EMPLOYMENT AGREEMENT JERRY LOVEJOY
Exhibit
10.6
XXXXX
XXXXXXX
EMPLOYMENT
AGREEMENT (the "Agreement") dated as of June 28, 2007 by and between El Pollo
Loco, Inc. (the "Company") and Xxxxx Xxxxxxx (the "Executive").
WHEREAS,
the Company considers it essential to its best interests and the best interests
of its stockholders to employ Executive and
to
enter into an agreement embodying the terms of such employment;
and
WHEREAS,
Executive is willing to accept employment on the terms hereinafter set forth
in
this Agreement.
NOW,
THEREFORE, in consideration of the premises and mutual covenants herein and
for
other good and valuable consideration, the parties agree as
follows:
1. Term
of Employment; Executive Representation.
a. Employment
Term.
Subject
to the provisions of Section 8 of this Agreement, Executive shall be employed
by
the Company for a period commencing on a date no later than June 28, 2007 (the
date on which employment commences, the "Effective Date") and ending on December
31, 2010 (the "Employment Term") on the terms and subject to the conditions
set
forth in the Agreement. Notwithstanding the preceding sentence, commencing
with
January 1, 2011 and on each January 1 thereafter (each an "Extension Date"),
the
Employment Term shall be automatically extended for an additional one-year
period, unless the Company or Executive provides the other party hereto 60
days'
prior written notice before the next Extension Date that the Employment Term
shall not be so extended. For the avoidance of doubt, the term "Employment
Term"
shall include any extension that becomes applicable pursuant to the preceding
sentence.
b. Executive
Representation.
Executive hereby represents to the Company that the
execution and delivery of this Agreement by Executive and the Company and the
performance by Executive of the Executive's duties hereunder shall not
constitute a breach of, or otherwise contravene, the terms of any employment
agreement or other agreement or policy to which Executive is a party or
otherwise bound.
2. Position.
a. During
the Employment Term, Executive shall serve as the Company's Senior Vice
President, Legal and shall principally perform Executive's duties to the Company
and its affiliates from the Company's offices in the Orange County, California
metropolitan area, subject to normal and customary travel requirements in the
conduct of the Company's business. In such position, Executive shall have such
duties and authority as shall be determined from time to time by the Chief
Executive Officer of the Company and the Executive shall report directly to
the
Chief Executive Officer.
1
b. During
the Employment Term, Executive will devote Executive's full business time and
best efforts to the performance of Executive's duties hereunder and will not
engage in any other business, profession or occupation (including in an advisory
capacity, consulting capacity, or otherwise) for compensation or otherwise
which
would conflict with the rendition of such services either directly or
indirectly, without the prior written consent of the Board; provided
that
Executive shall be permitted to participate in such charitable and
community-related services as Executive may choose; provided
further
that such services do not materially interfere with his duties
hereunder.
3. Compensation.
a. During
the Employment Term, the Company shall pay Executive a base salary (the "Base
Salary") at the annual rate of $220,000 (less applicable withholding taxes),
payable in regular installments in accordance with the Company's usual payment
practices. Executive shall be entitled to such increases in Executive's Base
Salary, if any, as may be determined from time to time in the sole discretion
of
the Board.
b. With
respect to each full calendar year during the Employment Term, Executive shall
be eligible to earn an annual bonus award (an "Annual Bonus") calculated, in
accordance with Exhibit A attached hereto, with a targeted bonus equal to
seventy-five percent (75%) of Executive's then current Base Salary (the "Target
Bonus").
4. Equity.
a. Option
Grant.
On the
Effective Date, Executive will receive a stock option award to purchase 11,123
shares of common stock of Chicken Acquisition Corp. on such terms and conditions
provided for in a stock option agreement substantially in the form attached
hereto as Exhibit B (the "Option Agreement").
b. Additional
Equity Investment.
Subject
to the execution of the Stockholders Agreement dated as of November
18, 2005, among the Company, and
certain other stockholders of the Company, Executive shall invest $50,000 in
Chicken Acquisition Corp.
5. Employee
Benefits.
During
the Employment Term, Executive shall be provided, in accordance with the terms
of the Company's employee benefit plans as in effect from time to time, health
insurance, retirement benefits and fringe benefits (collectively "Employee
Benefits") on the same basis as those benefits are generally made available
to
other senior executives of the Company. Executive shall be provided with annual
vacation of two (2) weeks per each 12-month period or additional weeks on a
basis consistent with Company policy.
