Exhibit 10.4
EMPLOYMENT AGREEMENT
--------------------
Agreement entered into as of this 30th day of September, 1991, by and
between NE Restaurant Company Limited Partnership, NE Restaurant (Glastonbury)
Limited Partnership and NE Restaurant (Cambridge) Limited Partnership
(collectively, the "Partnerships"); the respective general partners of the
Partnerships, NE Restaurant Company, Inc., NE Restaurant (Connecticut), Inc. and
NE Restaurant (Cambridge), Inc. (collectively, the "General Partners"); and
Xxxxxx Xxxxx (the "Employee"). The Partnerships and the General Partners shall
hereinafter be collectively referred to as the "Employers."
W I T N E S S E T H:
-------------------
WHEREAS, the Employers are desirous of assuring to themselves for a minimum
two year period the benefits to be obtained from the special abilities and
talents of the Employee relative to the operation of the Employers' business and
the Employee is desirous of working for the Employers.
NOW, THEREFORE, in consideration of the mutual covenants and agreements of
the parties hereto, it is hereby agreed by and between the Employers and the
Employee as follows:
1. Employment and Compensation.
---------------------------
(a) General. The Employers agree to employ the Employee during the term
-------
set forth herein, and the Employee agrees to be employed by the Employers for
the performance of the duties hereinafter set forth (i) at a base salary (the
"Base Salary") of One Hundred Sixty Thousand Dollars ($160,000) per year (pro
rated for any partial year), or such greater amount as the General Partners may
authorize from time to time, in their sole discretion, and (ii) for the
Incentive Compensation described below. The Base Salary shall be payable bi-
weekly or on such other basis, not less frequently than monthly, as the
Employers may generally pay their salaried employees. The Employee is not
entitled to additional compensation for services as an officer or director of
the Employers unless such additional compensation is approved by the General
Partners.
(b) Incentive Compensation. The Employee shall be eligible to receive
----------------------
an annual performance bonus in an amount of up to fifty (50%) percent of the
Base Salary which will be based upon a bonus plan tied to the combined operating
results of the Partnerships to be established and revised from time to time by
the General Partners.
2. Duties and Responsibilities. The Employee shall be employed as
---------------------------
President and Chief Operating Officer of each of the General Partners and shall
be Chief Operating Officer of each of the Partnerships. He shall also have such
other duties of similar responsibility and authority as may from time to time be
assigned to him by the General Partners. The Employee shall devote to the
performance of his duties on behalf of the Employers all of his time, energy
and experience. The Employee shall at all times be subject to the supervision of
the General Partners and their respective Boards of Directors.
3. Expenses.
--------
(a) General. Each Employer agrees to reimburse the Employee for all
-------
reasonable expenses incurred by him in connection with the business of that
Employer.
(b) Automobile. Without limiting the foregoing, the Employers agree to
----------
pay the Employee an automobile allowance of $709.00 per month and to reimburse
the Employee for reasonable expenses (subject to appropriate documentation),
including insurance and repair, incurred by the Employee in connection with the
use of his automobile for Employer business purposes.
4. Employee Benefits. In addition to his salary, the Employee shall
-----------------
receive such additional benefits, if any, by way of insurance, participation in
pension, profit sharing or thrift plans, hospitalization and similar employee
benefits as may from time to time be afforded or made available to employees by
the Employers generally.
5. Equity Participation.
--------------------
(a) If the Employee is then a full-time employee of the Partnerships,
the Employers agree to grant to the Employee a 6% Limited Partnership interest
(the "Incentive Interest") in each of the Partnerships upon receipt by the
Investor Limited Partners of the Partnerships of aggregate distributions from
the Partnerships equal to the amount of their combined capital contributions to
the Partnerships plus an annual priority return of 15% compounded annually (the
"Cumulative Priority Return"). In addition, if the Employee is then a full-time
employee of the Partnerships, commencing at the end of the Partnerships' third
full fiscal year through the end of the Partnerships' sixth full fiscal year,
the Employee may earn up to one-half of said Limited Partnership interest (3%)
if the Partnerships meet certain performance goals as set forth in the vesting
schedule set forth below. The Employee shall not be deemed to be a full-time
employee (for purposes of this Section 5 and Section 6) if either the Employee
or an Employer has given the other notice of the termination of the Employee's
full-time employment.
Cumulative Total Cumulative
Fiscal Year (1) EBITDA (1)(2) Percentage Interest Vested (3)
---------------------------------------- --------------------------- -------------------------------
End of 3rd full
Fiscal Year......................... $ 6,503,000 1%
End of 4th full
Fiscal Year......................... $ 9,703,000 2%
End of 5th full
Fiscal Year......................... $13,416,000 3%
End of 6th full
Fiscal Year......................... $17,544,000 3%
___________________
(1) If the Partnerships' fiscal years change, appropriate equitable adjustments
will be made to this vesting schedule as agreed to by the General Partners and
the Employee.
