EXHIBIT 10.2
Employment Agreement
This Employment Agreement (the “Agreement”) is made as of June 10, 2013 between Primo Water Corporation, a Delaware corporation (the “Company”), and Matt Sheehan, an individual (the “Executive”).
| 1. | BACKGROUND |
| 1.1 | The Company is a rapidly growing provider of three- and five-gallon purified bottled water exchange services, water bottle refill vending services, and water dispensers sold through major retailers nationwide and in Canada. The Company desires to employ the Executive, and the Executive desires to accept employment with the Company, on the terms and conditions set forth in this Agreement. |
| 2. | DEFINITIONS. For purposes of this Agreement, the following terms have the meanings set forth below. Other defined terms have the meanings set forth in the provisions of this Agreement in which they are used. |
| 2.1 | Board means Board of Directors of the Company. |
| 2.3 | Change of Control is defined in Section 10.2. |
| 2.4 | COBRA means the Consolidated Omnibus Budget Reconciliation Act, as the same may be amended from time to time, or any successor statute, together with any applicable regulations in effect at the time in question. |
| 2.5 | Code means the Internal Revenue Code of 1986, as amended. |
| 2.6 | Company Group means Primo Water Corporation and its subsidiaries. |
| 2.7 | Company Business is intentionally defined broadly in view of the Executive’s senior position with the Company and access to Confidential Information related to the Company Group’s business and business preparations; it means (1) any business engaged in by the Company Group during the Executive’s Employment and (a) in which the Executive materially participated or (b) concerning which the Executive had access to Confidential Information, or (2) any other business as to which the Company Group has made demonstrable preparations to engage in during such Employment and (a) in which preparation the Executive materially participated, or (b) concerning which preparation the Executive had access to Confidential Information. |
| 2.8 | Confidential Information means information about the Company Group or its suppliers, clients, customers or other parties with which it has business relationships (such as bottlers and distributors) that was learned by the Executive in the course of his Employment (including during the period of employment pre-dating the Effective Date), including (without limitation): |
| (a) | any proprietary knowledge (including business processes and methods), trade secrets, data, formulae, information and supplier, client, customer, bottler and distributor lists and all papers, resumes, and records (including computer records) of the documents containing such information; |
| (b) | terms and conditions of, and the identity of the parties to, the Company Group’s agreements with its suppliers, clients, customers or other parties with which it has business relationships (such as bottlers and distributors), including but not limited to price information; |
| (c) | professional advice rendered to, or taken by, the Company Group; |
| (d) | the Company Group’s own financial data, business and management information, processes, methods, strategies and plans and internal practices and procedures, including, but not limited to, internal financial records, statements and information, cost reports or other financial information; |
| (e) | proprietary software, systems and technology-related methodologies of the Company Group and their clients; |
| (f) | salary, bonus and other personnel information relating to the Company Group’s personnel; |
| (g) | the Company Group’s business and management development plans, including but not limited to proposed or actual plans regarding acquisitions (including the identity of any acquisition contacts), divestitures, asset sales, and mergers; |
| (h) | decisions and deliberations of the Company Group’s committees or boards; and |
| (i) | litigation, disputes, or investigations to which the Company Group may be party and legal advice provided to Executive on behalf of the Company Group in the course of Executive’s employment. |
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The term Confidential Information shall not include any information that: (i) was in the Executive’s possession or within the Executive’s knowledge before the Employment; (ii) is or becomes generally known to persons other than officers, directors and employees of the Company Group without breach of this Agreement by the Executive; (iii) the Executive obtained from a party not known by the Executive to be prohibited from disclosing it in violation of an obligation to the Company; or (iv) is required to be disclosed pursuant to any law, rule, regulation, court order or other legal process (e.g., a subpoena), provided that the Executive notifies the Company promptly upon receiving or becoming aware of such requirement.