6. Business
Expenses.
During
the Employment Term, reasonable, documented business expenses incurred by
Executive in the performance of Executive's duties hereunder shall be reimbursed
by the Company in accordance with Company policies.
7. Termination.
The
Employment Term and Executive's employment hereunder may be terminated by either
party at any time and for any reason; provided
that
Executive will be required to give the Company at least 30 days advance written
notice of any resignation of Executive's employment. Notwithstanding any other
provision of this Agreement, the provisions of this Section 7 shall exclusively
govern Executive's rights upon termination of employment with the Company and
its affiliates.
2
a. By
the
Company For Cause or By Executive's Resignation without Good
Reason.
(i) The
Employment Term and Executive's employment hereunder may be terminated by the
Company for Cause (as defined below) or by Executive's resignation without
Good
Reason (as defined below).
(ii) For
purposes of this Agreement, "Cause" shall mean action by the Executive that
constitutes misconduct, dishonesty, the failure to comply with specific
directions of the Board of Directors that are consistent with the terms hereof
(after having been given a reasonably detailed written notice of, and a period
of 20 days to cure, such misconduct or failure), a deliberate and premeditated
act against the Company or its Affiliates, the commission of a felony, substance
abuse or alcohol abuse which renders the Executive unfit to perform his duties,
or any breach of the covenants set forth in Section 8 of this Agreement. Any
voluntary termination of employment by the Executive in anticipation of an
involuntary termination of the Executive's employment for Cause shall be deemed
to be a termination for Cause.
(iii) If
Executive's employment is terminated by the Company for Cause, or if Executive
resigns without Good Reason, Executive shall be entitled to
receive:
(A) the
Base
Salary through the date of termination;
(B) any
Annual Bonus earned but unpaid as of the date of termination for any previously
completed calendar year;
(C) reimbursement
for any unreimbursed business expenses properly incurred by Executive in
accordance with Company policy prior to the date of Executive's termination;
and
(D) such
Employee Benefits, if any, as to which Executive may be entitled under the
employee benefit plans of the Company (the amounts described in clauses (A)
through (D) hereof being referred to as the "Accrued Rights").
Following
such termination of Executive's employment by the Company for Cause or
resignation by Executive without Good Reason, except as set forth in this
Section 7(a), Executive shall have no further rights to any compensation or
any
other benefits under this Agreement.
b. Disability
or Death.
(i) The
Employment Term and Executive's employment hereunder shall terminate upon
Executive's death and if Executive becomes physically or mentally incapacitated
and is therefore unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four (24) consecutive month period
to
perform Executive's duties (such incapacity is hereinafter referred to as
"Disability"). Any question as to the existence of the Disability of Executive
as to which Executive and the Company cannot agree shall be determined in
writing by a qualified independent physician mutually acceptable to Executive
and the Company. If Executive and the Company cannot agree as to a qualified
independent physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in writing.
The determination of Disability made in writing to the Company and Executive
shall be final and conclusive for all purposes of the Agreement.
3
(ii) Upon
termination of Executive's employment hereunder for either Disability or death,
Executive or Executive's estate (as the case may be) shall be entitled to
receive:
(A) the
Accrued Rights; and
(B) a
pro
rata portion of any Annual Bonus that the Executive would have been entitled
to
receive pursuant to Section 4 hereof in such year based upon the percentage
of
the calendar year that shall have elapsed through the date of Executive's
termination of employment, payable when such Annual Bonus would have otherwise
been payable had the Executive's employment not terminated,
Following
Executives termination of employment due to death or Disability, except as
set
forth in this Section 7(b), Executive or Executive's estate (as the case may
be)
shall have no further rights to any compensation or any other benefits under
this Agreement.
c. By
the
Company Without Cause or by Executive's Resignation with Good
Reason.
(i) The
Employment Term and Executive's employment hereunder may be terminated by the
Company without Cause or by Executive with Good Reason.
