EXHIBIT 10.4
EMPLOYMENT AGREEMENT
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This Employment Agreement is made and entered into this 15th day of
December, 1997, by and between Premium Cigars International, Ltd., an Arizona
corporation (the "Company") and Xxxx X. Xxxxxxxxx ("Employee").
W I T N E S S E T H:
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WHEREAS, the Company and the Employee mutually desire to agree upon the
terms and conditions of the Employee's employment with the Company;
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties to this Agreement
hereby agree as follows:
1. Employment. The Company agrees to employ the Employee as President
and Chief Operating Officer for the Company and the Employee shall at all times
exercise his best judgment in the performance of his duties. As President, the
Employee shall report directly to the Chief Executive Officer and the Board of
Directors until Employee assumes the position of Chief Executive Officer and
then shall at all times report to the Board of Directors of the Company. The
Employee shall perform such further duties as may be required by the Company
under and subject to the instruction, direction and control of the Chief
Executive Officer or Board of Directors of the Company as applicable. All
vice-presidents and division managers shall report directly to the Chief
Operating Officer. Employee shall become the Chief Executive Officer of the
Company and the Board of Directors shall create a vacancy and appoint Employee
to such vacancy on the Board of Directors on March 1, 1998, unless this
Agreement is terminated prior to such date. Employee shall, after March 1, 1998,
also retain the capacity of Chief Operating Officer until the Board of Directors
determines otherwise. Employee's duties under this Agreement shall be
principally carried out in Maricopa County, Arizona and the parties agree to
renegotiate this Agreement should the principal geographical focus of Employee's
duties require that Employee be based elsewhere due to the relocation of the
Company's executive offices, sale of the Company or change in the location of
the Company's business. Except as otherwise provided herein, as long as Employee
remains employed with the Company, the Company shall not alter the terms of this
Agreement unless Employee and the Company agree to such modifications in
writing.
2. Devotion to Employment. Employee accepts employment with the Company
on the terms and conditions herein set forth and agrees to devote his full time
and effort to perform his duties on behalf of the Company in his position as set
forth in paragraph 1. Employee shall begin full-time execution of his duties
with the Company on Monday, December 15, 1997. The
Employee shall not during the term of this Agreement be actively engaged in any
other business activity which will in any way impair his ability to properly
meet his obligations to the Company or engage in any activity competitive with
the Company or detrimental to its business. Employee agrees to comply with the
policies, standards and regulations of the Company from time to time
established.
3. Compensation. The Company agrees to pay the Employee compensation
for services as follows:
a. Commencing December 15, 1997, the initial annual salary
shall be One Hundred Twenty Thousand Dollars ($120,000) payable
bi-weekly during the term of this Agreement. Employee's annual salary
shall increase to One Hundred Fifty Thousand Dollars on the date that
Employee becomes the Chief Executive Officer of the Company. Such
salary may be adjusted by the Board of Directors of the Company at its
sole discretion. Employee understands and acknowledges that Employee is
exempt from the overtime pay requirements of the Fair Labor Standards
Act, 29 U.S.C. ss. 201 et seq.
b. Employee shall be covered under the Company's then existing
medical insurance plan. The Company retains the right to modify medical
insurance coverage as it deems appropriate. Except as otherwise
provided for by law or in paragraph 7 herein, the Company is under no
obligation or duty to provide medical coverage to the Employee after
such Employee has ceased to serve as an employee of the Company.
c. Vacation. The Employee shall be entitled to vacation as set
forth in the Company's employee manual. All vacation days must be taken
in accordance with the Company's policies, as those policies are
established from time to time.
d. Bonus Plan; Stock Option Plan. Employee shall be eligible
under a bonus plan ("Bonus Plan") and/or a stock option plan ("Stock
Option Plan") based upon the future performance of the Company in the
same manner as offered to other comparable executives of the Company.
As a part of his duties, Employee shall develop and propose to the
Board of Directors a Bonus Plan and Stock Option Plan for executives
and/or other employees of the Company on or before March 1, 1998.
