EXHIBIT 10.6
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of this
1st day of November, 1996, by and between CLF2, Inc., a Rhode Island corporation
with its principal place of business at 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx
Xxxxxx 00000 (the "Company"), and Xxxxxx X. Xxxx, an individual with a residence
address of 00 Xxxxxx Xxxx, Xxxxxxx, Xxxxxxxxxxxxx 00000 ("Employee").
INTRODUCTION
1. The Company is in the business of operating and managing cafe
restaurants. Employee possesses skills and knowledge advantageous to the
Company.
2. The Company desires to employ Employee and Employee desires to
accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. Employment; Duties. Subject to the terms and conditions set
forth herein, the Company hereby employs Employee, on a full-time basis, to act
as Vice President - Finance of the Company during the Employment Period, and to
perform such acts and duties and furnish such services to the Company in
connection with and related to that position as is customary for persons with
similar positions in like companies, as the Company's Board of Directors shall
from time to time reasonably direct. Employee hereby accepts such employment and
agrees to perform such acts, duties and services for the Company diligently,
competently, and in good faith manner.
2. Employment Period. The term of this Agreement (the "Employment
Period") shall commence on the date hereof and shall terminate thirty-six (36)
months thereafter, unless terminated earlier pursuant to Sections 4 or 5 below,
provided, however, that the Employment Period shall automatically renew for
additional one year periods thereafter unless the Company shall provide Employee
with not less than sixty (60) days' prior written notice of its intention not to
renew prior to the expiration of the initial Employment Period or any annual
extension thereof. In the event that the Company shall not renew this Agreement
as provided in the preceding sentence, the Company shall continue to pay
Employee's salary, at his then current rate, for a twelve (12) month period
following termination.
3. Compensation and Benefits.
3.1 Salary. During the initial months of the Employment
Period, the Company agrees to pay Employee at the rate of $100,000 per year,
payable in equal installments pursuant to the Company's customary payroll
policies in force at the time of payment, less required payroll deductions.
Employee's salary will thereafter increase to $108,000 effective at such time
the Company completes an initial public offering of its Common Stock, and will
thereafter be increased annually by 5% in the sole discretion of the Board of
Directors of the Company.
3.2 Stock Options/Bonus.
3.2.1 Stock Options. Employee as of the date of this
Agreement has received an incentive stock option under the company's 1996 Stock
Incentive Plan to purchase 43,500 shares of common stock at a price per share
equal to $3.45, of which options to purchase 10,875 shares are immediately
exercisable and of which options to purchase 32,625 shares vest at the rate of
1208.33 shares on the last day of each month hereafter commencing November 30,
1996 such that the entire option shall be fully vested as of January 31, 1999.
Employee shall also receive, on January 31, 1997, an option to purchase 60,000
shares of common stock at the price per share of common stock offered to the
public in an initial public offering of common stock, which option shall vest at
the rate of 1,666.66 shares per month over a three year period such that the
entire option shall be fully vested as of January 31, 2000 provided that said
option shall terminate in the event the Company has not succesfully completed an
initial public offering of its common stock by September 30, 1997.
3.2.2 Bonus. During the Employment Period, Employee
shall be entitled to receive cash bonuses in the sole discretion of the
Company's Board of Directors provided that the Company has achieved positive net
income and met its budget for the fiscal year preceding the date of payment of
any such bonus.
3.3 Health Benefits. During the Employment Period, the
Company agrees to pay for the cost of family health care coverage for Employee
as currently provided by the Company's health care provider(s) or by such other
health care provider(s) to be selected by the Company.
3.4 Vacation. Employee may take three(3) weeks paid vacation
each year during the Employment Period.
3.5 Reimbursement of Expenses. The Company shall reimburse
Employee for all reasonable expenses in connection with Employee's duties
hereunder and the promotion of the Company's business in general, upon
presentation by Employee of appropriate supporting documentation.
3.6 Miscellaneous. The Company agrees to provide Employee
with such other benefits in its discretion as it may provide to other similarly
situated employees, including but not limited to pension or other retirement
benefits, life insurance and disability insurance.
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3.7 Severance Payments.