(ii) For
purposes of this Agreement, "Good Reason" shall mean:
(A) Executive's
relocation by the Company outside Orange County, California; or
(B) a
reduction of Executive's title as set forth in Section 2(a) hereof;
or
(C) a
reduction of Executive's Base Salary (as increased from time to time) as set
forth in Section 3(a) hereof; or
(D) the
failure of the Company to provide or cause to be provided to Executive any
of
the employee benefits described in Section 5 hereof;
(E) a
change
in Executive's reporting relationship; or
(F) resignation
after Executive reaches the age of 60; provided
that
none of the events described in clauses (A) through (E) of this Section 7(c)(ii)
shall constitute Good Reason unless Executive shall have notified the Company
in
writing describing the events which constitute Good Reason and then only if
the
Company shall have failed to cure such event within thirty days after the
Company's receipt of such written notice.
4
(iii) If
Executive's employment is terminated by the Company without Cause (other than
by
reason of death or Disability), or by Executive with Good Reason, Executive
shall be entitled to receive:
(A) the
Accrued Rights;
(B) a
pro
rata portion of any Annual Bonus that the Executive would have been entitled
to
receive pursuant to Section 4 hereof in such year based upon the percentage
of
the calendar year that shall have elapsed through the date of Executive's
termination of employment, payable when such Annual Bonus would have otherwise
been payable had the Executive's employment not terminated; and
(C) except
in
the case of Executive's resignation for Good Reason pursuant to clause
(c)(ii)(F) of this Section 7, and subject to Executive's continued compliance
with the provisions of Section 8 and 9, continued payment of the Base Salary
until twelve 12 months after the date of such termination; provided
that
aggregate amount described in this clause (C) shall be reduced by the amount
of
any other cash severance or termination benefits payable to Executive under
any
other plans, programs or arrangements of the Company or its
affiliates.
Following
Executive's termination of employment by the Company without Cause (other than
by reason of Executive's death or Disability) or by Executive's resignation
with
Good Reason, except as set forth in this Section 7(c), Executive shall have
no
further rights to any compensation or any other benefits under this
Agreement.
d. Notice
of Termination.
Any
purported termination of employment by the Company or by Executive (other than
due to Executive's death) shall be communicated by written Notice of Termination
to the other party hereto in accordance with Section 11(g) hereof. For purposes
of this Agreement, a "Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed to
provide a basis for termination of employment under the provision so
indicated.
8. Non-Competition.
Executive acknowledges and recognizes the highly competitive nature of the
businesses of the Company and its affiliates and accordingly agrees as
follows:
a. Executive
agrees that during the term of employment and until the first anniversary of
the
date of termination of Executive's employment with the Company or any subsidiary
of the Company, as the case may be (the "Non-Competition
Period"),
the
Executive will not directly or indirectly, (i) engage in any business that
operates quick service restaurants that compete directly with the business
of El
Pollo Loco, Inc. or its Affiliates in any market in which El Pollo Loco, Inc.
or
its Affiliates operate restaurants or have targeted operating restaurants at
the
time of termination of Executive's employment (a "Competitive Business"), (ii)
enter the employ of, or render any services (including in an advisory capacity,
consulting capacity, or otherwise) to, any person engaged in a Competitive
Business, (iii) acquire a financial interest in, or otherwise become actively
involved with, any person engaged in a Competitive Business, directly or
indirectly, as an individual, partner, shareholder, officer, director,
principal, agent, trustee or consultant, or (iv) interfere with business
relationships (whether formed before or after the date of this Agreement)
between the Company or any of its Affiliates and customers, suppliers, partners,
members or investors of the Company or its Affiliates. Notwithstanding the
foregoing, Executive may, directly or indirectly own, solely as an investment,
securities of any person engaged in Competitive Business which are publicly
traded on a national or regional stock exchange or on the over-the-counter
market if Executive (i) is not a controlling person of, or a member of a group
which controls, such person and (ii) does not, directly or indirectly, own
5% or
more of any class of securities of such person.
