EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement"), dated as of May 1,
1999 is entered into by and between C3, Inc, a North Carolina corporation with
its principal office at 3800 Gateway Boulevard, Suite 310 Morrisville, NC 27560
(the "Company") and Mary Katherine Rafferty an individual currently residing at
16 West 16th Street, Apt. 12HS, New York, New York, 10011 ("Employee").
Statement of Purpose
The Company wishes to obtain the services of the 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 April 30, 2000. 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 existing
term, renew for successive one year terms.
3. Position and Duties. The Employee shall serve as Director of
Marketing and Public Relations of the Company. Employee will,
under the direction of the President and COO of the Company,
faithfully and to the best of her ability perform the duties as
may be reasonably assigned by the President and COO. Employee
agrees to devote her 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 $100,000
per year, payable in regular and equal semi-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, medical and disability
insurance, retirement benefits and three weeks paid vacation
annually (the "Employee Benefits").
C) INCENTIVE COMPENSATION. Employee will receive a cash bonus of
$30,000 if the net revenues of the company equal or exceed
$30 million for the year ending December 31, 1999. Employee
shall receive a cash bonus of $20,000 if the net revenues of
the company are equal to or in excess of $20 million, and
less than $30 million for the year ending December 31, 1999.
If the net revenues of the company are less than $20 million
for the year ending
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December 31, 1999, any cash bonus awarded the employee shall
be at the sole discretion of the President of the company.
For all periods after December 31, 1999, Employee shall
participate in such incentive plans as may be approved by the
Board of Directors for the senior management of the company
from time-to-time.
D) RELOCATION EXPENSES. Employee shall receive a one time
$20,000 payment in compensation for all costs associated with
the relocation of employee's domicile from New York, New York
to the Raleigh, North Carolina area. This payment will be
subject to income tax withholding and other taxes as provided
by federal and state statute. The payment will be due and
payable on May 30, 1999. Additionally, the Company will pay
the brokerage commission payable on the sale of Employee's
current residence if sold during the term of this agreement
or any extension thereof for an additional one-year period.
The company will provide temporary housing for the Employee
for a period not to exceed six months beginning May 15, 1999.
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 of the
Employee of the services under the 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 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 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 have no
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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, or for a period of seven calendar months,
whichever is greater, regardless of the contract term
("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, not
withstanding any provision in any applicable plan. 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 the
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
Termination Compensation times 2.99, and (z) shall continue
to participate in the same group employee benefit plans or
programs 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 offices of Company, then at the date of 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. The Company shall pay any such benefits to the same
extent as they were so paid prior to the termination or the
Change of Control of Company.
"Good Reason" shall mean the occurrence of any of the
following events without the Employee's express written
consent:
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(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 the 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 the Employee was
eligible in the preceding 12 months; or
(iii) An involuntary relocation of the Employee more than
fifty (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 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 proxy contest, merger,
consolidation or sale of assets, or as a result of any
combination for 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 which regardless of which entity is 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
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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 the 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 business are not related in any way to such other
business's products which are in competition with the
Company's products at the time of termination. 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 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.
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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, 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 Company, its
successors or assigns all of the 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 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, it's
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. 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 of this Agreement, and the remaining terms, covenants,
restrictions, or provisions in such paragraph and in the Agreement
shall remain in full force and effect and any court of competent
jurisdiction may so modify the objectionable provision to make it
valid, reasonable and enforceable.
12. 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.
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,
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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. Amendment. This Agreement may be amended only by an agreement in
writing signed by each of the parties hereto.
15. Entire Agreement. This Agreement contains the entire agreement of
the parties with respect to Employee's employment with the Company
and supercedes any prior agreements between them, whether written
or oral.
16. 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.
17. 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.
18. Benefit. This Agreement shall be binding upon and inure to the
benefit of and shall be enforceable by and against the Company,
it's 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: _____________________________
Robert S. Thomas, President
----------------------------
Mary Katherine Rafferty