| 2.9 | Effective Date is defined in Section 5.1. |
| 2.10 | Employment means the Executive’s employment with the Company. |
| 2.11 | Good Reason means: (a) a materially adverse change (without the Executive’s express written consent) in the Executive’s Position; (b) a reduction (without the Executive’s express written consent) in the Executive’s Base Salary; provided, however, a reduction in the Executive’s Base Salary of not more than twenty-five percent (25%) applied at the same time as the same percentage reduction is applied to the base salaries of all other Senior Executives shall not be deemed “Good Reason”; (c) a reduction in the Executive’s target annual bonus percentage from the percentage set forth on Exhibit A; (d) the requirement that the Executive relocate to an employment location that is more than 50 miles from the Principal Office; (e) the Company’s material breach (without the Executive’s express written consent) of this Agreement; provided, however, that the Executive has provided the Company written notice of the material breach and the Company has not cured such breach within fifteen (15) days following the date the Executive provides such notice; or (f) failure to require a successor to the Company, which does not assume this Agreement by operation of law, to expressly assume the terms of this Agreement. |
| 2.12 | Position means the title, duties and responsibilities identified on Exhibit A. If the Company in its sole discretion increases the Executive’s area of responsibility, then such increased area of responsibility shall be deemed the Position for all purposes hereunder. |
| 2.13 | Resign for Good Reason or Resignation for Good Reason means that all of the following occur: |
| (a) | the Executive notifies the Company in writing, in accordance with the notice provisions of this Agreement, of the occurrence of one or more events constituting Good Reason hereunder; |
| (b) | the Company fails to revoke, rescind, cancel, or cure the event (or if more than one, all such events) that was the subject of the notification under subparagraph (a) within thirty (30) days after such notice; and |
| (c) | within ten (10) business days after the end of the thirty-day period described in subparagraph (b), the Executive delivers to the Company a notice of resignation in accordance with this Agreement. |
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| 2.14 | Principal Office means the office of the Company located in Chicago, Illinois or Winston Salem, North Carolina, as determined in accordance with Section 3.3. |
| 2.15 | Senior Executives means those officers of the Company who are designated executive officers from time to time. |
| 2.16 | Termination Date means the effective date of the Executive’s termination of Employment with the Company. For purposes of this Agreement, whether a termination of Employment has occurred shall be determined consistent with the requirements of Section 409A of the Code and the Company’s administrative policies. |
| 2.17 | Tribunal means a court or other body of competent jurisdiction that is deciding a matter relating to this Agreement. |
| 3. | EMPLOYMENT |
| (a) | The Executive will (i) devote his full professional time, attention, and energies to the business of the Company and will diligently and to the best of his ability perform all duties incident to his Employment hereunder; (ii) use his best efforts to promote the interests and goodwill of the Company; and (iii) perform such other duties commensurate with the Position as the Board may from time-to-time assign to the Executive. |
| (b) | The Executive shall obtain the written consent of the Board prior to serving on corporate, civic or charitable boards or committees. This Section 3.1 shall not be construed as preventing the Executive from serving on the corporate, civic or charitable boards or committees on which he currently serves and which have been previously disclosed to the Company in writing; provided that in no event shall any such service or business activity require the provision of substantial services by the Executive to the operations or the affairs of such businesses or enterprises such that the provision thereof would interfere in any respect with the performance of the Executive’s duties hereunder. |
| 3.2 | Establishment of Chicago Office. Promptly after the Effective Date, the Company will establish a company office in Chicago, Illinois. The Chicago office will have reasonable IT and similar support and technology, including video-conferencing equipment. |
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| 3.4 | Office Space, Equipment, etc. The Company shall provide the Executive with an administrative assistant, office space, related facilities, equipment, and support personnel that are commensurate with the Position. |
| 3.5 | Expense Reimbursement. The Company will timely reimburse the Executive for reasonable business expenses incurred by the Executive in connection with the Employment in accordance with the Company’s then-current policies no later than seventy-five (75) days following the date on which the Executive incurs such expense(s). |
| 4. | COMPENSATION AND BENEFITS DURING EMPLOYMENT. During the Employment, the Company shall provide compensation and benefits to the Executive as follows. |
