Exhibit 10.39
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of
November 21, 2002, between NORTH ATLANTIC TRADING COMPANY, INC. ("NATC") and
XXXXX X. XXXXXXX (the "Executive").
AGREEMENT
1. Employment, Duties and Acceptance. (a) NATC shall employ
the Executive during the Term (as hereinafter defined) as the Senior Vice
President and General Counsel of NATC and its subsidiaries, National Tobacco
Company, L.P. ("NTC") and North Atlantic Operating Company, Inc. ("NAOC"). For
purposes hereof and unless the context otherwise requires, NATC, NTC and NAOC
are referred to collectively as the "Company".
(b) The Executive hereby accepts such employment and agrees
to render his services to the Company on a full-time basis. The Executive
further agrees to accept election and to serve during all or any part of the
Term as an officer, director or representative of the Company and/or any
subsidiary or affiliate of the Company (in addition to NTC and NAOC), without
any compensation therefor other than that specified in this Agreement. The
Executive shall report directly to the Chief Executive Officer of the Company,
the President (or Chief Operating Officer) of the Company or Chief Financial
Officer of the Company, as the Company may direct.
(c) The duties to be performed by the Executive hereunder
shall be performed primarily in New York, New York, subject to reasonable travel
requirements on behalf of the Company. The Executive acknowledges that he may be
required to spend a significant amount of time periodically in the Company's
Louisville facility. The Company shall not relocate the Executive outside of New
York, New York, without his prior written consent, which may be withheld in the
Executive's discretion. The Executive shall be entitled to four (4) weeks of
paid vacation time annually.
2. Term of Employment. As used herein, the "Term" means the
period commencing on the date hereof (the "Commencement Date") and ending on the
first anniversary of the Commencement Date; provided, however, that the Term
shall automatically be extended for an additional one-day period at the end of
each day following the Commencement Date (such that, at the end of every day,
the Term shall continue for a total of 12 months thereafter).
3. Compensation. The Executive shall be entitled to the
following compensation:
(a) During the Term, the Company agrees to pay to the
Executive a salary in cash (the "Salary") as compensation for the services to be
performed by him as provided herein. The Salary shall be paid at the rate of
$220,000 per annum. The Salary shall be paid in equal monthly installments or
more frequently in accordance with the Company's salaried payroll payment policy
less such deductions or amounts to be withheld as shall be required by
applicable law and regulations. The Salary shall be reviewed annually and may be
increased at the sole discretion of the Company's Board of Directors (the
"Board").
(b) The Executive shall also be eligible to receive, in
respect of each calendar year during the period of the Executive's employment
hereunder, an annual cash bonus (each, a "Bonus"). The maximum Bonus the
Executive shall be eligible to receive shall be 25% of Executive's then current
annual Salary, one-half of which shall be based upon the achievement of
individual annual performance goals established by the person to whom the
Executive reports (in accordance with the third sentence of Section 1(b)) after
consultation with the Executive and one-half of which shall be based on the
Company achieving budgeted EBITDA for the calendar year in question under the
Company's Management Bonus Program (as in effect from time to time). The Bonus,
if any, payable in respect of a calendar year shall be paid to the Executive
promptly following the completion of the audit of the Company's financial
statements for such year and the approval of such Bonus by the Board. It is
understood and agreed that, for purposes of the termination provisions of this
Agreement set forth in Section 4 hereof, any discretionary bonus paid to the
Executive (i.e., any bonus not based expressly on the factors set forth in this
Section 4(b)) shall not constitute a "Bonus" as such term is used therein.
(c) The Executive shall be entitled to all rights and
benefits for which he shall be eligible under any other corporate incentive
program, retirement, retirement savings, profit-sharing, pension or welfare
benefit plan, life, disability, health, dental, hospitalization and other forms
of insurance, all other so-called "fringe" benefits or perquisites and, as a
special benefit, will be accorded up to $10,000 for a one-time initiation fee
for a club membership and up to $3,000 per annum for membership dues with
respect to such club membership. In addition, to the extent obtainable at
reasonable premiums (as determined by the Company in its sole discretion), the
Company shall provide the Executive with a term life insurance policy in an
amount equal to $750,000, with Executive's estate being the beneficiary.
