall receive such benefits as are
made available to the other employees of the Company, including, but
not limited to, life,
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medical and disability insurance, retirement benefits and such vacation
as is provided to the other employees of the Company (the "Employee
Benefits").
(c) Incentive Compensation. Employee shall participate in such
incentive plans as may be approved by the Board of Directors from
time-to-time. The specific incentive compensation plans for 1998 are as
set out on Exhibit B hereto.
5. Reimbursement of Expenses. The Company shall reimburse Employee for
all reasonable out-of-pocket expenses incurred by Employee specifically and
directly related to the performance by Employee of the services under this
Agreement.
6. Withholding. The Company may withhold from any payments or benefits
under this Agreement all federal, state or local taxes or other amounts as may
be required pursuant to applicable law, government regulation or ruling.
7. Termination of Employment.
(a) Death of Employee. If the Employee shall die during the Term,
this Agreement and the employment relationship hereunder will automatically
terminate on the date of death, which date shall be the last day of the Term.
(b) Termination for Just Cause. The Company shall have the right to
terminate the Employee's employment under this Agreement at any time for Just
Cause, which termination shall be effective immediately. Termination for "Just
Cause" shall include termination for the Employee's personal dishonesty, gross
incompetence, willful misconduct, breach of a fiduciary duty involving personal
profit, intentional failure to perform stated duties, willful violation of any
law, rule, regulation (other than traffic violations or similar offenses),
written Company policy or final cease-and-desist order, conviction of a felony
or of a misdemeanor involving moral turpitude, unethical business practices in
connection with the Company's business, misappropriation of the Company's assets
(determined on a reasonable basis), disability or material breach of any other
provision of this Agreement, provided that the Employee has received written
notice from the Company of such material breach and such breach remains uncured
thirty days after the delivery of such notice. For purposes of this subsection,
the term "disability" means the inability of Employee, due to the condition of
his physical, mental or emotional health, to satisfactorily perform the duties
of his employment hereunder for a continuous three month period; provided
further that if the Company furnishes long term disability insurance for the
Employee, the term "disability" shall mean that continuous period sufficient to
allow for the long term disability payments to commence pursuant to the
Company's long term disability insurance policy. In the event the Employee's
employment under this Agreement is terminated for Just Cause, the Employee shall
receive within ten (10) business days
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a severance payment equal to six (6) months Base Salary, but shall have no right
to receive compensation or other benefits under this Agreement for any period
after such termination.
(c) Termination Without Cause. The Company may terminate the
Employee's employment other than for "Just Cause," as described in Subsection
(b) above, at any time upon written notice to the Employee, which termination
shall be effective immediately. In the event the Company terminates Employee
pursuant to this Subsection (c), (i) the Employee will receive the Base Salary
for the remainder of the then existing term but no less than six (6) months of
Base Salary ("Termination Compensation"), so long as the Employee complies with
Sections 8, 9 and 10 of the Agreement and (ii) the Company shall take such
action as may be required to vest any unvested benefits of the Employee under
any employee stock-based or other benefit plan or arrangement. Such amounts
shall be payable at the times such amounts would have been paid in accordance
with Section 4. In addition, Employee shall continue to participate in the same
group hospitalization plan, health care plan, dental care plan, life or other
insurance or death benefit plan, and any other present or future similar group
employee benefit plan or program for which officers of the Company generally are
eligible, on the same terms as were in effect prior to Employee's termination,
either under the Company's plans or comparable coverage, for all periods
Employee receives Termination Compensation. Notwithstanding anything in this
Agreement to the contrary, if Employee breaches Sections 8, 9 or 10 of this
Agreement, the Employee will not be entitled to receive any further compensation
or benefits pursuant to this Section 7(c).
