Exhibit 10.1
CHANGE IN CONTROL AGREEMENT
This CHANGE IN CONTROL AGREEMENT (this "Agreement") is dated as of
September 30, 2005 and is entered into by and between
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("Executive") and Grill Concepts, Inc., a Delaware corporation (the "Company").
BACKGROUND
The Company believes that because of its position in the industry,
financial resources and historical operating results there is a possibility that
the Company may become the subject of a Change in Control (as defined below),
either now or at some time in the future.
The Company believes that it is in the best interest of the Company and its
stockholders to xxxxxx Executive's objectivity in making decisions with respect
to any pending or threatened Change in Control of the Company and to assure that
the Company will have the continued dedication and availability of Executive,
notwithstanding the possibility, threat or occurrence of a Change in Control.
The Company believes that these goals can best be accomplished by alleviating
certain of the risks and uncertainties with regard to Executive's financial and
professional security that would be created by a pending or threatened Change in
Control and that inevitably would distract Executive and could impair his
ability to objectively perform his duties for and on behalf of the Company.
Accordingly, the Company believes that it is appropriate and in the best
interest of the Company and its stockholders to provide to Executive
compensation arrangements upon a Change in Control that lessen Executive's
financial risks and uncertainties and that are reasonably competitive with those
of other corporations.
With these and other considerations in mind, the Compensation Committee of
the Company has authorized the Company to enter into this Agreement with the
Executive to provide the protections set forth herein for Executive's financial
security following a Change in Control.
NOW, THEREFORE, in consideration of the foregoing, and for other good and
valuable consideration the receipt of which is hereby acknowledged, it is hereby
agreed as follows:
AGREEMENT
1. TERM OF AGREEMENT. This Agreement shall be effective from the date
first written above and, subject to the provisions of Section 4, shall extend to
(and thereupon automatically terminate) one (1) day after Executive's
termination of employment with the Company for any reason. No termination of
this Agreement shall limit, alter or otherwise affect Executive's rights
hereunder with respect to a Change in Control which has occurred prior to such
termination, including without limitation Executive's right to receive the
various benefits hereunder.
2. PURPOSE OF AGREEMENT. The purpose of this Agreement is to provide
that, in the event of a "Change in Control," Executive may become entitled to
receive certain additional benefits, as described herein, in the event of his
termination under specified circumstances.
3. CHANGE IN CONTROL. As used in this Agreement, the phrase "Change in
Control" shall mean:
(i) Except as provided by subparagraph (iii) hereof, the
acquisition (other than from the Company) by any person, entity or "group",
within the meaning of Section 13(d)(3) or 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (excluding, for this purpose, the
Company or its subsidiaries, or any executive benefit plan of the Company or its
subsidiaries which acquires beneficial ownership of voting securities of the
Company), of beneficial ownership (within the meaning of Rule 13d-3 promulgated
under the Exchange Act) of twenty-five percent (25%) or more of either the then
outstanding shares of common stock or the combined voting power of the Company's
then outstanding voting securities entitled to vote generally in the election of
directors; or
(ii) Individuals who, as of the date hereof, constitute the
Board of Directors of the Company (as of the date hereof the "Incumbent Board")
cease for any reason to constitute at least a majority of the Board of Directors
of the Company, provided that any person becoming a director subsequent to the
date hereof whose election, or nomination for election by the Company's
stockholders, is or was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board (other than an election or
nomination of an individual whose initial assumption of office is in connection
with an actual or threatened election contest relating to the election of the
Directors of the Company) shall be, for purposes of this Agreement, considered
as though such person were a member of the Incumbent Board; or
(iii) Approval by the stockholders of the Company of a
reorganization, merger or consolidation with any other person, entity or
corporation, other than
(1) a merger or consolidation which would result in
the voting securities of the Company outstanding
immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted
into voting securities of another entity) more than
fifty percent (50%) of the combined voting power of the
voting securities of the Company or such other entity
outstanding immediately after such merger or
consolidation, or
(2) a merger or consolidation effected to implement a
recapitalization of the Company (or similar
transaction) in which no person acquires twenty-five
percent (25%) or more of the combined voting power of
the Company's then outstanding voting securities; or
(iv) Approval by the stockholders of the Company of a plan of
complete liquidation of the Company or an agreement for the sale or other
disposition by the Company of all or substantially all of the Company's assets.
4. EFFECT OF A CHANGE IN CONTROL. In the event of a Change in Control,
Sections 6 through 11 of this Agreement shall become applicable to Executive.
