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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.

 

2.2 Cause means (i) the continued willful failure by the Executive to
substantially perform his duties with the Company, (ii) the willful engaging by
the Executive in misconduct materially and demonstrably injurious to the Company
or (iii) the Executive’s material breach of this Agreement; provided, however,
that with respect to any breach that is curable by the Executive, as determined
by the Board in good faith, the Company has provided the Executive written
notice of the material breach and the Executive has not cured such breach, as
determined by the Board in good faith, within fifteen (15) days following the
date the Company provides such notice.

 

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.

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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

 

3.1 Position.  Subject to the terms and conditions hereinafter set forth, the
Company hereby agrees to employ the Executive, and the Executive hereby agrees
to serve the Company, at the Principal Office and in the Position.

 

(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.

 

3.3 Principal Office.  The “Principal Office” shall initially be the Company’s
office in Chicago, Illinois.  The Executive may, in his sole discretion, elect
to permanently relocate to the greater Winston Salem, North Carolina area, at
which point the “Principal Office” shall be deemed to be the Company’s office
located in Winston Salem, North Carolina.

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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.

 

4.2 Bonuses; Additional Compensation.  Executive will be eligible to receive
bonuses and awards of equity and non-equity compensation and to participate in
annual and long-term compensation plans of the Company in accordance with any
plan or decision that the Board, or any committee or other person authorized by
the Board, may in its sole discretion determine from time to time.

 

(a) Annual Bonus Compensation.  Executive shall be eligible to be considered for
an annual, discretionary cash bonus each calendar year.  Executive’s target
annual bonus percentage for each calendar year shall be as set forth on Exhibit
A.  Executive acknowledges and agrees that any such annual bonus shall be
entirely within the discretion of the CEO and the Compensation Committee of the
Board based upon the achievement of goals (including without limitation
corporate and individual goals) and other discretionary factors as determined by
the Board and/or the Compensation Committee of the Board after consultation with
the CEO.  Except as specifically set forth in this Agreement, Executive shall
not be eligible to be considered for, or to receive, an annual bonus for any
calendar year unless he remains employed with the Company through completion of
the audit for such calendar year.  If Executive is terminated with Cause or
resigns without Good Reason, he shall not be entitled to receive any annual
bonus, even if a determination to award the Executive an annual bonus has
previously been made but such annual bonus has not yet paid.

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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.

 

4.3 Relocation Expenses.

 

(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

 

5.1 Term of Agreement.  The term of the Employment shall commence on the date
hereof (the “Effective Date”) and continue to the third anniversary of the
Effective Date (the “Original Term”) and renew automatically for successive
one-year terms (each, a “Renewal Term”) unless notice of non-renewal is given by
either party to the other party at least ninety (90) days prior to the end of
the Original Term or any Renewal Term (the “Expiration Date”); provided that the
Employment may also be terminated prior to such Expiration Date (i) by the
Executive for any reason (i.e., with or without Good Reason), (ii) by the
Company for any reason (i.e., with or without Cause) or (iii) due to the
Disability or death of the Executive.

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5.2 Termination in the Event of Disability.  In the event of the incapacity of
the Executive, by reason of mental or physical disability that materially
interferes with his ability to perform his material duties hereunder, for a
period of 120 consecutive days or 180 non-consecutive days during any twelve
(12) month period, as reasonably determined by the Board or as certified by a
qualified physician selected by the Board (collectively, “Disability”), the
Company may terminate the Executive’s Employment effective upon written notice
to the Executive; provided, however, that if a determination of Disability is
made by the Board and the Executive disagrees with such determination, the Board
and the Executive shall agree upon and appoint a qualified physician who shall
evaluate the Executive and determine whether the Executive meets the definition
of Disability, which decision shall be binding upon the Company and the
Executive.  Prior to the termination of Executive’s Employment pursuant to this
Section 5.2, during any period that the Executive fails to perform his full-time
duties with the Company as a result of incapacity due to physical or mental
illness, he shall continue to receive his Base Salary, annual bonus and other
benefits provided hereunder, less the amount of any disability benefits received
by the Executive during such period under any disability plan or program
sponsored by the Company.

 

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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6. SEVERANCE BENEFITS UPON CERTAIN TERMINATIONS

6.1 Severance Payment.  If (1) the Company does not renew the Agreement at the
end of the Original Term or any Renewal Term, (2) the Employment is terminated
by the Company other than for Cause or (3) the Executive resigns for Good
Reason, then:

(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.

 

(b) As a condition to making any such severance payment, the continuation of
insurance and related benefits under Section 6.2 below and the special equity
vesting under Section 6.3 below, the Company will require the Executive or his
legal representative(s) to first execute a release in form and substance
satisfactory to the Company, which contains a full release of all claims against
the Company and certain other provisions, including but not limited to a
reaffirmation of the covenants in Sections 8, 9.1 and 9.2.

 

6.2
Continuation of Insurance and Related Benefits.  If (1) the Company does not
renew the Agreement at the end of the Original Term or any Renewal Term, (2) the
Employment is terminated by the Company other than for Cause or (3) the
Executive resigns for Good Reason then:
 

(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.

 

6.3 Equity Vesting.  If (1) the Company does not renew the Agreement at the end
of the Original Term or any Renewal Term, (2) the Employment is terminated by
the Company other than for Cause or (3) the Executive resigns for Good Reason,
then the Executive shall vest upon such termination of Employment in any
restricted stock, stock option or other equity compensation awards granted by
the Company (a) that were otherwise scheduled to vest within six (6) months
after the Termination Date for all options that have a monthly or quarterly
vesting schedule and (b) that were otherwise scheduled to vest at the next
vesting date for all options that have an annual vesting schedule.  The
provisions of this Section 6.3 shall control except to the extent that the
provisions of the applicable restricted stock, stock option or other equity
award are more favorable. Any post-employment exercise period for vested stock
options shall continue to be governed by the terms of the applicable equity
compensation plan and award agreement.