(d) Change of Control Situations. In the event of a Change of
Control of Company at any time after the date hereof, Employee may voluntarily
terminate employment with Company up until twelve (12) months after the Change
of Control for "Good Reason" and, subject to Section 7(f), (y) be entitled to
receive in a lump sum (i) any compensation due but not yet paid through the date
of termination and (ii) in lieu of any further salary payments from the date of
termination to the end of the then existing term, an amount equal to the base
salary plus prior years incentive compensation times 2.99, and (z) shall
continue to participate in the same group hospitalization plan, health care
plan, dental care plan, life or other insurance or death benefit plan, and any
other present or future similar group employee benefit plan or program for which
officers of the Company generally are eligible, or comparable plans or coverage,
for a period of two years following termination of employment by the Employee,
on the same terms as were in effect either (A) at the date of such termination,
or (B) if such plans and programs in effect prior to the Change of Control of
Company are, considered together as a whole, materially more generous to the
officers of Company, then at the date of the Change of Control. Any equity based
incentive compensation (including but not limited to stock options, SARs, etc.)
shall fully vest and be immediately exercisable in full upon a Change in
Control, not withstanding any provision in any applicable plan. Any such
benefits shall be paid by the Company to the same extent as they were so paid
prior to the termination or the Change of Control of Company.
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"Good Reason" shall mean the occurrence of any of the following
events without the Employee's express written consent:
(i) the assignment to the Employee of duties inconsistent
with the position and status of the Employee with the Company
immediately prior to the Change of Control;
(ii) a reduction by the Company in the Employee's pay grade
or base salary as then in effect, or the exclusion of Employee from
participation in Company's benefit plans in which he previously
participated as in effect at the date hereof or as the same may be
increased from time to time during the Term, or Company's failure
to increase (within twelve (12) months of the Employee's last
increase in base salary) the Employee's base salary in an amount
which at least equals, on a percentage basis, the average
percentage increase in base salary for all executives entitled to
participate in Company's executive incentive plans for which
Employee was eligible in the preceding 12 months; or
(iii) an involuntary relocation of the Employee more than 50
miles from the location where the Employee worked immediately prior
to the Change in Control or the breach by the Company of any
material provision of this Agreement; or
(iv) any purported termination of the employment of Employee
by Company which is not effected in accordance with this Agreement.
A "Change of Control" shall be deemed to have occurred if (i) any
person or group of persons (as defined in Section 13(d) and 14(d) of the
Securities Exchange Act of 1934) together with its affiliates, excluding
employee benefit plans of Company, becomes, directly or indirectly, the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Securities
Exchange Act of 1934) of securities of Company representing 20% or more of the
combined voting power of Company's then outstanding securities; or (ii) during
the then existing term of the Agreement, as a result of a tender offer or
exchange offer for the purchase of securities of Company (other than such an
offer by the Company for its own securities), or as a result of a proxy contest,
merger, consolidation or sale of assets, or as a result of any combination of
the foregoing, individuals who at the beginning of any year period during such
term constitute the Company's Board of Directors, plus new directors whose
election by Company's shareholders is approved by a vote of at least two-thirds
of the outstanding voting shares of the Company, cease for any reason during
such year period to constitute at least two-thirds of the members of such Board
of Directors; or (iii) the shareholders of the Company approve a merger or
consolidation of the Company with any other corporation or entity regardless of
which entity is
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the survivor, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by remaining outstanding or being converted into
voting securities of the surviving entity) at least 60% of the combined voting
power of the voting securities of the Company or such surviving entity
outstanding immediately after such merger or consolidation; or (iv) the
shareholders of the Company approve a plan of complete liquidation or winding-up
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all of the Company's assets; or (v) any event which the
Company's Board of Directors determines should constitute a Change of Control.
(e) Employee's Right to Payments. In receiving any payments
pursuant to this Section 7, Employee shall not be obligated to seek other
employment or take any other action by way of mitigation of the amounts payable
to the Employee hereunder, and such amounts shall not be reduced or terminated
whether or not the Employee obtains other employment.
