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EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Agreement is made as of March 17, 1997 by and between HOTEL MEXICO,
INC., an Ohio corporation (the "COMPANY"), and XXXXXX X. XXXXXX (the
"EXECUTIVE").
WITNESSETH
WHEREAS, the Company desires to employ Executive in accordance with the
terms and conditions stated in this Agreement; and
WHEREAS, Executive desires to accept that employment pursuant to the terms
and conditions of this Agreement;
NOW, THEREFORE, in consideration of the covenants and agreements contained
herein, the parties hereto agree as follows:
I. EMPLOYMENT
1.1 Employment as President and Chief Operating Officer.
(a) The Company hereby employs Executive as President and Chief
Operating Officer and Executive accepts such employment pursuant to the
terms of this Agreement. Executive shall report to and take direction from
the Chief Executive Officer and the Board of Directors of the Company (the
"BOARD"). The Executive will perform those duties which are usual and
customary for a President and Chief Operating Officer of a restaurant
enterprise. Executive shall be employed at the Company's corporate
offices. He shall perform his duties in a manner reasonably expected of a
President and Chief Operating Officer of a restaurant company.
(b) The Company shall use its best efforts to cause the Executive to
be a member of the Board throughout the term of this Agreement and shall
include him in the management slate for election as a director at every
shareholders' meeting at which his term as a director would otherwise
expire. In every case under this Agreement where action of the Board is
required, such vote shall not include Executive's vote at any time that
Executive is a member of the Board.
(c) Executive shall be provided adequate human and financial resources
to allow him to perform his duties hereunder. He shall participate with
the Board and the Chief Executive Officer in establishing goals and plans
for the Company, and he shall be in charge of the implementation of such
goals and plans.
(d) In the event that Xxxxxxx X. Xxxx ceases to be Chief Executive
Officer of the Company, the Company shall appoint Executive as Chief
Executive Officer.
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1.2 Term. Employment shall be for an initial term of up to two years
commencing on January 6, 1997 and continuing until the earlier of (i) January
6, 1999 or (ii) the date Executive's employment terminates pursuant to Article
III hereof. This Agreement shall be automatically renewed for three additional
one (1) year terms unless the Board gives written notice of termination for
"Cause" (as defined in Section 3.2(a) below) to Executive not less than ninety
(90) days prior to expiration of the initial term or the renewal term then in
progress, as applicable.
II. COMPENSATION, BENEFITS AND PERQUISITES
2.1 Base Salary. The Company shall pay Executive an annualized base salary
("BASE SALARY") of $200,000 for the first year of this Agreement. The Base
Salary shall be payable in equal installments in the time and manner that other
employees of the Company are compensated. The Board will review the Base
Salary at least annually and may, in its sole discretion, increase it to
reflect performance, appropriate industry guideline data or other factors.
2.2 Bonuses. Executive shall receive an annualized base bonus ("BASE
BONUS") of up to $50,000 for the first year of this Agreement, payable
quarterly on the first quarterly anniversary of the first day of the term of
this Agreement and each quarter thereafter, dependent upon Executive's
satisfaction of certain criteria mutually agreed upon by Executive and the
Board. The Board and Executive will review and, if mutually agreed, revise the
criteria for the Base Bonus at least annually. In addition, Executive shall
receive, within forty-five (45) days following the end of each fiscal quarter
of the Company, 0.75% of the Company's EBITDA for the four quarters then ended,
or such fewer number of quarters as the Company shall have then been conducting
operations (the "INCENTIVE BONUS"), provided that no quarterly payment of
Incentive Bonus shall exceed one-fourth of 150% of Executive's then-current
Base Salary. The start-up costs associated with the Company's Kenwood
restaurant and any future restaurants shall be excluded from all EBITDA
calculations for purposes of this subsection.
2.3 Moving Expenses. Executive shall receive a one-time payment of
$15,000 for relocation expenses and shall also be reimbursed any reasonable
sales commission paid by Executive relating to the sale of his home in Edina,
Minnesota.
2.4 Automobile Allowance. Executive shall receive an automobile allowance
of $700 per month.
2.5 Vacations. Executive shall be entitled to three weeks' paid vacation,
or such greater amount of time as determined by the Board.
2.6 Cafeteria Plan Benefits. In lieu of participating in any
Company-sponsored welfare plans, Executive shall receive $20,000 per year in
cafeteria plan benefits which Executive will utilize in his sole discretion for
health, life, disability, and dental insurance or expenses, educational
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expenses, other personal expenses, and other benefits which the Company may
from time to time make available.
2.7 Attorney's Fees. The Company will pay Executive's reasonable cost of
having this Agreement reviewed by counsel, up to a maximum of $1,000.
