EMPLOYMENT AGREEMENT
This
Employment Agreement (the “Agreement”)
is
entered into as of the 15th
day of
October 2007, by and between KnowFat Franchise Company, a Delaware corporation,
with a business address of 000 Xxxxxxxxxx Xx. Xxxxx 000 Xxxxxx, XX 00000 (the
“Company”),
and
Xxxxxx Xxxxxxx, an individual with a residence address of 00 Xxxxxxxx Xxxxxx,
Xxxxxx, XX 00000 (the “Executive”).
INTRODUCTION
1. The
Company is in the better-for-you restaurant and nutritional product retail
business (the “Business”).
2. The
Company wishes to employ the Executive as its Chairman and Chief Executive
Officer pursuant to the terms and conditions set forth herein.
3. The
Executive desires to be employed by the Company, pursuant to the terms and
conditions set forth herein.
AGREEMENT
In
consideration of the premises and mutual promises herein below set forth, the
parties hereby agree as follows:
1. Employment
Period.
The
term of the Executive’s employment by the Company pursuant to this Agreement
(the “Employment
Period”)
shall
commence on the date hereof and shall continue for a period of three (3) years.
Thereafter, the Employment Period shall automatically renew for successive
periods of one (1) year, unless either party shall have given to the other
at
least ninety (90) days’ prior written notice of their intention not to renew the
Executive’s employment prior to the end of the Employment Period or the then
applicable renewal term, as the case may be. In any event, the Employment Period
may be terminated as provided herein.
2. Employment;
Duties.
Subject
to the terms and conditions set forth herein, the Company hereby employs the
Executive to act as Chairman and Chief Executive Officer of the Company during
the Employment Period, and the Executive hereby accepts such employment. The
duties assigned and authority granted to the Executive shall be as determined
by
the Board of Directors (the “Board”)
from
time to time. The Executive agrees to perform his duties for the Company
diligently, competently, and in a good faith manner.
3. Salary.
(a) Base
Salary. The
Executive shall be entitled to receive a salary from the Company during the
Employment Period at the rate of no less than Three Hundred Thousand ($300,000)
per year (the “Base
Salary”),
payable in accordance with the Company’s customary payroll practices. Beginning
on the second anniversary date of this Agreement, the Executive’s Base Salary
may be increased, but not decreased, on each anniversary date of this Agreement,
at the Board’s sole discretion.
(b) Equity
Payments. In
addition to the Base Salary, it is intended that the Executive shall receive
options to purchase one million five hundred thousand (1,500,000) shares of
the
common stock of UFood Restaurant Group, Inc. (the “Options”).
The
Options shall terminate ten (10) years from the date hereof, be exercisable
at
$1.00 per share, and vest and be exercisable as follows: (a) five hundred
thousand (500,000) Options shall vest upon the closing of the merger between
the
Company and a wholly-owned subsidiary of UFood Franchise Restaurant Group,
Inc.
(the “Merger
Date”);
and
(b) one million (1,000,000) Options shall vest in equal amounts on the first
day
of each month for thirty-six months. Notwithstanding the termination of this
Agreement for any cause, the Executive shall receive the Options pursuant to
the
terms set forth herein. The Options shall be granted pursuant to the 2007 Equity
Incentive Plan of UFood Restaurant Group, Inc., and the Company shall use its
best efforts to cause UFood Restaurant Group, Inc. to issue these Options as
of
the Merger Date.
(c) Franchise
and Development Fees. In
addition to the foregoing, upon the consummation by the Company of the sale
of
any franchise restaurant, the Company shall pay the Executive a franchise fee
of
$10,000 (the “Franchise
Fee”).
To
the extent any franchise transaction is a part of an Area Development Agreement,
the Franchise Fee shall be payable by the Company to the Executive upon
consummation of the franchise sale as follows : (i) $5,000 in cash, and (ii)
the
remaining portion of such Franchise Fee shall be paid in such number of shares
of the Company’s common stock having an aggregate value of $5,000 on the date
such Franchise Fee is due.
4. Bonus.
The
Executive’s annual bonus (if any) shall be in such amount as the Board may
determine in its sole discretion. The Executive shall be eligible to participate
in any bonus or other incentive program established by the Company for
executives of the Company.
5. Other
Benefits
(a) Insurance
and Other Benefits.
During
the Employment Period, the Executive shall be entitled to participate in the
Company’s insurance programs and any ERISA benefit plans, as the same may be
adopted and/or amended from time to time (the “Benefits”).
The
Executive shall be entitled to paid personal days on a basis consistent with
the
Company’s other senior executives. The Executive shall be bound by all of the
policies and procedures established by the Company from time to
time.