Notwithstanding the foregoing,
the parties agree that Employee's bonus for the year ending December
31, 1998, shall be guaranteed to be at least $50,000.00, to be paid in
cash on or before January 15, 1999. Other than as provided in the
following sentence, if this Agreement is terminated by the Company or
Employee for any reason on or before December 31, 1998, then Employee
shall be entitled to no bonus payment hereunder. However, even if
Employee's employment is terminated, Employee shall be entitled to the
entire bonus of at least $50,000.00, to be paid in cash on or before
January 15, 1999, in any of the following two situations: (i) the
Company terminates this Agreement without Cause (as defined in
paragraph 7 below) after March 31, 1998 but on or before December 31,
1998; or (ii) Employee terminates this Agreement on account of a
Material Breach by the Company
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(as defined in paragraph 7 below) after March 31, 1998 but on or before
December 31, 1998.
e. Additional Benefits. Employee shall also be offered other
benefits, insurance, stock interest savings loans or bonuses which may
be offered to other comparable executives of the Company.
4. Insurance. The Company shall maintain during the Employee's term of
employment, at the Company's expense, Director and Officer Liability Insurance.
5. Employee at Will. Employee is employed "at will". Subject to the
notice requirements set forth in paragraph 6 below, either Employee or the
Company may terminate Employee's employment at any time, for any reason, with or
without cause. Employee understands that no manager, supervisor or
representative of the Company has any authority to enter into any agreement with
Employee for employment for any specified period of time or to make any promise
or commitment contrary to the foregoing. Further, no amendment to this Agreement
will be valid or enforceable unless it is in writing and signed by the Chairman
of the Board of Directors of the Company.
6. Termination. The Employee's continued employment may be terminated
by the Employee by delivery to the other party of a written notice of
termination at least four (4) weeks prior to the termination date. The Company
may terminate Employee's continued employment at any time upon notice of
termination delivered to Employee. Upon termination of employment, the Employee
agrees to promptly return to the Company all customer records as that term is
defined in paragraph 8 herein, all confidential information, as that term is
defined in paragraph 9 herein, and all other documents and equipment pertaining
to the business of the Company. Employee further agrees that the Employee will
not at any time use any information acquired by him during the term of this
Agreement in a manner contrary to the interest of the Company, nor will the
Employee do any act or acts which may directly or indirectly induce any person
to terminate his relationship with the Company.
7. Severance Compensation. In the event Employee is terminated by the
Company, for any reason other than for "Cause" as defined below or if Employee
terminates his employment on account of a "Material Breach by the Company" as
defined below, Employee shall be entitled to the following:
a. If such termination is within the first six (6) months from
the date of this Agreement, Employee shall be entitled to his then
current salary payable bi-weekly for a three (3) month period. If such
termination is after the first six (6) months from the date of this
Agreement, Employee shall be entitled to his then current salary
payable bi-weekly for a nine (9) month period. During the period such
severance payments are made by the Company to Employee, Employee will
have no duty to mitigate the receipt of such severance payment by
obtaining other employment, and if Employee should
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obtain other employment, the Company shall not receive a credit for any
compensation earned by Employee and shall continue to pay the entire
severance payments required hereunder.
b. To the extent Employee has a vested interest in any stock
of the Company as of the date of termination of employment, such stock
shall be the sole property of Employee and shall be under the sole
control of the Employee; however, Employee shall have no ownership
right to any stock which has not vested.
c. Employee and his family shall continue to be eligible for
group medical coverage, at Employee's personal expense, under the
Consolidated Omnibus Budget Reconciliation Act of 1986 ("COBRA"), as
amended, for such duration as provided by existing law at the time of
termination.
d. The Board of Directors agrees to define terms to protect
Employee's and other Company executives' compensation from the effects
of certain material changes in control of the Company. Such terms shall
be agreed to on or
before March 1, 1998.
Employee shall not be entitled to any severance compensation
as provided in this paragraph 7 if the Employee has committed any of the
following which shall constitute dismissal for "Cause": (i) willful malfeasance,
willful misconduct or gross negligence in connection with his employment; (ii)
continuing refusal or inability to perform Employee's material duties hereunder
after the Company has given written notice to Employee specifying such refusal
or inability to perform such duties and, if curable, Employee cures such refusal
or inability within 30 days following the date such notice is received by
Employee, unless such refusal or inability cannot be cured within such 30 day
period at which time Employee will have an additional 30 day period to cure such
breach as long as Employee diligently pursues the cure of such refusal or
inability as set forth in such notice; (iii) any material breach by Employee of
the provisions of paragraphs 8, 9 or 10 of this Agreement after the Company has
given written notice to Employee specifying such material breach and, if
curable, Employee cures such material breach within 30 days following the date
such notice is received by Employee, unless such material breach cannot be cured
within such 30 day period at which time Employee will have an additional 30 day
period to cure such breach as long as Employee diligently pursues the cure of
such material breach as set forth in such notice; or (iv) the commission of any
felony or the conviction of a misdemeanor involving moral turpitude on the part
of Employee. Further, if during the term of payment of severance compensation,
Employee commits any of the above acts or omissions, no further severance
payments shall be made to Employee.