III. TERMINATION OF EXECUTIVE'S EMPLOYMENT
3.1 Termination of Employment. Executive's employment under this
Agreement may be terminated by the Company or Executive at any time for any
reason; provided, however, that if Executive's employment is terminated by the
Company during the term of this Agreement for a reason other than for Cause, or
if Executive terminates his employment for "Good Reason" (as defined in Section
3.2(b) below), he shall continue to receive his Base Salary, Base Bonus,
Incentive Bonus (the annual amount of which shall equal the sum of the
Incentive Bonus payments made to Executive for the four quarters preceding
termination) and the benefits listed in Sections 2.2 and 2.4 above for a period
of two (2) years from the date of termination, if such termination occurs prior
to consummation of an initial public offering of common stock by the Company;
provided, that if Executive obtains other employment during such two (2) year
period, the Company shall receive a dollar-for-dollar credit against its
severance obligation hereunder with respect to compensation and benefits
received by Executive in his new employment (except that in no event shall
Executive receive less than one year's Base Salary, Base Bonus, Incentive Bonus
and benefits). After such initial public offering, if Executive's employment
is terminated by the Company for a reason other than for Cause or if Executive
terminates his employment for Good Reason, he shall continue to receive his
Base Salary for a period of one (1) year from the date of termination. The
termination shall be effective as of the date specified by the party initiating
the termination in a written notice delivered to the other party, which date
shall not be earlier than the date such notice is delivered to the other party.
This Agreement shall terminate in its entirety immediately upon the death of
Executive. Except as expressly provided to the contrary in this section or
applicable law, Executive's rights to pay and benefits shall cease on the date
his employment under this Agreement terminates.
3.2 Definitions. For purposes of this Agreement,
(a) "Cause" shall mean only the following: (i) commission of a felony;
(ii) theft or embezzlement of Company property or commission of similar acts
involving moral turpitude; (iii) alcohol or drug abuse which, in the judgment
of the Board, has rendered Executive incapable of carrying out his duties
hereunder; or (iv) any other willful failure by Executive to substantially
perform his material duties under this Agreement (excluding nonperformance
resulting from disability), which willful failure is not cured within 30 days
after written notice from the Chairman of the Board specifying the act of
willful nonperformance or within such longer period (but no longer than 90 days
in any event) as is reasonably required to cure such willful nonperformance.
Notwithstanding the foregoing, Executive shall not be deemed to have been
terminated for Cause
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unless and until there shall have been delivered to Executive a copy of a
resolution duly adopted by the affirmative vote of the Board at a meeting of
the Board called and held for this specific purpose.
(b) "Good Reason" shall mean only the following: (i) Executive has been
demoted; (ii) Executive has incurred a substantial reduction in his authority
or responsibility; (iii) the Company fails to appoint Executive as Chief
Executive Officer pursuant to the terms of Section 1.1(c); (iv) the Board
elects to terminate Executive in lieu of permitting this Agreement to
automatically renew pursuant to Section 1.2 for a reason other than Cause; or
(v) Executive is not continued as a member of the Board of Directors.
3.3 Disability. If Executive has become disabled such that he cannot
perform the essential functions of his job with or without reasonable
accommodation, and the disability has continued for a period of more than 90
days, the Board may, in its discretion, terminate his employment under this
Agreement.
3.4 Notice. Executive must provide the Company with at least 30 days'
written notice if Executive desires to terminate his employment under this
Agreement.
IV. CONFIDENTIALITY
4.1 Prohibitions Against Use. Executive acknowledges and agrees that
during the term of this Agreement he may have access to various trade secrets
and confidential business information ("CONFIDENTIAL INFORMATION") of the
Company. Executive agrees that he shall use such Confidential Information
solely in connection with his obligations under this Agreement and shall
maintain in strictest confidence and shall not disclose any such Confidential
Information, directly or indirectly, or use such information in any other way
during the term of this Agreement or for a period of two (2) years after the
termination of this Agreement. Executive further agrees to take all reasonable
steps necessary to preserve and protect the Confidential Information. The
provisions of this Section 4.1 shall not apply to information known by
Executive which (i) was in possession of Executive prior to receipt thereof
from the Company, (ii) is or becomes generally available to the public other
than as a result of a disclosure by Executive, or (iii) becomes available to
Executive from a third party having the right to make such disclosure.
4.2 Remedies. Executive acknowledges that the Company's remedy at law for
any breach or threatened breach by Executive of Section 4.1 will be inadequate.
Therefore, the Company shall be entitled to injunctive and other equitable
relief restraining Executive from violating those provisions, in addition to
any other remedies that may be available to the Company under this Agreement or
applicable law.