These Sections shall continue to remain applicable until the second anniversary
of the date upon which the Change in Control occurs. On such second anniversary
date, and provided that the employment of Executive has not been terminated on
account of a Qualifying Termination (as defined in Section 5 below), this
Agreement shall terminate and be of no further force or effect.
5. QUALIFYING TERMINATION. If within twelve (12) months following a
Change in Control Executive voluntarily terminates his employment with the
Company and its affiliated companies, or if following or within ninety (90) days
prior to a Change in Control Executive's employment with the Company and its
affiliated companies is terminated, such termination shall be conclusively
considered a "Qualifying Termination" unless:
(a) Executive voluntarily terminates his employment with the
Company and its affiliated companies on a date that is more than twelve (12)
months after the Change in Control. Executive, however, shall NOT be considered
to have voluntarily terminated his employment with the Company and its
affiliated companies if, following, or within ninety (90) days prior to, the
Change in Control, Executive's overall compensation is reduced or adversely
modified in any material respect or his authority or duties are materially
changed and he elects to terminate his employment within sixty (60) days
following such reduction, modification or change. For such purposes, Executive's
authority or duties shall conclusively be considered to have been "materially
changed" if, without Executive's express and voluntary written consent, there is
any substantial diminution or adverse modification in Executive's title, status,
overall position, responsibilities, reporting relationship, general working
environment (including without limitation secretarial and staff support,
offices, and frequency and mode of travel), or if, without Executive's express
and voluntary written consent, Executive's job location is transferred to a site
more than fifty (50) miles away from his place of employment. In this regard as
well, Executive's authority and duties shall conclusively be considered to have
been "materially changed" if, without Executive's express and voluntary written
consent, Executive no longer holds the same title or no longer has the same
authority and responsibilities or no longer has the same reporting
responsibilities, in each case with respect and as to a publicly held parent
company which is not controlled by another entity or person.
(b) The termination is on account of Executive's death or
Disability. For such purposes, "Disability" shall mean a physical or mental
incapacity as a result of which Executive becomes unable to continue the
performance of his responsibilities for the Company and its affiliated companies
and which, at least three (3) months after its commencement, is determined to be
total and permanent by a physician agreed to by the Company and Executive, or in
the event of Executive's inability to designate a physician, Executive's legal
representative. In the absence of agreement between the Company and Executive,
each party shall nominate a qualified physician and the two physicians so
nominated shall select a third physician who shall make the determination as to
Disability.
(c) Executive is involuntarily terminated for "Cause." For
this purpose, "Cause" shall be limited to only three types of events:
(1) the refusal of Executive to comply with a lawful,
written instruction of the Board of Directors or
Executive's immediate or departmental supervisor, which
refusal is not remedied by Executive within a
reasonable period of time after his receipt of written
notice from the Company identifying the refusal, so
long as the instruction is consistent with the scope
and responsibilities of Executive's position prior to
the Change in Control;
(2) an act or acts of personal dishonesty by Executive
which were intended to result in substantial personal
enrichment of Executive at the expense of the Company
or any of its affiliated companies; or
(3) Executives conviction of any misdemeanor involving
an act of moral turpitude or any felony.
6. SEVERANCE PAYMENT. If Executive's employment is terminated as a
result of a Qualifying Termination, the Company shall pay Executive within
thirty (30) days after the Qualifying Termination a cash lump sum equal to one
hundred fifty percent (150%) of Executive's Compensation, as hereinafter defined
(the "Severance Payment"). Notwithstanding anything to the contrary herein, the
sum of the aggregate present value of (i) such Severance Payment, (ii) any and
all additional amounts or benefits which may be paid or conferred to or on
behalf of Executive in accordance with subsections (a) or (b) of Section 7
hereof, and (iii) any and all other amounts or benefits paid or conferred to or
on behalf of Executive that constitute a "parachute payment" ("parachute
payment," as defined in Section 280G(b)(2), or any successor thereto, of the
Internal Revenue Code of 1986, as amended (the "Code")), shall not exceed an
amount equal to one dollar less than three (3) times Executive's "base amount"
("base amount," as defined in Section 280G(b)(3), or any successor thereto, of
the Code). For the avoidance of doubt, the purpose and intent of the foregoing
sentence is to avoid giving rise to any obligation of the Company to reimburse
the Executive for (or otherwise pay on Executive's behalf) any Excise Tax
(hereinafter defined) pursuant to Section 8 hereof, to the extent of
then-current applicable law. The Severance Payment payable by the Company to the
Executive shall be reduced to the extent necessary to fulfill the requirement of
the two immediately preceding sentences that payment of amounts includable in
Executive's base amount shall not exceed an amount equal to one dollar less than
three (3) times Executive's base Amount.