For purposes of this Agreement, a "Material Breach" by the Company
shall only mean any one or more of the following:
(i) Employee's title or substantial duties are changed
contrary to the title and duties set forth in paragraph 1 of this
Agreement; or
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(ii) Employee is required to report to persons other than as
required by paragraph 1 of this Agreement; or
(iii) Employee is required to live in a location other than
Maricopa County, Arizona, in order to perform his responsibilities and
duties under this Agreement; or
(iv) The Company fails to pay any amounts due to Employee
hereunder within ten (10) days of receipt by the Company of written
notice from Employee specifying such failure to pay.
Notwithstanding anything mentioned to the contrary herein, in the event
Employee resigns or terminates this Agreement with the Company other than for a
Material Breach by the Company or if the Company terminates Employee's
employment for Cause, Employee shall not be entitled to any severance
compensation.
8. Customer Records.
a. Employee's Obligations Regarding Customer Records. The
Employee acknowledges that the list of the Company's customers or
clients as it may exist from time to time is a valuable, special and
unique asset of the Company's business. The Employee shall not, during
or after his employment with the Company, divulge, furnish or make
accessible to anyone (other than in the regular course of the Company's
business) any names, addresses or telephone numbers of those
individuals who conduct business with the Company. In addition, the
contents of customers' files or portfolios, or any other such
information shall be kept confidential during and after the Employee's
employment with the Company. All original records and all copies
thereof of those customers who do business with the Company, including
names, or any other such information, as well as all other secrets and
confidential information of the Company shall remain the property of
the Company during and after the Employee's term of employment with the
Company.
b. Injunctive Relief for Breach. In the event of a breach or
threatened breach by the Employee of the provisions of this section,
the Company shall be entitled to an injunction restraining the Employee
from disclosing, in whole or in part, the list of the Company's
customers, any names, addresses or telephone numbers of those
individuals who conduct business with the Company, or from rendering
any services to any person, firm, partnership, joint venture,
association, or other entity to whom such information, in whole or in
part, has been disclosed or is threatened to be disclosed. Nothing
herein shall be construed as prohibiting the Company from pursuing any
other remedies available to the Company for such breach or threatened
breach, including the recovery of damages from the Employee.
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9. Confidential Information.
a. Employee's Obligations Regarding Confidential Information.
Employee has in the past and may in the future develop, obtain or learn
about confidential information which is the property of the Company or
which the Company is under obligation not to disclose. Employee agrees
to use his best efforts and the utmost diligence to guard and protect
said information, to treat such information as confidential, and
Employee agrees that the Employee will not, during or after the period
of his performing services for the Company, use for Employee or others,
or divulge to others any of said confidential information which
Employee may develop, obtain or learn about during or as a result of
performing services for the Company, unless authorized to do so by the
Company in writing. Employee further agrees that if this Agreement is
terminated for any reason, Employee will not take, but will leave with
the Company or return to the Company, all documents, records and papers
and all matters of whatever nature which bears or may bear the
Company's confidential information or which is in any way related,
directly or indirectly to the Company.
b. Definition of Confidential Information. For the purposes of
this Agreement, the term "confidential information" shall include but
not be limited to the following: customer lists; product designs;
pricing policies; marketing strategies; business contacts; business
plans; computer software, including all rights under licenses and other
contracts relating thereto; source code and all documents relating
thereto; all intellectual property including without limitation all
trademarks, trademark registrations and applications, service marks,
copyrights, patents, trade secrets, proprietary marketing information
and know-how; books and records including lists of customers; credit
reports; sales records; price lists; sales literature; advertising
material; manuals; processes; technology; designs; statistics data;
techniques; or any information of whatever nature which gives to the
Company an opportunity to obtain an advantage over its competitors who
do not know or use it, but it is understood that said terms do not
include knowledge, skills or information which is common to the trade
or profession of the Employee.
