EXHIBIT 10.52
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") dated as of December 1,
2003 by and among NORTH ATLANTIC CIGARETTE COMPANY, INC., a Delaware corporation
("NACC"), NORTH ATLANTIC TRADING COMPANY, INC., a Delaware corporation ("NATC"),
and XXXXXXXX XXXXXX (the "Executive").
PREMISES:
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1. NATC, through its subsidiaries, is a leading manufacturer and
distributor of premium cigarette papers, loose leaf chewing tobacco and
make-your-own tobacco products, and has recently entered the premium cigarette
market with the launch of Zig-Zag premium cigarettes.
2. NATC intends to conduct its premium cigarette business through
NACC, a wholly-owned subsidiary of NATC.
3. NACC desires to employ the Executive as the President and Chief
Operating Officer of NACC and the Executive desires to accept such employment,
in each case on the terms and subject to the conditions set forth herein.
AGREEMENT
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In consideration of the premises and the mutual covenants and
agreements hereinafter contained, the parties hereto, intending to be legally
bound, hereby agree as follows:
1. Employment, Duties and Acceptance.
(a) During the Term (as hereinafter defined), NACC shall employ the
Executive as the President and Chief Operating Officer of NACC or, if the
premium cigarette paper business is conducted through any other subsidiary or
division of NATC or (NATC and its subsidiaries being referred to collectively as
the "Company"), as President and Chief Operating Officer of such subsidiary or
division.
(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
that, if requested by NATC, he will serve, during all or any part of the Term,
as an officer and/or director of any division or subsidiary of the Company that
is engaged in the premium cigarette business without any compensation therefor
in addition to that specified in this Agreement. The Executive shall report
directly to the Chief Executive Officer of NATC or such other senior executive
officer of the Company as may be determined by the Boards of Directors of NATC
and NACC (collectively, the "Board").
(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 at the Company's
other facilities. The Company shall not relocate the Executive outside of the
greater New York area without his prior written consent, which may be withheld
in the Executive's discretion. The Executive shall be entitled to two (2) weeks
of paid vacation time during 2003 and four (4) weeks of paid vacation time
during each calendar year thereafter during the Term thereafter.
2. Term of Employment. As used herein, the "Term" means the period
commencing on December 1, 2003 (the "Commencement Date") and ending on the date
of termination of the Executive's employment with the Company for any reason
(the "Termination Date").
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 $350,000 per
annum less such deductions or amounts to be withheld as shall be required by
applicable law and regulations. The Salary shall be paid in accordance with the
Company's salaried payroll payment policy. The Executive's Salary shall be
reviewed annually and may be increased at the sole discretion of the Board.
(b) The Executive will be paid a signing bonus, in the amount of
$50,000, subject to such deductions on amounts to be withheld as shall be
required by applicable law and regulations, on or before December 31, 2003.
(c) The Executive shall be eligible to receive, in respect of each
calendar year during the Term (other than 2003), an annual cash bonus (each, a
"Bonus"). The Bonus that the Executive shall be eligible to receive shall be up
to 50% of the Executive's then current annual Salary. The Bonus for 2004 shall
be based upon the achievement of individual annual performance goals established
by NACC after consultation with the Executive; provided, however, that the
minimum Bonus payable to the Executive for 2004 shall be $50,000. For 2005 and
subsequent calendar years, the Bonus shall be based on the Company achieving its
annual performance goals 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 any calendar year shall be paid to the Executive following
the completion of the audit of the Company's financial statements for such year
and the approval of such Bonus by the Board, subject to the Executive being
employed hereunder, on the date such Bonus is payable. 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(c))
shall not constitute a "Bonus" as such term is used therein.
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(d) The Executive shall be entitled to all rights and benefits for
which he shall be eligible under any other incentive program, retirement,
retirement savings, profit-sharing, pension or welfare benefit plan, life,
disability, health, dental, hospitalization and other forms of insurance and all
other so-called "fringe" benefits or perquisites provided by the Company
generally for its executive officers. In addition, the Executive shall be (i)
furnished with the use of a company car during the Term (for which the Company's
portion of the purchase price shall not exceed $45,000), subject to the
Company's policies, as communicated from time to time, regarding company cars
and their usage, (ii) reimbursed up to $3,000 per annum for dues for the
Executive's current club membership and (iii) reimbursed for up to $3,000 per
annum for either additional life insurance or disability insurance as the
Executive may elect (subject to availability and submission of appropriate
documentation under the Company's reimbursement policy).
(e) The parties acknowledge and agree that (i) pursuant to the terms
and subject to the conditions NATC's 2002 Share Incentive Plan (the "Plan") and
to Section 6 hereof, the Executive will be granted options to purchase 10,000
shares of common stock, par value $.01, per share, of NATC, at an exercise price
of not more than $90.00 per share, (ii) such options shall vest (subject to
Executive remaining employed hereunder on the applicable vesting dates) as
follows: options for 2,500 shares on each of December 1, 2004, December 1, 2005,
December 1, 2006 and December 31, 2007.
4. Termination.
(a) Death. If the Executive's employment hereunder shall terminate as
a result of the Executive's death, 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 Termination Date and (ii) any accrued and unpaid Bonus to
the Termination Date, including any Bonus for the year in which the Termination
Date occurs, as determined by the Board, in its sole discretion, after 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 the
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 fifteen business days after
the release of the Company's audited financial statements for the year in
respect of which such Bonus was awarded and 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(d) hereof.