| 4.1 | Salary. In consideration of the services to be rendered by Executive pursuant to this Agreement, the Company shall pay, or cause to be paid, to Employee a base salary (the “Base Salary”) as established by or pursuant to authority granted by the Board. Executive’s initial Base Salary shall be the base salary, as of the Effective Date, as set forth on Exhibit A. The Base Salary shall be reviewed annually by, or pursuant to authority granted by, the Board in connection with its annual review of executive compensation to determine if such Base Salary should be increased (but not decreased) for the following year in recognition of services to the Company. The Base Salary shall be payable at such intervals in conformity with the Company’s prevailing practice as such practice shall be established or modified from time to time. |
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| (b) | Equity Incentives. |
| (i) | The Board of Directors, upon the recommendation of the Compensation Committee, or the Compensation Committee, may grant Executive from time to time options to purchase shares of the Company’s common stock, and/or other equity awards including without limitation restricted stock or restricted stock units, both as a reward for past individual and corporate performance, and as an incentive for future performance. Such options and/or other awards, if awarded, will be pursuant to the Company’s then current equity incentive plan. |
| (ii) | In connection with this Agreement, the Company will grant Executive a signing bonus comprised of non-qualified stock options as set forth on Exhibit A (the “Options”) pursuant to the Company’s 2010 Omnibus Long-Term Incentive Plan. The grant of such Options shall be subject to Compensation Committee approval, and the grant date for such Options shall be deemed to be the date of such approval. Such Options shall vest in accordance with the vesting schedule set forth on Exhibit A, subject to acceleration of vesting as described herein and as may be set forth in the grant agreements issued by the Company, as amended, provided, that in the event of a conflict between any grant agreement and this Agreement, this Agreement shall control. |
| (c) | Value Creation Plan. The Executive shall be deemed a “Participant” for purposes of the Company’s Value Creation Plan, as approved by the Company’s Compensation Committee on May 14, 2013 and attached hereto as Exhibit B (the “VCP”). Notwithstanding anything in the VCP to the contrary, the Company agrees as follows: |
| (i) | during the Employment Term, (A) the Executive will always be deemed a “Participant” under the VCP and at no point during the Employment Term may the Company or any representative of the Company (including the Compensation Committee) remove him from participation in the VCP; (B) the Executive will receive not less than twenty-five percent (25%) of the bonus pool award actually made to all Participants under the VCP for any fiscal year under the VCP; and (C) any such award shall be paid in accordance with the terms of the VCP; provided, however, that such award shall be paid in the year following the year in which the applicable Adjusted EBITDA target was achieved and no later than December 31 of such year; |
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| (ii) | in the event the Executive is terminated for Cause or resigns without Good Reason, the Executive will forfeit all rights to an award for the fiscal year in which such termination occurs under the VCP and thereafter; and |
| (iii) | in the event the Executive is terminated without Cause or resigns for Good Reason or his employment is otherwise terminated due to death, Disability, or retirement from the Company in good standing, he shall remain eligible for an award for the fiscal year in which such termination occurs and may receive a full current-year award based on the Company’s progress towards the applicable Adjusted EBITDA (as defined in the VCP) target at the time of such termination. Any such award shall be paid in accordance with the terms of the VCP; provided, however, that such award shall be paid in the year following the year in which the termination of employment occurs and no later than December 31 of such year. |
| (d) | For the purposes of calculating any bonus for the Executive pursuant to this Section 4.2 for the fiscal year ended December 31, 2013, the Executive shall be deemed to have been employed as of January 1, 2013 and in no event shall any such bonus be prorated in relation to the Effective Date hereof. |
| (a) | In the event the Executive elects to make the Company's Winston Salem, North Carolina office the Principal Office in accordance with Section 3.3, the Company shall reimburse the Executive for all reasonable and necessary direct costs associated with moving the Executive and his family and personal property to the greater Winston-Salem, North Carolina area. Executive shall obtain three (3) quotes from different moving companies and allow the Company to select the moving company. Such reimbursement shall be paid at the time, and only if, Executive relocates his primary residence to the greater Winston-Salem, North Carolina area and shall be based and contingent upon documented receipts for direct moving costs provided by Executive to the Company. |