c. Contact with Customers and Third Parties. Upon Employee's
termination of employment with the Company, Employee agrees that for a
period of twelve (12) months from the date of termination of employment
that he shall not contact directly or indirectly any of the Company's
customers or companies which have any direct cigar-related business
dealings with the Company. Notwithstanding the foregoing, Employee may
contact customers or companies with which the Company does business
provided such business contacts do not relate directly or indirectly to
the cigar-related business.
d. Injunctive Relief for Breach. In the event of a breach or
threatened breach by the Employee of the provisions of this section,
the Company shall be entitled to an injunction restraining the Employee
from disclosing, in whole or in part, any
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confidential information, or from rendering any services to any person,
firm, partnership, joint venture, association, or other entity to whom
such confidential information, in whole or in part, has been disclosed.
Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to the Company for such breach or
threatened breach, including the recovery of damages from the Employee.
10. Covenant Not To Compete.
a. Interests to be Protected. The parties acknowledge that
during the term of this employment, Employee will perform essential
services for the Company and for clients of the Company. Therefore,
Employee will be given an opportunity to meet, work with and develop
close working relationships with the Company's clients on a first-hand
basis and will gain valuable insight as to the clients' operations,
personnel and need for services. In addition, Employee will be exposed
to, have access to, and be required to work with, a considerable amount
of the Company's confidential and proprietary information, including
but not limited to: information concerning the Company's methods of
operation, financial information, strategic planning, operational
budget and strategies, payroll data, computer systems, marketing plans
and strategies, merger and acquisition strategies, and customer lists.
The parties also expressly acknowledge that Employee holds a highly
specialized, professional position that is the key position in one of
the Company's most significant divisions and replacing Employee in this
position would require the Company to incur substantial expense. The
parties expressly recognize that should Employee compete with the
Company in any manner whatsoever, it could seriously impair the
goodwill and diminish the value of the Company's business. The parties
acknowledge that the covenant not to compete contained in this section
has an extended duration; however, they agree that this covenant is
reasonable and it is necessary for the protection of the Company, its
shareholders and employees. For these and other reasons, and the fact
that there are many other employment opportunities available to the
Employee if he should terminate, the parties are in full and complete
agreement that the following restrictive covenants are fair and
reasonable and are freely, voluntarily and knowingly entered into.
Further, each party was given the opportunity to consult with
independent legal counsel before entering into this Agreement.
b. Restrictions on Competition. Employee agrees that he shall
not during the term of this Agreement and for a period of twelve (12)
months from the date of his termination of employment from the Company,
directly or indirectly, either as principal, partner, shareholder,
joint venturer, officer, director, consultant, member, employee or
otherwise, own any interest in, manage, control, participate in,
consult with, render services for, or in any manner engage in any
business competing, directly or indirectly, with the business of the
Company (which is cigar distribution) in any state of the United States
or foreign country in which the Company is conducting business on the
date of Employee's termination. At any time and from time to time, each
party agrees, at its expense, to take action and to execute and deliver
documents as may be reasonably necessary to effectuate the purposes of
this Covenant.
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c. Judicial Amendment. If the scope of any provision of this
Agreement is found by any Court to be too broad to permit enforcement
to its full extent, then such provision shall be enforced to the
maximum extent permitted by law. The parties agree that the scope of
any provision of this Agreement may be modified by a judge in any
proceeding to enforce this Agreement, so that such provision can be
enforced to the maximum extent permitted by law. If any provision of
this Agreement is found to be invalid or unenforceable for any reason,
it shall not affect the validity of the remaining provisions of this
Agreement.
d. Injunction; Remedies for Breach. Since a breach of the
provisions of this section of this Agreement could not adequately be
compensated by money damages, the Company shall be entitled, in
addition to any other right or remedy available to it at law or equity,
to an injunction restraining the breach or threatened breach and to
specific performance of any provision of this section of this
Agreement, and, in either case, no bond or other security shall be
required in connection therewith, and the parties hereby consent to the
issuance of such an injunction and to the ordering of specific
performance.
