EXECUTIVE CHAIRMAN AGREEMENT
THIS
EXECUTIVE CHAIRMAN AGREEMENT (the
“Agreement”)
is
entered into as of July 8, 2008, between Chanticleer Holdings, Inc., a Delaware
corporation (the “Company”)
and
Xxxxxxx Xxxxxx (“Executive”).
WHEREAS,
Wise Acquisition Corp., a Delaware corporation, the Company, Hooters, Inc.,
a
Florida corporation (the “HI”),
and
certain other entities and selling stockholders have entered into that certain
Stock Purchase Agreement (the “SPA”),
dated
March 7, 2008, pursuant to which the Company will acquire, directly or
indirectly, all of the outstanding shares of capital stock of HI and certain
of
its affiliates;
WHEREAS,
Owl Acquisition Holdings Corp., a Delaware corporation, the
Company, certain related entities that have executed and delivered a
joinder thereto, and Texas
Wings Incorporated, a Texas corporation (“TW”), have
entered into
that
certain Asset Purchase Agreement (the “APA”),
dated
as of the date hereof, pursuant to which the Company will indirectly
acquire, certain Hooters restaurants or rights related thereto of TW and
certain of its affiliates as set forth in the APA;
WHEREAS,
it is contemplated that the closing of the transactions contemplated by the
SPA will occur immediately prior to the closing of the transactions
contemplated by the APA (collectively, the “Closings”),
and
upon the Closings the Company and Executive desire that, immediately at the
effective time of the Closings (the “Effective
Time”),
the
Company shall employ Executive, and Executive shall accept such employment,
on
the terms and subject to the conditions set forth herein; and
NOW,
THEREFORE, in consideration of the mutual agreements set forth herein and for
other good and valuable consideration, the receipt and sufficiency of which
are
hereby acknowledged, the parties hereto hereby agree as follows:
1. Employment
Period.
Subject
to earlier termination as hereinafter provided, Executive’s employment hereunder
shall be for a period (the “Employment
Period”)
commencing at the Effective Time and ending on the second anniversary of the
date of the Closings (the “Initial
Termination Date”).
If
not previously terminated, the Employment Period shall automatically be extended
for one additional year on the Initial Termination Date and on each subsequent
anniversary of the Initial Termination Date, unless either Executive or the
Company elects not to so extend the Employment Period by notifying the other
party, in writing, of such election not less than ninety (90) days prior to
the
last day of the then-current Employment Period.
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2. Position,
Duties and Responsibilities.
(a) Position.
Effective at the Effective Time, the Company shall employ Executive, and
Executive hereby agrees to serve the Company, as an executive and Chairman
of
the Board reporting to the Company’s Board of Directors (the “Board”).
In
addition, during the Term, the Company shall use
its
best efforts to cause
Executive to be nominated to serve as a member of the Board;
provided,
however,
that
the Company shall not be obligated to cause such nomination if circumstances
constituting Cause for Executive’s termination of employment exist or Executive
is no longer employed as Executive Chairman. Provided that
if
Executive is so nominated and elected, Executive hereby agrees to serve as
a
member of the Board. Executive shall perform such duties as are usual and
customary for such position. At the Company’s request, Executive shall serve the
Company and/or its subsidiaries and affiliates in such other offices and
capacities in addition to the foregoing (consistent with Executive’s position
with the Company) as the Company shall designate. In the event that Executive
serves in any one or more of such additional capacities, Executive’s
compensation will not be increased on account of such additional service beyond
that specified in this Agreement.
(b) Place
of Employment.
During
the Employment Period, Executive shall perform the services required by this
Agreement at the Company’s offices in Charlotte, North Carolina. Notwithstanding
the foregoing, the Company may from time to time require Executive to travel
temporarily to other locations for the Company’s business.
(c) Exclusivity.
Except
with the prior written approval of the Board (which the Board may grant or
withhold in its sole discretion), Executive, during the Employment Period,
shall
not engage, directly or indirectly, in any other business activity (whether
or
not pursued for pecuniary advantage) that is or may be competitive with, or
that
might place him in a competing position to, that of the Company or any of its
subsidiaries or affiliates.
3. Cash
Compensation.
(a) Base
Salary.
During
the Employment Period, the Company shall pay Executive an annual base salary
of
$150,000 per year, which shall be paid to Executive in accordance with the
Company’s standard payroll practices, as in effect from time to time (such base
salary, as may be increased pursuant to the following sentence, the
“Base
Salary”).
The
Base Salary shall be reviewed annually for increase as determined by the Board
or the Compensation Committee thereof in its sole discretion.
(b) Bonuses.
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i.
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Transaction
Bonus.
Subject to and contingent upon the consummation of each of the Closings,
the Company shall pay to Executive, at or as soon as practicable
after the
Effective Time, a one-time cash bonus in the amount of
$200,000.
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ii.
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Performance
Bonus.
