EXHIBIT 10.36(B)
EMPLOYMENT AGREEMENT
AGREEMENT dated to be effective as of March 1, 1998, made and
entered into by and between Schlotzsky's, Inc., a Texas corporation (the
"Company") and Xxxxxxx X. Xxxxxx ("Xxxxxx").
The Board of Directors of the Company has determined that it is in
the best interest of the Company to set forth the terms of employment of
Xxxxxx as Sr. Vice President and Secretary of the Company and Xxxxxx has
agreed to such terms. The Company and Xxxxxx wish to promote their mutual
best interest by setting forth the terms and conditions in writing.
NOW, THEREFORE, in consideration of the covenants and agreements set
forth in this Agreement, the parties agree as follows:
1. EMPLOYMENT. The Company employs Xxxxxx and Xxxxxx agrees to the
terms and conditions set forth in this Agreement. Xxxxxx agrees to serve as
Sr. Vice President and Secretary of the Company to be responsible for general
management of the affairs of the Company, reporting directly to President of
the Company, and to devote good faith efforts on behalf of the Company.
2. TERM OF EMPLOYMENT. Xxxxxx'x employment with the Company shall
continue for three years from the effective date hereof, provided that such
term shall be automatically extended from year to year thereafter, unless
terminated by Xxxxxx or the Company in accordance herewith.
3. BASE SALARY, BONUS AND OTHER COMPENSATION. The Company shall pay
to Xxxxxx a base salary at the annual rate of $160,000 for the balance of
1998, $170,000 during 1999, $185,000 during 2000 and for each year
thereafter, unless increased by agreement between the parties. Xxxxxx'x
salary shall be payable on the same schedule that salary is paid to other
employees. Xxxxxx shall be entitled to a cash bonus for 1998 calculated in
accordance with the attached Exhibit X. Xxxxxx shall also be entitled to such
other bonuses and compensation as the Compensation Committee of the Board of
Directors shall approve for each year thereafter.
4. BENEFITS. Xxxxxx shall receive, in addition to the base salary
and the bonuses set forth in Section 3 hereof, such other benefits as are
provided by the Company to its executive officers, such as group life,
medical and disability insurance. In addition, Xxxxxx is receiving stock
options to acquire shares of Common Stock of the Company, certain of such
options being subject to approval by the shareholders of an increase in the
number of shares issuable under the Company's stock option plan at the 1998
Annual Meeting of Shareholders.
5. XXXXXX COVENANTS.
(a) CONFIDENTIAL INFORMATION. Xxxxxx acknowledges that the
information, observations and data obtained by him while employed by the
Company (including
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those obtained by him while employed at the Company prior to the date of this
Agreement) concerning the business or affairs of the Company ("Confidential
Information") are the property of the Company. Therefore, Xxxxxx agrees that
he shall not disclose to any unauthorized person or use for his own account
any Confidential Information, unless and to the extent that the
aforementioned matters become generally known to and available for use by the
public other than as a result of Xxxxxx'x act or omissions to act. Xxxxxx
shall deliver to the Company at the termination of employment, or at any
other time the Company may request, all memoranda, notes, plans, records,
reports and other documents (and copies thereof) relating to the Confidential
Information or the business of the Company which he may then possess or have
under this control.
(b) INVENTIONS AND PATENTS.
(i) Xxxxxx agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, drawings, reports,
and all similar or related information which relates to the Company's actual
or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Xxxxxx
while employed by the Company ("Work Product") belong to the Company. Xxxxxx
will promptly disclose such Work Product to the Company and perform all
actions reasonably requested by the President or the Board of Directors to
establish and confirm such ownership.
(ii) Xxxxxx is hereby advised that Section 5(b)(i) of this
Agreement regarding the Company's ownership of intellectual property does not
apply to any invention for which no equipment, supplies, facilities or trade
secret information of the Company was used and which was developed entirely
on Xxxxxx'x own time, unless (i) the invention relates to the business of the
Company or to the Company's actual or demonstrably anticipated research or
developments, or (ii) the invention results from any work performed by Xxxxxx
of the Company.
(c) NON-COMPETE, NON-SOLICITATION
(i) Xxxxxx acknowledges that in the course of his employment
with the Company he will become familiar, and during his employment with the
Company he has become familiar, with the Company's trade secrets and with
other confidential information concerning the Company and that his services
will be of special, unique and extraordinary value to the Company. Therefore,
Xxxxxx agrees that, during employment and for twenty-four months thereafter,
he shall not directly or indirectly own, manage, control, participate in,
consult with, render services for, or in any manner engage in any business
competing with the business of the Company or any foreign country where the
Company is authorized to do business. For purposes of this Agreement, a
business shall be deemed competitive if it is a restaurant, sandwich shop or
food service operation offering principal menu entrees or items which are the
same or confusingly similar to those then offered at any Schlotzsky's
restaurant or outlet worldwide. Nothing herein shall prohibit Xxxxxx from
being a passive owner of not more than 5% of the outstanding stock of any
class of a corporation which is publicly
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traded, so long as Xxxxxx has no active participation in the business of such
corporation.