11. Notices. All notices provided for by this Agreement shall be made
in writing either (i) by actual delivery of the notice into the hands of the
parties thereunto entitled or (ii) the mailing of the notice in the United
States mail to the address, as stated below (or at such other address as may
have been designated by written notice) of the party entitled thereto, by
certified mail, return receipt requested. The notice shall be deemed to be
received on the date of its actual receipt of the party entitled thereto. All
communications hereunder shall be in writing and, if sent to the Company, shall
be delivered to:
Premium Cigars
00000 X. 00xx Xxx
Xxxxx 0, Xxxxxxxx X
Xxxxxxxxxx, Xxxxxxx 00000
Fax 000-0000
Attention: Xxxxx Xxxxxx
with a copy to:
Xxxxx, Xxxxxxxxx & Xxxxx, P.C.
0000 Xxxxx Xxxxxxxxxx Xxxx
Xxxxx X-000
Xxxxxxxxxx, Xxxxxxx 00000
Attention: Xxxx X. Xxxxxxxxx
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and, if sent to the Employee, shall be delivered to:
Xxxx X. Xxxxxxxxx
00000 Xxxxx 00xx Xxxxx
Xxxxxxxxxx, Xxxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxxxx
0000 Xxxxx Xxxxxx Xxxxxx Xxxxx
Xxxxx 000
Xxxxxxxxxx, Xxxxxxx 00000-0000
12. Assignment. This Agreement shall inure to the benefit of and shall
be binding on and enforceable by the parties and their respective successors and
permitted assigns, as the case may be. Except as provided for herein, neither
party shall have the right to assign its rights or obligations hereunder,
without the prior written consent of the other party.
13. Miscellaneous.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the law of the State of Arizona.
b. Waiver. No waiver or modification of this Agreement shall
be valid unless in writing and duly executed by the party to be charged
therewith. Waiver by either party hereto of any breach or default by
the other party of any of the terms and provisions of this Agreement
shall not operate as a waiver of any other breach or default, whether
similar to or different from the breach or default waiver.
c. Severability. All agreements, provisions, representations,
warranties and covenants contained herein are severable, and in the
event that any one or more of them shall be held to be invalid, illegal
or unenforceable in any respect by any court of competent jurisdiction,
the validity, legality and enforceability of the remaining provisions
contained herein shall not in any way be affected thereby, and this
Agreement shall be interpreted as if such invalid, illegal or
unenforceable agreements, provisions or covenants were not contained
herein.
d. Gender. Whenever the context requires, the masculine shall
include the feminine and neuter.
e. Entire Agreement. This Agreement constitutes and embodies
the full and complete understanding and agreement of the parties hereto
provided, and supersedes all prior understandings or agreements,
whether oral or in writing. Any and all agreements
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between the parties hereto, whether oral or in writing, prior to the
date hereof shall be deemed null and void.
f. Parties. This Agreement shall be binding upon and inure to
the benefit to the parties hereto, their officers, directors,
shareholders, successors, legal representatives, heirs and successors
and assigns, and no other person shall have or be construed to have any
legal or equitable right, remedy or claim under or in respect of, or by
virtue of, this Agreement or any provision herein contained.
g. Mediation; Arbitration. If a dispute arises out of or
relates to this Agreement, or the breach thereof, and if the dispute
cannot be settled through negotiation, the parties agree first to try
in good faith to settle the dispute by mediation administered by the
American Arbitration Association under its Commercial Mediation Rules.
If the dispute cannot be settled through negotiation or mediation, the
Parties agree to submit the dispute to arbitration administered by the
American Arbitration Association under its Commercial Arbitration
Rules, and judgment on the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. Venue for all such
mediation and/or arbitration proceedings shall be in Maricopa County,
Arizona.
h. Attorney's Fees. The prevailing party in any litigation
hereunder shall be entitled to the recovery of its reasonable
attorneys' fees and costs from the other party. Upon Employee's entry
into this Agreement, the Company shall undertake to bear Employee's
attorney's fees incurred in the negotiation of this Agreement, in an
amount not to exceed $4,000.00.
i. Counterparts. This Agreement may be executed in two (2) or
more counterparts, each of which shall be deemed an original and all of
which, together, shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement the day
and year first above-written.
"COMPANY" "EMPLOYEE"
PREMIUM CIGARS INTERNATIONAL, LTD.
By: /s/ Xxxx Xxxxxxxxx /s/ Xxxx Xxxxxxxxx
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Its: Secretary Xxxx X. Xxxxxxxxx
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