Document:

Exhibit 10.4

 

NOTICE OF GRANT OF
NON-QUALIFIED STOCK OPTION AWARD

 

WPCS INTERNATIONAL
INCORPORATED

2014 EQUITY INCENTIVE PLAN

 

FOR GOOD AND VALUABLE
CONSIDERATION, WPCS International Incorporated (the “Corporation”) hereby grants, pursuant to the provisions
of the WPCS International Incorporated 2014 Equity Incentive Plan (the “Plan”), to the Participant designated
in this Notice of Grant of Non-Qualified Stock Option Award (“Notice of Grant”), a stock option (the “Option”)
to purchase the number of shares of Common Stock set forth in this Notice of Grant (the “Shares”), subject to
certain provisions as outlined below in this Notice of Grant and the additional provisions set forth in the attached Terms and
Conditions of Stock Option Award (“Terms and Conditions,” and together with this Notice of Grant, “Option
Agreement”).

 

	

    Participant:  ________________________	 

                                                                                                                                                                    Type
                                         of Option:  Non-Qualified Stock Option

                                                                                 

	

                                                                                 

                                                                                Exercise
                                         Price per Share:  $____________

                                                                                 
	 

                                                                                                                           

                                                                                Grant
                                         Date:  ______________________________

	 

                                                                                                                                                         Total
                                         Number of
 Shares
                                         Granted:  ____________________

                                                                                 
	 

                                                                                                                           

                                                                                Expiration
                                         Date:  ____________________________

	 

        Vesting
        Schedule:

         

	 

        Exercise
        after Separation from Service:

         

        Separation
        from Service for any reason other than death, Disability, or Cause: any non-vested portion of the Option expires immediately
        and any vested portion of the Option remains exercisable for three (3) months following such Separation from Service;

         

        Separation
        from Service due to death or Disability: any non-vested portion of the Option expires immediately and any vested portion
        of the Option remains exercisable for twelve (12) months following such Separation from Service; and

         

        Separation
        from Service for Cause: the entire Option, including any vested and non-vested portion, expires immediately upon such
        Separation from Service.

         

        “Separation
        from Service” means termination of the Participant’s service with the Company and each Subsidiary.

         

        “Disability”
        means the Participant is unable to engage in any substantial gainful activity by reason of any medically determinable
        physical or mental impairment that can be expected to result in death or that has lasted or can be expected to last for
        a continuous period of not less than twelve (12) months.

         

        In
        no event may THE Option be exercised after the Expiration Date as provided above. 

         

 

    1 

     

    

 

By signing below, the Participant agrees
that the Option is granted under and governed by the provisions of the Plan and this Option Agreement.

 

	Participant	 	WPCS INTERNATIONAL INCORPORATED
	 	 	 	 
	Sign Name: 	                                     	 	Sign Name:  	                                     
	 	 	 	 	 
	Print Name:	 	 	Print Name:	 
	 	 	 	 	 
	Date:	 	 	Title:	 
	 	 	 	 	 
	 	 	 	Date:	 

 

    2 

     

    

 

TERMS
AND CONDITIONS OF STOCK OPTION AWARD

 

1.Grant of Option.
The Option granted to the Participant and described in the Notice of Grant is subject to the provisions of the Plan, which is incorporated
by reference in its entirety into these Terms and Conditions and into this Option Agreement more generally.

 

The Board has authorized
and approved the Plan, which has been approved by the stockholders of the Corporation. The Administrator has approved the award
to the Participant of the Option, conditioned on the Participant’s acceptance of the provisions set forth in this Option
Agreement within sixty (60) days after this Option Agreement is presented to the Participant for review. For purposes of this Option
Agreement, any reference to the Corporation shall include a reference to any Subsidiary.

 

The Corporation intends
that the Option not be considered to provide for the deferral of compensation under Code Section 409A and that this Option Agreement
shall be so administered and construed. The Corporation may modify the Plan and this Option Agreement to the extent necessary to
fulfill this intent.

 

2.Exercise of
Option.

 

(a)Right to Exercise.
The Option shall be exercisable, in whole or in part, during its term in accordance with the Vesting Schedule set forth in the
Notice of Grant and with the applicable provisions of the Plan and this Option Agreement. No Shares shall be issued pursuant to
the exercise of the Option unless the issuance and exercise comply with applicable laws. Assuming such compliance, for income tax
purposes the Shares shall be considered transferred to the Participant on the date on which the Option is exercised with respect
to such Shares. Until such time as the Option has been duly exercised and Shares have been delivered, the Participant shall not
be entitled to exercise any voting rights with respect to such Shares and shall not be entitled to receive dividends or other distributions
with respect thereto. The Administrator may, in its discretion and pursuant to, and in accordance with, its administrative authority
under the Plan, (i) accelerate vesting of the Option or (ii) extend the applicable exercise period of the Option.