(2) The combined cumulative Partnership earnings before interest, taxes,
amortization and transactions outside of the ordinary course of business, from
the beginning of the Partnerships' first full fiscal year through the end of the
fiscal year indicated in column 1. EBITDA shall be calculated in accordance with
generally accepted accounting principles. The EBITDA reported in the
Partnerships' audited financial statements shall be binding and conclusive on
all parties.
(3) The Limited Partnership interest indicated shall be deemed to be vested as
of the first day of the immediately following fiscal year.
(b) Notwithstanding the vesting of the Incentive Interests in the
Partnerships hereunder, the Employee shall not be entitled to any distributions
from the Partnerships with respect to such Interests in connection with (i) a
capital transaction, (ii) a financing or refinancing of the business or assets
of the Partnership, or (iii) the liquidation or dissolution of the Partnership,
until the Investor Limited Partners have received aggregate distributions from
the Partnerships equal to the amount of their combined capital contributions to
the Partnerships plus the Cumulative Preferred Return.
(c) As a condition to receiving the Incentive Interests set forth
above, the Employee shall be required to execute such documents as may be
reasonably required by the applicable Partnerships to effect the issuance of the
Incentive Interest to the Employee and the Employee's agreement to be bound by
the terms and conditions of the applicable partnership agreement with respect to
that interest, including without limitation, the restrictions on transfer set
forth therein.
(d) At the end of the third fiscal year and each fiscal year
thereafter, the General Partners will review the terms of the Incentive Interest
and make such changes, if any, that shall increase the vesting of the Incentive
Interest as they deem appropriate, in their sole discretion, subject to the
limitations set forth under the partnership agreements of the Partnerships.
6. Right of Repurchase.
-------------------
(a) If the Employee shall cease to be employed by the Employers on a
full time basis by the voluntary act of the Employee within the period ending
five (5) years from the Acquisition Date (as defined in Section 9) or at the
request of the Employers for Cause (as defined in Section 10), the Employers
shall have an option for a period of ninety (90) days commencing on the date of
cessation of full time employment to purchase all of the Incentive Interests
then owned by the Employee that were granted under Section 5 of this Agreement
(the "Vested Interests''). Upon written demand by one or more of the Employers
to the Employee he or his estate shall sell and the electing Employers (or their
designees) shall purchase all of such Vested Interests. The purchase price of
the Interests shall be the Fair Market Value thereof.
(b) The Fair Market Value shall be determined by agreement of the
Employee and the General Partners within fifteen (15) days after written request
therefor from one to the other. In the event such Fair Market Value cannot be so
determined within such time period, each party shall select an experienced
investment banking firm by notice to the other within ten (10) days after
written request by either. In the event both parties do not select the same
firm, the two (2) firms selected shall select a third experienced investment
banking firm which shall, within thirty (30) days after selection, determine the
Fair Market Value of the Vested Interests. Fair Market Value shall be the
amount which the selected firm determines would be paid by a third party to
acquire all of the Vested Interests, assuming the payment of the purchase price
in cash at closing, pursuant to open and competitive bidding conducted by a
knowledgeable and experienced investment banking firm, assuming complete
cooperation by management, with no reduction for the fact that the Vested
Interests being valued constitutes a minority interest or that there is no
public market for such Interests. In the event the investment banking firm
selected provides a range of values as opposed to a single value, the Fair
Market Value shall be the median of the range of values. The report of Fair
Market Value shall be deemed the Fair Market Value Report. The cost of any
determination of Fair Market Value shall be borne equally by the Partnerships as
a group and the Employee on the other hand.
(c) The closing of the purchase of the Vested Interests pursuant to
this Agreement shall be made as follows:
(i) Unless otherwise agreed upon in writing by the Employee and the
Partnerships (or their designees), the closing shall take place
in the principal executive offices of NE Restaurant Company, Inc.
at eleven o'clock in the morning on the sixtieth (60th) business
day after the later of
(i) the full exercise of their respective options, or (ii)
receipt by the Employers of the Fair Market Value Report.
(ii) The Employee shall deliver to each purchaser at the closing such
instruments of assignment as they shall reasonably request
transferring the Vested Interests, free and clear of any and all
liens and encumbrances whatsoever (and shall deliver a written
warranty and representation to such effect), against delivery of
a check drawn in an amount equal to the Fair Market Value.
(d) Notwithstanding anything to the contrary in the limited
partnership agreements of the Partnerships, during the term of the Employee's
full-time employment, and for a period of ninety (90) days thereafter, the
Employee may not sell, assign, transfer, pledge, hypothecate or otherwise
dispose of his Vested Interest without the consent of the General Partner of the
applicable Partnership, which may be withheld by the General Partner in its sole
discretion.