3.7.1 Termination by the Company. In the event the
Company terminates this Agreement pursuant to Section 4.2 (Disability) the
Company shall, prior to the effective date of the termination, pay Employee, in
one lump sum, an amount equal to 50% of Employee's annual cash salary, at his
then current rate, less applicable taxes. In the event the Company terminates
this Agreement pursuant to Section 5 (Termination without Cause) in connection
with a "Change in Control" or an "Approved Change in Control" (both as
hereinafter defined), the Company shall, prior to the effective date of
termination, pay Employee 100% of Employee's annual cash salary, at his then
current rate, less applicable taxes, if termination shall occur in connection
with a Change in Control. The Company shall also pay Employee's health insurance
benefits as described in Section 3.3 for a period of 6 months in the event of
termination pursuant to Section 4.2 or 5, and, in the event of a Change of
Control, all options granted to Employee shall become fully vested as of such
date of termination.
3.7.2 Termination by Employee for "Good Reason".
(a) After a Change in Control and provided
Employee has "Good Reason" (as hereinafter defined), Employee may terminate his
employment hereunder upon fifteen (15) days written notice to the Company and
the Company shall continue to pay Employee his annual salary, at his then
current rate, for a six (6) month period.
(b) After an Approved Change in Control
and provided Employee has Good Reason, Employee may terminate his employment
hereunder upon fifteen (15) days written notice to the Company and the Company
shall continue to pay Employee his annual salary, at his then current rate, for
a twelve three (3) month period.
3.7.3 Definitions.
(a) Change in Control. A "Change in
Control" shall be deemed to have occurred in any of the following events:
(i) the stockholders of the Company
approve a merger or consolidation of the Company with any other corporation,
other than (a) a merger or consolidation which would result in the voting
securities of the Company outstanding immediately prior thereto continuing to
represent (either by remaining outstanding or by being converted into voting
securities of the surviving entity) more than 80% of the combined voting power
of the voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, (b) a merger or consolidation
effected to implement a recapitalization of the Company (or similar transaction)
in which no "person" or group (as such terms are defined in Section 13(d)(3) of
the Securities Exchange Act of 1934) acquires more than 30% of the combined
voting power of the Company's then outstanding securities, or (c) a
reorganization pursuant to which the Company creates a holding company for
itself in which the stockholders of the Company immediately prior to the
reorganization (other than those exercising
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dissenters' rights) become the stockholders of the holding company immediately
after the reorganization; or
(ii) the stockholders of the Company
approve a plan of complete liquidation of the Company or an agreement for the
sale or disposition by the Company of all or substantially all of the Company's
assets; or
(iii) as a result of or in connection
with any cash tender offer, merger, or other business combination, sale of
assets or contested election, or combination of the foregoing, the persons who
were directors of the Company just prior to such event shall cease to constitute
a majority of the Board; or
(iv) when any "person" or "group" (as
such terms are defined in Section 13(d)(3) of the Securities Exchange Act of
1934) becomes a "beneficial owner" (as such term is defined in Rule 13d-3 under
the Securities Exchange Act of 1934), directly or indirectly, of securities of
the Company representing forty percent (40%) or more of the total number of
votes that may be cast for the election of directors of the Company; or
(v) the closing of a transaction or
series of transactions in which more than 50% of the voting power of the Company
is transferred; or
(vi) a tender offer or exchange offer
for the common stock of the Company, other than one made by the Company or by a
person or group (as such terms are defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) that on the date hereof holds more than 5% of the
outstanding shares of the Company entitled to vote for the election of
directors, where the offeror acquires more than 40% of the outstanding shares of
common stock of the Company.
(b) Approved Change in Control. An
"Approved Change in Control" of the Company shall mean a Change in Control that
is approved by a majority of the Company's Board of Directors.