(b) Vacation.
During
the Employment Period, the Executive shall be entitled to an annual vacation
of
such duration consistent with the Company’s policies from time to
time.
(c) Expense
Reimbursement.
The
Company shall reimburse the Executive for all reasonable business, promotional,
travel and entertainment expenses ("Reimbursable
Expenses")
incurred or paid by him during
the Employment Period in the performance of his services
under this Agreement, provided that the Executive furnishes to the Company
appropriate documentation required by the Internal Revenue Code in a timely
fashion in connection with such expenses and shall furnish such other
documentation and accounting as the Company may from time to time reasonably
request.
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6. Termination;
Compensation Due Upon Termination of Employment.
The
Executive's employment hereunder may terminate as provided in paragraphs (a)
through (e) below, and subject to those payments to Executive that expressly
survive the termination of this Agreement as set forth in Section 3 hereof,
the
Executive’s right to compensation for periods after the date his employment
with the Company terminates shall be determined in accordance with the
provisions of paragraphs (a) through (e) below:
(a) Voluntary
Resignation.
The
Executive may terminate his employment
at any time upon sixty (60) days prior written notice to the Company. In the
event of the Executive's voluntary termination of employment, the Company shall
have no obligation to make payments to the Executive in accordance with the
provisions of Sections 3 or 4, or, except as otherwise required by law, to
provide the benefits described in Section 5, for periods after the date on
which
the Executive's employment with the Company terminates due to the Executive
's
voluntary resignation, except for the payment of the Executive’s Base Salary
accrued through the date of such resignation.
(b) Discharge
for Cause.
Upon
(i) written notice to the Executive, and (ii) Executive’s failure to cure such
default within 30 days of receipt of notice, the Company may terminate the
Executive’s employment for Cause if any of the following events shall
occur:
(i) the
Executive’s continued and willful refusal or neglect to satisfactorily perform
and discharge his material duties and responsibilities;
(ii) the
Executive’s gross misconduct that is injurious to the Company or the Executive’s
ability to perform his duties and responsibilities hereunder;
(iii) the
Executive’s fraud, embezzlement or other acts of dishonesty;
(iv) the
Executive’s conviction of, or entry of a plea of guilty or nolo contendere to, a
felony or a crime;
(v) the
Executive’s willful or prolonged absence from work (other than by reason of
disability due to physical or mental illness); or
(vi) the
Executive’s breach of his obligations
under Section 7 or Section 8.
In
the
event Executive is terminated for “Cause,” the Company shall have no obligation
to make payments to Executive in accordance with the provisions of Sections
3 or
4, or, except as otherwise required by law, to provide the benefits described
in
Section 5, for periods after the Executive's employment with the Company is
terminated on account of the Executive's discharge for cause except for the
Executive’s base salary accrued through the date of such
termination.
(c) Disability. The
Company shall have the right, but shall not be obligated to terminate the
Executive's employment hereunder in the event the Executive becomes disabled
such that he is
unable
to discharge his duties
to
the Company for a period of ninety (90) consecutive days or one hundred twenty
(120) days in any one hundred eighty (180) consecutive day period (a
"Permanent
Disability").
In
the event of a termination of employment due to a Permanent Disability, then
the
Company shall be obligated to continue to make payments to the Executive in
an
amount equal to Executive’s then-current Base Salary and Benefits for the
Severance Period (as defined below), payable in the form of salary continuation
for the applicable Severance Period after the Executive’s employment with the
Company is terminated due to a Permanent Disability. A determination of a
Permanent Disability shall be made by a physician satisfactory to both the
Executive and the Company; provided,
however,
that if
the Executive and the Company do not agree on a physician, the Executive and
the
Company shall each select a physician and those two physicians together shall
select a third physician, whose determination as to a Permanent Disability
shall
be binding on all parties.
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(d) Death. The
Executive's employment hereunder shall terminate upon the death of the
Executive. The Company shall be obligated to continue to make payments in an
amount equal to Executive’s then-current Base Salary and Benefits for the
Severance Period following his death, payable to the Executive's beneficiary,
as
the Executive shall have indicated in writing to the Company (or if no such
beneficiary has been designated, to Executive’s estate).
(e) Termination
for Good Reason or Without Cause.