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| (b) | In addition, the Company shall provide Executive with a relocation stipend in the gross amount of $5,000 per month for up to six (6) months commencing on the date Executive completes his relocation to, and establishes primary residency within, the Winston-Salem, NC area. All payments under this Section 4.3 shall be subject to deduction for any tax withholdings required under applicable law. Executive agrees that if Executive terminates his Employment with the Company without Good Reason, or if the Company terminates Executive’s Employment for Cause, at any time before the first anniversary of the Effective Date, Executive shall repay the gross amount of all payments made to Executive pursuant to this Section 4.3 within thirty (30) days of the effective date of such termination. Any taxes payable with respect to the payments under this Section 4.3 shall be the sole responsibility of Executive, and the Company will follow federal, state and local tax regulations with regard to reporting of such payments and required withholdings related to such payments. |
| 4.4 | Fringe Benefits, Perquisites, Health Care and Benefit Plans. During the Employment, the Executive shall be eligible to receive all fringe benefits and perquisites and to participate in all health care and benefit programs normally available to other Senior Executives of the Company (subject to all applicable eligibility and contribution policies and rules), as may be in effect from time to time, including such insurance programs as may be implemented by the Company. The Executive's family shall be entitled to participate in all health care insurance programs implemented by the Company and made available to the families of other Senior Executives. |
| 4.5 | Other Benefits. During the period of employment under this Agreement, the Executive shall be entitled to participate in all other benefits of employment generally available to other Senior Executives and those benefits for which such persons are or shall become eligible, when and as the Executive becomes eligible therefore. |
| 5. | TERMINATION OF EMPLOYMENT |
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| 5.3 | Notice of Resignation; Waiver of Notice Period. If the Executive resigns from the Company without Good Reason, the Executive will give the Company at least four (4) weeks’ prior notice of resignation. The Company may in its discretion waive any notice period stated in the Executive’s notice of resignation, in which case the Termination Date of the Employment will be the date of such waiver. |
| 5.4 | No Termination of Agreement Per Se. Termination of the Employment will not terminate this Agreement per se; to the extent that either party has any right under applicable law to terminate this Agreement, any such termination of this Agreement shall be deemed solely to be a termination of the Employment without affecting any other right or obligation hereunder except as provided herein in connection with termination of the Employment. |
| 5.5 | Payments Following Termination. |
| (a) | If the Employment is terminated for any reason, either by the Company or by the Executive’s resignation, then the Company shall pay the Executive the following amounts as part of the Company’s next regular payroll cycle but in no event later than thirty (30) days after the Termination Date, to the extent that the same have not already been paid; |
| (i) | any and all Base Salary and vacation pay earned through the Termination Date; and |
| (ii) | any reimbursable expenses properly reported by the Executive. |
| (b) | Unless the Executive resigns without Good Reason or the Employment is terminated for Cause, then the Company shall pay to the Executive (i) any applicable prorated annual bonus, based on actual performance for the year of termination as determined by the Board in its discretion when making bonus determinations for other Senior Executives and payable at such time as annual bonuses are otherwise determined for other Senior Executives, (ii) any accrued but unpaid annual bonus for the fiscal year immediately preceding the year of termination, and (iii) any accrued vacation and any other amounts the Executive is entitled to under the employee benefit plans. Any such payments shall be made as part of the first payroll cycle following the Termination Date and in no event later than thirty (30) days after the Termination Date. |
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| (a) | The Company shall pay to the Executive an amount equal to one (1) times the sum of (A) one year’s Base Salary, which such Base Salary shall be the highest Base Salary in effect (i) during the 12 months immediately prior to the Termination Date or (ii) during the Employment, if the Employment has lasted less than 12 months plus (B) (i) the average annual bonus earned by the Executive pursuant to Section 4.2 for the most recent two (2) fiscal years ending prior to the Termination Date or (ii) if the Executive has not been employed by the Company for at least two (2) full fiscal years, the greater of (A) the annual bonus that the Executive earned for the immediately preceding fiscal year (if any) and (B) the bonus that the Executive would have been entitled to receive for the fiscal year in which the termination occurs pursuant to Section 4.2(a) as though the Executive had been employed for the full twelve (12) months of the fiscal year prorated based on the number of days the Executive was employed by the Company in such fiscal year. Such amount shall be paid in cash or immediately-available funds in a lump sum on the 60th day following the Termination Date. |