(d) The parties acknowledge and agree that (i) pursuant to
the terms and subject to the conditions of the Company's 2002 Share Incentive
Plan (the "Plan"), the Executive will be granted, as of the date hereof, options
to purchase 2,000 shares of common stock, par value $.01, per share, of NATC
("Common Stock") at an exercise price equal to $90.00 per share, (ii) such
options shall vest in equal installments of 25% (i.e., 500 shares) on each of
the first four anniversaries of the date of grant and (iii) such grant of
options will be made as partial consideration for Executive's employment
hereunder.
4. Termination. (a) If during the Term the Executive shall
die, the Executive's legal representative shall be entitled to receive in cash
an amount equal to the sum of (i) any accrued and unpaid Salary to the date of
such death, and (ii) any accrued and unpaid Bonus to the date of such death,
including any Bonus for the year in which the termination occurs, determined by
the Board reviewing the Executive's and the Company's performance for such
entire year and prorating any such Bonus for the number of days elapsed during
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such year prior to such termination. The amount referred to in clause (i) above
shall be paid in accordance the Company's existing payroll practices and any
Bonus payable pursuant to clause (ii) above shall be paid within ten business
days after the release of the Company's audited financial statements for the
year in respect of which such Bonus was awarded and the approval of such Bonus
by the Board. In addition, the Executive (or his legal representative) shall be
entitled to receive any insurance proceeds payable pursuant to any insurance
provided pursuant to Section 3(c) hereof.
(b) If during the Term the Executive shall become
physically or mentally disabled, whether totally or partially, so that he is
unable substantially to perform his services hereunder for a period of at least
90 days out of any twelve consecutive months (which condition is referred to
herein as the Executive becoming "Disabled"), the Company may at any time prior
to the 90th day after the last day of such twelfth consecutive month, by written
notice to the Executive, terminate the Executive's employment, in which event
the Executive (or his legal representative) shall be entitled to receive in cash
an amount calculated as the sum of (i) any accrued and unpaid Salary to the date
of such notice and (ii) any accrued and unpaid Bonus to the date of such notice,
including any Bonus for the year in which the termination occurs, determined by
the Board reviewing the Executive's and the Company's performance for such
entire year and prorating any such Bonus for the number of days elapsed during
such year prior to such termination. The amount referred to in clause (i) above
shall be paid in accordance the Company's existing payroll practices and any
Bonus payable pursuant to clause (ii) above shall be paid within ten business
days after the release of the Company's audited financial statements for the
year in respect of which such Bonus was awarded and the approval of such Bonus
by the Board. In addition, the Executive (or his legal representative) shall be
entitled to receive any disability benefits payable pursuant to any plan
referred to in Section 3(d) hereof. Nothing herein contained shall be deemed to
limit or abrogate any insurance or other similar benefits available to the
Executive.
(c) The Executive's employment may be terminated by the
Company during the Term for Cause (as hereinafter defined). If during the Term
the Executive's employment shall be lawfully terminated by the Company for Cause
or the Executive shall voluntarily resign without Good Reason (as hereinafter
defined), the Company's obligation to pay Salary and Bonus for the benefit of
the Executive, and the Executive's obligation to render services hereunder for
the benefit of the Company, shall cease on the effective date of such
termination or resignation (the effective date of a termination or resignation
pursuant to any provision of Section 4 is hereinafter referred to as the
"Termination Date"); provided, however, that the Executive shall be entitled to
receive in cash an amount equal to (i) any accrued and unpaid Salary to the
Termination Date and (ii) any accrued and unpaid Bonus for any year preceding
such Termination Date. The amount referred to in clause (i) above shall be paid
in accordance the Company's existing payroll practices and any Bonus payable
pursuant to clause (ii) above shall be paid within ten business days after the
release of the Company's audited financial statements for the year in respect of
which such Bonus was awarded and the approval of such Bonus by the Board.