 

(b)Method of Exercise.
The Participant may exercise the Option by delivering an exercise notice in a form approved by the Corporation (the “Exercise
Notice”), which shall state the election to exercise the Option, the number of Shares with respect to which the Option
is being exercised, and such other representations and agreements as may be required by the Corporation. The Exercise Notice shall
be accompanied by payment of the aggregate exercise price as to all Shares exercised. The Option shall be deemed to be exercised
upon receipt by the Corporation of such fully executed Exercise Notice accompanied by the aggregate exercise price.

 

(c)Acceleration
of Vesting Under Certain Circumstances. The vesting and exercisability of the Option shall not be accelerated under any circumstances,
except as otherwise provided in the Plan.

 

3.Method of
Payment. If the Participant elects to exercise the Option by submitting an Exercise Notice in accordance with Section 2(b)
of this Option Agreement, the aggregate exercise price (as well as any applicable withholding or other taxes) may be paid by means
of any lawful consideration as determined by the Administrator and subject to compliance with applicable laws, in accordance with
Section 5.5 of the Plan, including one or a combination of the following methods:

 

    3 

     

    

 

(a)cash, check payable
to the order of the Corporation, or electronic funds transfer;

 

(b)notice and third
party payment in such manner as may be authorized by the Administrator;

 

(c)the delivery of
previously owned shares of Common Stock that are fully vested and unencumbered;

 

(d)by a reduction
in the number of Shares otherwise deliverable pursuant to the Option; or

 

(e)subject to such
procedures as the Administrator may adopt, pursuant to a “cashless exercise” with a third party who provides financing
for the purposes of (or who otherwise facilitates) the purchase or exercise of awards under the Plan.

 

4.Restrictions
on Exercise. The Option may not be exercised until such time as the Plan has been approved by the stockholders of the Corporation,
or if the issuance of the Shares upon exercise or the method of payment of consideration for those shares would constitute a violation
of any applicable law, regulation, or Corporation policy.

 

5.Non-Transferability
of Option. Except as specifically permitted under Section 5.7.3 of the Plan: (a) the Option is not transferable and shall
not be subject in any manner to sale, transfer, anticipation, alienation, assignment, pledge, encumbrance, or charge; (b) the Option
shall be exercised only by the Participant; and (c) amounts payable or Shares issuable pursuant to the Option shall be delivered
only to (or for the account of) the Participant. No permitted transfer or assignment shall be effective until the Corporation has
acknowledged such transfer or assignment in writing. The terms of the Plan and this Option Agreement shall be binding upon the
executors, administrators, heirs, successors, and assigns of the Participant.

 

6.Term of Option.
The Option may be exercised only within the term set out in the Notice of Grant, and may be exercised during such term only in
accordance with the Plan and the terms of this Option Agreement.

 

7.Withholding.

 

(a)The Administrator
shall determine the amount of any withholding or other tax required by law to be withheld or paid by the Corporation with respect
to any income recognized by the Participant with respect to the Option Award.

 

(b)The Participant
shall be required to meet any applicable tax withholding obligation in accordance with the provisions of Section 8.5 of the Plan.

 

(c)Subject to any
rules prescribed by the Administrator, the Participant shall have the right to elect to meet any withholding requirement (i) by
having withheld at the appropriate time that number of whole shares of Common Stock whose Fair Market Value is equal to the amount
of any taxes required to be withheld with respect to the Option, (ii) by direct payment to the Corporation in cash of the amount
of any taxes required to be withheld with respect to the Option or (iii) by a combination of shares and cash.

 

8.Defined Terms.
Capitalized terms used but not defined in this Option Agreement shall have the meanings set forth in the Plan.

 

9.Participant
Representations. The Participant hereby represents to the Corporation that the Participant has read and fully understands the
provisions of the Notice of Grant, these Terms and Conditions, and the Plan and the Participant’s decision to participate
in the Plan is completely voluntary. Further, the Participant acknowledges that the Participant is relying solely on his or her
own advisors with respect to the tax consequences of the Option.