| (a) | The Company shall, to the greatest extent permitted by applicable law and the terms and conditions of the applicable insurance or benefit plan, maintain the Executive and the Executive’s dependents as participants in the health, dental, life, accident, disability and similar benefit plans offered to (and on the same terms as) other Senior Executives until the 12-month anniversary of the Termination Date. |
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| (b) | To the extent that applicable law or the terms and conditions of the applicable insurance or benefit plan do not permit the Company to comply with subparagraph (a), the Company shall reimburse the Executive (if living) and the Executive’s dependents, for all expenses incurred by any of them in maintaining the same levels of coverage under COBRA, to the extent applicable, for the period set forth in subparagraph (a) (not to exceed applicable COBRA continuation coverage period), but solely to the extent that such expenses exceed the deduction or amount that would have been required to be paid by the Executive for such coverage if the Employment had not been terminated. If the period set forth in subparagraph (a) exceeds the applicable COBRA continuation coverage period, then following such period, if any, the Company shall provide the Executive (if living) and the Executive’s dependents with substantially similar levels of coverage under an individual or group policy for the duration of the time period specified in subparagraph (a). |
| (c) | If the Executive dies before the expiration of the Company’s obligation under this Section 6.2, then the Company shall, to the greatest extent permitted by applicable law and the terms and conditions of the applicable insurance or benefit plan, continue to maintain coverage for the Executive’s dependents under all insurance plans referred to in this Section 6.2 for which such dependents had coverage as of the date of the Executive’s death, at the same coverage levels and for the same period of time as would have been required had the Executive not died. |
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| 6.5 | No Other Severance Benefits. Other than as described above in Sections 6.1, 6.2, 6.3 and 6.4 and as described below in Section 10, the Executive shall not be entitled to any payment, benefit, damages, award or compensation in connection with termination of the Employment, by either the Company or the Executive, except as may be expressly provided in another written agreement, if any, approved by the Board and executed by the Executive and the Company. Neither the Executive nor the Company is obligated to enter into any such other written agreement. |
| 6.6 | No Waiver of ERISA-Related Rights. Nothing in this Agreement shall be construed to be a waiver by the Executive of any benefits accrued for or due to the Executive under any employee benefit plan (as such term is defined in the Employee Retirement Income Security Act of 1974, as amended) maintained by the Company, if any, except that the Executive shall not be entitled to any severance benefits pursuant to any severance plan or program of the Company other than as provided herein. |
| 6.7 | Mitigation Not Required. The Executive shall not be required to mitigate the amount of any payment or benefit which is to be paid or provided by the Company pursuant to this Section 6. Any remuneration received by the Executive from a third party following termination of the Employment shall not apply to reduce the Company’s obligations to make payments or provide benefits hereunder. |
| 7. | TAX WITHHOLDING. Notwithstanding any other provision of this Agreement, the Company may withhold from amounts payable under this Agreement, or under any other agreement between the Executive and the Company, all federal, state, local and foreign taxes that are required to be withheld by applicable laws or regulations. |
| 8.1 | Executive acknowledges that in the course of his employment by the Company (including during the period of employment pre-dating the Effective Date), the Company has provided him and will continue to provide him, prior to any termination hereof, with certain Confidential Information which the Company desires to protect. |
| 8.2 | Executive understands that the Confidential Information is confidential, and he agrees not to reveal the Confidential Information to anyone outside the Company so long as the confidential or secret nature of such information shall continue. Executive further agrees that he will at no time use the Confidential Information in competing with all or any portion of the Company. At such time as Executive shall cease to be employed by the Company, he will surrender to the Company all papers, documents, writing and other property produced by him or coming into his possession by or through his employment (including during the period of employment pre-dating the Effective Date) and relating to the Confidential Information, and the Executive agrees that all such materials will at all times remain the property of the Company. |
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“Territory” means all of the following: (1) any state in which any entity in the Company Group conducts Company Business at the time of enforcement of this provision; (2) the United States of America; (3) Canada; and (4) North America.