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As used herein, the term "Cause" shall mean only (i) a
felony conviction of the Executive (as determined by a court of competent
jurisdiction, not subject to further appeal), (ii) the commission by the
Executive of an act of fraud or embezzlement against the Company or any of its
affiliates, (iii) gross misconduct which is demonstrably willful and deliberate
on the Executive's part and which is detrimental to the Company or any of its
affiliates, (iv) any material breach by the Executive of any agreement with the
Company or any affiliate thereof not cured within 10 days after receiving
written notice thereof or any material violation of any policies or procedures
of the Company if the Company has given Executive written notice of such
violation and Executive persists in such violation or (v) insubordination
consisting of the Executive's continued failure to take specific action which is
within his individual control and consistent with his status as a senior
executive of the Company and his duties and responsibilities hereunder after
written notice from the Chief Executive Officer of the Company of not less than
10 days.
As used herein, the term "Good Reason" means any of the
following:
(i) the assignment to the Executive of any duties
inconsistent with his status as Senior Vice President and
General Counsel of the Company or a material adverse
alteration in the nature or status of his responsibilities
from those provided herein or the transfer of a significant
portion of such responsibilities to one or more other
persons;
(ii) the failure by the Company to pay or provide
to the Executive, within 30 days of a written demand
therefor, any amount of compensation or any material
benefit which is due, owing and payable pursuant to the
terms hereof or of any written plan, program, arrangement
or policy; or
(iii) the breach in any material respect by the
Company of any of its other obligations or agreements set
forth herein and the failure by the Company to cure such
breach within 20 days after written notice thereof from the
Executive.
(d) If during the Term the Executive's employment shall be
terminated by the Company without Cause (and other than pursuant to Section
4(b)) or by the Executive for Good Reason (each a "Section 4(d) Event"), the
following provisions shall apply:
(i) The Executive shall be entitled to receive
severance pay equal to the sum of the following amounts:
(A) an amount equal to all accrued but unpaid
Salary owing by the Company as of the Termination Date;
(B) any accrued and unpaid Bonus to the
Termination Date, including any Bonus for the year in which
the Executive is terminated, determined by the Board after
reviewing the Executive's and the Company's performance for
such entire year and prorating any such Bonus for the
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number of days elapsed during such year prior to such
termination;
(C) subject to Section 5 hereof, an amount equal
to the Executive's annual Salary hereunder (at the rate
then in effect) for the period commencing on the
Termination Date and ending on the expiration of the Term;
and
(D) subject to Section 5 hereof, an amount equal
to the highest annual Bonus paid to the Executive pursuant
to this Agreement in the two (2) years preceding the
Termination Date.
(ii) The amounts payable by the Company pursuant
to Section 4(d)(i) shall be paid as follows:
(A) The amount referred to in clause (A) of
Section 4(d)(i) shall be paid in accordance with the
Company's existing payroll practices;
(B) The amount of any Bonus payable pursuant to
clause (B) of Section 4(d)(ii) shall be paid 10 business
days after the release of the Company's annual audited
financial statements for the year in respect of which such
Bonus was awarded and the approval of such Bonus by the
Board;
(C) The amounts payable by the Company pursuant
to clauses (C) and (D) of Section 4(d)(i) shall be paid as
a lump sum cash payment within ten business days after the
Termination Date.
(iii) Any options to purchase shares of Common
Stock granted to the Executive and any shares of restricted
stock granted to the Executive that have not vested as of
the Termination Date shall vest as of such date.
