EMPLOYMENT AGREEMENT
Exhibit 99.1
This Agreement is made effective as of June 3, 2009, by and between Xxxxxx’x Restaurants, Inc., an Ohio corporation (hereinafter referred to as “Corporation”) and Xxxxx X. Xxxxx (hereinafter referred to as “Xxxxx”) and is hereby amended effective April 6, 2011 following approval by the Board of Directors.
WHEREAS, Xxxxx is the President and Chief Executive Officer of the Corporation; and
WHEREAS, the Corporation and Xxxxx agree that Xxxxx’x compensation should be based upon the Corporation’s performance; and
WHEREAS, the Corporation has employed Xxxxx pursuant to an employment agreement dated May 31, 2006, which expires on June 2, 2009.
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties do hereby agree upon the following terms and conditions of this Employment Agreement.
1. Employment. The Corporation agrees to employ Xxxxx and Xxxxx agrees to serve the Corporation upon the terms and conditions hereinafter set forth.
2. Term. The employment of Xxxxx hereunder shall be for a period of three fiscal years, commencing June 3, 2009 and ending on May 29, 2012.
3. Duties and Responsibilities. Xxxxx agrees to serve the Corporation and its subsidiaries and divisions faithfully, ethically, and to the best of his ability as its President and Chief Executive Officer, under the direction of the Board of Directors. Xxxxx agrees to devote (except as otherwise permitted in paragraph 5) his full business time, energy and skill to such employment and to perform such other duties as the Board of Directors shall reasonably request from time to time. Xxxxx agrees to perform his duties in compliance with all applicable federal and state laws and regulations, the rules of the New York Stock Exchange, and all ethical codes, conflict of interest policies, securities trading policies and all other corporate governance and other policies adopted by the Board of Directors of the Corporation from time to time.
4. Compensation.
(a) Base Salary. During the first fiscal year of his employment hereunder, the Corporation agrees to pay Xxxxx a “Base Salary” of Three Hundred Thousand Dollars ($300,000). Xxxxx’x Base Salary shall be adjusted at the beginning of the second and third years of this Agreement to reflect One Hundred Percent (100%) of the latest annual change in the Consumer Price Index for All Urban Consumers (“CPI-U”) published by the U.S. Department of Labor; Bureau of Labor Statistics.
(b) Incentive Compensation. In addition to his Base Salary, the Corporation shall pay Xxxxx “Incentive Compensation,” which shall consist of Base Incentive Compensation and
Incremental Incentive Compensation (both defined below), for each fiscal year in which the Corporation’s Pre-Tax Earnings equal or exceed four percent (4%) of its Total Revenue for such year, as reported in the Corporation’s annual report to shareholders. “Pre-Tax Earnings” shall be the amount reported in the annual report, but shall be computed without reduction for: this Incentive Compensation; the value of stock options granted by Corporation and deducted as an expense in calculating Pre-Tax Earnings; and performance based bonuses paid to participants in the Corporation’s Senior Executive Bonus Plan.
Xxxxx’x “Base Incentive Compensation” shall be one and one-half percent (1-1/2%) of the Corporation’s Pre-Tax Earnings. However, the amount of the Base Incentive Compensation in a fiscal year shall be reduced, if necessary, so that the Corporation’s Pre-Tax Earnings, after reduction for the Base Incentive Compensation, shall not be less than four percent (4%) of the Corporation’s Total Revenue for that fiscal year.
In addition, if the Pre-Tax Earnings of the Corporation equal or exceed five percent (5%) of its Total Revenue for that year, the Corporation shall pay Xxxxx “Incremental Incentive Compensation” equal to an additional one percent (1%) of the Corporation’s Pre-Tax Earnings.
Ninety percent of the Incentive Compensation shall be paid in cash and ten percent shall be paid in shares of the Corporation’s common stock.
The number of shares allocated to Xxxxx shall be determined by dividing the amount of Incentive Compensation to be paid in shares by the Average Value of the Corporation’s common shares during the fiscal year for which the Incentive Compensation has been earned. The “Average Value” of the Corporation’s shares for any fiscal year shall be the mean between the highest price at which common shares were traded during such year and the lowest price.