(f) Reduction in Agreement Payments. Notwithstanding anything
in this Agreement to the contrary, if any of the payments provided for under
this Agreement (the "Agreement Payments"), together with any other payments that
the Employee has the right to receive (such other payments together with the
Agreement Payments are referred to as the "Total Payments"), would constitute a
"parachute payment" as defined in Section 280G(b)(2) of the Internal Revenue
Code of 1986, as amended (the "Code") (a "Parachute Payment"), the Agreement
Payments shall be reduced by the smallest amount necessary so that no portion of
such Total Payments would be Parachute Payments. In the event the Company shall
make an Agreement Payment to the Employee that would constitute a Parachute
Payment, the Employee shall return such payment to the Company (together with
interest at the rate set forth in Section 1274(b)(2)(B) of the Code). For
purposes of determining whether and the extent to which the Total Payments
constitute Parachute Payments, no portion of the Total Payments the receipt of
which Employee has effectively waived in writing shall be taken into account.
8. Covenant Not to Compete. Employee agrees that during his employment
with the Company and for a period of one (1) year following the termination of
his employment with the Company, for whatever reason:
(a) Employee shall not, directly or indirectly, own any interest
in, manage, operate, control, be employed by, render advisory
services to, or participate in the management or control of any
business that operates in the same business as the Company, which
Employee and the Company specifically agree as the business of
fabricating (wafering, preforming and faceting), marketing and
distributing moissanite gemstones or other diamond simulants to the
gem and jewelry industry (the "Business"), unless Employee's duties,
responsibilities and activities for and on behalf of such other
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business are not related in any way to such other business's products
which are in competition with the Company's products. For purposes of
this section, "competition with the Company" shall mean competition for
customers in the United States and in any country in which the Company
is selling the Company's products at the time of termination.
Employee's ownership of less than one percent of the issued and
outstanding stock of a corporation engaged in the Business shall not by
itself be deemed to be a violation of this Agreement. Employee
recognizes that the possible restriction on his activities which may
occur as a result of his performance of his obligations under Paragraph
8(a) are substantial, but that such restriction is required for the
reasonable protection of the Company.
(b) Employee shall not, directly or indirectly, influence or
attempt to influence any customer of the Company to discontinue its
purchase of any product of the Company which is manufactured or sold by
the Company at the time of termination of Employee's employment or to
divert such purchases to any other person, firm or employer.
(c) Employee shall not, directly or indirectly, interfere
with, disrupt or attempt to disrupt the relationship, contractual or
otherwise, between the Company and any of its suppliers.
(d) Employee shall not, directly or indirectly, solicit any
employee of the Company to work for any other person, firm or employer.
9. Confidentiality. In the course of his employment with the Company,
Employee will have access to confidential information, records, data, customer
lists, lists of product sources, specifications, trade secrets and other
information which is not generally available to the public and which the Company
and Employee hereby agree is proprietary information of the Company
("Confidential Information"). During and after his employment by the Company,
Employee shall not, directly or indirectly, disclose the Confidential
Information to any person or use any Confidential Information, except as is
required in the course of his employment under this Agreement. All Confidential
Information as well as records, files, memoranda, reports, plans, drawings,
documents, models, equipment and the like, including copies thereof, relating to
the Company's business, which Employee shall prepare or use or come into contact
with during the course of his employment, shall be and remain the Company's sole
property, and upon termination of Employee's employment with the Company,
Employee shall return all such materials to the Company.
10. Proprietary Information. Employee shall assign to the Company, its
successors or assigns, all of Employee's rights to copyrightable works and
inventions which, during the period of Employee's employment by the Company or
its successors in business, Employee makes or conceives, either solely or
jointly with others, relating to any subject matter with which Employee's work
for the Company is or may be concerned ("Proprietary Information"). Employee
shall promptly disclose in writing to the Company such copyrightable works and
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inventions and, without charge to the Company, to execute, acknowledge and
deliver all such further papers, including applications for copyrights and
patents for such copyrightable works and inventions, if any, in all countries
and to vest title thereto in the Company, its successors, assigns or nominees.