(e) During the term of the Executive's employment with
Company and for twelve months after the Termination Date (the "Noncompetition
Period"), Executive hereby agrees not to Compete with the Company. For purposes
of this section, the term Compete means:
(i) soliciting or counseling, personally or by or
on behalf of any person, firm or corporation, the
employment of any employee of Company, or requesting,
inducing or attempting to influence any employee of the
Company to terminate his employment with Company; or
(ii) directly or indirectly (A) requesting,
inducing or attempting to influence any supplier of goods
or services to Company to curtail or cancel any business it
transacts with Company; or (B) requesting, inducing or
attempting to influence any customer of Company to curtail
or cancel any business they may transact with Company; or
(C) engaging in any business that the Company is engaged in
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as of the date of such termination (whether as an officer,
director, partner, employee, consultant or equity owner).
Notwithstanding the foregoing, the term "Compete" shall not include owning (as a
"beneficial owner", as such term is defined in the Securities Exchange Act of
1934, as amended, or otherwise) one percent (1%) or less of any class of equity
securities of a company that is engaged in a business in which the company is
engaged, provided that such class of equity securities is listed on a national
securities exchange or actively traded in the over-the-counter market and that
the Executive does not serve as an officer, director, partner, employee or
consultant of such company.
(f) The Company acknowledges and agrees that the Executive
shall have no duty at any time to seek other employment or to mitigate his
damages hereunder. The amounts payable to the Executive under this Agreement
shall be paid regardless of whether the Executive obtains other employment.
(g) Upon any termination of the Executive's employment
hereunder, the Company shall pay to the Executive or reimburse the Executive for
any business expenses and any amount payable under any benefit plan or program
or other amounts that were accrued or incurred but unpaid or unreimbursed at the
Termination Date.
5. Golden Parachute Payments.
(a) Notwithstanding any other provision of this Agreement
to the contrary, the Company shall not be obligated to make any payment or
provide any benefit (including the acceleration of stock options) to the extent
that such payment or benefit results in a "parachute payment" (as defined in
Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"));
provided, however, that the Company shall make all payments and provide all
benefits under this Agreement to the fullest extent permitted without giving
rise to a parachute payment.
(b) Whether any payment or benefit under this Agreement
results in a parachute payment (as defined in Section 280G of the Code) (i)
shall be determined by the Company's certified public accountants (the
"Accountants"); and (ii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Accountants in accordance with the
principles of Section 280G of the Code.
(c) In the event that a payment or benefit under this
Agreement is subsequently determined by the Accountants to be a parachute
payment, the Executive shall repay to the Company, within 30 days following the
time that the character of such payment or benefit is re-defined by the
Accountants, the amount of such payment or benefit that has been paid to the
Executive or on the Executive's behalf and that would not have been paid if such
payment or benefit had been initially treated as a parachute payment, plus
interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code. Notwithstanding the foregoing provisions of this
Section 7(e), in the event any portion of the payment or benefit to be refunded
to the Company has been paid to any federal, state or local authority, repayment
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thereof shall not be required until actual refund or credit of such portion has
been made to the Executive, and interest payable to the Company shall not exceed
interest received or credited to the Executive by such tax authority for the
period it held such portion. The Executive and the Company shall mutually agree
upon the course of action to be pursued (and the method of allocating the
expenses thereof) if the Executive's good faith claim for refund or check is
denied.
6. Stockholders' Agreement. Executive agrees (a) to be
bound by all of the provisions and conditions of the Exchange and Stockholders'
Agreement dated June 25, 1997 by and among the Company and the Stockholders (as
defined therein) party thereto (the "Stockholders' Agreement"), (b) that the
Executive shall constitute a "Management Stockholder" for purposes of the
Stockholders' Agreement, (c) that all "Shares of Voting Common Stock" (as
defined in the Stockholders' Agreement) owned from time to time by the Executive
(including, without limitation, any such shares acquired pursuant to the
exercise of the options referred to in Section 3(d) hereof) shall be subject to
the Stockholders' Agreement and (d) Executive shall execute and deliver to the
Company such additional documents, if any, as the Company may reasonably request
to further evidence or give effect to the provisions of this Section 6.