 

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10.Regulatory
Limitations on Exercises. Notwithstanding the other provisions of this Option Agreement, the Administrator shall have the sole
discretion to impose such conditions, restrictions, and limitations (including suspending the exercise of the Option and the tolling
of any applicable exercise period during such suspension) on the issuance of Common Stock with respect to the Option unless and
until the Administrator determines that such issuance complies with (a) any applicable registration requirements under the Securities
Act or the Administrator has determined that an exemption therefrom is available, (b) any applicable listing requirement of any
stock exchange on which the Common Stock is listed, (c) any applicable Corporation policy or administrative rules, and (d) any
other applicable provision of state, federal, or foreign law, including foreign securities laws where applicable.

 

11.Miscellaneous.

 

(a)Notices.
Any notice that either party hereto may be required or permitted to give to the other shall be in writing and may be delivered
personally, by intraoffice mail, by fax, by electronic mail, or other electronic means, or via a postal service, postage prepaid,
to such electronic mail or postal address and directed to such person as the Corporation may notify the Participant from time to
time; and to the Participant at the Participant’s electronic mail or postal address as shown on the records of the Corporation
from time to time, or at such other electronic mail or postal address as the Participant, by notice to the Corporation, may designate
in writing from time to time.

 

(b)Waiver.
The waiver by any party hereto of a breach of any provision of this Option Agreement shall not operate or be construed as a waiver
of any other or subsequent breach.

 

(c)Entire
Agreement. This Option Agreement (including these Terms and Conditions and the Notice of Grant) and the Plan constitute the
entire agreement between the parties hereto with respect to the subject matter hereof. Any prior agreements, commitments, or negotiations
concerning the Option are superseded.

 

(d)Binding
Effect; Successors. This Option Agreement shall inure to the benefit of and be binding upon the parties hereto and to the extent
not prohibited herein, their respective heirs, successors, assigns, and representatives. Nothing in this Option Agreement, express
or implied, is intended to confer on any person other than the parties hereto and as provided above, their respective heirs, successors,
assigns, and representatives, any rights, remedies, obligations, or liabilities.

 

(e)Governing
Law. This Option Agreement shall be governed by and construed in accordance with the laws of the State of Delaware without
giving effect to the principles of conflicts of law, and applicable Federal law.

 

(f)Headings.
The headings contained herein are for the sole purpose of convenience of reference, and shall not in any way limit or affect the
meaning or interpretation of any of the provisions of this Option Agreement.

 

(g)Conflicts;
Amendment. The provisions of the Plan are incorporated in this Option Agreement in their entirety. In the event of any conflict
between the provisions of this Option Agreement and the Plan, the provisions of the Plan shall control. This Option Agreement may
be amended at any time by the Administrator pursuant to, and subject to, the provisions of the Plan.

 

(h)No Right
to Continued Employment. Nothing in this Option Agreement shall confer upon the Participant any right to continue in the employ
or service of the Corporation or any Subsidiary or affect the right of the Corporation or any Subsidiary to terminate the Participant’s
employment or service at any time.

 

    5 

     

    

 

(i)Further
Assurances. The Participant agrees, upon demand of the Corporation or the Administrator, to do all acts and execute, deliver,
and perform all additional documents, instruments, and agreements that may be reasonably required by the Corporation or the Administrator,
as the case may be, to implement the provisions and purposes of this Option Agreement and the Plan.

 

(j)Confidentiality.
The Participant agrees that the provisions of this Option Agreement are strictly confidential and, with the exception of Participant’s
counsel, tax advisor, immediate family, or as required by applicable law, have not and shall not be disclosed, discussed, or revealed
to any other persons, entities, or organizations, whether within or outside the Corporation, without prior written approval of
the Corporation. The Participant further agrees to take all reasonable steps necessary to ensure that confidentiality is maintained
by any of the individuals or entities referenced above to whom disclosure is authorized.

 

    6Exhibit 10.1

 

  Exhibit 10.1
 EMPLOYMENT AGREEMENT
 

 THIS EMPLOYMENT AGREEMENT (the “Agreement”) between GLENN PRILLAMAN (“Employee”) and STANLEY FURNITURE COMPANY, INC., a Delaware corporation (the “Company”), is effective as of July 22, 2016 (the “Effective Date”). 
 