5
b. Executive
further agrees that during the Non-Competition Period, Executive will not,
directly or indirectly, (i) solicit or encourage any employee of the Company
or
its Affiliates to leave the employment of the Company or its Affiliates, (ii)
solicit or encourage any employee who was employed by the Company or its
Affiliates as of the date of Executive's termination of employment with the
Company or who left the employment of the Company or its Affiliates within
one
year prior to or after the termination of Executive's employment with the
Company, or (iii) solicit or encourage to cease to work with the Company or
its
Affiliates any consultant then under contract with the Company or its
Affiliates.
c. It
is
expressly understood and agreed that although Executive and the Company consider
the restrictions contained in this Section 8 to be reasonable, if a final
judicial determination is made by a court of competent jurisdiction that the
time or territory or any other restriction contained in this Agreement is an
unenforceable restriction against Executive, the provisions of this Agreement
shall not be rendered void but shall be deemed amended to apply as to such
maximum time and territory and to such maximum extent as such court may
judicially determine or indicate to be enforceable. Alternatively, if any court
of competent jurisdiction finds that any restriction contained in this Agreement
is unenforceable, and such restriction cannot be amended so as to make it
enforceable, such finding shall not affect the enforceability of any of the
other restrictions contained herein.
9. Confidentiality.
Executive will not at any time (whether during or after Executive's employment
with the Company) disclose or use for Executive's own benefit or purposes or
the
benefit or purposes of any other person, firm, partnership, joint venture,
association, corporation or other business organization, entity or enterprise
other than the Company and any of its subsidiaries or affiliates, any trade
secrets, information, data, or other confidential information relating to
customers, development programs, costs, marketing, trading, investment, sales
activities, promotion, credit and financial data, manufacturing processes,
financing methods, plans, or the business and affairs of the Company generally,
or of any subsidiary or affiliate of the Company, provided
that the
foregoing shall not apply to information which is not unique to the Company
or
which is generally known to the industry or the public other than as a result
of
Executive's breach of this covenant; provided
further
that the foregoing shall not apply when Executive is required to divulge,
disclose or make accessible such information by a court of competent
jurisdiction or an individual duly appointed thereby, by any administrative
body
or legislative body (including a committee thereof) having supervisory authority
over the business of the Company, or by any administrative body or legislative
body (including a committee thereof) with jurisdiction to order Executive to
divulge, disclose or make accessible such information. Executive agrees that
upon termination of Executive's employment with the Company for any reason,
he
will return to the Company immediately all memoranda, books, papers, plans,
information, letters and other data, and all copies thereof or therefrom, in
any
way relating to the business of the Company and its affiliates, except that
he
may retain personal notes, notebooks and diaries that do not contain
confidential information of the type described in the preceding sentence.
Executive further agrees that he will not retain or use for Executive's account
at any time any trade names, trademark or other proprietary business designation
used or owned in connection with the business of the Company or its
affiliates.
6
10. Specific
Performance.
Executive acknowledges and agrees that the Company's remedies at law for a
breach or threatened breach of any of the provisions of Section 8 or Section
9
would be inadequate and, in recognition of this fact, Executive agrees that,
in
the event of such a breach or threatened breach, in addition to any remedies
at
law, the Company, without posting any bond, shall be entitled to cease making
any payments or providing any benefit otherwise required by this Agreement
and
obtain equitable relief in the form of specific performance, temporary
restraining order, temporary or permanent injunction or any other equitable
remedy which may then be available.
11. Miscellaneous.
a. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of California, without regard to conflicts of laws principles
thereof.
b. Entire
Agreement/Amendments.
This
Agreement contains the entire understanding of the parties with respect to
the
employment of Executive by the Company. There are no restrictions, agreements,
promises, warranties, covenants or undertakings between the parties with respect
to the subject matter herein other than those expressly set forth herein. This
Agreement supersedes any other agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof which have been
made by either party. This Agreement may not be altered, modified, or amended
except by written instrument signed by the parties hereto.
c. No
Waiver.
The
failure of a party to insist upon strict adherence to any term of this Agreement
on any occasion shall not be considered a waiver of such party's rights or
deprive such party of the right thereafter to insist upon strict adherence
to
that term or any other term of this Agreement.
d. Severability.
In the
event that any one or more of the provisions of this Agreement shall be or
become invalid, illegal or unenforceable in any respect, the validity, legality
and enforceability of the remaining provisions of this Agreement shall not
be
affected thereby.
e. Assignment.
This
Agreement shall not be assignable by Executive. This Agreement may be assigned
by the Company to a company which is a successor in interest to substantially
all of the business operations of the Company. Such assignment shall become
effective when the Company notifies the Executive of such assignment or at
such
later date as may be specified in such notice. Upon such assignment, the rights
and obligations of the Company hereunder shall become the rights and obligations
of such successor company, provided
that any
assignee expressly assumes the obligations, rights and privileges of this
Agreement.
