EXHIBIT 10.4
EXECUTIVE EMPLOYMENT AGREEMENT
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THIS EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made and entered into
as of November 16, 1998 (the "Effective Date") by and between HOSPITALITY DESIGN
& SUPPLY, INC., a Delaware corporation (the "Company") and XXXXX XXXXXXXXXXX, an
individual resident of the State of California ("Executive"), with reference to
the following:
B a c k g r o u n d
A. The Company is a newly formed entity that intends to pursue
consolidation opportunities in the restaurant design and supply
business (the "Business").
B. The Company now desires to retain the full-time services of Executive
as Executive Vice President and Chief Financial Officer of the
Company, and Executive is willing to be employed by the Company in
that capacity on the terms and conditions set forth in this Agreement.
NOW THEREFORE, the Company and Executive hereby agree as follows:
1. EMPLOYMENT. The Company hereby employs Executive on the terms set
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forth herein and Executive hereby accepts such employment commencing on the
Effective Date for a term of three years (the "Employment Term"), unless sooner
terminated under Section 6 below.
2. DUTIES. During the period of his employment with the Company
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hereunder, Executive will be employed as Executive Vice President and Chief
Financial Officer of the Company. Executive's primary place of employment will
be the Company's principal offices, located in Los Angeles County, California.
Executive will:
(a) devote his full business time, ability, knowledge and attention,
and give his best effort and skill solely to the Company's business affairs and
interests;
(b) perform such services and assume such duties and responsibilities
appropriate to the positions identified above as well as those which may from
time to time be reasonably assigned to him by the Chief Executive Officer of the
Company; and
(c) in all respects use his best efforts to further, enhance and
develop the Company's business affairs, interests and welfare.
3. COMPENSATION. In consideration of Executive's services to the Company
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during the Employment Term, Executive will receive the following:
(a) the Company will pay Executive a minimum gross base salary of
$175,000 per annum during the Employment Term. Executive's base salary will be
paid in equal installments (pro rated for portions of a pay period) on the
Company's regular pay days and the Company will withhold from such compensation
all applicable federal and state income, social security, and
disability and other taxes as required by applicable laws. The Company may also
pay Executive such bonuses as are determined from time to time by the Board of
Directors.
(b) As soon as reasonably practicable after the consummation of the
Company's first sale in one transaction or a series of related transactions of
Preferred Stock for an aggregate purchase price paid to the Company of not less
than five hundred thousand dollars ($500,000), the Company will grant to
Executive an option to purchase one hundred thirty thousand (130,000) shares of
Common Stock of the Company at an exercise price per share equal to the price at
which the Preferred Stock issued in such sale would convert into one share of
Common Stock at the time of such grant. Such option will vest (i.e. become
exercisable) as follows: One-half of the option will vest upon the consummation
of the earlier of (i) the Initial Public Offering (as defined herein), or (ii)
the Private Financing (as defined herein), and one-half of the option will vest
upon the completion of the first eighteen (18) months of the Employment Term.
For purposes of this Agreement, "Initial Public Offering" means the Company's
first firm commitment underwritten offering of its securities pursuant to a
registration statement under the Securities Act of 1933, as amended (the
"Securities Act"), which results in aggregate net cash proceeds to the Company
of not less than ten million dollars ($10,000,000) and "Private Financing" means
the Company's first sale in one transaction or a series of related transactions,
not registered under the Securities Act, of Common Stock, Preferred Stock and/or
debt securities of the Company which results in aggregate net cash proceeds to
the Company of not less than ten million dollars ($10,000,000).