(a) For purposes of this Agreement, Executive's
"Compensation" shall equal the sum of (i) Executive's highest annual salary rate
with the Company, or any of its affiliated companies, within the three (3) year
period ending on the date of Executive's Qualifying Termination, or such shorter
period if Executive has been employed by the Company or any of its affiliated
companies for a shorter period, plus (ii) a "Bonus Increment." The Bonus
Increment shall equal the annualized average of all bonuses and incentive
compensation payments paid to Executive during the two (2) year period
immediately before the date of Executive's Qualifying Termination under all of
the Company's bonus and incentive compensation plans or arrangements, or during
such shorter period if Executive has been employed by the Company or any of its
affiliated companies for a shorter period.
(b) The Severance Payment hereunder is in lieu of any
severance payment that Executive might otherwise be entitled to from the Company
in the event of a Change in Control under the Company's applicable severance pay
policies, if any, or under any other oral or written agreement; PROVIDED,
HOWEVER, that Executive shall continue to be entitled to receive the severance
pay benefits under the Company's applicable policies, if any, or under another
written agreement if and to the extent Executive's termination is not a
Qualifying Termination after, or within ninety (90) days prior to, a Change in
Control.
7. ADDITIONAL BENEFITS.
(a) In the event of a Qualifying Termination, any and all
unvested stock options of Executive shall immediately become fully vested and
exercisable.
(b) In the event of a Qualifying Termination, Executive shall
be entitled to continue to participate in the following executive benefit
programs which had been made available to Executive (including his family)
before the Qualifying Termination: group medical insurance, group dental
insurance, group-term life insurance and disability insurance. These programs
shall be continued at no cost to Executive, except to the extent that tax rules
require the inclusion of the value of such benefits in Executive's income. The
programs shall be continued in the same way and at the same level as immediately
prior to the Qualifying Termination. The programs shall continue for Executive's
benefit for two (2) years after the date of the Qualifying Termination;
PROVIDED, HOWEVER, that Executive's participation in each of such programs shall
be earlier terminated or reduced, as applicable, if and to the extent Executive
receives benefits as a result of concurrent coverage through another program.
8. INDEMNIFICATION FOR EXCISE TAX. In the event that Executive becomes
entitled to receive a Severance Payment in accordance with the provisions of
Section 6 above, and notwithstanding the provision for a reduction in Severance
Payment in Section 6, such Severance Payment and any other benefits or payments
(including transfers of property) that Executive receives, or is to receive,
pursuant to this Agreement or any other agreement, plan or arrangement with the
Company in connection with a Change in Control of the Company ("Other Benefits")
shall be subject to the tax imposed pursuant to Section 4999 of the Code (or any
successor thereto) or any comparable provision of state law (an "Excise Tax"),
the following rules shall apply:
(a) The Company shall pay to Executive, within thirty (30)
days after the Executive's Qualifying Termination, an additional amount (the
"Gross-Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax with respect to the Severance Payment or the Other
Benefits and any federal, state and local income tax, FICA tax and Excise Tax
upon such Gross-Up Payment, is equal to the amount that would have been retained
by Executive if such Excise Tax were not applicable. It is intended that
Executive shall not suffer any loss or expense resulting from the assessment of
any Excise Tax or the Company's reimbursement of Executive for payment of any
such Excise Tax.
(b) For purposes of determining whether any of the Severance
Payments or Other Benefits will be subject to an Excise Tax and the amount of
such Excise Tax, (i) any other payments or benefits received or to be received
by Executive in connection with a Change in Control of the Company or
Executive's termination of employment (whether pursuant to the terms of this
Agreement or any other plan, arrangement or agreement with the Company, any
person whose actions result in a Change in Control or any person affiliated with
the Company or such person) shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code (or any successor thereto), and all
"excess parachute payments" within the meaning of Section 280G(b)(l) of the Code
(or any successor thereto) shall be treated as subject to the Excise Tax, unless
in the opinion of tax counsel selected by the Company's independent auditors and
acceptable to Executive such other payments or benefits (in whole or in part) do
not constitute parachute payments, or such excess parachute payments (in whole
or in part) represent reasonable compensation for services actually rendered
within the meaning of Section 280G(b)(4) of the Code (or any successor
thereto), (ii) the amount of the Severance Payments and Other Benefits which
shall be treated as subject to the Excise Tax shall be equal to the lesser of
(A) the total amount of the Severance Payments or Other Benefits or (B) the
amount of excess parachute payments within the meaning of Sections 280G(b)(l)
and (4) of the Code (or any successor or successors thereto), after applying
clause (i), above, and (iii) the value of any non-cash benefits or any deferred
payment or benefit shall be determined by the Company's independent auditors in
accordance with the principles of Sections 280G(d)(3) and (4) of the Code (or
any successor or successors thereto).