The
Executive may terminate this Agreement at any time for Good Reason. In the
event
that this Agreement is terminated by the Executive for Good Reason or this
Agreement is terminated by the Company without Cause, the Company shall pay
to
the Executive severance in an amount equal to the Executive’s then-current Base
Salary and Benefits for a period (the “Severance
Period”)
equal
to the lesser of (i) 12 months or (ii) the remainder of the then-current
Employment Period, payable in the form of salary continuation for the applicable
Severance Period following the Executive’s termination, subject to the Company’s
regular payroll practices and required withholdings. For the purposes of this
Agreement, “Good Reason” shall mean any of the following (without Executive’s
express written consent): (i) removal of Executive from his position
as Chairman
and Chief Executive Officer; (ii) a reduction by Company in Executive’s
then current annual base salary or other compensation, unless said reduction
is
pari passu with other senior executives of the Company; (iii) the taking of
any action by the Company that would, directly or indirectly, materially reduce
Executive’s benefits, unless said reductions are pari passu with other senior
executives of the Company; or (iv) breach by Company of any material term
of this Agreement that is not cured by Company within 30 days following receipt
by Company of written notice thereof.
7. Non-Competition;
Non-Solicitation.
Unless
Executive terminates this Agreement pursuant to Section 6(e), for the duration
of the Employment Period and three (3) years following the Employment Period
(the “Non-compete
Period”),
the
Executive shall not, directly or indirectly, engage or invest in, own, manage,
operate, finance, control or participate in the ownership, management,
operation, financing, or control of, be employed by, associated with, or in
any
manner connected with, lend any credit to, or render services or advice to,
any
business, firm, corporation, partnership, association, joint venture or other
entity that engages or conducts any business the same as or substantially
similar to the Business or currently proposed to be engaged in or conducted
by
the Company or included in the future strategic plan of the Business, anywhere
within the United States of America; provided,
however,
that the
Executive may own less than 5% of the outstanding shares of any class of
securities of any enterprise (but without otherwise participating in the
activities of such enterprise) if such securities are listed on any national
or
regional securities exchange or have been registered under Section 12(g) of
the
Securities Exchange Act of 1934, as amended.
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During
the Employment Period and the Non-compete Period, Executive will not and will
not cause another person, business or commercial enterprise, without the express
prior written approval of the Company, to hire, recruit, solicit or otherwise
induce or influence any proprietor, partner, stockholder, lender, director,
officer, employee, sales agent, joint venturer, investor, lessor, customer,
consultant, agent, representative or any other person which has a business
relationship with the Company or had a business relationship with the Company
to
discontinue or reduce such employment, agency or business
relationship.
The
Executive recognizes and agrees that because a violation by him of
his obligations
under this Section 7 will cause irreparable harm to the Company that would
be
difficult to quantify and for which money damages would be inadequate, the
Company shall have the right to injunctive relief to prevent or restrain any
such violation, without the necessity of posting a bond. The Non-compete Period
will be extended by the duration of any violation by the Executive of any of
his obligations
under this Section 7.
The
Executive expressly agrees that the character, duration and scope of the
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 the covenant
not to compete is unreasonable in light of the circumstances as they then exist,
then it is the intention of both the Executive and the Company that the covenant
not to compete shall be construed by the court in such a manner as to impose
only those restrictions on the conduct of the Executive which are reasonable
in
light of the circumstances as they then exist and necessary to assure the
Company of the intended benefit of the covenant to compete.
8. Confidentiality
Covenants.
(a) The
Executive understands that the Company, from time to time, may impart to him
confidential business information, whether such information is written, oral
or
graphic, including, but not limited to, financial plans and records, marketing
plans, business strategies and relationships with third parties, present and
proposed products, trade secrets, information regarding customers and suppliers,
strategic planning and systems and contractual terms (collectively “Confidential
Information”).
The
Executive hereby acknowledges Company’s exclusive ownership of such Confidential
Information.
(b) The
Executive agrees as follows: (1) only to use the Confidential Information to
provide services to Company; (2) only to communicate the Confidential
Information to fellow employees, agents and representatives on a need-to-know
basis; and (3) not to otherwise disclose or use any Confidential Information.
Upon demand by Company or upon termination of the Executive’s employment, the
Executive will deliver to Company all manuals, photographs, recordings and
any
other instrument or device by which, through which or on which Confidential
Information has been recorded and/or preserved, which are in the Executive’s
possession, custody or control.
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9. Executive’s
Representation.
The
Executive hereby represents that his entry
into this Employment Agreement will not violate the terms or conditions of
any
other agreement to which the Executive is a party.
10. Technology
Ownership.
The
Executive hereby assigns to the Company all inventions, discoveries, designs,
trade secrets, formulae, processes, methods, techniques, mask works,
improvements, developments, concepts, computer programs, databases and works
which the Executive may make or acquire during the term of his employment
hereunder, whether or not during working hours and whether made solely or
jointly with others, that (1) are related to the Business of the Company at
the
time they are made or acquired, or (2) are made using the equipment, supplies,
facilities, or proprietary information of the Company, as well as all patents,
patent applications, copyrights, copyright registrations and all other
intellectual property rights which cover, protect or are embodied in any of
the
foregoing.
