EMPLOYMENT AGREEMENT
Exhibit (10)(h)
This Agreement made by and between Xxxxxx’x Restaurants, Inc., an Ohio corporation, hereinafter referred to as “Corporation”, and Xxxxx X. Xxxxx, hereinafter referred to as “Xxxxx”, WITNESSETH:
WHEREAS, Xxxxx is the President and Chief Executive Officer of the Corporation; and
WHEREAS, the Corporation and Xxxxx agree that Xxxxx’x compensation should be highly variable based upon the Corporation’s performance, so that Xxxxx’x compensation will be substantial if the Corporation attains its performance goals but if the Corporation fails to reach its performance goals, his compensation will be significantly below what the chief executive officer of a comparable company would receive;
WHEREAS, Xxxxx has been employed by the Corporation pursuant to an employment agreement dated March 31, 2000 which expires on June 1, 2003;
NOW, THEREFORE, in consideration of the mutual agreements herein contained, the parties do hereby agree upon the terms and conditions of this Employment Agreement which shall become effective as of June 2, 2003.
1. Employment. The Corporation agrees to employ Xxxxx and Xxxxx agrees to serve the Corporation upon the terms and conditions hereinafter set forth.
2. Term. The employment of Xxxxx hereunder shall be for a period of three (3) fiscal years commencing June 2, 2003 and ending May 28, 2006.
3. Duties. Xxxxx agrees to serve the Corporation and any and all of its subsidiaries and divisions faithfully and to the best of his ability as its President and Chief Executive Officer under the direction of the Board of Directors, devoting (except as otherwise permitted in paragraph 5) his entire business time, energy and skill to such employment and performing from time to time such other services and acting in such other office or capacity as the Board of Directors shall request or direct.
4. Compensation.
(a) Base Salary. The Corporation agrees to pay Xxxxx during the first fiscal year of his employment hereunder, as “Base Salary” for his full-time active services as an officer, the sum of Two Hundred Fifty Thousand Dollars ($250,000). Xxxxx’x Base Salary shall be adjusted at the beginning of the second and third years of this Agreement to reflect Fifty Percent (50%) of the latest annual change in the Consumer Price Index for All Urban Consumers (“CPI-U”) published by the U.S. Department of Labor; Bureau of Labor Statistics.
(b) Incentive Compensation. In addition to his Base Salary, the Corporation shall pay Xxxxx “Incentive Compensation”, which shall consist of Base Incentive Compensation and Incremental Incentive Compensation (both defined below), for each fiscal year of the Corporation in which the Pre-Tax Earnings of the Corporation equal or exceed four percent (4%) of the Corporation’s Sales for such year. “Pre-Tax Earnings” shall be the amount reported to shareholders in the Corporation’s annual report, but Pre-Tax Earnings shall be computed without reduction for this Incentive Compensation. “Sales” shall be the amount of “Total Revenue” reported to shareholders in the Corporation’s annual report.
Xxxxx’x “Base Incentive Compensation” shall be one and one-half percent (1-1/2%) of the Corporation’s Pre-Tax Earnings. The amount of the Base Incentive Compensation shall be reduced, if necessary, so that the Corporation’s Pre-Tax Earnings, after reduction for the Base Incentive Compensation, shall not be less than four percent (4%) of the Corporation’s Sales for such year.
Exhibit (10)(h)
In addition, if the Pre-Tax Earnings of the Corporation equal or exceed five percent (5%) of the Corporation’s Sales for such year, the Corporation shall pay Xxxxx “Incremental Incentive Compensation”, equal to an additional one percent (1%) of the Corporation’s Pre-Tax Earnings.
Ninety percent (90%) of the Incentive Compensation shall be paid in cash and ten percent (10%) shall be paid in shares of the Corporation’s common stock.
The number of shares allocated to Xxxxx shall be determined by dividing the amount of Incentive Compensation to be paid in shares by the Average Value of the Corporation’s common shares during the fiscal year for which the Incentive Compensation has been earned. The “Average Value” of the Corporation’s shares for any fiscal year shall be the mean between the highest price at which shares were traded during such year and the lowest price.
Example: In the fiscal year beginning June 2, 2003, the Corporation has Sales of $210,000,000 and Pre-Tax Earnings (before calculation of Xxxxx’x Incentive Compensation) of $12,000,000. Since Pre-Tax Earnings exceed 5% of Sales, Xxxxx has earned both Base and Incremental Incentive Compensation. Two and one-half percent of Pre-Tax Earnings equals $300,000. Ninety percent or $270,000 is payable in cash. Ten percent or $30,000 is payable in the Corporation’s shares. During the fiscal year beginning June 2, 2003, the Corporation’s shares traded at a high price of $24 and a low price of $16. The mean price is $20.00 per share. Xxxxx therefore receives an award of 1,500 shares ($30,000 divided by $20.00 per share = 1,500 shares).
If the Pre-Tax Earnings had been $9,000,000 (over 4% of Sales but less than 5%), Xxxxx would have earned Base Incentive Compensation only. One and one-half percent of Pre-Tax Earnings equals $135,000. Ninety percent is payable in cash. Ten percent is payable in the Corporation’s shares.