7. Withholding Taxes. The Company may require, as a
condition to any payments required to be made by the Company pursuant to this
Agreement or as a condition to effectuating a repurchase of Shares pursuant to
Section 6 hereof, that the Company be reimbursed in cash for any taxes required
by any government to be withheld or otherwise deducted and paid by the Company
in respect of such payment or repurchase of Shares by the Company. In lieu
thereof, the Company or any affiliate thereof which employs the Executive shall
have the right to withhold the amount of such taxes from any sums due or to
become due from it to the Executive.
9. Expenses. In the event that the Executive institutes any
legal action to enforce his rights under, or to recover damages from breach of,
this Agreement, the Executive, if he is the prevailing party, shall be entitled
to recover from the Company any actual expenses for attorneys' fees and
disbursements reasonably incurred by him.
10. Assignment. This Agreement is binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns. Notwithstanding the foregoing, neither party shall assign or transfer
any rights or obligations hereunder, except that the Company may assign or
transfer this Agreement to (a) a successor corporation in the event of a merger,
consolidation, or transfer or sale of all or substantially all of the assets, of
the Company or (b) an affiliate of the Company; provided that no such assignment
referred to in the foregoing clause (a) or (b) shall relieve the Company from
liability for its obligations hereunder. Any purported assignment, other than as
provided above, shall be null and void.
11. Indemnification. The Company shall indemnify the
Executive in accordance with its Certificate of Incorporation and Bylaws, copies
of which have been delivered to the Executive, against all costs, charges and
expenses incurred or sustained by him in connection with any action, suit or
proceeding to which he may be made a party by reason of his being an officer,
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director or employee of the Company or of any subsidiary or affiliate of the
Company. The Company's obligations under this Section 11 shall survive any
termination of this Agreement or the Executive's employment hereunder.
12. Notices. All notices, requests, consents and other
communications, required or permitted to be given hereunder, shall be in writing
and shall be delivered personally or sent by prepaid telegram, telex, facsimile
transmission, overnight courier or mailed, first class, postage prepaid by
registered or certified mail, as follows:
If to the Company: North Atlantic Trading Company, Inc.
000 Xxxx Xxxxxx Xxxxx, 0xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
If to the Executive: Xxxxx X. Xxxxxxx
00 Xxxxxxx Xxxx
Xxxxxxx, XX 00000
or such other address as either party shall designate by notice in writing to
the other in accordance herewith. Any such notice shall be deemed given when so
delivered personally, by telex, facsimile transmission or telegram, or if sent
by overnight courier, one day after delivery to such courier by the sender or if
mailed, five days after deposit by the sender in the U.S. mails.
13. Entire Agreement; Non-Exclusive Rights. (a) Subject to
Section 13(b), this Agreement shall constitute the entire agreement between the
Executive and the Company concerning the subject matter hereof, and performance
of its obligations hereunder by the Company shall constitute full settlement and
release of any claim or cause of action, of whatsoever nature, which the
Executive might otherwise assert or claim against the Corporation or any of its
directors, stockholders, officers or employees on account of any termination. No
provisions of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing, signed by the
Executive and an authorized officer of the Company.
(b) Nothing in this Agreement shall impair or limit (i) any
right or obligation of any party hereto under the Stockholders' Agreement or
(ii) the Executive's continuing or future participation, during the term of
Executive's employment, in any benefit bonus, incentive or other plan or program
provided by the Company and for which the Executive may qualify, nor shall
anything herein limit or otherwise prejudice such rights as the Executive may
have under any other agreements with the Company, including, but not limited to
the Stock Option Agreement and any other stock option or restricted stock
agreements. Amounts which are vested benefits or which the Executive
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is otherwise entitled to receive under any plan or program of the Company at or
subsequent to the Termination Date shall be payable in accordance with such plan
or program.
14. Governing Law. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
applicable to agreements made and to be performed entirely within such State.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the day and year first written above.
NORTH ATLANTIC TRADING COMPANY, INC.
By: /s/ Xxxxxx X. Xxxxx, Xx.
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Name: Xxxxxx X. Xxxxx, Xx.
Title: Chairman of the Board of Directors and
Chief Executive Officer
/s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