(c) For purposes of determining the amount of the Gross-Up
Payment, Executive shall be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the
Gross-Up Payment is to be made and state and local income taxes at the highest
marginal rates of taxation in the state and locality of Executive's residence on
the date of the Executive's Qualifying Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes.
(d) In the event that the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at the time
of the Executive's Qualifying Termination, the Executive shall repay to the
Company, at the time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such reduction
plus interest on the amount of such repayment at the rate provided in Section
1274(b)(2)(B) of the Code (or any successor thereto) (the "Applicable Rate"). In
the event that the Excise Tax is determined to exceed the amount taken into
account hereunder at the time of such Qualifying Termination (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), the Company shall make an additional Gross-Up
Payment in respect of such excess (plus interest, determined at the Applicable
Rate, payable with respect to such excess) at the time that the amount of such
excess is finally determined.
9. RIGHTS AND OBLIGATIONS PRIOR TO A CHANGE IN CONTROL. Prior to the
date which is ninety (90) days before a Change in Control, the rights and
obligations of Executive with respect to his employment by the Company shall be
determined in accordance with the policies and procedures adopted from time to
time by the Company and the provisions of any written employment contract in
effect between the Company and Executive from time to time. This Agreement deals
only with certain rights and obligations of Executive subsequent, or within
ninety (90) days prior to, a Change in Control, and the existence of this
Agreement shall not be treated as raising any inference with respect to what
rights and obligations exist prior to the date which is ninety (90) days before
a Change in Control. Unless otherwise expressly set forth in a separate written
employment agreement between Executive and the Company, the employment of
Executive is expressly at-will, and Executive or the Company may terminate
Executive's employment with the Company at any time and for any reason, with or
without cause, provided that if such termination occurs within ninety (90) days
prior to or two (2) years after a Change in Control and constitutes a Qualifying
Termination (as defined in Section 5 above) the provisions of this Agreement
shall govern the payment of the Severance Payment and certain other benefits as
provided herein.
10. NON-EXCLUSIVITY OF RIGHTS. Subject to Section 6(c) hereof, nothing
in this Agreement shall prevent or limit Executive's continuing or future
participation in any benefit, bonus, incentive or other plan or program provided
by the Company or any of its affiliated companies and for which Executive may
qualify, nor shall anything herein limit or otherwise affect such rights as
Executive may have under any stock option or other agreements with the Company
or any of its affiliated companies. Except as otherwise provided in Section 6(c)
hereof, amounts which are vested benefits or which Executive is otherwise
entitled to receive under any plan or program of the Company or any of its
affiliated companies at or subsequent to the date of any Qualified Termination
shall be payable in accordance with such plan or program.
11. FULL SETTLEMENT. The Company's obligation to make the payments
provided for in this Agreement and otherwise to perform its obligations
hereunder shall not be affected by any set-off, counter-claim, recoupment,
defense or other claim, right or action which the Company may have against
Executive or others. In no event shall Executive be obligated to seek other
employment or to take any other action by way of mitigation of the amounts
payable to Executive under any of the provisions of this Agreement. The Company
agrees to pay, to the full extent permitted by law, all legal fees and expenses
which Executive may reasonably incur as a result of Executive's successful
collection efforts to receive amounts payable hereunder, or as a result of any
contest (regardless of the outcome thereof) by the Company or others of the
validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by Executive about the amount of any payment pursuant to this Section).
12. SUCCESSORS.
(a) This Agreement is personal to Executive, and without the
prior written consent of the Company shall not be assignable by Executive other
than by will or the laws of descent and distribution. This Agreement shall inure
to the benefit of and be enforceable by Executive's legal representatives.
(b) The rights and obligations of the Company under this
Agreement shall inure to the benefit of and shall be binding upon the successors
and assigns of the Company.
13. GOVERNING LAW. This Agreement is made and entered into in the State
of California, and the internal laws of California shall govern its validity and
interpretation in the performance by the parties hereto of their respective
duties and obligations hereunder.
14. MODIFICATIONS. This Agreement may be amended or modified only by an
instrument in writing executed by all of the parties hereto.