Upon termination of Employee's employment hereunder, Employee shall return to
the Company or its successors or assigns, as the case may be, any Proprietary
Information. The obligation of Employee to assign the rights to such
copyrightable works and inventions shall survive the discontinuance or
termination of this Agreement for any reason.
11. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to Employee's employment by the Company and supersedes
any prior agreements between them, whether written or oral.
12. Waiver. The failure of either party to insist in any one or more
instance, upon performance of the terms and conditions of this Agreement, shall
not be construed as a waiver or a relinquishment of any right granted hereunder
or of the future performance of any such term or condition.
13. Notices. Any notice to be given under this Agreement shall be
deemed sufficient if addressed in writing and delivered personally, by telefax
with receipt acknowledged, or by registered or certified U.S. mail to the
address first above appearing, or to such other address as a party may designate
by notice from time to time.
14. Severability. In the event that any provision of any paragraph of
this Agreement shall be deemed to be invalid or unenforceable for any reason
whatsoever, it is agreed such invalidity or unenforceability shall not affect
any other provision of such paragraph or of this Agreement, and the remaining
terms, covenants, restrictions or provisions in such paragraph and in this
Agreement shall remain in full force and effect and any court of competent
jurisdiction may so modify the objectionable provision as to make it valid,
reasonable and enforceable.
15. Amendment. This Agreement may be amended only by an agreement in
writing signed by each of the parties hereto.
16. Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or breach thereof, shall be settled by arbitration in Raleigh,
North Carolina in accordance with the expedited procedures of the Rules of the
American Arbitration Association, and judgment upon the award may be rendered by
the arbitrator and may be entered in any court having jurisdiction thereof.
17. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of North Carolina. Each of the parties
hereto irrevocably submits to the exclusive jurisdiction of the courts located
in North Carolina for the purposes of any suit, action or other proceeding
contemplated hereby or any transaction contemplated hereby.
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18. Benefit. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against the Company, its successors
and assigns, and Employee, his heirs, beneficiaries and legal representatives.
It is agreed that the rights and obligations of Employee may not be delegated or
assigned except as may be specifically agreed to by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
C3, Inc.
By: /s/Xxxx X. Xxxxxx
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Xxxx X. Xxxxxx, President
/s/Xxxxxx X. XxXxx
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Xxxxxx X. XxXxx
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POSITION DESCRIPTION EXHIBIT A
XXXXXX X. XXXXX - VICE PRESIDENT OF MARKETING
Purpose:
To lead the marketing, promotion, advertising and public relations activities
for the Company. This position will report to the President and may serve as
Vice-President of the Company.
Responsibilities:
Lead all aspects of marketing moissanite gemstones, test instruments and other
products as developed, including planning, budgeting and policy setting.
Work closely with the Director of Sales to support the sales of moissanite
gemstones.
Manage all aspects of gemstone and test instrument branding such as product
image and recognition to trade and consumers, including collaboration with
the Director of Sales in maintaining brand images.
Direct all aspects of advertising and promotion of all products to the trade and
consumers. Interface with Advertising and Promotional (PR) Firms as
necessary to support product image.
Direct market research activities and continually develop plans to better meet
customer and consumer needs.
Keep current with consumer marketing and prevailing gemstone and jewelry
industry trends and issues.
Serve on company-wide project teams and perform such other responsibilities as
may be assigned by the President or Board of Directors from time to time.
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INCENTIVE COMPENSATION PLANS EXHIBIT B
XXXXXX XXXXX
Background
Each member of the management team can have a significant impact on the
Company's ability to meet and exceed its goals. The Company has established an
Annual Incentive Compensation Plan and a Long-term Incentive Compensation Plan
to provide management and key employees with incentives to not only achieve the
performance goals outlined in the business plan, but to exceed those goals.