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| 9.4 | For the purposes of this Agreement, “Potential Customer” or “Potential Client” shall be defined as those entities for which Executive has had access to Confidential Information or confidential information of such potential customer or client during his Employment, and “Customer” or “Client” shall be defined as those entities with which any member of the Company Group has conducted any business during the twelve (12) month period prior to the termination of the Employment. For the purposes of this Agreement, “Product” shall mean any product sold by any member of the Company Group at any time within the one (1) year period preceding the termination of the Executive’s Employment and “Services” shall mean activities performed by any member of the Company Group at any time within the one (1) year period preceding the termination of Executive’s Employment. |
| 9.5 | Executive acknowledges and agrees that the restrictive covenants contained herein are reasonable in time, territory and scope, and in all other respects. If a Tribunal determines that any of the restrictions set forth in this Section 9 are unreasonably broad or otherwise unenforceable under applicable law, then (i) such determination shall be binding only within the geographical jurisdiction of the Tribunal, and (ii) the restriction will not be terminated or rendered unenforceable, but instead will be blue penciled or reformed (solely for enforcement within the geographic jurisdiction of the Tribunal) to the minimum extent required to render it enforceable. |
| (a) | If, during the specific time periods listed in subparagraph (b), the Employment is terminated by any of the specific events listed there, then the Executive will be entitled to the following benefits: |
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| (ii) | The continuation of insurance and other benefits set forth in Section 6.2 shall be extended by an additional six months. |
| (iii) | The amount payable under subparagraph (i) is in addition to, and not in lieu of, any severance payments due to Executive under the provisions of Section 6.1 as a result of such termination of Employment, and the continuation of insurance and other benefits under subparagraph (ii) is in addition to the continuation of benefits under the provisions of Section 6.2 as a result of such termination of Employment. |
| (b) | The specific termination events and time periods in which the Executive will be entitled to the special severance benefits under Section 10.1(a)(i) above are as follows: |
| (i) | the Executive’s Employment is terminated by the Company or its successor in interest, for any reason other than Cause, at any time during the period beginning on the Change of Control date and ending on the date two (2) years after the Change of Control date; or |
| (ii) | the Executive Resigns for Good Reason at any time during the period beginning on the Change of Control date and ending on the date two (2) years after the Change of Control date. |
For the avoidance of doubt, if the Executive’s employment is terminated in connection with the closing of a transaction that constitutes a Change of Control, either by the Company immediately prior to the closing of such transaction or by the successor in interest by refusing to assume this Agreement in its entirety, the Executive will be entitled to the special severance benefits under Section 10.1(a)(i)
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| (d) | As a condition to providing the Executive with the special severance benefits under Sections 10.1(a)(i) and (ii), the Company will require the Executive to first execute a release consistent with the requirements of Section 6.1(b). |
| (a) | Any individual, entity or group (within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) (a “Person”) becomes the beneficial owner (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 50% or more of either (A) the then-outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (B) the combined voting power of the then-outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that, for purposes of this Section, the following acquisitions shall not constitute a Change of Control: (i) any acquisition directly from the Company, (ii) any acquisition by the Company, (iii) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company, or (iv) any acquisition pursuant to a transaction that complies with Sections 10.2(c)(i), (ii) and (iii). |
| (b) | Individuals who, as of the date hereof, constitute the Board (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date hereof whose election, or nomination for election by the Company’s stockholders, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual was a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board; |
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| (d) | The stockholders of the Company approve a complete liquidation or dissolution of the Company. |
Notwithstanding the foregoing, if it is determined that a payment hereunder is subject to the requirements of Section 409A, the Company will not be deemed to have undergone a Change of Control unless the Company is deemed to have undergone a “change in control event” pursuant to the definition of such term in Section 409A.