Subject to and contingent upon the Company’s attainment of the performance
objectives described on Exhibit
A
hereto (the “Acquisition
Transaction”)
on or prior to December 31, 2010, as determined in the sole discretion
of
the Compensation Committee of the Board, Executive shall be eligible,
under and in accordance with the terms of Section 9.1 of the Company’s
2008 Equity Incentive Plan (the “Plan”),
to receive a one-time cash bonus in the amount of $1,200,000, payable
upon
the earliest to occur of (A) (1) if the Acquisition Transaction is
consummated on or prior to December 31, 2009 and
the consummation of such transaction constitutes a “change of control
event” of the Company (within the meaning of Section 409A of the Code) (a
“Payment
Event”),
and/or (2) if the Acquisition Transaction is consummated during 2010,
in
either case, on or within ten days after the date on which the Acquisition
Transaction is consummated, but in no event later than December 31,
2010,
or (B) if the consummation of the Acquisition Transaction occurs
prior to
January 1, 2010 and does not
constitute a Payment Event, on or within ten days after
January 1, 2010, in any case, subject to certification by the Compensation
Committee of the attainment of the Performance Goal if Executive
remains
employed by the Company at the time the Performance Goal is
attained.
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iii.
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Discretionary
Bonuses.
During the Employment Period, Executive shall be eligible to receive
additional discretionary cash and/or equity incentive bonus awards
based
on significant acquisitions, significant corporate achievements and/or
the
attainment of other objectives. The award of any bonus under this
Section
3(b)(ii) (if any) shall be made in the sole discretion of the Board
and
shall be paid, if at all, at such time or times and in such form
as the
Board determines.
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4. Equity
Grants.
(a) General.
Subject
to adoption by the Board and approval by Company’s shareholders of the Plan in
substantially the form attached as Exhibit
B
hereto,
the Company shall grant to Executive (i) an option (“Option”)
to
purchase shares of common stock, par value $0.0001 per share, of the Company
(“Shares”),
and
(ii) restricted Shares (the “Restricted
Stock”),
each
as provided below in this Section 4.
To
the
greatest extent permitted under applicable law, the Option shall constitute
an
“incentive stock option” within the meaning of Section 422 of the Internal
Revenue Code of 1986, as amended (the “Code”).
If
approval of the Plan is not obtained by the time any portion of the Option
or
Restricted Stock are scheduled to vest, the Company will instead grant awards
that substantially replicate the terms and economics of the Option and
Restricted Stock award, payable in cash or other awards that do not require
the
approval of the Company’s shareholders.
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(b) Option.
Subject
to Section 4(a) above and Section 4(g) below, as soon as practicable following
the Effective Time, the Company shall grant to Executive an Option to purchase
149,535 Shares (subject to adjustment for stock splits and similar changes
in
share capital between the date hereof and the Effective Date). The Option shall,
subject to Sections 4(d) and 7(a) hereof, vest and become exercisable as to
one-half of the Shares subject thereto on each of the first two anniversaries
of
the date of grant (the “Grant
Date”)
of
such Option, subject to Executive’s continued employment with the Company
through each such vesting date. The Option shall be
granted at
an
exercise price per share equal to the Fair Market Value (as defined in the
Plan)
of a Share on the Grant Date.
Consistent
with the applicable provisions of this Section 4, the
terms
and conditions of the Option, including without limitation any applicable
vesting and forfeiture conditions, shall be set forth in a Stock Option
Agreement to be entered into by the Company and Executive in substantially
the
form attached hereto as Exhibit
C
(the
“Option
Agreement”).
The
Option shall be governed in all respects by the terms of the Plan and the Option
Agreement.
(c) Restricted
Stock.
Subject
to Section 4(a) above and Section 4(g) below, as soon as practicable following
the Effective Time, the Company shall grant to Executive 37,384 Shares of
Restricted Stock (the “Restricted
Stock”)
(subject to adjustment for stock splits and similar changes in share capital
between the date hereof and the Effective Date).
The
Restricted Stock shall vest and the restrictions thereon shall lapse,
subject
to Sections 4(d) and 7(a) hereof,
with
respect to one-half of the Shares subject thereto on each of the first two
anniversaries of the Grant Date of such Restricted Stock, subject to Executive’s
continued employment with the Company through each such vesting date. Consistent
with the applicable provisions of this Section 4, the terms and conditions
of
the Restricted Stock shall be set forth in a Restricted Stock Agreement to
be
entered into by the Company and Executive in substantially the form attached
hereto as Exhibit
D
which
shall evidence the grant of the Restricted Stock (the “Restricted
Stock Agreement”).
The
Restricted Stock shall be governed in all respects by the terms of the Plan
and
the Restricted Stock Agreement.
(d) Change
in Control.
Notwithstanding anything herein to the contrary, in the event that a Change
in
Control (as defined in the Plan) occurs and Executive remains employed until
at
least immediately prior to the closing of the Change in Control, then,
immediately prior to such Change in Control, 50% of the then-unvested Shares
subject to each of the Option and the Restricted Stock award shall
vest.
(e) Additional
Terms.
The
Option shall terminate immediately upon Executive’s termination of employment
for Cause (as defined below), without regard to the vested status of such Option
at the time of such a termination. In the event of any other termination of
employment, the Option, to the extent vested, shall remain outstanding and
exercisable for a period of up to (i) 180 days following Executive’s termination
of employment for any reason other than Cause or due to death or Disability
(as
defined below), and (ii) one year following Executive’s termination of
employment due to death or Disability (but in no event beyond the stated
expiration date of the Option).