 

6.4 D&O Insurance, and Indemnification.  Through at least the sixth anniversary
of the Termination Date, the Company shall maintain coverage for the Executive
as a named insured on all directors’ and officers’ insurance maintained by the
Company for the benefit of its directors and officers on at least the same basis
as all other covered individuals and provide the Executive with at least the
same corporate indemnification as it provides to other Senior Executives.

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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. CONFIDENTIAL INFORMATION

 

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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9. NONCOMPETITION AND NONSOLICITATION COVENANT

 

9.1 Noncompetition.  In return for the consideration stated in this Agreement,
including the receipt of Confidential Information by Executive and the promise
of the Company to provide the Executive with Confidential Information, the
Executive agrees that, during his Employment and for one (1) year after the
termination of Employment, Executive shall not directly or indirectly possess an
ownership interest in, manage, control, participate in, consult with, or render
services for any other person, firm, association or corporation, engaged in the
Company Business in the Territory without the prior written consent of the
Company, because such activity would unavoidably and unfairly compromise the
Company’s legitimate, protectable business interests in its Confidential
Information, clients, employees, suppliers and business relationships.

“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.

9.2 Non-interference.  Executive agrees that he shall not, either directly or
indirectly, during Executive’s Employment and for one (1) year after the
termination of Employment, in any capacity whatsoever (either as an employee,
officer, director, stockholder, proprietor, partner joint venturer, consultant
or otherwise) (a) solicit, contact, call upon, communicate with, or attempt to
communicate with any of the Company Group Customers or Clients or Potential
Customers or Potential Clients for the purpose of selling Products or providing
Services to such Customer or Client or Potential Customer or Potential Client,
(b) sell Products or provide any Services to any Customer or Client or Potential
Customer or Potential Client of the Company Group, or (c) cause, or attempt to
cause, any of the Company’s suppliers, distributors, bottlers or other business
partners to cease doing business with the Company or to reduce the amount of
business they do with the Company.

 

9.3 Nonsolicitation.  The Executive agrees that he shall not directly or
indirectly during the Executive’s Employment and for one (1) year after the
termination of Employment, either alone or through or in conjunction with any
other person or entity employ, solicit, induce, or recruit, any person employed
by any member of the Company Group at any time within the one (1) year period
immediately preceding such employment, solicitation, inducement or recruitment.

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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.

 

10. CHANGE OF CONTROL

 

10.1 Special Severance Benefits.

 

(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:

 

(i) The Company shall pay to the Executive an amount equal to one-half (1/2)
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 (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.

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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)
 

(c) In addition, all then-outstanding restricted stock, stock option or other
equity compensation awards granted by the Company that were unvested immediately
prior to the Change of Control shall, become fully vested immediately prior to
the Change of Control.  Immediately prior to the Change of Control, all stock
options (to the extent then vested or vesting upon such Change of Control) will
be deemed canceled and the Company shall pay, or cause to be paid, to the
Executive cash for all such options in an amount equal to the product of (i) the
positive difference (if any) between the price per share (or distribution per
share, if applicable) in such Change of Control transaction less the exercise
price(s) of such stock options and (ii) the number of shares underlying such
stock options.  The provisions of this Section 10.1(c) shall control except to
the extent that the provisions of the applicable restricted stock, stock option
or other equity award are more favorable.

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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).

 

10.2 A Change of Control shall occur when:

 

(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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(c) There is consummation of a reorganization, merger, statutory share exchange
or consolidation or similar transaction involving the Company or any of its
subsidiaries, a sale or other disposition of all or substantially all of the
assets of the Company, or the acquisition of assets or stock of another entity
by the Company or any of its subsidiaries (each, a “Business Combination”), in
each case unless, following such Business Combination, (i) all or substantially
all of the individuals and entities that were the beneficial owners of the
Outstanding Company Common Stock and the Outstanding Company Voting Securities
immediately prior to such Business Combination beneficially own, directly or
indirectly, more than 50% of the then-outstanding shares of common stock (or,
for a non-corporate entity, equivalent securities) and the combined voting power
of the then-outstanding voting securities entitled to vote generally in the
election of directors (or, for a non-corporate entity, equivalent governing
body), as the case may be, of the entity resulting from such Business
Combination (including, without limitation, an entity that, as a result of such
transaction, owns the Company or all or substantially all of the Company’s
assets either directly or through one or more subsidiaries) in substantially the
same proportions as their ownership immediately prior to such Business
Combination of the Outstanding Company Common Stock and the Outstanding Company
Voting Securities, as the case may be, (ii) no Person (excluding any corporation
resulting from such Business Combination or any employee benefit plan (or
related trust) of the Company or such corporation resulting from such Business
Combination) beneficially owns, directly or indirectly, 20% or more of,
respectively, the then-outstanding shares of common stock of the corporation
resulting from such Business Combination or the combined voting power of the
then-outstanding voting securities of such corporation, except to the extent
that such ownership existed prior to the Business Combination, and (iii) at
least a majority of the members of the board of directors (or, for a
non-corporate entity, equivalent governing body) of the entity resulting from
such Business Combination were members of the Incumbent Board at the time of the
execution of the initial agreement or of the action of the Board providing for
such Business Combination; or

 

(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

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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.
 

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