| 11. | ADJUSTMENTS TO PAYMENTS |
| 11.1 | Anything in this Agreement to the contrary notwithstanding, in the event it shall be determined that any payment or distribution by the Company to Executive or for Executive's benefit (whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise) (the “Payments”) would be subject to the excise tax imposed by Section 4999 (or any successor provisions) of the Code, or any interest or penalty is incurred by Executive with respect to such excise tax (such excise tax, together with any such interest and penalties, is hereinafter collectively referred to as the “Excise Tax”), then the Payments shall be reduced (but not below zero) if and to the extent that such reduction would result in Executive retaining a larger amount, on an after-tax basis (taking into account federal, state and local income taxes and the imposition of the Excise Tax), than if Executive received all of the Payments. The Company shall reduce or eliminate the Payments, by first reducing or eliminating the portion of the Payments which are not payable in cash and then by reducing or eliminating cash payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the determination. |
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| 11.2 | All determinations required to be made under this Section, including whether and when an adjustment to any Payments is required and, if applicable, which Payments are to be so adjusted, shall be made by an independent accounting firm selected by the Company from among the four (4) largest accounting firms in the United States or any nationally recognized financial planning and benefits consulting company (the “Accounting Firm”) which shall provide detailed supporting calculations both to the Company and to the Executive within fifteen (15) business days of the receipt of notice from the Executive that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Executive shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. If the Accounting Firm determines that no Excise Tax is payable by Executive, it shall furnish the Executive with a written opinion that failure to report the Excise Tax on the Executive's applicable federal income tax return would not result in the imposition of a negligence or similar penalty. Any determination by the Accounting Firm shall be binding upon the Company and the Executive. |
| 12. | COMPLIANCE WITH SECTION 409A OF THE INTERNAL REVENUE CODE. To the extent applicable, it is intended that this Agreement comply with the provisions of Section 409A of the Code (hereinafter referred to as “Section 409A”). This Agreement shall be administered in a manner consistent with this intent, and any provision that would cause the Agreement to fail to satisfy Section 409A shall have no force and effect until amended to comply with Section 409A. Notwithstanding any provision of this Agreement to the contrary, in the event any payment or benefit hereunder is determined to constitute nonqualified deferred compensation subject to Section 409A, then to the extent necessary to comply with Section 409A, such payment or benefit shall not be made, provided or commenced until six months after Executive’s Termination Date. Lump sum payments will be made, without interest, as soon as administratively practicable following the six-month delay. Any installments otherwise due during the six-month delay will be paid in a lump sum, without interest, as soon as administratively practicable following the six-month delay, and the remaining installments will be paid in accordance with the original schedule. For purposes of Section 409A, the right to a series of installment payments shall be treated as a right to a series of separate payments. Each separate payment in the series of separate payments shall be analyzed separately for purposes of determining whether such payment is subject to, or exempt from compliance with, the requirements of Section 409A. |
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| 13. | EMPLOYEE HANDBOOKS, ETC. From time to time, the Company may, in its discretion, establish, maintain and distribute employee manuals or handbooks or personnel policy manuals, and officers or other representatives of the Company may make written or oral statements relating to personnel policies and procedures. The Executive will adhere to and follow all rules, regulations, and policies of the Company set forth in such manuals, handbooks, or statements as they now exist or may later be amended or modified. Such manuals, handbooks and statements do not constitute a part of this Agreement nor a separate contract, and shall not be deemed as amending this Agreement or as creating any binding obligation on the part of the Company, but are intended only for general guidance. |
| 14. | OTHER PROVISIONS |
| 14.1 | This Agreement shall inure to the benefit of and be binding upon (i) the Company and its successors and assigns and (ii) the Executive and the Executive’s heirs and legal representatives, except that the Executive’s duties and responsibilities under this Agreement are of a personal nature and will not be assignable or delegable in whole or in part without the Company’s prior written consent. |
| 14.2 | All notices and statements with respect to this Agreement must be in writing and shall be delivered by certified mail return receipt requested; hand delivery with written acknowledgment of receipt; or overnight courier with delivery-tracking capability. Notices to the Company shall be addressed to the Company’s chief executive officer or chief financial or accounting officer at the Company’s then-current headquarters offices. Notices to the Executive may be delivered to the Executive in person or to the Executive’s then-current home address as indicated on the Executive’s pay stubs or, if no address is so indicated, as set forth in the Company’s payroll records. A party may change its address for notice by the giving of notice thereof in the manner hereinabove provided. |