(f) Additional
Discretionary Equity Grants.
During
the Employment Period, Executive shall be eligible as a senior executive of
the
Company to receive future grants of equity-based awards, including, without
limitation, upon authorization of additional Shares for grant under the Plan.
The award of additional equity-based awards (if any) pursuant to this Section
4(f) shall be made in the sole discretion of the Board or the Compensation
Committee thereof and shall be subject to such terms and conditions as the
Board
or the Compensation Committee may determine.
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(g) Equity
Grant Allocation.
Notwithstanding the provisions of Sections 4(b) and 4(c) above, if, on the
Grant
Date, the Fair Market Value of a Share is greater than $7 per Share, then the
parties agree to cooperate and work together in good faith to adjust the number
of Shares subject to the Option and/or Restricted Stock grants described in
Sections 4(b) and 4(c) above to reflect the value intended to be provided to
Executive under the Options and Restricted Stock had such awards been granted
in
the amounts stated in Sections 4(b) and 4(c) above with the Options having
an
exercise price equal to $7 per Share.
5. Benefits
and Vacation.
During
the Employment Period, Executive shall be eligible to participate in such group
life, health, accident, disability and/or hospitalization insurance and
retirement plans as the Company may make available generally to its senior
executives as a group, on a basis no less favorable than those provided to
similarly situated senior executives of the Company. In addition, Executive
shall be eligible for such other benefits, perquisites, paid vacation and
holidays, to the extent applicable generally to other senior executives of
the
Company, subject to the terms and conditions of the applicable policies. In
addition, the Company agrees to consider the implementation of a nonqualified
deferred compensation plan and an executive supplemental life insurance program.
Nothing contained herein shall, or shall be construed so as to, obligate the
Company to adopt, maintain or continue any particular plans, policies or
programs at any time.
6. Expenses.
During
the Employment Period, Executive shall be entitled to receive prompt
reimbursement of all reasonable business expenses incurred by Executive
in accordance with the expense reimbursement policy applicable to the Company’s
senior executives, as in effect from time to time.
7. Termination
of Employment.
(a) Termination
Without Cause or for Good Reason.
The
Company may terminate Executive’s employment without Cause (as defined below) at
any time during the Employment Period upon ten (10) days’ written notice
provided to Executive in accordance with Section 8 below or, in the Company’s
sole discretion, payment of Executive’s Base Salary for such period in lieu of
notice. In addition, Executive may terminate his employment for Good Reason
(as
defined below) at any time during the Employment Period in accordance with
the
terms of Section 7(i)(ii) hereof. If Executive experiences
a “separation from service” (within the meaning of Section 409A(a)(2)(A)(i) of
the Code, and Treasury Regulation Section 1.409A-1(h)) (“Separation
from Service”)
due to a
termination by the Company without Cause or by Executive for Good Reason, the
Company shall promptly or, in the case of obligations described in clause (iv)
below, as such obligations become due, pay or provide to Executive, (i)
Executive’s earned but unpaid Base Salary accrued through the date of such
Separation from Service (the “Termination
Date”),
(ii)
accrued but unpaid vacation time through the Termination Date, (iii)
reimbursement of any unreimbursed business expenses incurred by Executive prior
to the Termination Date that are reimbursable under Section 6 above, (iv) any
vested benefits and other amounts due to Executive under any plan, program
or
policy of the Company, and (v) any payment in lieu of notice of termination
under this Section 7(a) (together, the “Accrued
Obligations”).
In
addition, subject to Section 7(f) below and Executive’s execution and
non-revocation of a binding release in accordance with Section 7(g) below,
in
the event of a termination of Executive’s employment by the Company without
Cause or by Executive for Good Reason, 50% of the then-unvested Shares subject
to each of the Option and the Restricted Stock award shall vest immediately
prior to such termination, provided,
that
if
such termination occurs within the one year period after either of (x) a Change
in Control or (y) the consummation of an Excluded Acquisition (as defined in
the
Plan) that, but for the Change in Control Exceptions (as defined in the Plan),
would constitute a Change in Control, in either case, then all of the
then-unvested Shares subject to each of the Option and the Restricted Stock
award shall vest immediately prior to such termination; provided
further,
if the
preceding proviso is not applicable, then the portion of the Option and
Restricted Stock award that did not vest immediately prior to such termination
shall conditionally remain outstanding and unvested, and if within the six-month
period following such termination, an event described in clause (x) or (y)
occurs, such unvested portion shall vest upon such event, and as to the Option,
shall remain exercisable for at least 30 days thereafter (unless canceled in
connection with such Change in Control), and if within the six-month period
following such termination, an event described in clause (x) or (y) does not
occur, such unvested portion shall be forfeited on the six-month anniversary
of
the Termination Date. Notwithstanding the foregoing, in no event shall any
portion of any such award remain outstanding beyond its stated expiration date.
The accelerated vesting described in the preceding sentence shall be referred
to
herein as the “Severance.”
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(b) Resignation
without Good Reason.
Executive may terminate his employment at any time without Good Reason upon
thirty (30) days’ written notice provided to the Company in accordance with
Section 8 hereof, provided,
that
the Company may, in its sole discretion, waive such notice period without
payment in lieu thereof. If Executive so resigns his employment, Executive
shall
be entitled to receive the Accrued Obligations promptly or, in the case of
benefits described in Section 7(a)(iv) above, as such obligations become
due.
(c) Death;
Disability.
If
Executive dies during the Employment Period or his employment is terminated
due
to his total and permanent disability (as determined by the Board), Executive
or his estate, as applicable, shall be entitled to receive the Accrued
Obligations promptly or, in the case of benefits described in Section 7(a)(iv)
above, as such obligations become due.
(d) Cause.
The
Company may terminate Executive’s employment for Cause by providing notice to
Executive in accordance with Section 8 hereof. If the Company terminates
Executive’s employment for Cause, Executive shall be entitled to receive the
Accrued Obligations promptly or, in the case of benefits described in Section
7(a)(iv) above, as such obligations become due.
(e) Non-Renewal.
Either
party may terminate Executive’s employment by electing not to renew the
Employment Period in accordance with Section 1 hereof. Upon Executive’s
Separation from Service in connection with any such election, Executive shall
be
entitled to receive the Accrued Obligations promptly or, in the case of benefits
described in Section 7(a)(iv) above, as such obligations become due. In no
event
shall an election not to extend the Employment Period in accordance with Section
1 hereof constitute a termination of employment without Cause or for Good
Reason.
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(f) Potential
Six-Month Delay.
Notwithstanding anything to the contrary in this Agreement, no compensation
or
benefits, including without limitation any Severance, shall be paid to Executive
during the 6-month period following his Separation from Service to the extent
that the Company determines that Executive is a “specified employee” at the time
of such Separation from Service (within the meaning of Section 409A of the
Code)
and that that paying such amounts at the time or times indicated in this
Agreement would be a prohibited distribution under Section 409A(a)(2)(b)(i)
of
the Code. If the payment of any such amounts is delayed as a result of the
previous sentence, then on the first business day following the end of such
6-month period (or
such
earlier date upon which such amount can be paid under Section 409A of the Code
without being subject to such additional taxes, including as a result of
Executive’s
death),
the
Company shall pay to Executive a lump-sum amount equal to the cumulative amount
that would have otherwise been payable to Executive during such 6-month
period.
(g) Release.
Executive’s right to receive any of the Severance payments or benefits is
conditioned on and subject to the execution and non-revocation by Executive
of a
general release of claims against the Company, substantially in the form
attached hereto as Exhibit
E,
as may
be amended to reflect changes in applicable law.1
(h) Termination
of Offices and Directorships.
Upon
termination of Executive’s employment for any reason, Executive shall be deemed
to have resigned from all offices and directorships, if any, then held with
the
Company or any affiliate, and shall take all actions reasonably requested by
the
Company to effectuate the foregoing.
(i) Definitions.
For
purposes of this Agreement:
(i)
“Cause”
shall
mean: (A) any willful and material failure by Executive to perform his duties
and responsibilities under this Agreement (other than due to Executive’s
disability); (B) any material act of fraud, embezzlement, theft or
misappropriation by Executive relating to the Company or its business or assets,
(C) Executive’s commission of a felony or a crime involving moral turpitude; (D)
any gross negligence or willful misconduct on the part of Executive in the
conduct of his duties and responsibilities with the Company or which has a
materially adverse economic impact on the Company or its affiliates; or (E)
any
willful and material breach by Executive of this Agreement,
provided,
that no
termination for Cause shall be effective unless and until (1) the Company
has first provided Executive with written notice specifically identifying the
acts or omissions constituting the grounds for “Cause” within thirty (30) days
after the Company has knowledge of the occurrence thereof, and (2) if capable
of
cure, Executive has not cured such acts or omissions within fifteen (15) days
of
his actual receipt of such notice. For purposes of the foregoing, no act or
failure to act shall be deemed willful unless done in bad faith, and a failure
to meet performance expectations, after a good faith effort to do so, shall
not
in of itself constitute Cause.
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The
release for this agreement needs to carve-out rights in connection with
any
post-termination payment of the HOA bonus.
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(ii)
“Good
Reason”
shall
mean the Company’s material breach of this Agreement, including: (A) a material
reduction in Executive’s Base Salary, (B) a material reduction in Executive’s
job duties and responsibilities or the assignment to Executive of any duties
inconsistent in any material respect with Executive’s position with the Company,
or (C) a relocation of Executive’s principal work location to a location that is
more than 50 miles from Executive’s principal work location as of the date of
the Closing, provided,
that no
resignation for Good Reason shall be effective unless and until
(1) Executive has first provided the Company with written notice
specifically identifying the acts or omissions constituting the grounds for
“Good Reason” within thirty (30) days after Executive has or should reasonably
be expected to have had knowledge of the occurrence thereof, (2) the Company
has
not cured such acts or omissions within thirty (30) days of its actual receipt
of such notice, and (3) the
effective date of Executive’s termination for Good Reason occurs no later than
ninety (90) days after the initial existence of the facts or circumstances
constituting Good Reason.
8. Notice.
Any
notice or other communication required or permitted under this Agreement shall
be effective only if it is in writing and delivered personally or sent by fax,
email or registered or certified mail, postage prepaid, addressed as follows
(or
if it is sent through any other method agreed upon by the parties):
If
to the
Company:
0000
Xxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxx,
XX 00000
Fax:
(000) 000-0000
Attention:
Chief Executive Officer and General Counsel
If
to
Executive: to Executive’s most current home address on file with the Company’s
Human Resources Department, or to such other address as any party hereto may
designate by notice to the other in accordance with this Section 8, and shall
be
deemed to have been given upon receipt.
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9. Certain
Additional Payments by the Company.
(a) Gross-Up
Payment.
Anything in this Agreement to the contrary notwithstanding and except as set
forth below, in the event it shall be determined that any Payment (as defined
below) would be subject to the Excise Tax (as defined below), then Executive
shall be entitled to receive an additional payment (the “Excise
Tax Gross-Up Payment”)
in an
amount such that, after payment by Executive of all taxes (and any interest
or
penalties imposed with respect to such taxes), including, without limitation,
any income taxes (and any interest and penalties imposed with respect thereto)
and Excise Tax imposed upon the Excise Tax Gross-Up Payment, Executive retains
an amount of the Excise Tax Gross-Up Payment equal to the Excise Tax imposed
upon the Payments. Notwithstanding the foregoing provisions of this Section
9(a), if it shall be determined that Executive is entitled to the Excise Tax
Gross-Up Payment, but that the Parachute Value (as defined below) of all
Payments does not exceed 110% of the Safe Harbor Amount (as defined below),
then
no Excise Tax Gross-Up Payment shall be made to Executive and the amounts
payable under this Agreement shall instead be reduced so that the Parachute
Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The
reduction of the amounts payable hereunder, if applicable, shall be made by
first reducing the payments under Section 7(a)(y) hereof, unless an alternative
method of reduction is elected by Executive, and in any event shall be made
in
such a manner as to maximize the Value (as defined below) of all Payments
actually made to Executive. The Company’s obligation to make Excise Tax Gross-Up
Payments under this Section 9 shall not be conditioned upon Executive’s
termination of employment or Executive’s Separation from Service. For purposes
of determining the amount of any Excise Tax Gross-Up Payment, Executive shall
be
considered to pay federal income tax at Executive’s actual marginal rate of
federal income taxation in the calendar year in which the Excise Tax Gross-Up
Payment is to be made and state and local income taxes at Executive’s actual
marginal rate of taxation in the state and locality of Executive’s residence on
the date on which the Excise Tax Gross-Up Payment is calculated for purposes
of
this Section 9, net of Executive’s actual reduction in federal income taxes
which could be obtained from deduction of such state and local taxes, and taking
into consideration the phase-out of Executive’s itemized deductions under
federal income tax law.
(b) Determinations.
Subject
to the provisions of Section 9(c) below, all determinations required to be
made under this Section 9, including whether and when an Excise Tax Gross-Up
Payment is required, the amount of such Excise Tax Gross-Up Payment and the
assumptions to be utilized in arriving at such determination, shall be made
by
such nationally recognized accounting firm as may be selected by the Company
(the “Accounting
Firm”);
provided,
that
the Accounting Firm’s determination shall be made based upon “substantial
authority” within the meaning of Section 6662 of the Code. The Accounting Firm
shall provide detailed supporting calculations both to the Company and Executive
within fifteen business days of the receipt of notice from Executive that there
has been a Payment or such earlier time as is requested by the Company. All
fees
and expenses of the Accounting Firm shall be borne solely by the Company. Any
Excise Tax Gross-Up Payment, as determined pursuant to this Section 9, shall
be
paid by the Company to Executive within five days of the receipt of the
Accounting Firm’s determination. Any determination by the Accounting Firm shall
be binding upon the Company and Executive, unless the Company obtains an opinion
of outside legal counsel, based upon at least “substantial authority” within the
meaning of Section 6662 of the Code, reaching a different determination, in
which event such legal opinion shall be binding upon the Company and Executive.
Notwithstanding anything herein to the contrary, in no event shall any Excise
Tax Gross-Up Payment or any payment of any income or other taxes to be paid
by
the Company under this Section 9 be made later than the end of Executive’s
taxable year next following Executive’s taxable year in which Executive remits
the related taxes. Any costs and expenses incurred by the Company on behalf
of
Executive under this Section 9 due to any tax contest, audit or litigation
will
be paid by the Company promptly upon the date the Excise Tax (or any related
penalties and interest) is due, and in no event later than by the end of
Executive’s taxable year following Executive’s taxable year in which the taxes
that are the subject of the tax contest, audit or litigation are remitted to
the
taxing authority, or where as a result of such tax contest, audit or litigation
no taxes are remitted, the end of Executive’s taxable year following Executive’s
taxable year in which the audit is completed or there is a final and
non-appealable settlement or other resolution of the contest or
litigation.