V. NON-COMPETITION
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5.1 Agreement Not to Compete. Executive agrees that, on or before the
date which is one (1) year after the date Executive's employment under this
Agreement terminates, he will not, unless he receives the prior approval of the
Board, directly or indirectly engage in any of the following actions:
(a) Own an interest in (except as provided below), manage, operate,
join, control, lend money or render financial or other assistance to, or
participate in or be connected with, as an officer, employee, partner,
stockholder, consultant or otherwise, any entity whose primary business is
entertainment-themed restaurants in the United States, such as, but not
limited to, Rainforest Cafe, Plant Hollywood, Cheesecake Factory, Hard Rock
Cafe, Dive!, and Xxxx & Busters. However, nothing in this subsection (a)
shall preclude Executive from holding less than 1% of the outstanding
capital stock of any corporation required to file periodic reports with the
Securities and Exchange Commission under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended, the securities of which are
listed on any securities exchange, quoted on the National Association of
Securities Dealers Automated Quotation System or traded in the
over-the-counter market.
(b) Intentionally solicit, endeavor to entice away from the Company,
or otherwise interfere with the Company's relationship with any person who
is employed by or otherwise engaged to perform services for the Company
(including, but not limited to, any independent sales representatives or
organizations), whether for Executive's own account or for the account of
any other individual, partnership, firm, corporation or other business
organization.
If the scope of the restrictions in this Section 5.1 are determined by a court
of competent jurisdiction to be too broad to permit enforcement of such
restrictions to their full extent, then such restrictions shall be construed or
rewritten (blue-lined) so as to be enforceable to the maximum extent permitted
by law, and Executive hereby consents, to the extent he may lawfully do so, to
the judicial modification of the scope of such restrictions in any proceeding
brought to enforce them.
VI. MISCELLANEOUS
6.1 Amendment. This Agreement may be amended only in writing, signed
by both parties.
6.2 Entire Agreement. Other than an Option Agreement dated [January 15,
1997] between the Company and Executive, this Agreement contains the entire
understanding of the parties with regard to all matters contained herein.
Other than such Option Agreement and this Agreement, there are no other
agreements, conditions or representations, oral or written, expressed or
implied, with regard thereto. This Agreement and such Option Agreement
supersede all prior agreements relating to the employment of Executive by the
Company.
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6.3 Assignment. This Agreement shall be binding upon, and shall inure to
the benefit of parties and their respective successors, assigns, heirs and
personal representatives and any entity with which the Company may merge or
consolidate or to which the Company may sell substantially all of its assets.
6.4 Notices. Any notice required to be given under this Agreement shall
be in writing and shall be delivered either in person or by certified or
registered mail, return receipt requested. Any notice by mail shall be
addressed as follows:
If to the Company, to:
Hotel Mexico, Inc.
0000 XxxxxXxxxx Xxxxx, Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention: President
If to Executive, to:
Xxxxxx X. Xxxxxx
0000 Xxxxxx Xxxxx Xxxx
Xxxxx, XX 00000
or to such other addresses as either party may designate in writing to the
other party from time to time.
6.5 Waiver of Breach. Any waiver by either party of compliance with any
provision of this Agreement by the other party shall not operate or be
construed as a waiver of any other provision of this Agreement, or of any
subsequent breach by such party of a provision of this Agreement.
6.6 Severability. If any one or more of the provisions (or portions
thereof) of this Agreement shall for any reason be held by a final
determination of a court of competent jurisdiction to be invalid, illegal, or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provisions (or portions of the provisions) of this
Agreement, and the invalid, illegal or unenforceable provisions shall be deemed
replaced by a provision that is valid, legal and enforceable and that comes
closest to expressing the intention of the parties hereto.
6.7 Governing Law. This Agreement shall be interpreted and enforced in
accordance with the laws of the State of Ohio, without giving effect to
conflict of law principles.
6.8 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach of this Agreement or the breach of any exhibits
attached to this Agreement shall be settled by arbitration in accordance with
the Commercial Arbitration Rules of the American
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Arbitration Association, and a judgment upon the award rendered by the
arbitrator(s) may be entered in any court having jurisdiction. The
arbitrator(s) shall have the authority to award the prevailing party its costs
and reasonable attorney's fees which shall be paid by the non-prevailing party.
In the event the parties hereto agree that it is necessary to litigate any
dispute hereunder in a court, the non-prevailing party shall pay the prevailing
party its costs and reasonable attorney's fees. Notwithstanding anything in
this Section 6.9 to the contrary, during the pendency of any dispute or
controversy arising under or in connection with this Agreement or exhibits
attached to this Agreement, the Company shall be entitled to seek an injunction
or restraining order in a court of competent jurisdiction to enforce the
provisions of Article IV and Article V.
IN WITNESS WHEREOF, the parties have executed this Agreement effective as
of the date set forth above.
HOTEL MEXICO, INC.
/s/ Xxxxxxx X. Xxxx
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Xxxxxxx X. Xxxx
President
/s/ Xxxxxx X. Xxxxxx
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XXXXXX X. XXXXXX
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