Examples:
If the Corporation has Total Revenue of $300,000,000 and Pre-Tax Earnings (before calculation of Xxxxx’x Incentive Compensation) of $16,000,000 in a fiscal year, Xxxxx would earn both Base and Incremental Incentive Compensation since Pre-Tax Earnings exceeded 5% of Total Revenue. The Incentive Compensation of two and one-half percent of Pre-Tax Earnings equals $400,000. Ninety percent ($360,000) is payable in cash and ten percent ($40,000) is payable in shares. If during the applicable fiscal year the Corporation’s shares traded at a high price of $24 and a low price of $16, and therefore the mean price was $20.00 per share, Xxxxx would receive an award of 2,000 shares ($40,000 divided by $20.00 per share = 2,000 shares).
If, however, Pre-Tax Earnings had been $13,000,000 (over 4% of Total Revenue but less than 5%), Xxxxx would have earned Base Incentive Compensation only of $195,000 (one and one-half percent of Pre-Tax Earnings). As in the prior example, ninety percent is payable in cash and ten percent in shares.
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Finally, if Pre-Tax Earnings had been $12,100,000 (over 4% of Total Revenue but less than 5%), Xxxxx would have earned Base Incentive Compensation only. However, if the Corporation paid the Incentive Compensation of $181,500 (one and one-half percent of Pre-Tax Earnings), its Pre-Tax Earnings (after reduction for Incentive Compensation) would fall below 4% of Total Revenue. Therefore, the Incentive Compensation would be reduced to $100,000 - the largest amount that could be paid so that the Company’s Pre-Tax Earnings, after reduction for Incentive Compensation, are not less than 4% of Total Revenue. As in the prior example, ninety percent is payable in cash and ten percent in shares.
The shares granted as Incentive Compensation will not be registered under the Securities Act of 1933, as amended, and each stock certificate will bear the following legend or one similar thereto: “The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act.”
(c) Contribution to Nondeferred Cash Balance Plan. In any year in which the Corporation’s Pre-Tax Earnings equal or exceed 4% of Total Revenue, the Corporation shall make a contribution to the trust established for the benefit of Xxxxx under the Xxxxxx’x Restaurants, Inc. Nondeferred Cash Balance Plan (the “Plan”) as follows:
| Pre-Tax Earnings As a Percentage Of Total Revenue |
Contribution to the Plan As a Percentage of Salary |
|||
| At least 4%, but less than 5% |
18 | % | ||
| At least 5%, but less than 6% |
37 | % | ||
| At least 6% |
55 | % | ||
All amounts contributed to the Plan by Corporation shall be subject to the terms and conditions of the Plan.
In accordance with Section 1.409A-1(b)(4)(ii) of the Treasury Regulations, and notwithstanding any other provision in this Agreement, the payment of cash and the delivery of shares under Section 4(b) and the making of contributions under 4(c) shall be delayed automatically if (i) the Employee is a “covered employee” for purposes of Section 162(m) of the Internal Revenue Code for the Company’s taxable year that includes the date such payments and contributions are anticipated to be made; and (ii) the Employee’s total “compensation” (excluding compensation treated as performance-based under Section 162(m)) that the Company and its subsidiaries could otherwise deduct for the Company’s fiscal year in which such payments and contributions are anticipated to be made is restricted due to the application of Section 162(m). In this event, such payments and contributions will be made on the date they were originally anticipated to be made but only to the extent such amount is permitted to be deductible by the Company under IRC Section 162(m), and any payments and contributions not made at such time shall be made as soon as reasonably practicable following the first date on
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which the Company anticipates that its deduction with respect to such payments and contributions would no longer be restricted due to the application of IRS Section 162(m).
Xxxxx understands and agrees that, notwithstanding the foregoing, no amount shall become payable or contributed under Sections 4(b) or (c) above on account of the Corporation’s 2011-2012 fiscal year unless the material terms of the incentive compensation described in Sections 4(b) and (c) are disclosed to and approved by the shareholders of the Corporation at its October 2011 meeting in accordance with Section 1.162-27(e)(4) of the Treasury Regulations and the Compensation Committee of the Corporation’s Board of Directors certifies in writing prior to the payment or contribution thereof that the performance goals and any other material terms were satisfied in accordance with Section 1.162-27(e)(5) of the Treasury Regulations. The Corporation shall strictly enforce the foregoing forfeiture conditions and, in the event these conditions are not satisfied and amounts described in Section 4(b) or (c) are forfeited, the Corporation shall not pay or contribute, nor shall the Corporation cause or permit any other entity to pay or contribute, any portion of the incentive compensation described in Sections 4(b) or (c) or an amount in lieu of all or a portion of such incentive compensation under any undocumented arrangement that modifies or alters the effect of this paragraph or creates any additional obligations to, or rights of, Xxxxx.