4. CHANGE OF CONTROL. In the event of any Change of Control of the
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Company, then (i) any and all of Executive's stock options that are unvested as
of the effective date of such Change of Control will become vested immediately
prior to such event and (ii) Executive will receive from the Company an
aggregate payment equal to three (3) times his gross base salary, payable in
accordance with the provisions of Section 3 above if Executive ceases for any
reason to be employed by the Company within six (6) months following the date of
such Change of Control; provided however, that in the event that the Company
determines, in its sole discretion, that any portion of the same constitutes an
excess parachute payment under (S)280G of the Internal Revenue Code of 1986, as
amended, then the Company will have no obligation to provide such portion to the
Executive. For purposes of this Agreement, a "Change of Control" means (a) the
sale of all or substantially all of the assets of the Company to any person or
entity that, prior to such sale, did not control, was not under common control
with, or was not controlled by, the Company, or (b) the Company's merger or
consolidation with or into another entity, regardless of which entity survives
such merger or consolidation, unless at least fifty percent (50%) of the
outstanding voting securities of the surviving or parent corporation, as the
case may be, immediately following such transaction are beneficially held by
such persons and entities in the same proportion as such persons and entities
beneficially held the outstanding voting securities of the Company immediately
prior to such transaction, or (c) the acquisition of at least fifty percent
(50%) of the outstanding voting securities of the Company by any person, or any
"group" as contemplated under Section 13(d) of the Securities Exchange Act of
1934, as amended; it being agreed, in any event, that the issuances of shares to
the stockholders of the founding companies consolidating with the Company on or
about the time of either the Initial Public Offering or the Private Financing,
as the case may be, and the issuance of shares in such Initial Public Offering
or Private Financing, shall in no event constitute a Change of Control.
5. BENEFITS AND REIMBURSEMENTS.
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5.1 Executive will, during the Employment Term, have the right to
receive such benefits as are generally made available to full-time executive
officers of the Company, including the right to
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participate in any retirement plan or executive bonus plan that the Company may
create. In addition, or inclusive of such benefits, the Company will provide
Executive with the following:
(a) reimbursement of all "COBRA" payments paid by Executive for the
continuation of medical, dental or similar coverage for Executive and his
immediate family arising from the cessation of his employment with BDK
Holdings, Inc. to the extent that (i) such payments are not otherwise
reimbursable to Executive and (ii) such coverage is not available to
Executive under any benefits plan provided by the Company;
(b) the opportunity to apply for coverage under the Company's
medical, life and disability plans, to the extent the same are established
by the Company. If the Executive is accepted for coverage under such plans,
the Company will provide to Executive and his immediate family such
coverage on the same terms as is customarily provided by the Company to the
plan participants as modified from time to time.
(c) in addition to normal holidays recognized by the Company,
Executive will be entitled to three weeks paid vacation annually, provided
that any vacation may be taken by Executive at any time Executive deems
appropriate, upon consultation with the Board of Directors, which may
determine that the best interests of the Company require otherwise.
5.2 The Company will reimburse Executive for travel and other out-of-
pocket expenses reasonably incurred by Executive in the performance of his
duties hereunder, provided that all such expenses will be reimbursed only (i)
upon the presentation by Executive to the Company of such documentation as may
be reasonably necessary to substantiate that all such expenses were incurred in
the performance of his duties, and (ii) if such expenses are consistent with all
policies of the Company in effect from time to time as to the kind and amount of
such expenses.
6. TERMINATION OF EMPLOYMENT.
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6.1 Expiration of the Term of Agreement. This Agreement will terminate
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automatically upon the expiration of the Employment Term.
6.2 Death or Permanent Disability of Executive. This Agreement will
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terminate upon the death or permanent disability of Executive. Executive will
be deemed permanently disabled for the purpose of this Agreement if, in the good
faith determination of the Board of Directors, based on sound medical advice,
Executive has become physically or mentally incapable of performing his duties
hereunder for a continuous period of one hundred eighty (180) days, in which
event Executive will be deemed permanently disabled upon the expiration of such
one hundred eighty (180) day period.
6.3 Executive's Discharge for Cause. The Company will have the right to
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terminate Executive's employment hereunder for "Cause" at any time effective
upon its giving of written notice setting forth with particularity the facts and
circumstances constituting such Cause. For such purposes, "Cause" means the
occurrence of one or more of the following: (i) the commission by Executive of
any act materially detrimental to the Company, including fraud, embezzlement,
theft, bad faith, gross negligence, recklessness or willful misconduct; (ii)
repeated failure or refusal to perform the duties required by this Agreement and
as may be assigned to Executive by the Chief Executive Officer of the Company;
(iii) conviction of a felony or of any crime of moral turpitude to the extent
materially detrimental to the Company; (iv) any material misrepresentation by
Executive
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to the Company regarding the operation of the business; or (v) breach of any
covenant of this Agreement, provided that the action or conduct described in
clauses (ii) or (v) above will constitute "Cause" only if such action or conduct
continues after the Company has provided Executive with written notice thereof
and a reasonable opportunity (to be not less than 30 days) to cure the same.