(b) Disability. 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 as of the date of
such notice (or any later date specified therein), 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 Termination
Date and (ii) any accrued and unpaid Bonus to the Termination Date, including
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any Bonus for the year in which the Termination Date occurs, determined by the
Board, in its sole discretion, after 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 the 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 fifteen business days after the release of the Company's audited
financial statements for the year in respect of which such Bonus was awarded and
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) Termination for Cause or Resignation without Good Reason. 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 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; 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 fifteen 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.
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, (iii) gross misconduct which is
demonstrably willful and deliberate on the Executive's part and which is
materially detrimental to the Company, (iv) any material breach by the Executive
of any agreement with the Company not cured within 10 days after receiving
written notice thereof or any material violation of any policies or procedures
of the Company 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 having been provided with not less than 10
days' prior written notice from the Chief Executive Officer of NATC or the
Board.
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 President and Chief Operating Officer of NACC 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;
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(ii) the failure by the Company to pay or provide to the
Executive, within thirty (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 twenty (20) days after
written notice thereof from the Executive.
(d) Termination without Cause or for Good Reason. The Executive's
employment hereunder may be terminated by the Company without Cause or by the
Executive for Good Reason. 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 Termination Date occurs,
determined by the Board, in its sole discretion, after 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 the Termination Date;
(C) subject to Section 5 hereof, an amount equal to the
Executive's current annual Salary hereunder; and
(D) subject to Section 5 hereof, an amount equal to the average
annual Bonus paid to the Executive pursuant to this Agreement for the
two calendar years preceding the Termination Date (or, if the
Executive has been employed hereunder for less than two full calendar
years as of the Termination Date, the amount of the Bonus, if any,
paid to the Executive for the prior calendar year).
(ii) The amounts payable by the Company pursuant to Section
4(d)(i) shall be paid as follows:
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(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 fifteen 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; and
(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 fifteen 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) Non-Competition. During the term of the Executive's employment
with NACC 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 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) Confidentiality. During the Term and at all times thereafter, the
Executive shall not, except in connection with the performance of his duties
hereunder, directly or indirectly, use, furnish or make accessible to any person
or entity (whether or not such person or entity Competes with the Company) any
Confidential Information (as defined below) of the Company. In the event that
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the Executive is requested by any governmental authority, or by any other person
or entity involved in a legal proceeding, to disclose any Confidential
Information, the Executive shall give the Company prompt notice of such request,
such that the Company may seek a protective order or other appropriate relief
and, in the absence of a protective order, the Executive shall in any such
proceeding disclose only so much of the Confidential Information as is required
by court order to be disclosed. For purposes hereof, "Confidential Information"
is information that the Executive generates, is exposed to or has access to
concerning any of the businesses of the Company; provided, however, that
Confidential Information shall not include information that has become available
to the public otherwise than by the Executive's act or omission. Confidential
Information includes, but is by no means limited to, discoveries and works,
product and service ideas and plans; business ideas and strategies; "know-how,"
technologies, concepts and designs; computer programs, databases, codes and
documentation; information relating to research and development efforts;
marketing plans and studies; revenue and budget projections and other financial
information; information concerning clients, customers, vendors and suppliers of
the Company or its affiliates; training manuals and similar materials; personnel
files; information concerning the skills, responsibilities and compensation of
employees, directors and independent contractors of the Company and contracts
between the Company and third parties.
(g) No Duty to Mitigate. 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.
(h) Reimbursement of Expenses. 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.
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(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 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, as the same may be amended from time to time (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(e) 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, 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. In lieu thereof, the Company shall have the right to withhold the
amount of such taxes from any sums due or to become due from it to the
Executive.
8. 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 NATC and/or NACC 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 its assets or
(b) an affiliate thereof; provided that no such assignment referred to in the
foregoing clause (a) or (b) shall relieve NATC and NACC from liability for its
obligations hereunder. Any purported assignment, other than as provided above,
shall be null and void.
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9. Indemnification. NATC and NACC shall indemnify the Executive in
accordance with their respective Certificates 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,
director or employee of the Company. The obligations of NATC and NACC under this
Section 10 shall survive any termination of this Agreement or the Executive's
employment hereunder.
10. 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
Attention: General Counsel
If to the Executive: Xxxxxxxx Xxxxxx
000 Xxxxxx Xxxxxx
Xxx Xxxxxx, 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.
11. Entire Agreement; Non-Exclusive Rights. (a) Subject to Section
12(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 NATC and NACC 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 Company or any of its
directors, stockholders, officers or employees relating to the employment of the
Executive. 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 each of NATC and NACC.
(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, 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 any stock option or restricted stock
agreements. Amounts which are vested benefits or which the Executive 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.
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12. 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
NORTH ATLANTIC CIGARETTE COMPANY, INC.
By: /s/ Xxxxx X. Xxxxxxx
-----------------------------------------------------
Name: Xxxxx X. Xxxxxxx
Title: Executive Vice President and Chief Financial
Officer
/s/ Xxxxxxxx Xxxxxx
----------------------------------------------------
Xxxxxxxx Xxxxxx
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