(c) Good Reason. "Good Reason" shall mean
without Employee's written consent, the occurrence after a Change in Control of
any of the circumstances set forth in subparagraphs (1) through (8) below. For
purposes hereof, Employee's continued employment shall not constitute consent
to, or a waiver of rights with respect to, any circumstance constituting "Good
Reason" hereunder, and any good faith determination of "Good Reason" made by
Employee shall be conclusive. Good Reason shall mean any of the following:
(1) a significant change in the nature
or scope of the Employee's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions or duties
exercised by the Employee immediately prior to the Change in Control;
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(2) a reasonable determination by
Employee that, as a result of a Change in Control, he is unable to exercise the
responsibilities, authorities, powers, functions or duties exercised by the
Employee immediately prior to such Change in Control;
(3) a reduction in the Employee's
annual base salary as in effect on the date hereof or as the same may be
increased from time to time except for across-the-board salary reductions
similarly affecting all management personnel of the Company and all management
personnel of any person in control of the Company;
(4) the failure by the Company to
continue in effect any material compensation, incentive, bonus or benefit plan
in which Employee participated immediately prior the Change in Control, unless
an equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company to
continue Employee's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of Employee's participation relative to other
participants, as existed at the time of the Change in Control;
(5) the failure by the Company to
continue to provide the Employee with benefits substantially similar to those
available to the Employee under any of the life insurance, medical, health and
accident, or disability plans or any other material benefit plans in which the
Employee was participating at the time of the Change in Control, or the taking
of any action by the Company which would directly or indirectly materially
reduce any of such benefits, or the failure by the Company to provide the
Employee with the number of paid vacation days to which the Employee is entitled
on the basis of years of service with the Company in accordance with the
Company's normal vacation policy in effect at the time of the Change in Control;
(6) any requirement by the Company or
of any person in control of the Company that Employee establish a permanent
residence in a state other than Rhode Island or Massachusetts or any requirement
that Employee's principal duties for the Company require Employee to spend
substantial time at a location other than Rhode Island or Massachusetts;
(7) the failure by the Company to pay
Employee any portion of Employee's current compensation within seven (7) days
after such compensation is due; or
(8) any requirement by the Company or
any person in control of the Company that Employee travel on an overnight basis
to an extent not substantially consistent with Employee's business travel
obligations immediately prior to the Change in Control.
4. Termination for Cause; Disability
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4.1 Termination for Cause. The Company may discharge
Employee and terminate his employment under this Agreement for cause without
further liability to the Company by a majority vote of the Board of Directors of
the Company, except that Employee, if a Director, shall not be entitled to vote
thereon. As used in this Section 4.1, "cause" shall mean any or all of the
following: (i) gross or willful misconduct of Employee during the course of his
employment; (ii) conviction of a fraud or felony or any criminal offense
involving dishonesty, breach of trust or moral turpitude during the Employment
Period; or (iii) Employee's breach of any of the material terms of this
Agreement.
4.2 Disability. If during the Employment Period, Employee
shall become ill, disabled or otherwise incapacitated so as to be unable to
perform his usual duties (a) for a period in excess of one hundred twenty (120)
consecutive days or (b) for more than one hundred eighty (180) days in any
consecutive twelve (12) month period, then the Company shall have the right to
terminate this Agreement without further liability except as set forth in
Section 3.79 on thirty (30) days' prior notice to Employee.
5. Termination without Cause.
5.1 Upon thirty (30) thirty days prior written notice, the
Company may terminate this Agreement without cause and without further liability
to the Company except as set forth in Section 3.79 by a majority vote of the
Board of Directors except that Employee, if a Director, shall not be entitled to
vote thereon.
5.2 NOTWITHSTANDING ANY OTHER PROVISION OF THIS AGREEMENT,
IN THE EVENT THAT THE COMPANY DOES NOT COMPLETE AN INITIAL PUBLIC OFFERING OF
COMMON STOCK BY FEBRUARY 28, 1996, THIS AGREEMENT MAY BE TERMINATED BY THE
COMPANY WITHOUT CAUSE UPON FIFTEEN (15) DAYS PRIOR WRITTEN NOTICE, AND EMPLOYEE
SHALL NOT BE ENTITLED TO ANY SEVERANCE PAYMENTS OR BENEFITS DESCRIBED IN SECTION
3.7.1 ABOVE.
6. Non-Competition. Employee, during the Employment Period and for
a period of one (1) year thereafter in exchange for a payment of one year's
salary from the Company for such one (1) year period, shall not directly or
indirectly enter into or engage in or have a proprietary interest (except with
respect to the ownership of less than 2% of securities of publicly-held
companies) in any cafe-related business located in New England, which competes
with the Company or its affiliates, either as an individual, partner, joint
venturer, employee or agent for any person, company, corporation or association
or as an officer, director or stockholder of a corporation or otherwise.
Employee expressly agrees that the character, duration and geographical scope of
this covenant not to compete are reasonable in light of the circumstances as
they exist at the date upon which this Agreement has been executed. However,
should a determination nonetheless be made by a court of competent jurisdiction
at a later date that the character, duration or geographical scope of this
covenant not to compete is unreasonable in light of the circumstances as they
then exist, then it is the intention of both Employee and the Company that this
covenant not to compete shall be construed by the court in such a manner as to
impose only those restrictions on the conduct of Employee which are reasonable
in light of the
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circumstances as they then exist and necessary to assure the Company of the
intended benefit of this covenant not to compete.