6.4 The Company's Right to Terminate At Will. Subject to the payment to
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Executive of the applicable severance payment as provided in Section 6.7 below,
the Company will have the right (in addition to its right of termination under
Section 6.1 above), exercisable at any time during the term of this Agreement,
to terminate Executive's employment with the Company without "Cause" (as defined
in Section 6.3 above), immediately upon written notice to Executive.
6.5 Termination for Lack of Successful Financing. Subject to the payment
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to Executive of the applicable severance payment as provided in Section 6.7
below, each party will have the right (in addition to the Company's right of
termination under Section 6.1 above), exercisable at any time after June 30,
1999 to terminate this Agreement in the event that the Company has not
consummated either an Initial Public Offering or a Private Financing by such
date.
6.6 Termination by Executive. Except as otherwise provided in this
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Section 6, Executive shall have the right to voluntarily terminate his
employment at any time for any reason. In the event he does so, Executive shall
receive no severance compensation.
6.7 Compensation Upon Termination.
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(a) Upon termination of Executive's employment pursuant to this
Section 6, Executive will be entitled to only: (i) the compensation provided for
in Section 3 above for the period of time ending with the date of termination;
(ii) compensation for any unused vacation that Executive may have accrued, as
well as all earned benefits, up to and including the date of termination; (iii)
"COBRA" benefits to the extent required by applicable law; and (iv)
reimbursement for such expenses as Executive may have properly incurred on
behalf of the Company as provided in Section 5.2 above prior to the date of
termination.
(b) If the Company terminates Executive's employment pursuant to
Section 6.4 above, in addition to the amounts payable in Section 6.7(a) above,
Executive will be entitled to receive a severance payment in an amount equal to
the base salary paid to Executive by the Company pursuant to Section 3 above for
a period of one year following the date of termination of the Agreement. Such
severance payment will be paid in periodic payments in accordance with the
payment schedule set forth in Section 3 above. Notwithstanding anything to the
contrary in this Section 6.7(b), Executive's severance payment from the Company
will be reduced by the amount of any salary received by Executive as a result of
Executive's new employment with any person, persons, company, partnership,
corporation or business of whatever nature.
(c) If either party terminates this Agreement pursuant to Section 6.5
above, in addition to the amounts payable in Section 6.7(a) above, Executive
will be entitled to receive a severance payment in an amount equal, in the
Company's sole discretion, to either (i) the base salary paid to Executive by
the Company pursuant to Section 3 above for a period of six (6) months following
the date of termination of the Agreement, payable in periodic payments in
accordance with the payment schedule set forth in Section 3 above, or (ii)
$85,000, payable in one lump sum payment. Notwithstanding anything to the
contrary in this Section 6.6(c), Executive's severance payment from the Company
immediately will be reduced by the amount of any salary received by Executive as
a
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result of Executive's new employment with any person, persons, company,
partnership, corporation or business of whatever nature.
(d) The payments set forth in this Section 6.7 will fully discharge
all responsibilities of the Company to Executive under this Agreement or
relating to or arising out of the termination of Executive's employment.
7. UNFAIR COMPETITION BY EXECUTIVE.
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7.1 Executive agrees that all trade secrets, confidential or
proprietary information with respect to the activities and businesses of the
Company, including, without limitation, personnel information, secret processes,
know-how, customer lists, sales distribution territories, databases, ideas,
techniques, processes, inventions (whether patentable or not), and other
technical plans, business plans, marketing plans, product plans, forecasts,
contacts, strategies and information (collectively "Proprietary Information")
which were learned by Executive in the course of his employment by the Company,
and any other Proprietary Information received, developed or learned by
Executive hereafter in the course of his future employment by or in association
with the Company, are confidential and will be kept and held in confidence and
trust as a fiduciary by Executive. Executive will not use or disclose
Proprietary Information of the Company except as necessary in the normal course
of the business of the Company for its sole and exclusive benefit, unless
Executive is compelled so to disclose under process of law, in which case
Executive will first notify the Company promptly after receipt of a demand to so
disclose.