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(c) Notification;
Contest.
Executive shall notify the Company in writing of any claim by the Internal
Revenue Service that, if successful, would require the payment by the Company
of
the Excise Tax Gross-Up Payment. Such notification shall be given as soon as
practicable, but no later than 15 business days after Executive is informed
in
writing of such claim. Executive shall apprise the Company of the nature of
such
claim and the date on which such claim is requested to be paid. Executive shall
not pay such claim prior to the expiration of the 30-day period following the
date on which Executive gives such notice to the Company (or such shorter period
ending on the date that any payment of taxes with respect to such claim is
due).
If the Company notifies Executive in writing prior to the expiration of such
period that the Company desires to contest such claim, Executive
shall:
(i)
give the Company any information reasonably requested by the Company relating
to
such claim,
(ii)
take such action in connection with contesting such claim as the Company shall
reasonably request in writing from time to time, including, without limitation,
accepting legal representation with respect to such claim by an attorney
reasonably selected by the Company,
(iii)
cooperate with the Company in good faith in order effectively to contest such
claim, and
(iv)
permit the Company to participate in any proceedings relating to such
claim;
provided,
that
the Company shall bear and pay directly all costs and expenses (including
additional interest and penalties) incurred in connection with such contest,
and
shall indemnify and hold Executive harmless, on an after-tax basis, for any
Excise Tax or income tax (including interest and penalties) imposed as a result
of such representation and payment of costs and expenses. Without limitation
on
the foregoing provisions of this Section 9(c), the Company shall control all
proceedings taken in connection with such contest, and, at its sole discretion,
may pursue or forgo any and all administrative appeals, proceedings, hearings
and conferences with the applicable taxing authority in respect of such claim
and may, at its sole discretion, either direct Executive to pay the tax claimed
and xxx for a refund or contest the claim in any permissible manner, and
Executive agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided,
that any
extension of the statute of limitations relating to payment of taxes for the
taxable year of Executive with respect to which such contested amount is claimed
to be due is limited solely to such contested amount. Furthermore, the Company’s
control of the contest shall be limited to issues with respect to which the
Excise Tax Gross-Up Payment would be payable hereunder, and Executive shall
be
entitled to settle or contest, as the case may be, any other issue raised by
the
Internal Revenue Service or any other taxing authority.
10
(d) Refund.
If,
after the receipt by Executive of an Excise Tax Gross-Up Payment, Executive
becomes entitled to receive any refund with respect to the Excise Tax to which
such Excise Tax Gross-Up Payment relates, Executive shall (subject to the
Company’s complying with the requirements of Section 9(c) hereof, if
applicable) promptly pay to the Company the amount of such refund (together
with
any interest paid or credited thereon after taxes applicable thereto).
(e) Excise
Tax Withholding.
Notwithstanding any other provision of this Section 9, the Company may, in
its
sole discretion, withhold and pay over to the Internal Revenue Service or any
other applicable taxing authority, for the benefit of Executive, all or any
portion of any Excise Tax Gross-Up Payment, and Executive hereby consents to
such withholding. Any other liability for unpaid or unwithheld Excise Taxes
shall be borne exclusively by the Company, in accordance with Section 3403
of
the Code. The foregoing sentence shall not in any manner relieve the Company
of
any of its obligations under this Employment Agreement.
(f) Definitions.
The
following terms shall have the following meanings for purposes of this Section
9:
(i) “Excise
Tax”
shall
mean the excise tax imposed by Section 4999 of the Code, together with any
interest or penalties imposed with respect to such excise tax.
(ii) “Parachute
Value”
of
a
Payment shall mean the present value as of the date of the change of control
for
purposes of Section 280G of the Code of the portion of such Payment that
constitutes a “parachute payment” under Section 280G(b)(2) of the Code, as
determined by the Accounting Firm for purposes of determining whether and to
what extent the Excise Tax will apply to such Payment.
(iii) “Payment”
shall
mean any payment or distribution in the nature of compensation (within the
meaning of Section 280G(b)(2) of the Code) to or for the benefit of Executive,
whether paid or payable pursuant to this Agreement or otherwise.
(iv) “Safe
Harbor Amount”
shall
mean 2.99 times Executive’s “base amount,” within the meaning of Section
280G(b)(3) of the Code.
(v)
“Value”
of
a
Payment shall mean the economic present value of a Payment as of the date of
the
change of control for purposes of Section 280G of the Code, as determined by
the
Accounting Firm using the discount rate required by Section 280G(d)(4) of the
Code.
11
10. Restrictive
Covenants.
(a) Non-Competition.