(e) The Employee further agrees that his Incentive Interests shall be
subject to the right of first purchase and other restrictions on transfer set
forth by Xxxxxxx International, Inc. (or its successors or assigns, collectively
"Xxxxxxx") under the Development Agreement and Franchise Agreements entered into
by the Partnerships with Xxxxxxx, as such agreements may be amended from time to
time.
7. Non-Competition.
---------------
(a) During the term of his employment with the Employers
hereunder, the Employee will be a full-time employee of the Employers and will
not work as a consultant, employee, owner or part-owner of any other business.
(b) For so long as the Employee is employed by an Employer and for
a period of one (1) year thereafter (the "Non-Competition Period"), the Employee
will not, without the express written consent of the Employer:
(i) directly or indirectly, engage in, participate in, or assist,
as owner, part-owner, partner, director, officer, trustee,
employee, agent or consultant, or in any other capacity, any
business organization engaged in the restaurant business whose
menu, method of operation or 0000clientele, is the same or is
similar to that of restaurants owned, operated or under
development by an Employer (the "Company Restaurants"), and
which are, or are intended to be located, within a ten (10)
mile radius of the locations of any such Company Restaurants;
(ii) impair or attempt to impair the relationship, contractual or
otherwise, between an Employer and any person who is a
supplier, customer or client of the Employer; or
(iii) hire or attempt to hire away from an Employer any director,
officer, employee or agent of the Employer, assist in such
hiring by any other person, or otherwise encourage any person
to terminate his or her employment with the Employer.
(c) Nothing in paragraphs (a) - (b) hereof shall preclude the
Employee from making passive investments of not more than 10% of a class of
securities of any business enterprise registered under the Securities Exchange
Act of 1934 or from remaining as an investor in and serving as a member of the
board of directors of Uno Concepts, Inc.
8. Employee Proprietary Information and Invention Agreement.
--------------------------------------------------------
(a) The Employee will keep in confidence, and will not disclose or
transfer, any trade secrets or trade secret materials of an Employer to anyone.
In addition, the Employee similarly will keep in confidence and will not
disclose or transfer any information which is not technically a trade secret but
which is identified to him as being confidential information of an Employer.
The Employee will not appropriate such trade secrets or confidential information
for the benefit of himself or any other person.
(b) The Employee will not remove from an Employer's premises, or make
any copies of, trade secret material or material containing confidential
information, except for use in an Employer's business. The Employee will return
to an Employer all such materials, including all copies of it, in his possession
or under his control, (i) at any time upon the request of the Employer, and (ii)
without such a request at the termination of any employment by the Employer.
(c) The Employee understands that the Employers will own and operate
restaurants under the name and xxxx "Chili's Grill & Bar" as a franchisee of
Xxxxxxx, and, in connection therewith, the Employee agrees to enter into an
Agreement for Protection of Xxxxxxx'x Trade Secrets Regarding the Development
and/or Operation of a Restaurant Using the Chili's System as may be required by
Xxxxxxx. The Employee further agrees to enter into a limited guaranty, together
with the other executive 0officers of the General Partners, of the Employers
obligations under their Franchise Agreements and Development Agreement with
Xxxxxxx, in substantially the form presented to the Employee.
9. Term. Unless sooner terminated as provided in Section 10 below,
----
the term of the Employee's employment hereunder shall be for an initial term of
two (2) years, commencing if and when the Employers acquire substantially all
the assets of Dunkin' Ventures Corporation (the "Acquisition Date") pursuant to
that certain Asset Purchase Agreement, dated as of November 21, 1990, as amended
by the Second Amendment to Asset Purchase Agreement dated as of August 22, 1991
as it may be further amended from time to time, and thereafter shall continue
for an indefinite period unless terminated by either party upon six months'
prior written notice. The Employers may, during the period following notice of
termination, appoint another President and Chief Operating Officer, provided
that the Employee continues to receive the benefits set forth elsewhere in this
Agreement.
10. Termination. The Employee's employment hereunder may be
-----------
terminated at any time as follows:
(a) By the Employee, upon a material breach by the Employers
of any of their obligations hereunder which continues for a period of fifteen
(15) days after written notice from the Employee to that effect.
(b) By the Employers, for "cause," effective upon giving
written notice to the Employee. "Cause" as used herein shall mean any of the
following committed by the Employee, directly or indirectly:
(i) Commission by the Employee of an act of dishonesty
involving any Employer;
(ii) Failure by the Employee to perform a material portion of
his duties (not otherwise excused by the disability of
the Employee), or material breach by the Employee of any
representation, warranty or agreement of the Employee
hereunder, which continues for a period of thirty (30)
days after written notice from the a General Partner to
the Employee to that effect;
(iii) Commission by the Employee of an act of gross
incompetence in the course of his employment hereunder;
(iv) The Employee's use of drugs or alcohol which interferes
with the Employee's performance of his duties or
responsibilities under this Agreement; or
(v) It the Employee is found guilty or pleads nolo contendere
---- ----------
to the commission of a felony or serious misdemeanor
offense.