11. Arbitration.
In the
event of any breach arising from the performance of this Agreement, either
party
may request arbitration. In such event, the parties will submit to arbitration
by a qualified arbitrator with the definition and laws of the Commonwealth
of
Massachusetts. Such arbitration shall be final and binding on both
parties.
12. Governing
Law/Jurisdiction.
This
Agreement and any disputes or controversies arising hereunder shall be construed
and enforced in accordance with and governed by the internal laws of the
Commonwealth of Massachusetts other than principles of law that would apply
the
law of another jurisdiction. The parties agree that this Agreement was made
and
entered into in the Commonwealth of Massachusetts and, subject to Section 11,
each party hereby consents to the jurisdiction of any competent federal or
state
court within the Commonwealth of Massachusetts to hear any dispute arising
out
of this Agreement.
13. Entire
Agreement.
This
Agreement constitutes the entire agreement between the parties hereto with
respect to the subject matter hereof and thereof and supersedes and cancels
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.
14. Notices.
All
notices, requests, demands and other communications called for or contemplated
hereunder shall be in writing and shall be deemed to have been given when
delivered to the party to whom addressed or when sent by telecopy (if promptly
confirmed by registered or certified mail, return receipt requested, prepaid
and
addressed) to the parties, their successors in interest, or their assignees
at
the following addresses, or at such other addresses as the parties may designate
by written notice in the manner aforesaid:
(a) to
the
Company at:
KnowFat
Franchise Company
000
Xxxxxxxxxx Xx. Xxxxx 000
Xxxxxx,
XX 00000
Attn:
Xxxxxxx Xxxxxxx
Fax:
000-000-0000
6
with
a
copy to:
Xxxxxxxx
& Xxxx LLP
000
Xxxx
Xxxx Xxxxxx
Xxxxxxxx,
Xxxxxxxxxxx 00000
Attn:
Xxxxxxx X. Xxxxxx
Fax:
(000) 000-0000
(b) to
the
Executive at:
00
Xxxxxxxx Xx.
Xxxxxx,
XX 00000
Fax:
___________________
All
such
notices, requests and other communications will (i) if delivered personally
to
the address as provided in this Section 14, be deemed given upon delivery,
(ii)
if delivered by facsimile transmission to the facsimile number as provided
for
in this Section 14, be deemed given upon facsimile confirmation, (iii) if
delivered by mail in the manner described above to the address as provided
for
in this Section 14, be deemed given on the earlier of the third business day
following mailing or upon receipt and (iv) if delivered by overnight courier
to
the address as provided in this Section 14, be deemed given on the earlier
of
the first business day following the date sent by such overnight courier or
upon
receipt (in each case regardless of whether such notice, request or other
communication is received by any other person to whom a copy of such notice
is
to be delivered pursuant to this Section 14). Either party may, by notice given
to the other party in accordance with this Section 14, designate another address
or person for receipt of notices hereunder.
15. 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 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.
16. 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.
17. Successors
and Assigns.
This
Agreement shall be binding upon the Company and any successors and assigns
of
the Company. Neither this Agreement nor any right or obligation hereunder may
be
assigned by the Executive. The Company may assign this Agreement and its right
and obligations hereunder, in whole or in part.
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18. Counterparts.
This
Agreement may be executed in multiple counterparts, each of which shall be
deemed an original, and all of which together shall constitute one and the
same
instrument.
19. Headings.
Headings in this Agreement are for reference purposes only and shall not be
deemed to have any substantive effect.
20. Opportunity
to Seek Advice.
The
Executive acknowledges and confirms that he has had the opportunity to seek
such
legal, financial and other advice and representation as he has deemed
appropriate in connection with this Agreement.
21. Withholding
and Payroll Practices.
All
salary, severance payments, bonuses or benefits provided by the Company under
this Agreement shall be net of any tax or other amounts required to be withheld
by the Company under applicable law and shall be paid in the ordinary course
pursuant to the Company’s then existing payroll practices.
[the
next page is the signature page]
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IN
WITNESS WHEREOF, the parties have executed this Agreement as of the date first
written above.
|
KnowFat
Franchise Company,
a
Delaware company
|
||
| |
|
|
| By: | /s/ Xxxx Xxxxx | |
|
Name:
Xxxx Xxxxx
Title:
Secretary
|
||
| Witness: | EXECUTIVE: | |
| |
|
|
| ________________________ | /s/ Xxxxxx Xxxxxxx | |
| Name: |
Name: Xxxxxx Xxxxxxx |
|
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