7. Confidentiality; Conflicts of Interest. Employee agrees to
accept, perform and abide by the confidentiality and non-solicitation covenants
set forth on Exhibit A hereto.
8. Remedies. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
9. Governing Law/Jurisdiction. This Agreement shall be governed by
and interpreted and governed in accordance with the laws of the State of Rhode
Island.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes any and all previous agreements, written and oral, regarding the
subject matter hereof between the parties hereto. This Agreement shall not be
changed, altered, modified or amended, except by a written agreement signed by
both parties hereto.
11. Notices. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand,
sent by generally recognized overnight courier service, telex or telecopy, or
mail,
(a) to the Company at:
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
(b) to Employee at:
00 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxxxxxxxx 00000
12. Severability. If any term or provision of this Agreement, or
the application thereof to any person or under any circumstance, shall to any
extent be invalid or unenforceable, the remainder of this Agreement, or the
application of such terms to the persons or under circumstances other than those
as to which it is invalid or unenforceable, shall be considered severable and
shall not be affected thereby, and each term of this Agreement shall be valid
and
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enforceable to the fullest extent permitted by law. The invalid or unenforceable
provisions shall, to the extent permitted by law, be deemed amended and
given such interpretation as to achieve the economic intent of this Agreement.
13. Waiver. The failure of any party to insist in any one instance
or more upon strict performance of any of the terms and conditions hereof, or to
exercise any right or privilege herein conferred, shall not be construed as a
waiver of such terms, conditions, rights or privileges, but same shall continue
to remain in full force and effect. Any waiver by any party of any violation of,
breach of or default under any provision of this Agreement by the other party
shall not be construed as, or constitute, a continuing waiver of such provision,
or waiver of any other violation of, breach of or default under any other
provision of this Agreement.
14. Survival of the Company's Obligations. The Company's
obligations hereunder shall not be terminated by reason of any liquidation,
dissolution, bankruptcy, cessation of business, or similar event relating to the
Company. This Agreement shall not be terminated by a merger or consolidation or
other reorganization of the Company. In the event any such merger,
consolidation, or reorganization shall be accomplished by transfer of stock or
by transfer of assets or otherwise, the provisions of this Agreement shall be
binding upon the surviving or resulting corporation or person. This Agreement
shall be binding upon and inure to the benefit of the executors, administrators,
heirs, successors and assigns of the parties; provided, however, that except as
herein expressly provided, this Agreement shall not be assignable either by the
Company (except to an affiliate of the Company) or by Employee.
15. Assignment. The Company may assign this Agreement to any
affiliate without the consent of Employee. For purposes of this section,
"affiliate" shall mean any individual, corporation, partnership or other
business entity that directly or indirectly through one or more intermediaries
controls, or is controlled by, or is under common control with, the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE COMPANY:
CLF2, INC.
By:/s/Xxxxxx X. XxXxxxx
--------------------
Title: President
EMPLOYEE:
/s/Xxxxxx X. Xxxx
-----------------
Xxxxxx X. Xxxx
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EXHIBIT A
Confidentiality Covenants. In accepting employment with CLF2, Inc. and/or
its affiliates (collectively, the "Company"), I understand that the Company may
impart to me confidential business information including, without limitation,
vendor lists, recipes, designs, software, financial information, personnel
information, real estate information, and the like (collectively "confidential
information"). I hereby acknowledge the Company's exclusive ownership of such
confidential information.
I agree: (1) only to use the confidential business information to provide
services or goods to the Company; (2) only to communicate the confidential
information to fellow employees on a need-to-know basis; and (3) not otherwise
disclose or use, at any time any confidential information. Upon demand by the
Company or upon termination of my employment, I will deliver to the Company all
blueprints, manuals, documents plans, recordings, photographs, software and any
other instrument or device by which, through which, or on which confidential
information has been recorded and/or preserved, which are in my possession,
custody or control.
I further agree that the disclosure or use of any confidential
information in breach of this understanding would cause irreparable harm to the
Company and accordingly, not only may the Company seek damages but I agree to
the issuance of a permanent injunction against me restraining such disclosure
and use, and I agree that any court of competent jurisdiction selected by the
Company shall have personal jurisdiction over me.
I agree that neither this document nor any other communication shall bind
the Company to employ me now or hereafter and that no consideration has been
furnished to the Company for my employment other than my services. I also
understand and agree that this agreement may not be modified orally, and that if
such a modification is made it must be in writing and signed by an executive
officer of the Company.
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