 WHEREAS, the Company desires to assure that it will have the benefit of the continued service and experience of the Employee, who is a principal executive officer of the Company and an integral part of its management, and the Employee is willing to enter into an agreement to such end upon the terms and conditions set forth in this Agreement; 
 

 NOW, THEREFORE, in consideration of the foregoing and the mutual agreements herein contained, the parties agree as follows:
  
 1.     Employment. The Company hereby employs the Employee and the Employee hereby accepts employment upon and agrees to the terms and conditions set forth herein.
 2.     Term. The term of employment under this Agreement (the “Term”) shall commence on the Effective Date and continue through December 31, 2017 and shall automatically renew for additional one-year periods thereafter unless either party gives notice on or before November 1 of any calendar year that employment under this Agreement will not continue for an additional period of one year beginning on the following January 1.
 3.     Compensation.
 a.   Salary. During the Employee’s employment hereunder, the Company shall pay the Employee for all services rendered by the Employee a base salary at an annual rate of at least $255,000, with upward adjustments as the Board of Directors of the Company shall deem appropriate (the “Salary”). The Salary shall be payable to the Employee in accordance with the Company’s usual paying practices, but not less frequently than monthly.
 b.   Annual Bonus. In addition to Salary, the Employee shall be eligible to receive a target annual bonus of 100% of his Salary for each fiscal year of the Company while this Agreement is in effect, subject to performance (the “Annual Bonus”). The Annual Bonus for any fiscal year shall be related to the achievement of certain performance thresholds and objectives to be set at the beginning of each fiscal year by the Board of Directors of the Company (the “Board”). The Annual Bonus (if any) shall be payable promptly following a determination by the Board that the applicable performance criteria have been satisfied but no later than March 15th of the next following year. Nothing in this Section 3(b) shall prohibit Employee from receiving any other bonus amount payable pursuant to any plan approved by the Compensation Committee of the Board of Directors of the Company. 
 c.   Other Benefits. The Employee shall also be eligible to participate in such employee benefit plans and receive such other fringe benefits as are afforded generally by the Company to its senior personnel, subject to the terms and conditions of such plans as in effect from time to time. 

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 d.   Directors and Officers Insurance. The Company shall maintain directors and officers liability insurance for the benefit of Employee in connection with Employee’s employment with the Company.
 e.   Paid Time Off. During the Term, Employee shall be entitled to at least four (4) weeks of paid time off (“PTO”) for vacation and illness in each calendar year in accordance with Company policy. 
 f.    Business Expenses. During the Term, the Company shall reimburse Employee for documented, reasonable and necessary business expenses incurred on its behalf in performing Employee’s duties and promoting the business of the Company, in accordance with Company policy.
 4.     Duties. The Employee shall continue to perform the duties of President and Chief Executive Officer of the Company and shall, under the direction of the Board, faithfully and to the best of his ability perform such duties and such other duties and responsibilities as may be reasonably assigned by the Board from time to time, including service as an officer or director of any subsidiaries of the Company.
 5.     Extent of Services. During the Employee’s employment hereunder, the Employee shall devote his entire working time, attention and energy to the business of the Company and shall not be engaged in any other active business of any kind except as authorized by the Board.
 6.     Non-competition Restriction. 
 a.   During the Restricted Period (as defined below), in the event Employee receives severance payments pursuant to Section 17(b), the Employee shall not: (i) engage in Competitive Activity (as defined below) within or with respect to the Prohibited Territory (as defined below); or (ii) assist any entity or person to engage in Competitive Activity within or with respect to the Prohibited Territory, whether as an owner, investor, executive, consultant or otherwise.  In interpreting the foregoing, the Employee agrees, for example, that communications about furniture to be delivered to a location within the Prohibited Territory (whether such communication is by telephone, e-mail, or otherwise) would constitute the Employee engaging in activity “within or with respect to the Prohibited Territory” regardless of where the Employee may be physically located at the time of that communication.
 b.   The “Restricted Period” means: (i) the period of time that the Employee is employed by the Company; and (ii) the 12 month period following Employee’s last day of employment with the Company (the “Separation Date”).
 c.   “Competitive Activity” means: (i) engaging in work for a competitor of the Company that is the same as or substantially similar to the work the Employee performed on behalf of the Company; and/or (ii) engaging in an aspect of the Restricted Business (as defined below) that the Employee was involved with on behalf of the Company.  Notwithstanding the preceding, passively owning less than 3% of a public company shall not constitute by itself Competitive Activity or assisting others to engage in Competitive Activity.
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  d.   The “Restricted Business” means: (i) the business engaged in by the Company as of the Separation Date; and (ii) the business of designing, sourcing, manufacturing, marketing, distributing and selling wood furniture for the residential market in the United States. 

 e.   “Prohibited Territory” means: (a) the United States; and (b) each country in which the Company had sales at any time during the 12 months prior to the Separation Date.  As a senior executive for the Company, the Employee acknowledges and agrees that he has duties and responsibilities with respect to all of the Company’s business and that such business extends throughout the United States.
 7.     Non-interference Restriction. 
 a.   During the Restricted Period, in the event Employee receives severance payments pursuant to Section 17(b), the Employee shall not: (i) solicit, encourage, or cause any Restricted Partner (as defined below) not to do business with or to reduce any part of its business with the Company; (ii)  solicit, encourage, or cause any Restricted Partner to do business with any Company competitor; (iii) make any disparaging comments about the Company or its business, products, directors or employees, whether in writing, verbally, or on any online forum; (v) assist or encourage anyone else to engage in any of the conduct prohibited by this Section; or (vi) allow any of the Employee’s immediate family members or any entity controlled by the Employee to engage in any of the conduct prohibited by this Section
 b.   “Restricted Partner” means: (i) each Company supplier, independent sales representative, customer, financing source, or other business partner (each, a “Partner”) with whom the Employee had business contact or communications at any time during the 12 months prior to the Separation Date; (ii) each Company Partner for whom the Employee supervised or assisted with the Company’s dealings at any time during the 12 months prior to the Separation Date; (iii) each Company Partner about whom the Employee received Confidential Information (as defined below) at any time during the 12 months prior to the Separation Date; and (iv) each prospective Company Partner with whom the Employee had business contact or communications at any time during the six months prior to the Separation Date.  
 8.     Non-solicitation of Employees.  Except with the prior consent in writing of the Board, the Employee shall not during the Restricted Period directly or indirectly, on his own behalf or on behalf of any other person, hire, attempt to hire, employ in any capacity, solicit the employment of, offer employment to, entice away, or in any other manner persuade or attempt to persuade to leave, any person who is then or was at any time during the preceding six months employed by the Company.
 9.     Confidential Information. The Employee further agrees to keep confidential and not use for his personal benefit or for any other person’s benefit any and all proprietary information received or developed by the Employee during his employment with the Company relating to inventions, products, production methods, financial matters, sources of supply, markets, marketing methods or customers of the Company (“Confidential Information”). Notwithstanding the foregoing, Employee shall be authorized to disclose Confidential Information (i) as may be required by law or legal process after providing the Company with prior written notice and an opportunity to respond to such demand for disclosure (unless such notice is prohibited by law);  and (ii) with the prior written consent of the Board. 
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 “Confidential information” shall not include any information that is generally known to the industry or the public other than as a result of Employee’s breach of this covenant or any breach of other confidentiality obligations by third parties.  This Agreement, however, does not prohibit communications directly with the Securities and Exchange Commission about any possible securities law violation.
 10.   Return of Property.  All property, documents, data, and Confidential Information prepared or collected by the Employee as part of the Employee’s employment with the Company, in whatever form, are and shall remain the property of the Company.  The Employee shall return upon the Company’s request at any time (and, in any event, before the Employee’s employment with the Company ends) all documents, data, Confidential Information, and other property belonging to the Company in the Employee’s possession or control, regardless of how stored or maintained and including all originals, copies and compilations.
 11.   Developments.  The Employee hereby assigns and agrees in the future to assign to the Company the Employee’s full right, title and interest in all Developments (as defined below).  In addition, all copyrightable works that the Employee has created or creates in the course of or related to the Employee’s employment with the Company shall be considered “work made for hire” and shall be owned exclusively by the Company. “Developments” means any design, invention, formula, process, development, innovation or improvement made, conceived or first reduced to practice by the Employee, solely or jointly with others, during the Employee’s employment with the Company and that was developed using the equipment, supplies, facilities or trade secret information of the Company or that relates at the time of conception or reduction to practice to: (a) the business of the Company, or (b) any work performed by the Employee for the Company.