(d) Restricted Stock Grants. On the day of the annual shareholders’ meeting in each year of his employment hereunder, the Corporation agrees to xxxxx Xxxxx restricted stock in the same amount and subject to the same conditions as the restricted stock granted to the non-employee directors on that day.
The Compensation Committee of the Corporation’s Board of Directors may impose such other terms and conditions upon the grants as are consistent with the terms and conditions of the grants by the Corporation to its non-employee directors.
(e) Disability Compensation. If Xxxxx becomes Disabled during the term of this Agreement when the Corporation still actively employs him, the Corporation shall pay Disability Compensation (defined below) to Xxxxx. “Disabled” shall mean a condition which entitles Xxxxx to receive benefits under the Corporation’s long term disability plan as it exists at the time the determination that Xxxxx is Disabled is made.
The annual amount of the “Disability Compensation” shall be Sixty Percent (60%) of Xxxxx’x Average Compensation at the time he becomes Disabled, reduced by any disability benefits to which Xxxxx is entitled under disability income plans (including insurance funded plans) maintained by the Corporation. “Average Compensation” means the total compensation, including Incentive Compensation, earned by Xxxxx in the three fiscal years preceding the year in which he becomes Disabled; divided by 3.
The Disability Compensation shall be paid to Xxxxx monthly while he is alive, for a period of 120 months, provided that Xxxxx has not willfully violated any of the provisions of this Agreement. Xxxxx’x Disability Compensation shall be increased on each anniversary of the
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commencement of payments by One Hundred Percent (100%) of the latest annual change in the CPI-U.
5. Restrictive Covenants. Xxxxx agrees that during the term of this Agreement, including any renewals, he will not, without the prior written consent of the Corporation, directly or indirectly render any services to, become employed by, or otherwise participate in, any business which is competitive with any of the businesses of the Corporation or its subsidiaries or divisions. Notwithstanding the foregoing, nothing herein shall prohibit Xxxxx from:
| (a) | owning and operating the franchise known as Frisch’s New Richmond Big Boy, Inc.; |
| (b) | operating or otherwise providing services to any other franchisee of Corporation; |
| (c) | owning stock or other securities, or serving as a director or officer of a corporation conducting a business referred to in subparagraph (a); |
| (d) | owning stock or other securities of competitors which are sold in a public market and which comprise less than five percent (5%) of the total outstanding stock of such corporation. |
6. Binding Effect. This Agreement shall be binding upon and inure to the benefit of the heirs and successors of the parties. Any successor of the Corporation shall be deemed substituted for the Corporation under the terms of this Agreement. A “Successor” of the Corporation shall include any person or entity that at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the capital stock, assets or business of the Corporation.
7. Change in Control. Xxxxx and the Corporation have previously entered into an Agreement granting Xxxxx certain rights in the event of a “Change in Control” of the Corporation (as defined in such Agreement). Such Agreement was amended on October 7, 2008. Xxxxx and the Corporation hereby reaffirm such Agreement and confirm that its provisions are in addition to this Agreement and control in the event of a conflict with this Agreement.
IN WITNESS WHEREOF, Xxxxxx’x Restaurants, Inc. has caused this Agreement to be executed in its corporate name by Xxxxxxx X. Xxxxxx, its Vice President of Human Resources, thereunto duly authorized by its Board of Directors, and Xxxxx X. Xxxxx has hereunto set his hand, effective as of the date set forth above.
| /s/ Xxxxx X. Xxxxx |
XXXXXX’X RESTAURANTS, INC. | |||||||
| Xxxxx X. Xxxxx | ||||||||
| By: | /s/ Xxxxxxx X. Xxxxxx | |||||||
| Dated: | April 11, 2011 |
Xxxxxxx X. Xxxxxx | ||||||
| Vice President of Human Resources | ||||||||
| Dated: | April 6, 2011 | |||||||
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