(c) upon the death of the Employee; or
(d) By either party, by giving written notice to the other,
upon the "disability" of the Employee. "Disability" as used herein shall mean
one hundred and eighty (180) consecutive days or two hundred ten (210) days out
of twelve (12) consecutive months of inability, due to physical or mental cause,
of the Employee to perform his usual and regular duties for the Employers. For
purposes herein, the Employee shall be deemed to have ceased employment
hereunder at the end of such period. Nothing in this Agreement shall impair the
power of the Board of Directors of a General Partner to designate temporarily
another Chief Operating Officer during any period while the Employee is so
disabled, but such action shall not otherwise impair the Employee's rights under
this Agreement. The Employers may, at any time during the period in which the
Employee is unable to perform his usual and regular duties for the Employers,
reasonably require the Employee to submit to the examination of a physician
appointed by the Employers for the purpose of verifying the Employee's inability
to perform his
usual and regular duties. If the Employee shall disagree with the determination
of the physician appointed by the Employers, he may request an examination to be
conducted by a physician of his choice. If the two physicians shall disagree,
the two physicians shall jointly appoint an independent physician, whose
determination shall be final and binding upon the parties.
11. Prior Agreements. The Employee hereby represents and warrants to
----------------
the Employers that he is not now under any obligation to any person, firm or
corporation which is inconsistent with or in conflict with this Agreement or
which would prevent, limit or impair in any way the performance by him of his
obligations hereunder.
12. Remedies. In the event of any breach or threatened breach by the
--------
Employee of the provisions of this Agreement, the Employers shall be entitled to
an injunction restraining such breach. Nothing herein shall be construed as
prohibiting an Employer from pursuing any other remedies available to the
Employer for such breach or threatened breach, including the recovery of damages
from the Employee. The Employee acknowledges that his employment by the
Employers imposes on him a duty to act solely for the benefit of the Employers
in all matters connected with or related to his employment. The Employee agrees
that in the event that he violates his duty of loyalty to an Employer, in
addition to any and all other remedies which an Employer may have 0available to
it, the Employer will be entitled, at its election, to recover from the Employee
(i) the value of anything belonging to the Employer which the Employee uses in
breach of such duty or (ii) any benefit which the Employee receives as a result
of violating his duty of loyalty, or its proceeds, and the Employer shall also
be entitled to recover from the Employee the amount of damages thereby caused.
13. Miscellaneous.
-------------
(a) In case it is determined by a court of competent jurisdiction
that any provision herein contained is illegal or unenforceable, such
determination shall solely affect such provision and shall not impair the
remaining provisions of this Agreement.
(b) This Agreement contains the whole agreement between the
parties hereto and the parties expressly acknowledge that there are no
inducements, promises, terms, conditions or obligations made or entered into by
an Employer or the Employee other than contained herein. This Agreement may not
be amended except by a writing signed by the party against whom enforcement
thereof is sought.
(c) This Agreement shall be governed by the Laws or Commonwealth
of Massachusetts.
IN WITNESS WHEREOF, the parties hereto or their duly authorized
representatives have signed, sealed and delivered this Agreement effective as of
the day and year first above written.
THE EMPLOYERS: NE RESTAURANT COMPANY LIMITED
PARTNERSHIP
By: NE Restaurant Company, Inc.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------
Xxxxxxxx Xxxxxxxx
Chairman of the Board
NE RESTAURANT (GLASTONBURY ) LIMITED
PARTNERSHIP
By: NE Restaurant (Connecticut), Inc.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------
Xxxxxxxx Xxxxxxxx
Chairman of the Board
NE RESTAURANT (CAMBRIDGE) LIMITED
PARTNERSHIP
By: NE Restaurant (Cambridge), Inc.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------
Xxxxxxxx Xxxxxxxx
Chairman of the Board
NE RESTAURANT COMPANY, INC.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------
Xxxxxxxx Xxxxxxxx
Chairman of the Board
NE RESTAURANT (CONNECTICUT), INC.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------
Xxxxxxxx Xxxxxxxx
Chairman of the Board
NE RESTAURANT (CAMBRIDGE), INC.
By: /s/ Xxxxxxxx Xxxxxxxx
---------------------
Xxxxxxxx Xxxxxxxx
Chairman of the Board
THE EMPLOYEE: /s/ Xxxxxx Xxxxx
--------------------------------
Xxxxxx Xxxxx
