EMPLOYMENT AGREEMENT
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This Employment Agreement (the "Agreement") is made and entered into
this 13th day of June 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 Director
and Vice President of National Sales for the Company and the Employee shall at
all times exercise his best judgment in the performance of his duties. The
Employee shall perform such further duties as may be required by the Company
under and subject to the instruction, direction and control of his immediate
supervisor of the Company. 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. 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.
Notwithstanding the foregoing, the parties acknowledge and agree that Employee
may retain his ownership interest in Rosehearts Hearts, Inc., a Washington
corporation ("Rosehearts") provided Employee continues to meet his obligations
to the Company. Employee agrees to comply with the reasonable 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. Salary. Commencing May 1, 1997, the initial annual salary
shall be Sixty Thousand Dollars ($60,000), payable bi-weekly during the
term of this Agreement. Such salary may be adjusted by the Board of
Directors of the Company at its sole discretion
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or by a compensation committee selected by the Board of Directors.
During the first twelve months of this Agreement, Employee shall be
entitled to the same percent raise, if any, as that granted to any vice
president, president or chief operating officer of the Company.
Salaries shall be based on performance reviews conducted with the
involvement of the Employee. 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. Management Fee. In addition to the annual salary of Sixty
Thousand Dollars ($60,000), Employee shall receive a management fee in
an aggregate amount of Eighty Thousand Dollars ($80,000) payable at
Five Thousand Dollars ($5,000) on the first day of each month for 16
consecutive months commencing on July 1, 1997 to compensate Employee
for his expertise in sales, marketing, operations, management and
existing contacts with major retail distributors (the "Management
Fee"). The Employee shall be responsible to pay any withholding taxes
incurred in connection with the payment of the Management Fee and shall
sign all documents requested by the Company in connection therewith. In
the event the Employee or any company or entity in which Employee has
an ownership interest in, including without limitation Rosehearts, has
any liabilities or accounts payable to the Company, the amount of such
liabilities or accounts payable shall be offset or credited against the
back end of the Management Fee due by the Company. For example, if the
offset or credit amount is Seven Thousand Dollars ($7,000), such amount
shall be offset against the last two Management Fees payments. In the
event the "liquid assets" of the Company, as determined by the
Company's accounting firm, exceed Five Million Dollars ($5,000,000),
the Company agrees to pay the full amount of the Management Fee, less
any applicable credits or offsets, within sixty (60) days of such
determination that the Company's "liquid assets" exceed Five Million
Dollars ($5,000,000).
c. Medical Insurance Plan. Employee shall be covered under the
Company's then existing medical insurance plan which shall apply to all
employees of the Company. 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.
d. Vacation. The Employee shall be entitled to three (3) weeks
paid vacation per fiscal year, subject to the terms 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.
e. 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.
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f. Additional Benefits. Employee shall also be offered other
benefits, insurance, stock interest savings loans, bonuses or pension
plan which may be offered to other comparable executives of the
Company. If in the future the Company provides dental insurance, life
insurance or disability insurance to any employee of the Company, such
insurance coverage shall also be provided to Employee.
g. Reimbursement of Business Expenses. The Company shall
reimburse the Employee for valid business expenses of the Employee
incurred in connection with the Employee performing his duties on
behalf of the Company, provided Employee submits to his supervisor
receipts or other evidence of such payment. Reimbursement payments
shall be made once a month as determined by the supervisor.
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.
6. Termination. The Employee's continued employment may be terminated
by the Employee by delivery to the Company of a written notice of termination at
least two weeks prior to the termination date. Employee's continued employment
may be terminated by the Company upon notice of termination. 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, Employee shall
be entitled to the following:
a. For a nine (9) month period after the date of Employee's
termination of employment with the Company, the Employee's then current
salary payable biweekly for such six (6) month period;
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b. To the extent Employee has a vested interest in any stock
of the Company as of the date of termination, 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; and
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. The Company shall pay such insurance premiums for a nine
(9) month period after the date of Employee's termination of
employment.
Employee shall not be entitled to any severance compensation as
provided in this paragraph 7 in the event the Employee: (i) is grossly negligent
in performing his duties or continues to commit willful malfeasance or willful
misconduct after being provided with written notice of such actions; (ii)
continues to refuse to perform his duties hereunder after written notice of any
such refusal to perform such duties has been given to the Employee; (iii)
breaches the provisions of paragraph 8, 9 or 10 of this Agreement; or (iv) is
convicted of any felony directly relating to his ability to perform his duties
hereunder or otherwise directly harming the Company. Further, if during the term
of payment of severance compensation, the Employee breaches the provisions of
paragraph 8, 9 or 10 of this Agreement no further severance payments shall be
made to the Employee.
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
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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.
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. "Confidential information" shall not
include: (i) information that has become publicly available other than
through a breach of this Agreement; or (ii) information required to be
disclosed by a court of competent jurisdiction, to the extent
specifically ordered by such court.
c. Contact with Customers and Third Parties. Upon Employee's
termination of employment with the Company, Employee agrees that for a
period of one (1) year from the date of termination of employment that
he shall not contact directly or indirectly any of the Company's
customers or companies with which it does business, or
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is affiliated with in any way, or any third parties which have any
direct or indirect business dealings with Company.
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 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 one (1) year
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
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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 his expense, to take action and to execute and deliver
documents as may be reasonably necessary to effectuate the purposes of
this Covenant.
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
and, if sent to the Employee, shall be delivered to:
Xxxx Xxxxxxxxx
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12. Assignment. The rights and benefits of the Company under this
Agreement shall be transferable, and all covenants and agreements hereunder
shall inure to the benefit of and be enforceable by its successors and assigns.
The skills and obligations of the Employee hereunder are unique and may not be
assigned, transferred nor may the performance hereof by any other party or
parties be substituted, without prior express written consent of the Company.
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 between the parties
hereto, whether oral or in writing, prior to the date hereof shall be
deemed null and void. No amendment to this Agreement will be valid or
enforceable unless it is in writing and signed by the President of the
Company.
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.
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g. 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.
h. 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. XXXX X. XXXXXXXXX
By: /s/ Xxxxxx X. Xxxxxxxxx
/s/ XXXX X. XXXXXXXXX
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Its: CEO
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