During
the Restricted Period, Executive will not (except as an officer, director,
stockholder, member, manager, employee, agent or consultant of the Company)
directly or indirectly, own, manage, operate, join, or have a financial interest
in, control or participate in the ownership, management, operation or control
of, or be employed as an employee, agent or consultant, or in any other
individual or representative capacity whatsoever, or use or permit his name
to
be used in connection with, or be otherwise connected in any manner with any
Competitive Enterprise; provided
that the
foregoing restriction shall not be construed to prohibit the ownership by
Executive together with his affiliates and associates, as the case may be,
of
not more than five percent (5%) of any class of securities of any corporation
which is engaged in any Competitive Business, provided further,
that
such ownership represents a passive investment and that Executive together
with
his affiliates and associates, either directly or indirectly, do not manage
or
exercise control of any such corporation, guarantee any of its financial
obligations, otherwise take part in its business other than exercising
Executive’s rights as a shareholder, or seek to do any of the foregoing.
(b) Non-Solicitation.
During
the Restricted Period, Executive shall not, directly or indirectly, solicit
or
influence any individual who is an employee or consultant of the Company to
terminate his or her employment or consulting relationship with the Company
or
to apply for or accept employment with a Competitive Enterprise.
(c) Trade
Secrets and Confidential Information.
Executive recognizes that it is in the legitimate business interest of the
Company to restrict his disclosure or use of Trade Secrets or other Confidential
Information relating to the Company for any purpose other than in connection
with Executive’s performance of his duties to the Company, and to limit any
potential appropriation of such Trade Secrets or other Confidential Information.
Executive therefore agrees that all Trade Secrets or other Confidential
Information relating to the Company heretofore or in the future obtained by
Executive shall be considered confidential and the proprietary information
of
the Company. Executive shall not use or disclose, or authorize any other person
or entity to use or disclose, any Trade Secrets or other Confidential
Information.
(d) Remedies.
Executive agrees that the Company’s remedies at law for any breach or threat of
breach by Executive of any of the provisions of this Section 10 will be
inadequate, and that, in addition to any other remedy to which the Company
may
be entitled at law or in equity, the Company shall be entitled to a temporary
or
permanent injunction or injunctions or temporary restraining order or orders
to
prevent breaches of the provisions of this Section 10 and to enforce
specifically the terms and provisions hereof, in each case without the need
to
post any security or bond and without the requirement to prove that monetary
damages would be difficult to calculate and that remedies at law would be
inadequate. Nothing herein contained shall be construed as prohibiting the
Company from pursuing, in addition, any other remedies available to the Company
for such breach or threatened breach.
12
(e) Enforceability.
It is
expressly understood and agreed that although the parties consider the
restrictions contained in this Section 10 to be reasonable for the purpose
of
preserving the goodwill, proprietary rights and going concern value of the
Company, if a final determination is made by an arbitrator or court, as the
case
may be, having jurisdiction that the time or territory or any other restriction
contained in this Section 10 is an unenforceable restriction on Executive’s
activities, the provisions of this Section 10 shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and
to
such other extent as such arbitrator or court, as the case may be, may determine
or indicate to be reasonable. Alternatively, if the arbitrator or court, as
the
case may be, referred to above finds that any restriction contained in this
Section 10 or any remedy provided herein is unenforceable, and such restriction
or remedy cannot be amended so as to make it enforceable, such finding shall
not
affect the enforceability of any of the other restrictions contained therein
or
the availability of any other remedy.
(f) Definitions.
For
purposes of this Section 10:
(i) “Competitive
Enterprise”
means
any business that owns or operates a restaurant chain with at least 10 stores,
and either (A) operates under the Hooters brand name, (B) derived more than
25%
of total food revenue in the preceding 12 month period from sales of chicken
wings or related buffalo style chicken items and more than 15% of total food
and
beverage revenue in the preceding 12 month period from the sale of alcoholic
beverages, or (C) features female sex appeal in a casual dining
setting.
(ii) “Restricted
Period”
shall
mean the period commencing on the Effective Date and ending on the first
anniversary following the termination of Executive’s employment, provided that
if such termination occurs by reason of a nonrenewal of the Employment Period,
Restricted Period shall end nine months following such termination.
(iii) “Trade
Secrets or other Confidential Information”
by
way
of example and without limitation, and in whatever medium, includes the whole
or
any portion or phase of any scientific or technical information, design,
process, procedure, formula, machine, invention, improvement, manufacturing
or
sales technique, manufacturing, sales or test data, reimbursement information,
business or financial information, listing of names, addresses, or telephone
numbers, or other information relating to any business or profession which
is of
value.
13
11. Indemnification.
Concurrently
with the execution of this Agreement, Executive and the Company shall enter
into
an Indemnification Agreement substantially in the form attached hereto as
Exhibit
F.
12. Arbitration.
Any
dispute, controversy, or claim arising out of or relating to this Agreement
or
the breach of this Agreement shall be resolved by binding arbitration in
Clearwater, Florida administered by the American Arbitration Association
(“AAA”)
or, if
administration by AAA is unavailable for any reason, then by J.A.M.S. and,
in
any case, judgment on the award rendered by the arbitrator may be entered in
and
fully enforced by any court having jurisdiction thereof. All
fees
and expenses of the arbitrators and all other expenses of the arbitration,
except for attorneys’ fees and witness expenses, which shall be borne by each
party as incurred by such party, shall be shared equally by Executive and the
Company. However, if in any arbitration proceeding or injunctive action,
Executive is the prevailing party on any material claim, the Company shall
reimburse Executive for reasonable attorneys’ fees actually incurred by
Executive in connection with such proceeding or action.