 12.   Specific Enforcement. It is agreed and understood by the parties hereto that, in view of the nature of the business of the Company, the restrictions in Sections 6 through 16 are reasonable and necessary to protect the legitimate interests of the Company, that monetary damages alone are not an adequate remedy for any breach of such provisions, and that any violation thereof would result in irreparable injuries to the Company. The Employee therefore acknowledges that, in the event of his violation of any of such restrictions, the Company shall be entitled to obtain from any court of competent jurisdiction preliminary and permanent injunctive relief as well as damages and an equitable accounting of all earnings, profits and other benefits arising from such violation, which rights shall be cumulative and in addition to any other rights or remedies to which the Company may be entitled.
 13.   Severability and Extension. If a court of competent jurisdiction determines that any part of Sections 6 through 16 is not enforceable, then the parties request that such court modify such provision in order to render such provision not unenforceable and then enforce the provision as modified. The parties further agree that each provision of this Agreement is severable from each other provision of this Agreement.  If the Employee violates any of the restrictions contained in Sections 6 through 8, the Restricted Period shall not run in favor of the Employee from the time of the commencement of any such violation until such time as such violation shall cease.
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 14.   Breach. If after Employee’s termination of employment, Employee breaches (other than an unintentional and immaterial breach) the post-employment restrictions in this Agreement and fails to cure the breach to the satisfaction of the Board, as determined in its sole discretion, within fifteen (15) days after receipt of written notice of the breach from the Company, in addition to any other remedy available at law or in equity to the Company, the Company’s obligation to make or provide payments or benefits (other than the Accrued Benefits) under Section 17 shall cease.
 15.   Certain Affiliates.  The “Company” as used in Section 6 and 7 shall mean: (a) the Company as defined above; and (b) any Company subsidiary or affiliate with or for whom the Employee performed services or had responsibilities at any time during the 12 months prior to the Separation Date.   The “Company” as used in Sections 8 through 14 shall mean the Company and its subsidiaries and affiliates.
 16.   Survival.  Section 6 and 7 shall survive termination of Employee’s employment in the event Employee receives severance payments pursuant to Section 17(b). Any termination of Employee’s employment or of this Agreement shall have no effect on the continuing operation of Sections 8 through 16. 
 17.   Termination of Employment and Severance Payments.
 a.   Termination for Cause. During the Term, the Company may terminate the Employee’s employment under this Agreement at any time for Cause (as defined below) upon written notice specifying the cause and date of termination. Upon termination for Cause, Employee shall be entitled to no further payments or benefits under this Agreement, other than: (i) any unpaid salary earned or accrued through the date of termination, (ii) any accrued but unused PTO, (iii) any reimbursement for business expenses owed to Employee by the Company, and (iv) any other previously unpaid payments to which Employee may be entitled through the date of termination under the terms of any applicable employee benefit plan (including COBRA, disability or death benefit plans) of the Company (collectively, the “Accrued Benefits”).  
 For purposes of this Agreement, “Cause” means gross or willful neglect of duty which is not corrected after 30 days’ written notice thereof; misconduct, malfeasance, fraud or dishonesty which materially and adversely affects the Company or its reputation in the industry; or the commission of a felony or a crime involving moral turpitude.
 b.  Termination without Cause; Resignation for Good Reason. During the Term, the Company may terminate the Employee’s employment under this Agreement at any time for any reason other than Cause, death or Disability, upon written notice specifying the date of termination; or Employee may terminate the Employee’s employment under this Agreement at any time for Good Reason (as defined below) upon written notice specifying the date of termination, and in either case, the Employee shall be entitled to the payments provided under this Section 17(b).  In the event (i) the Company terminates the Employee’s employment for reasons other than Cause, death or Disability, (ii) the Employee terminates the Employee’s employment for Good Reason, or (iii) the Employee terminates the Employee’s employment under this Agreement without Good Reason and the Company elects to make the following severance payments in order to have the non-competition restriction in Section 6   