7
f. Successors
Binding Agreement.
This
Agreement shall inure to the benefit of and be binding upon personal or legal
representatives, executors, administrators, successors, heirs, distributes,
devises and legatees.
g. Notice.
For the
purpose of this Agreement, notices and all other communications provided for
in
the Agreement shall be in writing and shall be deemed to have been duly given
when delivered or mailed by United States registered mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth
below Agreement, or to such other address as either party may have furnished
to
the other in writing in accordance herewith, except that notice of change of
address shall be effective only upon receipt.
If
to the
Company:
El
Pollo
Loco, Inc.
0000
Xxxxxxxxx Xxxxx
Xxxxx
000
Xxxxxx,
XX 00000
Attn:
President
With
a
copy to:
Trimaran
Capital Partners
000
Xxxxx
Xxxxxx, 00xx
Xxxxx
Xxx
Xxxx,
XX 00000
Attn:
Xxxxxx Flyer
If
to
Executive: To the most recent address of Executive set forth in the personnel
records of the Company.
h. Withholding
Taxes.
The
Company may withhold from any amounts payable under this Agreement such Federal,
state and local taxes as may be required to be withheld pursuant to any
applicable law or regulation.
i. Counterparts.
This
Agreement may be signed in counterparts, each of which shall be an original,
with the same effect as if the signatures thereto and hereto were upon the
same
instrument.
8
IN
WITNESS WHEREOF, the parties hereto have duly executed this Agreement as of
the
day and year first above written.
| /s/ Xxxxx Xxxxxxx | ||
|
XXXXX XXXXXXX |
||
| CHICKEN ACQUISITION CORP., | ||
|
on
behalf of its subsidiary,
EL
POLLO LOCO, INC.
|
||
| |
|
|
| By: | /s/ Xxxxxxx X. Xxxxxx | |
|
Name: Xxxxxxx
X. Xxxxxx
Title:
President
|
||
9
Exhibit
A
Annual
Bonus Calculation
(i) Bonuses
for any calendar year will be established by reference to budgeted "EBITDA"
for
such calendar year ("Budgeted EBITDA"), with EBITDA defined as the income of
the
Company before, without duplication, interest expense, amortization of deferred
financing fees and acquisition-related bank/financing fees, income taxes,
depreciation and amortization expense, before gains (or losses) on the sale
of
Company operated restaurants or other significant assets, after all bonuses
including the Annual Bonus) and profit sharing expenses of the Company of any
kind. Budgeted EBITDA will be established by the Company's Board of Directors
(following annual plan reviews with the Company's management) within the first
three months of each calendar year during the Employment Term.
The
bonus
for any calendar year will in no event exceed 150% of the Target Bonus for
such
calendar year and will be calculated on the basis of the extent of attainment
of
Budgeted EBITDA for such calendar year as follows:
|
EBITDA
as Percentage of Budgeted EBITDA
|
Percent
of Target Bonus To Be Paid EBITDA
|
|
|
Less
than 90%
|
0%
|
|
|
90%
|
25%
|
|
|
100%
|
100%
|
|
|
125%
or more
|
150%
|
For
purposes of calculating bonuses in the event that EBITDA exceeds 90% of budgeted
EBITDA but is less than 125% of Budgeted EBITDA, payout amounts shall be
calculated in accordance with the following interpolative
principles:
|
!
|
Between
90% of Budgeted EBITDA and 100% of Budgeted EBITDA, the payout will
be
based on a linear sliding scale between 25% and 100% of the Target
Bonus
(e.g., at 95% of Budgeted EBITDA, the payout will equal 62.5% of
the
Target Bonus, and, at 98% of Budgeted EBITDA, the payout will equal
85% of
the Target Bonus); and
|
|
!
|
Between
100% of Budgeted EBITDA and 125% of Budgeted EBITDA, the payout will
be
based on a linear sliding scale between 100% and 150% of the Target
Bonus
(e.g., at 110% of Budgeted EBITDA, the payout will equal 120% of
the
Target Bonus, and, at 120% of Budgeted EBITDA, the payout will equal
140%
of the Target Bonus).
|
10
Exhibit
B
[Attach
Form of Option Agreement]
11