7.2 During the term of this Agreement, directly or on behalf of or in
conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature, Executive will not engage as an officer, director,
shareholder, owner, partner, joint venturer, financier, or in a managerial
capacity, whether as an employee, independent contractor, consultant, advisor,
or sales representative, in any corporation, partnership, firm or other entity
engaged in the Business that is within 100 miles of the principal places of
business of the Company or any of the Company's subsidiaries, or of any
geographic location in which Executive has represented the interests of the
Company or any of its subsidiaries. During the term of this Agreement and for a
period of one year following its termination for any reason, directly or on
behalf of or in conjunction with any other person, persons, company,
partnership, corporation or business of whatever nature, Executive will not:
(a) call upon any prospective acquisition candidate engaged in the
Business on Executive's own behalf or on behalf of any competitor of the Company
or any of its subsidiaries, which candidate was either called upon by the
Company (including its subsidiaries) for the purpose of acquiring such entity.
(b) contact or solicit any employees of the Company or its
subsidiaries for the purposes of hiring them.
7.3 Except for activities expressly permitted by the prior written
approval of the Board of Directors of the Company, during the term of this
Agreement, the Executive will not: (a) engage in business independent of the
Executive's employment by the Company that requires any substantial portion of
the Executive's time; (b) serve as an officer, general partner or member in any
for-profit corporation, partnership or firm; (c) serve as a director of any
corporation, partnership or firm having the Business as its principal
enterprise; or (d) directly, indirectly or through any Affiliate, invest in,
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participate in or acquire an interest in any entity engaged in the Business. For
purposes of this Agreement, the terms: (i) "Affiliate" means as to any Person,
each other Person that directly or indirectly (through one (1) or more
intermediaries) controls, is controlled by or is under common control with such
person; and (ii) "Person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust, associate (as
defined in regulations promulgated by the Securities Exchange Commission) or
other legally recognizable entity. The limitation in this paragraph will not
prohibit any investment by the Executive in securities that are listed on a
public exchange or the National Association of Securities Dealers Automated
Quotation National Market System and issued by a company, firm, corporation,
partnership, trust or other entity involved in the Business or otherwise.
7.4 Executive and the Company acknowledge that: (i) each covenant and
restriction contained in Sections 7.1, 7.2 and 8 of this Agreement is necessary,
fundamental, and required for the protection of the Company's business; (ii)
such relate to matters which are of a special, unique, and extraordinary
character that gives each of them a special, unique, and extraordinary value;
and (iii) a breach of any such covenant or restriction will result in
irreparable harm and damage to the Company which cannot be compensated
adequately by a monetary award. Accordingly, it is expressly agreed that, in
addition to all other remedies available at law or in equity, and
notwithstanding anything to the contrary in Section 10 below, the Company will
be entitled to the immediate remedy of a temporary restraining order,
preliminary injunction, or such other form of injunctive or equitable relief as
may be used by any court of competent jurisdiction to restrain or enjoin any of
the parties hereto from breaching any such covenant or restriction, or otherwise
specifically to enforce the provisions contained in Sections 7.1, 7.2 and 8 of
this Agreement.
8. PROPRIETARY MATTERS. Executive expressly understands and agrees that
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any and all improvements, inventions, discoveries, processes, or know-how that
are generated or conceived by Executive during the term of this Agreement,
whether so generated or conceived during Executive's regular working hours or
otherwise, will be the sole and exclusive property of the Company, and Executive
will, whenever requested to do so by the Company (either during the term of this
Agreement or thereafter), execute and assign any and all applications,
assignments and/or other instruments and do all things which the Company may
deem necessary or appropriate in order to apply for, obtain, maintain, enforce
and defend patents, copyrights, trade names or trademarks of the United States
or of foreign countries for said improvements, inventions, discoveries,
processes, or know-how, or in order to assign and convey or otherwise make
available to the Company the sole and exclusive right, title, and interest in
and to said improvements, inventions, discoveries, processes, know-how,
applications, patents, copyrights, trade names or trademarks.