If the Pre-Tax Earnings had been $8,500,000 (over 4% of Sales but less than 5%), Xxxxx would have earned Base Incentive Compensation only. One and one-half percent of Pre-Tax Earnings equals $127,500. However, if the Company pays Incentive Compensation of $127,500, its Pre-Tax Earnings (after reduction for Incentive Compensation) will fall below 4% of Sales. Therefore, the Incentive Compensation is reduced to $100,000 (the largest amount which can be paid so that the Company’s Pre-Tax Earnings, after reduction for Incentive Compensation, are not less than 4% of Sales). Ninety percent is payable in cash. Ten percent is payable in the Corporation’s shares.
The shares granted as Incentive Compensation will not be registered under the Securities Act of 1933, as amended, and each stock certificate will bear the following legend or one similar thereto: “The shares represented by this certificate have been acquired for investment and have not been registered under the Securities Act of 1933. The shares may not be sold or transferred in the absence of such registration or an exemption therefrom under said Act.”
(c) Stock Options. In any year in which the Corporation’s Pre-Tax Earnings equal or exceed 4% of Sales, the Corporation shall award stock options to Xxxxx as follows:
| Pre-Tax Earnings As a Percentage of Sales |
Stock Option Available | |
| At least 4%, but less than 5% |
10,000 shares | |
| At least 5%, but less than 6% |
20,000 shares | |
| At least 6% |
30,000 shares |
Exhibit (10)(h)
All stock options shall be awarded under the terms of the Stock Option Plan of the Corporation in effect at the time the options are awarded.
(d) Disability Compensation. If Xxxxx becomes Disabled during the term of this Agreement, including any renewal terms, and is then employed by the Corporation, the Corporation shall pay Disability Compensation (defined below) to Xxxxx. “Disability” shall mean a condition which entitles Xxxxx to receive benefits under the Corporation’s long term disability plan as it exists at the time the determination of Xxxxx’x Disability is made.
The annual amount of the “Disability Compensation” shall be Sixty Percent (60%) of Xxxxx’x Average Compensation at the time he incurs the Disability, reduced by any disability benefits to which Xxxxx is entitled under disability income plans (including insurance funded plans) maintained by the Corporation.
“Average Compensation” means the total compensation, including Incentive Compensation earned by Xxxxx in the three calendar years preceding the year in which the Disability occurs; divided by 3.
The Disability Compensation shall be paid to Xxxxx monthly while he is alive, for a period of 120 months, provided that Xxxxx has not willfully violated any of the provisions of this Agreement. Xxxxx’x Disability Compensation shall be adjusted on each anniversary of the commencement of payments to reflect Sixty Percent (60%) of the latest annual change in the CPI-U.
5. Restrictive Covenants. Xxxxx agrees that during the term of this Agreement, or of any renewal thereof, he will not directly or indirectly render any services of an advisory nature or otherwise to, become employed by, or participate in, any business which is competitive with any of the businesses of the Corporation, its subsidiaries or divisions, without the prior written consent of the Corporation; provided, however, that nothing herein shall prohibit Xxxxx from:
(a) owning and operating the franchise known as Frisch New Richmond Big Boy, Inc.;
(b) Operating or otherwise providing services to any other franchisee of Corporation.
(c) owning stock or other securities, or serving as a director or officer of a corporation conducting a business referred to in subparagraph (a);
(d) owning stock or other securities of competitors which are sold in a public market and which comprise less than five percent (5%) of the total outstanding stock of such corporation.
6. Binding Effect. This Agreement shall be binding upon and inure to the benefit of any Successor of the Corporation and any such Successor shall be deemed substituted for the Corporation under the terms of this Agreement. A “Successor” of the Corporation shall include any person, firm, corporation or other business entity which at any time, whether by merger, purchase or otherwise, acquires all or substantially all of the capital stock, assets or business of the Corporation.
7. Change in Control. Xxxxx and the Corporation have previously entered into an Agreement granting Xxxxx certain rights in the event of a “Change in Control” of the Corporation (as defined in such Agreement). Xxxxx and the Corporation hereby reaffirm such agreement and confirm that its provisions are in addition to this Agreement and control in the event of a conflict with this Agreement.
IN WITNESS WHEREOF, Xxxxxx’x Restaurants, Inc. has caused this Agreement to be executed in its corporate name by Xxxxxxx X. Xxxxxx, its Vice President of Human Resources, thereunto duly authorized by its Board of Directors, and Xxxxx X. Xxxxx has hereunto set his hand on the date set forth below.
Exhibit (10)(h)
| DATED: June 30, 2003 |
/s/ XXXXX X. XXXXX | |||
| Xxxxx X. .Xxxxx | ||||
| XXXXXX’X RESTAURANTS, INC. | ||||
| By: | /s/ XXXXXXX X. XXXXXX | |||
| Xxxxxxx X. Xxxxxx | ||||
| Vice President of Human Resources | ||||