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 and the non-interference restriction in Section 7 be effective,  then the Employee shall be entitled to the Accrued Benefits and, provided Employee signs, delivers and does not revoke a Release (as defined below) and the Release has become effective no later than the 30th day after the date of termination, shall be entitled to severance payments as follows: for 12 months following the date of termination, monthly payments equal to one-twelfth of the sum of (i) the Employee’s Salary in effect at the date of termination, plus (ii) an amount equal to the highest of the Annual Bonuses paid to the Employee for the two fiscal years preceding the fiscal year in which Employee’s employment terminates. Such payments shall commence with the next regular payroll date on or following the 30th day after the date of termination (or such other date as may be required by Section 409A pursuant to Section 24 below).   For purposes of this Agreement, “Good Reason” means any of the following events occur without Employee’s consent: (i) a 10% or more diminution in the Employee’s Salary; (ii) a material diminution in the Employee’s authority, duties, or responsibilities; (iii) a requirement that the Employee report to a corporate officer or employee instead of reporting directly to the Board of Directors of the Company or its ultimate parent following a Change in Control (as defined in the Change in Control Agreement as defined in Section17(e) below); (iv) a change of more than 50 miles in the geographic location at which the Employee must perform the services from the Company’s offices in High Point, North Carolina; or (v) any other action or inaction that constitutes a material breach by the Company of this Agreement; provided, however, that Good Reason shall not exist unless the Employee has provided written notice to the Company of the event within 30 days after its initial occurrence and the Company has failed to cure such event within 30 days after its receipt of Employee’s notice, and unless Employee’s employment terminates within two years after the initial occurrence of the event. 
 For purposes of this Agreement, “Release” means a general release of claims against the Company and its subsidiaries and affiliates, and their respective directors, employees, benefit plans, attorneys, and owners, on a form reasonably determined by the Company (which shall have no post-employment obligation or limitation in it other than as set forth in this Agreement hereof, and shall except out rights of indemnification, rights to directors and officers liability insurance coverage and amounts due under this Agreement).
 c.   Termination in Event of Death or Disability. If the Employee dies or incurs a Disability (as defined below) during the Term, his employment under this Agreement shall terminate, and Employee or his estate shall be entitled to no further payments or benefits under this Agreement other than the Accrued Benefits and the payment described in the following sentence. If the Employee’s employment is terminated pursuant to this Section 17(c), the Employee or Employee’s estate shall be entitled to a pro-rated Annual Bonus payment for the year of termination in an amount equal to the amount determined by multiplying the Annual Bonus (if any) which would otherwise have been payable for the full fiscal year in which the termination occurs by a fraction, the numerator of which is the number of days the Employee was employed during such fiscal year and the denominator of which is 365, payable at the same time such bonuses are paid to similarly-situated active employees of the Company in accordance with Section 3(b) above.  
 For purposes of this Agreement, “Disability” means that either (i) the Employee is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental
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 impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (ii) the Employee is, by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Company. 
 d.  Resignation without Good Reason. During the Term, the Employee may terminate the Employee’s employment under this Agreement at any time without Good Reason, upon 30 days’ advance written notice (which the Board may choose to waive in its sole discretion). Upon termination without Good Reason, Employee shall be entitled to no further payments or benefits under this Agreement, other than the Accrued Benefits or the severance payments contemplated by Section 17(b) in the event the Company has elected to make such payments in order to have the non-competition restriction in Section 6 and the non-interference restriction in Section 7 be effective.  
 e.   Coordination with Change in Control Agreement. If in connection with any termination of his employment, the Employee is or becomes entitled to any severance payments or benefits upon such termination pursuant to the Change in Control Protection Agreement between the Company and the Employee dated as of December 11, 2015, as amended (the “Change in Control Agreement”), then Employee shall not be entitled to any payments or benefits under Section 17(b) of this Agreement. 
 f.    Resignation from Company Offices. Unless the Company agrees in writing to waive this requirement, upon termination of Employee’s employment for any reason, Employee agrees to promptly resign as an officer, director or manager of any member of the Company and its subsidiaries and affiliates.
 g.   No Mitigation. Employee shall not be required to mitigate any amounts payable under this Agreement and no such amounts shall be offset or reduced by the amount of any compensation or benefits from any subsequent employment.
 18.   Notices.
 a.   If to the Company:
  