New goals and targets will be established each year for the Annual Incentive
Compensation Plan and goals and targets for the Long-term Incentive Plan will
be established from time-to-time.
1998 Annual Incentive Compensation Plan
The 1998 Annual Incentive Compensation Plan (Annual Plan) provides for a "target
bonus" which is based on a percentage of base compensation. Your specific
"target bonus" is outlined below. Each person that participates in the Annual
Plan has the ability to earn far in excess of their "target bonus" if the
Company exceeds its performance goals.
1. Your "Target Bonus". Your 1998 "target bonus" is 55% of your base
compensation, or $51,700.
2. Performance Goals. The Annual Plan performance goals for 1998 have been
separated into several categories based on the Company's performance relative
to net revenue and pre-tax income. Based upon the Company achieving different
performance levels, as outlined in the chart below, the participating employee
can earn different percentages of their "target bonus".
NET REVENUE
TARGET TARGET + OPTIMUM OUTSTANDING
PRE-TAX INCOME >$31.7 M >$35.6 M >$42.2 M >$48.5 M
TARGET >$12.4 M 100% 110% 120% 130%
TARGET + >$16.3 M 150% 165% 180% 195%
OPTIMUM >$22.9 M 225% 245% 270% 290%
OUTSTANDING >$29.2 M 325% 360% 390% 425%
The actual net revenue and pre-tax income from the Company's 1998 audited
financial statements will be used to determine the appropriate percentage in the
table above. For example, net revenue of $34 million with pre-tax income of $14
million would lead to a bonus equal to 100% of the participant's "target bonus";
net revenue of $35.6 million with pre-tax income of $16.3 million would lead to
a bonus equal to 165% of the participants "target bonus", etc. If the
performance of the Company exceeds the criteria above, the percentages will
increase on a similar
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basis to those used above. If however, the Company does not meet the criteria
above, the bonus structure will be modified as follows:
(a) As long as the $12.4 million pre-tax income target is met the bonuses will
be awarded at the 100% level.
(b) If pre-tax income is below $12.4 million, so long as the Company achieves a
positive pre-tax income, the percentage of the "target bonus" bonus would
be reduced on a linear basis. Therefore, the percentage will be calculated
by dividing the actual pre-tax net income by the $12.4 million target. No
bonuses will be earned or paid if the Company does not achieve positive
pre-tax net income.
Long-term Incentive Compensation Plan
The Long-term Incentive Compensation Plan (Long-term Plan) provides for the
award of equity based incentives (stock options, stock appreciation rights,
etc.); the specific grants and terms of which will be determined by the
Compensation Committee of the Board of Directors from time-to-time. Generally
the awards under the Long-term Plan will vest and become exercisable only upon
the attainment of specific operating goals for the target. These targets will be
based on factors that are deemed to have a direct impact on the performance of
the Company's stock, typically this will be earnings per share.
1. Your Award. Your current award under the Long-term Plan, to be granted
only upon completion of an IPO, is incentive stock options for the purchase of
20,000 shares of common stock at $13.50 per share.
2. Vesting Period. These options will vest and become exercisable based upon
the Company achieving the following results (note vesting will stop once 100%
vesting level has been achieved):
Completion of IPO 15%
98 Q1 sales > $800k & margin > 28% 5%
98 Q1 EPS > $.01 per share (stretch goal) 10%
98 Q2 sales > $2.2 M & margin 36% 5%
98 Q2 EPS > $.01 per share (stretch goal) 10%
98 Q2 EPS > $.33 per share 10%
1998 TOTAL EPS > $1.13 per share 25%
99 Q1 EPS > $1.13 per share 5%
99 Q2 EPS > $1.31 per share 5%
99 Q3 EPS > $1.71 per share 5%
1999 TOTAL EPS > $8.00 per share 25%
2000 TOTAL EPS > $14.00 per share 25%
2001 TOTAL EPS > $19.00 per share 25%