13. Effectiveness.
This
Agreement shall become effective at the Effective Time. Notwithstanding anything
contained herein, in the event that the SPA or APA is terminated in accordance
with its terms or that either Closing otherwise does not occur for any reason,
this Agreement shall automatically, and without notice, terminate without any
obligation due to the other party and the provisions of this Agreement shall
be
of no force or effect.
14. Representations.
Executive hereby represents and warrants to the Company that (a) Executive
is
entering into this Agreement voluntarily and that the performance of his
obligations hereunder will not violate any agreement between Executive and
any
other person, firm, organization or other entity, and (b) Executive is not
bound
by the terms of any agreement with any previous employer or other party to
refrain from competing, directly or indirectly, with the business of such
previous employer or other party that would be violated by his entering into
this Agreement and/or providing services to the Company pursuant to the terms
of
this Agreement.
15. Section
409A.
To the
extent applicable, this Agreement shall be interpreted in accordance with
Section 409A of the Code and any applicable exemptions therefrom.
Notwithstanding any provision of this Agreement to the contrary, if at any
time
the Company determines that any payments or benefits payable hereunder may
be
subject to Section 409A of the Code or may not comply with Section 409A of
the
Code, the Company may adopt such amendments to this Agreement or take such
other
actions that the Company determines are necessary or appropriate to (i) exempt
such payments and benefits from Section 409A of the Code and/or preserve the
intended tax treatment of such payments or benefits, or (ii) comply with the
requirements of Section 409A of the Code. To the extent that any reimbursable
expenses are deemed to constitute compensation to Executive, such expenses
shall
be reimbursed by December 31 of the year following the year in which the expense
was incurred, provided that the foregoing shall not be construed so as to extend
the time by which reimbursements are to be made under Section 6 above. The
amount of any expense reimbursements that constitute compensation in one year
shall not affect the amount of expense reimbursements constituting compensation
that are eligible for reimbursement in any subsequent year, and Executive’s
right to reimbursement of any such expenses shall not be subject to liquidation
or exchange for any other benefit.
14
16. Withholding.
The
Company may withhold from any amounts payable under this Agreement such federal,
state, local or foreign taxes as shall be required to be withheld pursuant
to
any applicable law or regulation.
17. Entire
Agreement.
As of
the Effective Date, this Agreement, together with the agreements contained
in
the exhibits hereto, constitutes the final, complete and exclusive agreement
between Executive and the Company with respect to the subject matter hereof
and
replaces and supersedes any and all other agreements, offers or promises,
whether oral or written, made to Executive by the Company or any representative
thereof. Executive agrees that any such agreement, offer or promise is hereby
terminated and will be of no further force or effect, and that upon his
execution of this Agreement, Executive will have no right or interest in or
with
respect to any such agreement, offer or promise.
18. Amendment.
The
terms of this Agreement may not be amended or modified other than by a written
instrument executed by the parties hereto or their respective
successors.
19. Acknowledgement.
Executive
hereby acknowledges (a) that Executive has consulted with or has had the
opportunity to consult with independent counsel of his own choice concerning
this Agreement, and has been advised to do so by the Company, and (b) that
Executive has read and understands this Agreement, is fully aware of its legal
effect, and has entered into it freely based on his own judgment.
20. Governing
Law.
This
Agreement shall be governed by and construed in accordance with the laws of
the
State of New York, without regard to conflicts of laws principles
thereof.
21. No
Waiver.
Failure
by either party hereto to insist upon strict compliance with any provision
of
this Agreement or to assert any right such party may have hereunder shall not
be
deemed to be a waiver of such provision or right or any other provision or
right
of this Agreement.
22. Assignment.
This
Agreement is binding on and for the benefit of the parties hereto and their
respective successors, heirs, executors, administrators and other legal
representatives. Neither this Agreement nor any right or obligation hereunder
may be assigned by Executive.
23. Severability.
The
invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision of this
Agreement.
15
24. Construction.
The
parties hereto acknowledge and agree that each party has reviewed and negotiated
the terms and provisions of this Agreement and has had the opportunity to
contribute to its revision. Accordingly, the rule of construction to the effect
that ambiguities are resolved against the drafting party shall not be employed
in the interpretation of this Agreement. Rather, the terms of this Agreement
shall be construed fairly as to all parties hereto and not in favor or against
any party by the rule of construction abovementioned.
25. Counterparts.
This
Agreement may be executed in several counterparts, each of which shall be deemed
an original, but all of which shall constitute one and the same
instrument.
26. Captions.
The
captions of this Agreement are not part of the provisions hereof, rather they
are included for convenience only and shall have no force or effect.
[Signature
page follows]
16
IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date and
year first above written.
| CHANTICLEER HOLDINGS, INC. | ||
|
By:
|
/s/ Xxxxx
Xxxxxxx
|
|
|
Name:
|
Xxxxx
Xxxxxxx
|
|
|
Title:
|
Director
|
|
| EXECUTIVE | ||
|
/s/
Xxxxxxx Xxxxxx
|
||
17