| 14.3 | If the Executive Resigns for Good Reason because of (i) the Company’s failure to pay the Executive on a timely basis the amounts to which he is entitled under this Agreement or (ii) any other breach of this Agreement by the Company, then the Company shall pay all amounts and damages to which the Executive may be entitled as a result of such failure or breach, including interest thereon at the maximum non-usurious rate and all reasonable legal fees and expenses and other costs incurred by the Executive to enforce the Executive’s rights hereunder and the Executive will be relieved of all obligations under Section 9 (noncompetition). |
| 14.4 | This Agreement sets forth the entire present agreement of the parties concerning the subjects covered herein except for any equity incentive award agreements between the Company and the Executive and the Invention Assignment and Non-Disclosure Agreement between the Company and the Executive (provided, however, that in the event of any conflict between the latter agreement and this Agreement, the terms and conditions of this Agreement shall prevail). Without limiting the foregoing, the parties agree that this Agreement supersedes and replaces in its entirety that certain letter agreement between the Company and the Executive dated December 1, 2012. There are no promises, understandings, representations, or warranties of any kind concerning those subjects except as expressly set forth herein or therein. |
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| 14.5 | Any modification of this Agreement must be in writing and signed upon the express consent of all parties. Any attempt to modify this Agreement, orally or in writing, not executed by all parties will be void. |
| 14.6 | If any provision of this Agreement, or its application to anyone or under any circumstances, is adjudicated to be invalid or unenforceable in any jurisdiction, such invalidity or unenforceability will not affect any other provision or application of this Agreement which can be given effect without the invalid or unenforceable provision or application and will not invalidate or render unenforceable such provision or application in any other jurisdiction. |
| 14.7 | This Agreement will be governed and interpreted under the laws of the State of North Carolina. |
| 14.8 | No failure on the part of any party to enforce any provisions of this Agreement will act as a waiver of the right to enforce that provision. |
| 14.9 | Termination of the Employment, with or without Cause, will not affect the continued enforceability of this Agreement. |
| 14.10 | Section headings are for convenience only and shall not define or limit the provisions of this Agreement. |
| 14.11 | This Agreement may be executed in several counterparts, each of which is an original. It shall not be necessary in making proof of this Agreement or any counterpart hereof to produce or account for any of the other counterparts. A copy of this Agreement manually signed by one party and transmitted to the other party by FAX or in image form via email shall be deemed to have been executed and delivered by the signing party as though an original. A photocopy of this Agreement shall be effective as an original for all purposes. |
By signing this Agreement, the Executive acknowledges that the Executive: (a) has received a copy of it; (b) has read and understood the entire Agreement; (c) has had the opportunity to ask questions and consult counsel or other advisors about its terms; and (d) agrees to be bound by it.
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Executed and effective as of the Effective Date.
| Primo Water Corporation | Executive | ||
| By: | /s/ Billy Prim | /s/ Matt Sheehan | |
| Name: | Billy Prim | Matt Sheehan | |
| Title: | Chief Executive Officer | ||
Exhibit A
| Office | Winston Salem, NC or Chicago, Illinois, determined in accordance with Section 3.3 | |
| Position | President and Chief Operating Officer | |
| Base Salary | $300,000* | |
| Target Bonus | Seventy-five percent (75%) of Base Salary as of January 1 of the applicable new calendar year | |
| Signing Bonus Options | 50,000 | |
| Vesting of Options | Annual vesting at the rate of 25% per year, over four years | |
*Base Salary shall be subject to an annual automatic cost of living increase effective each January 1 during the period of Employment determined by multiplying the most recent Base Salary times a fraction (not less than one) whose numerator shall be the Consumer Price Index (the “CPI”) (All Urban Consumers, South Region Average (1982-84 = 100); All Items, Bureau of Labor Statistics of The United States Department of Labor), for the month of November next preceding the applicable January 1, and whose denominator shall be the CPI for the month of November for the immediately preceding year. If the quotient obtained in the foregoing fraction shall be a number less than one, the Base Salary shall not be decreased. In the event (i) the CPI ceases to use the 1982-84 average of 100 as the base of calculation, or (ii) a substantial change is made in the quality or quantity of the items utilized in determining the CPI, or (iii) the publishing of the CPI shall be discontinued for any reason, the United States Department of Labor shall be requested to furnish a new index comparable to the CPI, together with the information which will make possible the conversion of such new index to replace the CPI for the purposes of computing the Base Salary as provided for herein. If for any reason the United States Department of Labor does not furnish such an index and information, the parties hereto shall thereafter accept and use, as determined by the Board, such other index or comparable statistics to measure the cost of living as shall be computed and published by (i) an agency of the United States Government, (ii) a reasonable financial periodical or (iii) a recognized authority mutually selected by the Company and the Executive.