 Stanley Furniture Company, Inc.
 200 North Hamilton Street
 No. 200
 High Point, NC  27260
 

 b.   If to the Employee:
  
 Glenn Prillaman
 [Address]
  
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 Any party may change the address to which notices are to be addressed by giving the other party written notice in the manner herein set forth.
 

 19.   Waiver of Breach. Waiver by either party of a breach of any provision of this Agreement by the other shall not operate as a waiver of any subsequent breach by such other party.
 20.   Entire Agreement. This Agreement contains the entire agreement of the parties in this matter and supersedes any other agreement, oral or written, concerning the employment or compensation of the Employee by the Company, excluding the Change in Control Agreement. It may be changed only by an agreement in writing signed by both parties hereto.
 21.   Governing Law and Exclusive Venue. This Agreement shall be governed by the laws of the State of North Carolina, without regard to the choice of law principles of any jurisdiction.  Each party agrees that any litigation under this Agreement shall occur exclusively in a state or federal court in Guilford County, North Carolina and in no other venue.  As such, each party irrevocably consents to the jurisdiction of and venue in the courts in Guilford County, North Carolina for all disputes with respect to this Agreement.  Executive agrees to service of process in any such dispute via FedEx to Executive’s last home address in the Company’s records, without limiting other service methods allowed by applicable law.  The parties agree that the terms in this Section are material to this Agreement, and that they will not challenge the enforceability of this Section in any forum.
 22.   Benefit. This Agreement shall be binding upon and inure to the benefit of and shall be enforceable by and against the Company, its successors and assigns, and the Employee, his heirs, beneficiaries and legal representatives. The Employee irrevocably consents to any assignment or transfer of this Agreement to a Company affiliate or to a successor to all or part of the Company’s business or assets.  As used in this Agreement, the “Company” shall include the Company as defined above and any affiliated entity or successor to which this Agreement is assigned or transferred.
 23.   Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state and local income and employment taxes as the Company shall determine is required to be withheld pursuant to any applicable law or regulation. 
 24.   Section 409A.
 a.   It is intended that any amounts payable under this Agreement shall either be exempt from or comply with Section 409A of the Internal Revenue Code of 1986, as amended (including the Treasury regulations and other published guidance relating thereto) (“Section 409A”) so as not to subject the Employee to payment of any interest or additional tax imposed under Section 409A.  To the extent that any amount payable under this Agreement would trigger the additional tax, penalty or interest imposed by Section 409A, this Agreement shall be modified to avoid such additional tax, penalty or interest yet preserve (to the nearest extent reasonably possible) the intended benefit payable to the Employee.

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 b.   To the extent a payment or benefit is nonqualified deferred compensation subject to Section 409A, a termination of employment shall not be deemed to have occurred for purposes of any provision of this Agreement providing for the payment of any amounts upon or following a termination of employment unless such termination is also a “separation from service” within the meaning of Section 409A and, for purposes of any such provision of this Agreement, references to a “termination,” “termination of employment” or like terms shall mean “separation from service.”  If Employee is deemed on the date of a separation from service (within the meaning of Section 409A) to be a “specified employee” (within the meaning of that term under Section 409A(a)(2)(B) of the Code and determined using any identification methodology and procedure selected by the Company from time to time, or, if none, the default methodology and procedure specified under Section 409A), then with regard to any payment or the provision of any benefit that is “nonqualified deferred compensation” within the meaning of Section 409A and which is paid as a result of the Employee’s “separation from service,” such payment or benefit shall not be made or provided prior to the date which is the earlier of (A) the expiration of the six month period measured from the date of such “separation from service” of the Employee, and (B) the date of the Employee’s death (the “Delay Period”).  Upon the expiration of the Delay Period, all payments and benefits delayed pursuant to this clause (whether they would have otherwise been payable in a single sum or in installments in the absence of such delay) shall be paid or reimbursed to the Employee in a lump sum, and any remaining payments and benefits due under this Agreement shall be paid or provided in accordance with the normal payment dates specified for them herein.
 c.   For purposes of Section 409A, the Employee’s right to receive any installment payments pursuant to this Agreement shall be treated as a right to receive a series of separate and distinct payments.  Whenever a payment under this Agreement specifies a payment period with reference to a number of days (e.g., “payment shall be made within thirty (30) days following the date of termination”), the actual date of payment within the specified period shall be within the sole discretion of the Company.
 d.   With regard to any provision herein that provides for reimbursement of costs and expenses or in-kind benefits, except as permitted by Section 409A, (i) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit; (ii) the amount of expenses eligible for reimbursement, or in-kind benefits, provided during any taxable year shall not affect the expenses eligible for reimbursement, or in-kind benefits to be provided, in any other taxable year, provided, that the foregoing clause (ii) shall not be violated with regard to expenses reimbursed under any arrangement covered by Section 105(b) of the Internal Revenue Code solely because such expenses are subject to a limit related to the period the arrangement is in effect; and (iii) such payments shall be made on or before the last day of the Employee’s taxable year following the taxable year in which the expense was incurred.
  
 

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 IN WITNESS WHEREOF, the Employee and the Company have executed this Agreement as of the day and year above written.
 

 COMPANY:
 STANLEY FURNITURE COMPANY, INC.
 

 By:
 /s/T. Scott MchIlhenny, Jr.
  
 T. Scott McIlhenny, Jr., Chairman,
 Compensation and Benefits Committee
 

 

 

 EMPLOYEE:
 

 

 /s/Glenn Prillaman
 Glenn Prillaman
 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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