(ii) During employment Xxxxxx shall not, except in the course of
properly dispensing his duties (i) induce or attempt to induce any employee
of the Company to leave the employ of the Company or in any way interfere
with the relationship between the Company and any employee thereof, (ii) hire
directly or through another entity any person who was an employee of the
Company at any time during employment or (iii) induce or attempt to induce
any customer, supplier, licensee or other business relation of the Company to
cease doing business with the Company or in any way interfere with the
relationship between any such customer, supplier, licensee or business
relation and the Company.
(d) FULL-TIME. Xxxxxx agrees to devote his best efforts to the
business and affairs of the Company. Xxxxxx shall seek written consent from
the Compensation Committee of the Board of Directors of the Company to
provide service to a third party for compensation. Consent to such activities
may be withheld in the sole judgment of the Compensation Committee. Consents
granted may be referenced in an addendum to this Agreement.
(e) ENFORCEMENT. If, at the time of enforcement of paragraphs 5(a),
(b), (c), or (d) of this Agreement, a court holds that the restrictions
stated herein are unreasonable under circumstances then existing, the parties
hereto agree that the maximum period, scope or geographical area reasonable
under such circumstances shall be substituted for the stated period, scope or
area. Because Xxxxxx'x services are unique and because Xxxxxx has access to
Confidential Information and Work Product, the parties hereto agree that
money damages would be inadequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent
jurisdiction for specific performance or injunction or other relief in order
to enforce, or prevent any violations of, the provisions hereof.
6. TERMINATION.
(a) Xxxxxx or the Company may terminate the employment of Xxxxxx
for cause or without cause by giving written notice at least 60 days in
advance of the effective date of termination. For purposes of this Agreement
"for cause" means termination by the Company of the employment of Xxxxxx upon
any of the following grounds and no others: (i) any act of dishonesty or
violation of law on the part of Xxxxxx resulting or intended to result
directly or indirectly in personal gain or benefit at the expense of the
Company, fraud, misappropriation, embezzlement or willful and material damage
of or to property of the Company; (ii) any intentional act on the part of
Xxxxxx preventing him from discharging his duties for a material length of
time; or (iii) a material breach of this Agreement, including willful and
habitual neglect of duties, which is not cured within ten days following
receipt of written notice.
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(b) Upon termination of Xxxxxx'x employment for any reason, he shall
be entitled to receive the base salary and any bonuses earned through the
date of termination. In addition, the Company shall continue to use good
faith efforts to remove Xxxxxx from all guaranties in favor of the Company as
soon as practicable.
(c) Upon termination of Xxxxxx'x employment without cause, he shall
be entitled to receive the base salary and any bonuses earned through the
date of termination, plus the base salary through the end of the term then in
effect, or for one year, whichever is longer. Xxxxxx may elect to treat a
substantial reduction in responsibilities and duties as termination without
cause. In the event of any dispute between the Company and Xxxxxx concerning
the status of a reduction in responsibilities and duties as "substantial,"
the dispute shall be submitted to an independent third party arbitrator
acceptable to the Company and Xxxxxx for a determination which shall be
binding on both parties.
7. DISABILITY OR DEATH.
(a) If as a result of illness, injury or other disability,
Xxxxxx is unable to perform his duties hereunder on a substantially full time
basis for any period of twelve months or more, the Company may at its option
terminate Xxxxxx'x employment hereunder and shall pay to Xxxxxx the base
salary and any bonuses through the date of termination, plus the base salary
through the end of the term then in effect, or for one year, whichever is
longer.
(b) If Xxxxxx shall die during the term of this employment by
the Company, the Company shall pay to Xxxxxx'x estate the base salary and any
bonuses through the date of his death, plus the base salary through the end
of the term then in effect, or for one year, whichever is longer.
8. MISCELLANEOUS. This Agreement contains the entire agreement of
the parties regarding the subject matter hereof. This Agreement may not be
changed orally but only by an agreement in writing signed by the parties
hereto. This Agreement shall be binding upon and inure to the benefit of the
parties and, to their respective successors and assigns. This Agreement shall
be construed under and enforced in accordance with the laws of the State of
Texas, and shall be performable in Xxxxxx County, Texas.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the date set forth above.
COMPANY:
SCHLOTZSKY'S, INC.
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By: /s/
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Its:
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XXXXXX:
/s/
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Xxxxxxx X. Xxxxxx
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EXHIBIT A
Xx. Xxxxxx shall be entitled to a cash bonus for 1998, based on the following
criteria: (i) $60,000 if at least 34 units developed by the Company's Turnkey
real estate development department are opened by June 30, 1998 (Milestone 1),
51 units are opened by September 30, 1998 (Milestone 2), or 68 units are
opened by December 31, 1998 (Milestone 3); (ii) $80,000 if at least 38 units
developed by the Company's Turnkey real estate development department are
opened by Milestone 1, 56 units are opened by Milestone 2 or 75 units are
opened by Milestone 3; (iii) $80,000 if two of the three criteria in (i)
above are met; (iv) $100,000 if two of the three criteria in (ii) above are
met; (v) $100,000 if all three of the criteria in (i) above are met; or (vi)
$160,000 if all three of the criteria in (ii) above are met. Xxxxxx shall be
entitled to the cash bonus in items (i) through (vi) above which yields the
highest amount, but shall not be entitled to more than the amount reflected
in the single item for which he has met the highest applicable criteria
(i.e., no aggregation of the bonuses is permitted).
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