9. KEY-PERSON INSURANCE. Executive agrees to make himself available and
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to undergo, at the Company's request and expense, any physical examination or
other procedure necessary to allow the Company to obtain a key-person insurance
policy on Executive. If the Company obtains such policy, it will maintain the
policy at its expense and all proceeds will be the sole property of the Company.
10. RESOLUTION OF DISPUTES. The parties will attempt in good faith
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promptly by negotiations to resolve any dispute or controversy arising out of or
relating to this Agreement or to the employment or termination of Executive by
the Company. If a party intends to be accompanied at a negotiation meeting by
an attorney, the other party will be given at least three working days' notice
of such intention and may also be accompanied by an attorney. All negotiations
pursuant to
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this clause are confidential and will be treated as compromise and settlement
negotiations for purposes of the Federal Rules of Evidence and state rules of
evidence.
11. MISCELLANEOUS.
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11.1 Governing Law; Interpretation. This Agreement will be governed by
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the substantive laws of the State of California applicable to contracts entered
into and fully performed in such jurisdiction. The headings and captions of the
Sections of this Agreement are for convenience only and in no way define, limit
or extend the scope or intent of this Agreement or any provision hereof. This
Agreement will be construed as a whole, according to its fair meaning, and not
in favor of or against any party, regardless of which party may have initially
drafted certain provisions set forth herein.
11.2 Assignment. This Agreement is personal to Executive and he may not
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assign any of his rights or delegate any of his obligations hereunder without
first obtaining the prior written consent of the Board of Directors of the
Company.
11.3 Notices. Any notice, request, claim or other communication required
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or permitted hereunder will be in writing and will be deemed to have been duly
given if delivered by hand or if sent by certified mail, postage and
certification prepaid, to Executive at his residence (as noted in the Company's
records), or to the Company at its address as set forth below its signature on
the signature page of this Agreement, or to such other address or addresses as
either party may have furnished to the other in writing in accordance herewith.
11.4 Severability. In the event any court of competent jurisdiction shall
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determine that the scope, time or territorial restrictions of any provision of
this Agreement are unreasonable, then it is the intention of the parties that
such restrictions be enforced to the fullest extent which the court deems
reasonable, and the Agreement shall thereby be reformed. The remaining
provisions of this Agreement will remain in full force and effect unless the
result would be manifestly unjust or would deprive either party of the benefit
of its bargain.
11.5 Entire Agreement; Amendments. This Agreement and any other exhibits
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and attachments hereto constitutes the final and complete expression of all of
the terms of the understanding and agreement between the parties hereto with
respect to the subject matter hereof, and this Agreement replaces and supersedes
any and all prior or contemporaneous negotiations, communications,
understandings, obligations, commitments, agreements or contracts, whether
written or oral, between the parties respecting the subject matter hereof.
Except as provided in Section 11.4 above, this Agreement may not be modified,
amended, altered or supplemented except by means of the execution and delivery
of a written instrument mutually executed by both parties.
11.6 Attorneys' Fees. If it becomes necessary for any party to initiate
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legal action or any other proceeding to enforce, defend or construe such party's
rights or obligations under this Agreement, the prevailing party will be
entitled to its reasonable costs and expenses, including reasonable attorneys'
fees, incurred in connection with such action or proceeding.
12. Executive Acknowledgment. Executive acknowledges that he has been
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given the opportunity to consult with legal counsel concerning the rights and
obligations arising under this Agreement, that he has read and understands each
and every provision of this Agreement, and that he is fully aware of the legal
effect and implications of this Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly
executed as of the day and year first above written.
Company: Executive:
HOSPITALITY DESIGN & SUPPLY, INC. XXXXX XXXXXXXXXXX
By: /s/ Xxxx Xxxxxx /s/ Xxxxx Xxxxxxxxxxx
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Name: Xxxx Xxxxxx
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Title: President
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Address:
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Address: Fax:
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Fax:
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