15. DISPUTE RESOLUTION.
(a) Any controversy or dispute between the parties involving
the construction, interpretation, application or performance of the terms,
covenants, or conditions of this Agreement or in any way arising under this
Agreement (a "Covered Dispute") shall, on demand by either of the parties by
written notice served on the other party in the manner prescribed in Section 16
hereof, be referenced pursuant to the procedures described in California Code of
Civil Procedure ("CCP") Sections 638, ET seq., as they may be amended from time
to time (or such procedures as nearly the same as may be available under the
laws of California, the "Reference Procedures"), to a retired Judge from the
superior court of California for the County of Los Angeles (the "Venue County")
for a decision.
(b) The Reference Procedures shall be commenced by either
party by the filing in the superior court of Venue County a petition pursuant to
CCP Section 638(1) (or such procedures as nearly the same as may be available
under the laws of California, a "Petition"). Said Petition shall designate as a
referee a Judge from the list of retired superior court Judges from the Venue
County who have made themselves available for trial or settlement of civil
litigation under said Reference Procedures. If the parties hereto are unable to
agree on the designation of a particular retired superior court Judge of the
Venue County, or the designated Judge is unavailable or unable to serve in such
capacity, request shall be made in said Petition that the Presiding or Assistant
Presiding Judge of the superior court of the Venue County appoint as referee a
retired superior court Judge from the aforementioned list.
(c) Except as hereafter agreed by the parties, the referee
shall apply the internal law of the State of California in deciding the issues
submitted hereunder. Unless formal pleadings are waived by agreement among the
parties and the referee, the moving party shall file and serve its complaint
within fifteen (15) days from the date a referee is designated as provided
herein, and the other party shall have fifteen (15) days thereafter in which to
plead to said complaint. Each of the parties reserves its respective rights to
allege and assert in such pleadings all claims, causes of action, contentions
and defenses which it may have arising out of or relating to the general subject
matter of the Covered Dispute that is being determined pursuant to the Reference
Procedures. Reasonable notice of any motions before the referee shall be given,
and all matters shall be set at the convenience of the referee. Discovery shall
be conducted as the parties agree or as allowed by the referee. Unless waived by
each of the parties, a reporter shall be present at all proceedings before the
referee.
(d) It is the parties' intention by this Section 15 that all
issues of fact and law and all matters of a legal and equitable nature related
to any Covered Dispute will be submitted for determination by a referee
designated as provided herein. Accordingly, the parties hereby stipulate that a
referee designated as provided herein shall have all powers of a Judge of the
superior court including, without limitation, the power to grant equitable and
interlocutory and permanent injunctive relief.
(e) Each of the parties specifically (i) consents to the
exercise of jurisdiction over his person by a referee designated as provided
herein with respect to any and all Covered Disputes; and (ii) consents to the
personal jurisdiction of the California courts with respect to any appeal or
review of the decision of any such referee.
(f) Each of the parties acknowledges that the decision by a
referee designated as provided herein shall be a basis for a judgment as
provided in CCP Section 644 and shall be subject to exception and review as
provided in CCP Section 645, or such procedures as nearly the same as may be
available under the laws of California.
(g) The Company shall pay all fees and costs incurred by
Executive in connection with the Reference Procedures for a Covered Dispute
other than attorneys' fees incurred by Executive, except as otherwise required
to be paid pursuant to Section 11.
16. NOTICES. Any notice or communications required or permitted to be
given to the parties hereto shall be delivered personally or be sent by United
States registered or certified mail, postage prepaid and return receipt
requested, and addressed or delivered as follows, or at such other addresses the
party addressed may have substituted by notice pursuant to this Section:
To the Company: Grill Concepts, Inc.
00000 Xxx Xxxxxxx Xxxx., Xxxxx 000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attn:
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To the Executive:
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17. CAPTIONS. The captions of this Agreement are inserted for
convenience and do not constitute a part hereof.
18. SEVERABILITY. In case any one or more of the provisions contained
in this Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Agreement, but this Agreement shall
be construed as if such invalid, illegal or unenforceable provision had never
been contained herein and there shall be deemed substituted for such invalid,
illegal or unenforceable provision such other provision as will most nearly
accomplish the intent of the parties to the extent permitted by the applicable
law. In case this Agreement, or any one or more of the provisions hereof, shall
be held to be invalid, illegal or unenforceable within any governmental
jurisdiction or subdivision thereof, this Agreement or any such provision
thereof shall not as a consequence thereof be deemed to be invalid, illegal or
unenforceable in any other governmental jurisdiction or subdivision thereof.
19. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one in the same Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered effective as of the day and year first written
above.
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[Name of Executive]
GRILL CONCEPTS, INC.,
a Delaware corporation
By:
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Name:
Title:
