EXHIBIT 99.01
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EMPLOYMENT AGREEMENT, dated as of September 8, 2003 (this
"AGREEMENT"), between Sbarro, Inc., a New York corporation (the "COMPANY"), and
Xxxxxxx X'Xxxxxxx, ("EXECUTIVE").
Recitals
The Company desires to employ Executive as the Company's
President and Chief Executive Officer ("CEO"), subject to the terms and
conditions of this Agreement and its Exhibits.
The Executive (a) after reviewing and fully understanding all
information concerning the Company which has been filed with, and is
publicly available from, the Securities and Exchange Commission, (b)
being cognizant that the Company has elected to be, and currently is,
treated as a subchapter S corporation for federal income tax purposes
and has no present intention to change such status, and (c) after
meeting with Company officers and directors and having all of his
questions concerning the Company answered to his reasonable
satisfaction, desires to accept such employment.
NOW, THEREFORE, in consideration of the mutual promises,
agreements and covenants contained herein, the parties agree as follows:
1. Term. Executive's employment by the Company hereunder shall commence
on September 8, 2003 (the "COMMENCEMENT DATE") and continue until December 31,
2006, unless earlier terminated as provided elsewhere in this Agreement (the
"TERM"). If the Company determines not to offer continued employment to
Executive upon expiration of the Term, the Company shall give Executive at least
four (4) months prior written notice thereof, and if such notice is not given
then the Term shall be deemed to have been automatically extended, although not
for any stated period, until four (4) months prior written notice of termination
is thereafter given by the Company to Executive.
2. Duties.
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2.1 Executive shall, during the Term, use his best efforts to
faithfully perform the duties of President and Chief Executive Officer of the
Company (pursuant to which he shall have complete authority over the day-to-day
operations and business of the Company in accordance with the Company's approved
budgets and business plans, including without limitation its investments in
joint venture operations), and shall perform such other duties, commensurate
with his position, as shall be specified and designated from time to time by the
Company's Board of Directors (the "BOARD") and its Chairman (the "CHAIRMAN").
Executive shall, during the Term, devote his full business time, effort, skills
and loyalty to effectively perform his duties and further the business of the
Company; provided, however, that Executive may continue to act as a director of
Champps Entertainment, Inc. (and retain all compensation therefrom) and as a
director of Boston Intercity School Program, a Massachusetts not-for- profit
entity (for which he receives no compensation, other than reimbursement for
expenses) so long as such directorships do not interfere, in any material
respect, with the performance of Executive's duties and responsibilities to the
Company. Executive shall report to the Chairman and to the Board, and shall
promptly disclose, at appropriate times, all material developments relating to
the Company so as to enable the Company to obtain the most effective use of
Executive's services and the business opportunities that come to Executive's
attention.
2.2 Executive shall be elected to the Board and shall serve on the
Board without additional compensation for such services. Upon his termination as
an employee of the Company, Executive shall be deemed to have simultaneously
tendered his resignation as a member of the Board, unless he has resigned such
directorship prior thereto. Executive, during the Term, shall continue to be
elected as a director at each annual meeting of the shareholders, unless
Executive has been removed from the Board for cause in accordance with the New
York Business Corporation Law. During the Term,
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Executive may nominate for election to the Board other qualified individuals for
consideration by the Board and the Company's stockholders.
2.3 Executive shall be subject to the rules, regulations and policies
of the Company involving the general conduct of business of the Company in force
from time to time, as applicable to senior executives of the Company, and shall
adhere in all material respects to such applicable rules, regulations and
policies; provided, however, that such rules, regulations and policies are not
illegal and that Executive (a) has been made aware thereof by delivery to him of
a written document(s) containing such rules, regulations and policies, or (b)
has participated in establishing such rules, regulations and policies. In
performance of Executive's duties hereunder, Executive shall comply, in all
material respects, with applicable laws, rules and regulations applicable to the
Company and its business that.
2.4 During the Term, and any time thereafter, Executive agrees to give
prompt written notice to the Company of any claim or injury relating to the
Company, and, until the expiration of applicable statute of limitations, to
fully cooperate in good faith and to the best of Executive's ability with the
Company in connection with all pending, potential or future claims,
investigations or actions which directly or indirectly relate to any
transaction, event or activity about which Executive has knowledge. Such
cooperation shall include all assistance that the Company, its counsel or its
representatives may reasonably request, including reviewing and interpreting
documents, meeting with counsel at a mutually and reasonably convenient time and
location (depending on the circumstances), providing factual information and
material, and appearing or testifying as a witness. Executive shall be
reimbursed for all reasonably incurred out-of-pocket expenses which he incurs in
connection with his rendering his assistance hereunder. After the Term, his
assistance may be given telephonically, unless the same is not reasonably
practicable, and reasonable advance notice of the need for his assistance will
be given to the extent practicable.
2.5 Executive shall relocate his residence and family to Nassau County
or Suffolk County, New York no later than the first anniversary of the date of
this Agreement. Although Executive will perform his duties at the Company's
principal headquarters in the greater New York metropolitan area, he understands
that his responsibilities require substantial travel in connection with the
Company's national and international operations.
3. Compensation
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3.1 Salary. The Company shall pay Executive during the Term a base
salary in accordance with the customary payroll practices of the Company, at the
rate of $450,000 per annum, which amount may be increased (but not decreased)
from time to time at the sole discretion of the Board (such amount, as may be so
increased, the "BASE SALARY").
3.2 Annual Bonus. In addition to his Base Salary, Executive shall be
eligible to receive an annual performance bonus during the Term (the "ANNUAL
BONUS"), the maximum amount of which shall be in the sole discretion of the
Board. The Annual Bonus shall be divided into two components. Seventy-five
percent (75%) of the Annual Bonus shall be based upon achievement of stated
increases in the Company's EBITDA and twenty-five percent (25%) of the Annual
Bonus shall be based upon attainment of stated objectives, as set forth from
time to time in the Company's annual strategic business plan and budget approved
by the Board (the "STRATEGIC BUSINESS Plan"). The first Annual Bonus shall
accrue with respect to the year ended December 31, 2004 and shall not be less
than $112,500. The Annual Bonus for each calendar year thereafter shall accrue
as of December 31 of such year. Each Annual Bonus shall be payable no later than
the date that the Company files its Annual Report on Form 10-K with the
Securities and Exchange Commission with respect to such year. Executive shall
develop and propose to the Board a strategic business plan (containing, among
other items and on a Company
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fiscal quarter basis, stated business objectives to be accomplished and an
EBITDA goal) and proposed budget no later than December 1 of each year,
commencing with December 1, 2003, for the next succeeding calendar year and in
time for the Board to consider, review, discuss, modify and approve the
Strategic Business Plan for the next ensuing year. The proposed strategic
business plan and budget to be proposed to the Board no later than December 1,
2003 shall have, as a priority, an immediate focus on operations' improvement,
with an emphasis placed on profitability and free cash flow generation.
3.3 Withholding. All payments of Base Salary and Annual Bonus shall be
subject to applicable withholding taxes and other legally required payroll
deductions. Executive shall provide the Company with all information reasonably
requested by the Company with respect thereto.
3.4 Benefits. Executive shall, during the Term, be entitled to
participate in all of the Company's employee benefits plans, to the extent
permitted by the terms of each such plan, on the same terms and conditions made
available to other executive level employees of the Company except that, with
respect to life insurance, the Company shall maintain and pay the premiums for a
$1,000,000 term insurance policy on Executive's life, as to which Executive
shall designate the beneficiary from time to time; provided, however, that
Executive is insurable at substantially normal rates, in addition to such
insurance, if any, which may be provided under group insurance plans generally
provided to employees of the Company or insurance obtained for the benefit of
the Company. If requested by the Company, Executive shall cooperate with the
Company in applying for and obtaining key-man insurance, in such amounts as
determined by the Company from time to time, for the benefit of the Company.
Nothing herein shall be construed to require the Company to establish any plans
not in existence on the date hereof, or to prevent the Company from modifying or
terminating any such plans. Executive affirms that, to his knowledge, he
currently is in good health, with no chronic or recurring illness, is physically
and mentally able to perform his duties under this Agreement and is insurable at
normal rates.
3.5 Special Incentive Program.
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(a) Executive is being granted, simultaneously herewith, a
special incentive award which will reward Executive for increases in the value
of the Company during Executive employment with the Company (the "SPECIAL
AWARD"). Unless the Special Award has been cancelled at or prior to the time of
Executive's termination with the Company, the Special Award shall vest upon such
termination and Executive shall be paid the Special Award, with interest at the
lesser of (i) five percent (5%) per annum, or (ii) the then prime rate in effect
(as published in The New York Times) on the date of such termination, in twelve
(12) equal quarterly installments of interest and principal, the first such
payment being due on the first day of the first calendar month which occurs
three (3) months after Executive's termination of employment. The amount of the
Special Award shall be based upon the Company's EBITDA for the four (4) most
recent fiscal quarters of the Company which have been filed by the Company with
the Securities and Exchange Commission and shall be determined as follows:
Baseline Calculation: The Company's EBITDA for the twelve (12) months ended
the end of its second fiscal quarter 2003, as adjusted, multiplied by five
(5), to which is (i) added the Company's cash and cash items (including
marketable securities) as of such date, and (ii) deducted the Company's
long-term debt (excluding mortgage debt) as of such date. A calculation of
the Baseline Calculation is attached hereto as Exhibit A.
Termination Calculation: At the time of Executive's termination of
employment, a similar calculation (using the same methodology) shall be made,
which shall be based upon the information filed by the Company with the
Securities and Exchange Commission for the most recent twelve (12) month
period then ended. The difference between the Termination Calculation and the
Baseline Calculation shall then be multiplied by eight and one-half percent
(8 1/2%), and eighty percent (80%) of such result shall be the amount of the
Special Award; provided, however, that if the Executive's termination of
employment occurs (i) prior to the first anniversary of the
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commencement of the Term, the Special Award shall be zero, (ii) after the
first anniversary of the commencement of the Term and before January 1, 2005,
the Special Award shall be reduced by seventy-five percent (75%), or (iii)
after December 31, 2004 and before January 1, 2006, the Special Award shall
be reduced by fifty percent (50%).
(b) The Special Award shall be automatically cancelled and
extinguished, and shall be of no further force and effect, if the employment of
Executive is terminated for Cause or if Executive terminates his employment with
the Company for other than Good Reason.
(c) The Special Award shall be automatically cancelled and
extinguished, and shall be of no further force and effect, upon (i) the
consummation of a public offering of the Company's common stock, or (ii) any
change in the ownership or effective control of the Company (other than changes
which occur within the group of shareholders constituting the current holders of
the Company's common stock, members of their families and trusts for their
respective benefits), including without limitation (a) the sale of fifty percent
(50%) or more of the voting securities or assets of the Company, (b) the
liquidation or dissolution of the Company, and/or (c) the merger of the Company
with another entity whereby the shareholders of the Company as of the date
immediately preceding the effective date of the merger do not own 50% or more of
the outstanding voting power of the resulting entity as of the effective date of
the merger (the first of any such events being the "SPECIAL EVENT").
(d) If Executive is in the employment of the Company under
this Agreement at the time of the Special Event, Executive shall receive, within
twenty (20) business days after such Special Event a special bonus (the "SPECIAL
EVENT Bonus"), payable in cash (unless Executive and the Company agree
otherwise). The Special Event Bonus shall be in an amount equal to (i) six
hundred thousand (600,000) (provided, however, that such number shall be
proportionately adjusted for any increase or decrease in the number of
outstanding shares of the Company's common stock which is effected without the
receipt of adequate consideration, in each case as determined by the Board in
its good faith sole discretion), multiplied by (ii) (A) (1) the per share public
offering price, minus the per share expenses (including without limitation any
underwriting discounts and commissions), as reported to the Securities and
Exchange Commission, if the Special Event is a public offering, (2) the amount
paid per share of common stock (net of expenses) if the Special Event is the
sale (other than through the consummation of a public offering) of voting
securities, (3) the amount paid (net of expenses) for the Company's assets
(proportionately increased if less than all of such assets are sold), divided by
the number of then outstanding shares of the Company's common stock, if the
Special Event is the sale of assets, (4) the per share consideration paid to the
stockholders of the Company for their shares of the Company's common stock, if
the Special Event is a merger (and if such per share consideration includes
securities of the surviving entity, than the fair market value of such
securities at the time of the merger), or (5) the per share liquidation proceeds
paid to the Company's stockholders, if the Special Event is the liquidation or
dissolution of the Company, minus (B) eight dollars and eighty-one cents
($8.81).
3.6 Expenses. The Company shall pay, or reimburse Executive, for all
reasonable out-of-pocket expenses actually incurred by Executive during the Term
in the performance of Executive's services under this Agreement. Executive shall
submit proof of such expenses (including, in the case of reimbursements, proof
of payment), with the properly completed forms as prescribed from time to time
by the Company once each month; provided, however, that such proof is submitted
within a reasonable time after such expenses have been so incurred (and, in the
case of reimbursements, have been actually paid).
3.7 Vacation. During the Term, Executive shall be entitled to four (4)
weeks of annual vacation in accordance with the Company's standard policies in
effect from time to time regarding vacation time and accrual thereof. Vacation
shall be taken at times when reasonably appropriate, given
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Executive's responsibilities and consistent with the needs of the Company.
Executive shall be entitled to sick and personal days in accordance with Company
policy.
3.8 Automobile. During the Term, the Company shall provide Executive
with a leased Mercedes S430, Lexus LS430 or Cadillac Sedan de Ville, as
determined by Executive. The Company shall provide insurance for such vehicle
under its automobile insurance policy in effect from time to time and shall
provide Executive with a gasoline credit card for such vehicle.
3.9 Relocation Expenses. The Company shall pay all of the following
expenses reasonably incurred by Executive in connection with Executive's (and
his family's) relocation of his principal residence from Ponte Vedra, Florida to
New York; provided, however, that any individual expense (or group of related
expenses) reasonably expected to be in excess of $5,000 shall be submitted to
the Chairman for consent, which consent shall not be unreasonably withheld or
delayed:
(a) moving, storage, shipping, packing and unpacking of
Executive's (and his family's) household furnishings and belongings;
(b) up to three (3) house-hunting trips, if necessary, for
Executive's spouse (and his children) to New York for the purpose of assisting
Executive in locating and obtaining a new principal residence in New York; and
(c) temporary housing expenses for Executive (but not beyond
the first anniversary of the Commencement Date) of up to a maximum of $5,000 per
month, including food, lodging and other incidental living expenses.
To the maximum extent possible, all relocation payments shall be made by the
Company directly to the persons or entities providing goods or services.
Executive shall be required to obtain and submit to the Company receipts and/or
other documentation, reasonably satisfactory to the Company, to evidence all
relocation expenses. Executive shall be entitled to receive an additional
payment hereunder (a "RELOCATION GROSS-UP PAYMENT") in an amount equal to any
increase in Executive's income and payroll taxes attributable to any relocation
expenses paid to or on behalf of Executive, including an amount equal to any
additional income and payroll taxes which are imposed on the Relocation Gross-Up
Payment, such that Executive retains an amount of the Relocation Gross-Up
Payment equal to the income tax imposed on account of the payment of his
relocation expenses. The Relocation Gross-Up Payment shall be paid to Executive
within ten (10) business days after submission to the Company of an appropriate
calculation showing the amount of increases in such taxes attributable to the
payment of Executive's relocation expenses; provided, however, that no such
payment shall be made to Executive prior to the time that such taxes are due.
4. Disability or Death.
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4.1 Disability. If Executive fails, due to disability or incapacity,
either physical or mental, to perform substantially and continuously all of the
material and essential duties assigned to him for a period of more than ninety
(90) consecutive days or for one hundred and twenty (120) non-consecutive days
out of any consecutive one (1) year period, the Company may terminate
Executive's employment by written notice to Executive delivered at least ten
(10) calendar days prior to the effective date of his termination; provided,
however, that if Executive becomes disabled or incapable of performing such
duties, which disabilities or incapacities are reasonably expected to continue
for more than ninety (90) consecutive days, the Company may forthwith terminate
Executive's employment on ten (10) calendar days written notice to Executive.
The determination as to whether Executive is disabled or incapable of performing
his duties hereunder or whether his disabilities or incapacities are expected to
endure, shall be made by a disinterested physician jointly selected by Executive
and the Board (or its Chairman); provided, however, that if a disinterested
physician can not be selected within fifteen (15)
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calendar days of the Company's written request therefor, the Company shall have
the right to request the Medical Society of Suffolk or Nassau County to select a
qualified disinterested physician to conduct an appropriate examination and such
physician's determination as to Executive's disability or incapacity shall be
final and binding. Executive shall submit to examination by such physician at
such reasonable times and places as may be requested by the Company, and any
failure by Executive to submit to such examination schedule shall be deemed a
binding admission by Executive of his disability or incapacity.
4.2 Termination Payments. Upon death or termination of employment by
virtue of disability or incapacity, Executive (or Executive's estate or
beneficiaries in the case of the death of Executive) shall have no right to
receive any compensation or benefit hereunder on and after the effective date of
the termination of employment other than (i) Base Salary earned and accrued
under this Agreement prior to the effective date of termination, (ii)
continuation of Base Salary for a period of four (4) months; provided, however,
that the Company may deduct therefrom any disability payments received by
Executive from the Company or from insurance paid for by the Company, (iii)
accrued benefits (including without limitation compensation for accrued
vacation) in accordance with and subject to the terms of the Company's benefit
plans and policies, (iv) the Special Award or Special Event Bonus, if any, and
(v) reimbursement, in accordance with the terms of this Agreement, for business
and relocation expenses properly incurred prior to the effective date of
termination.
4.3 Payment After Death. In the event of Executive's death, any
payments by the Company shall be made to the executors or administrators of
Executive's estate against the delivery of such documents as the Company may
reasonably request.
4.4 Termination of this Agreement. This Agreement, except for the
provisions of Section 4.2 - "Termination Payments," Section 6 - "Restrictive
Covenants" (to the extent applicable in accordance with its terms) and Section
7.4 - "Indemnification", shall otherwise terminate upon (a) the effective date
of the termination of employment if termination has been effected by disability
or incapacity, and (b) upon Executive's death, and Executive and his estate
shall have no further rights hereunder.
5. Certain Terminations of Employment
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5.1 Termination for Cause. The Company may terminate Executive for
Cause; provided, however, that the Company has given prior written notice of
such Cause to Executive (specifying in detail the nature of the Cause) and the
same has not been cured in all material respects or waived by the Board or the
Chairman within fifteen (15) calendar days after the giving of such notice.
During such time period, the Chairman or the Board, as the case may be, will be
available to meet with Executive (and Executive's legal counsel if requested by
Executive) upon three (3) calendar days' prior written notice, if requested by
Executive, which meeting if of the Board may be held telephonically. As used in
this Agreement, "Cause" means and shall be deemed to exist if, without the prior
written consent of the Chairman or the Board, Executive (a) commits a crime with
respect to which incarceration for more than fifteen (15) calendar days is
probable, (b) while acting on behalf of the Company or otherwise in the
performance of his duties for the Company, knowingly (i) submits false reports
(whether oral or in writing), lies or steals, (ii) commits an act (other than on
the advice of counsel) which is illegal, or (iii) commits a willful act of gross
misconduct or gross negligence, (c) knowingly partakes of illegal substances,
(d) engages in alcohol abuse to such an extent that Executive's ability to
properly fulfill his responsibilities to the Company in a manner reasonably
expected is impaired in any material respect, provided that Executive has
received at least one prior written warning from the Board or the Chairman with
respect to his alcohol abuse, (e) fails to follow any written Company policy
affecting all employees of the Company, which policy provides that such failure
shall result in termination of employment, or (f) fails to comply in any
material respect with the lawful and reasonable written direction of the Board
or the Chairman.
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5.2 Termination Without Cause. The Company may terminate Executive's
employment at any time and for any reason upon thirty (30) days' prior written
notice to Executive, which notice shall specify the effective date of such
termination.
5.3 Termination for Good Reason by Executive. Executive shall have the
right to terminate his employment with the Company for any reason at any time
and the Company shall have no right or remedy at law or in equity based on such
a termination. In addition, Executive may terminate his employment with the
Company for Good Reason; provided, however, that Executive has given thirty (30)
calendar days prior written notice of such Good Reason to the Chairman and to
the Board (specifying in detail the nature of the Good Reason) and the same
shall not have been cured in all material respects or waived by Executive within
such period of thirty (30) calendar days. As used in this Agreement, "GOOD
REASON" means and shall be deemed to exist if, without the prior express written
consent of Executive (a) Executive suffers a material change in his reporting
obligations, (b) Executive suffers a material decrease in the duties,
responsibilities or effective authority associated with his title and position,
as set forth in Section 2.1, (c) Executive's Base Salary is reduced, (d) the
Company fails to pay Executive's compensation provided for hereunder when due;
(e) the Company's principal headquarters is relocated outside of the greater New
York metropolitan area, or (f) the Company sells, transfers or otherwise
disposes of all or substantially all of the Company's assets or business, and
transfers its obligations under this Agreement to a successor, which successor
fails to expressly assume in writing all of the Company's obligations to
Executive under this Agreement.
5.4 Effects of Termination.
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(a) Termination for Cause. Notwithstanding any other provision of this
Agreement, if the Company terminates Executive's employment for Cause, such
action shall be without prejudice to any other rights or remedies that the
Company may have at law or in equity; and the Company shall have no further
obligation to Executive and Executive shall have no right to receive any
compensation or benefit from the Company, on and after the effective date of
such termination, other than (i) Base Salary earned and accrued under this
Agreement prior to such effective date of termination; (ii) accrued benefits
(including without limitation compensation for accrued vacation) in accordance
with and subject to the terms of the Company's benefit plans and policies, (iii)
any then earned, but unpaid, Annual Bonus with respect to the year prior to the
year in which termination occurs, payable on its normal payment date, and (iv)
reimbursement, in accordance with the terms of this Agreement, for business and
relocation expenses properly incurred prior to the effective date of
termination. This Agreement, except for the provisions of this Section 5.4(a),
Section 6 - "Restrictive Covenants" (to the extent applicable in accordance with
its terms) and Section 7.4 - "Indemnification", shall otherwise terminate upon
the effective date of the termination of employment and Executive shall have no
further rights hereunder.
(b) Termination Without Cause or for Good Reason. If Executive's
employment with the Company is terminated by the Company without Cause or by
Executive for Good Reason, Executive shall have no right to receive any
compensation or benefit from the Company, whether under this Agreement or
otherwise, on and after the effective date of the termination of employment
other than (i) Base Salary earned and accrued under this Agreement prior to the
effective date of termination, (ii) accrued benefits (including without
limitation compensation for accrued vacation) in accordance with and subject to
the terms of the Company's benefit plans and policies, (iii) any then earned,
but unpaid, Annual Bonus with respect to the year prior to the year in which
termination occurs, payable on its normal payment date, (iv) a pro rata portion
(based on the number of elapsed days) of Annual Bonus with respect to the year
in which termination occurs, payable on its normal payment date, (v) the Special
Award or Special Event Bonus, if any, (vi) reimbursement, in accordance with the
terms of this Agreement, for business and relocation expenses properly incurred
prior to the effective date of termination, and (vii) continuation of Base
Salary, only, for the period specified below, payable monthly in arrears:
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Time of Effective Date of Termination Salary Continuation Period
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On or before December 31, 2004 twelve (12) months
January 1, 2005 through December 31, 2005 eighteen (18) months
January 1, 2006 through December 31, 2006 twelve (12) months
This Agreement, except for the provisions of this Section 5.4(b), Section 6 -
"Restrictive Covenants" (to the extent applicable in accordance with its terms)
and Section 7.4 - "Indemnification", shall otherwise terminate upon the
effective date of the termination of employment and Executive shall have no
further rights hereunder. A condition precedent to the Company's obligation to
make the payments associated with a termination without Cause or for Good Reason
shall be Executive's execution and delivery of a release in the form attached
hereto as Exhibit B. If Executive shall fail to execute and deliver such
release, or if Executive revokes such release as provided therein, then in lieu
of the payments provided for herein, Executive shall receive a severance payment
determined in accordance with the Company's policies relating to notice and
severance.
(c) Termination Without Good Reason. Notwithstanding any other
provision of this Agreement, if Executive terminates his employment with the
Company other than for Good Reason, the Company shall have no further obligation
to Executive and Executive shall have no right to receive any compensation or
benefit from the Company, on and after the effective date of such termination,
other than (i) Base Salary earned and accrued under this Agreement prior to such
effective date of termination; (ii) accrued benefits (including without
limitation compensation for accrued vacation) in accordance with and subject to
the terms of the Company's benefit plans and policies, (iii) any then earned,
but unpaid, Annual Bonus with respect to the year prior to the year in which
termination occurs, payable on its normal payment date, and (iv) reimbursement,
in accordance with the terms of this Agreement, for business and relocation
expenses properly incurred prior to the effective date of termination. This
Agreement, except for the provisions of this Section 5.4(c), Section 6 -
"Restrictive Covenants" (to the extent applicable in accordance with its terms)
and Section 7.4 - "Indemnification", shall otherwise terminate upon the
effective date of the termination of employment and Executive shall have no
further rights hereunder.
6. Restrictive Covenants
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6.1 General Acknowledgement. Executive acknowledges that (a) his
employment by the Company, throughout the term of his employment, will bring him
into close contact with many confidential affairs of the Company, including
information about costs, profits, markets, sales, products, key personnel,
pricing policies, operational methods, technical processes and other business
affairs and methods and other information not readily available to the public,
and plans for future development, (b) the services to be performed by him under
this Agreement are of a special, unique, unusual, extraordinary and intellectual
character, (c) the business of the Company is international in scope, its
products and services are marketed throughout the world and the Company competes
with other entities that are or could be located in nearly any part of the
world, and (d) the nature of his services, position and expertise are such that
he is capable of competing with the Company from nearly any location in the
world. In recognition of the foregoing, Executive agrees that the restrictions
contained in this Article 6 are necessary for the protection of the trade
secrets, proprietary information and contractual relationships of the Company,
and are considered by Executive to be reasonable for such purpose. Executive
agrees that any breach by him of this Article 6 will cause the Company
substantial and irrevocable damage and, therefore, in the event of any such
breach, Executive agrees that he shall forfeit his right to receive the balance
of any compensation thereafter due him under this Agreement.
6.2 Non-Competition; Non-Solicitation.
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(a) During the term of Executive's employment with the Company,
Executive shall not, directly or indirectly, as an individual proprietor,
partner, stockholder, officer, executive, director, joint venturer, investor,
lender or in any other capacity whatsoever (other than solely as an inactive
investor (i) holding not more than one percent (1%) of the outstanding publicly
traded securities of an entity which is registered under section 12(b) or 12(g)
of the Securities Exchange Act of 1934 in which he is not part of any control
group of such entity, (ii) in The Ale House, a Florida based chain of affiliated
casual sports bars, or (iii) in such other enterprises as may be consented to in
writing by the Board, which consent shall not be unreasonably withheld or
delayed), engage in the business of developing, producing, managing, consulting
for, marketing or selling, whether at wholesale or at retail, or of performing,
providing or offering, products and/or services of the kind or type developed or
being developed, produced, marketed, sold, offered, provided or performed by the
Company while Executive is employed by the Company. For the avoidance of doubt,
and irrespective of any other business which may be engaged in by the Company,
it is acknowledged that the engagement in any business involving any of the
following would violate Executive's non-competition covenant: (i) Italian motif
quick service restaurants; and (ii) Italian motif quick casual restaurants. For
a period equal to the longer of one (1) year after Executive's termination of
employment with the Company or the period during which he is continuing to
receive his Base Salary following such termination, Executive shall not,
directly or indirectly, as an individual proprietor, partner, stockholder,
officer, executive, director, joint venturer, investor, lender or in any other
capacity whatsoever (other than solely as an inactive investor (x) holding not
more than one percent (1%) of the outstanding publicly traded securities of an
entity which is registered under section 12(b) or 12(g) of the Securities
Exchange Act of 1934 in which he is not part of any control group of such
entity, or (y) in The Ale House, a Florida based chain of affiliated casual
sports bars), or engage in any business involving (i) Italian motif quick
service restaurants, or (ii) Italian motif quick casual restaurants.
(b) During the term of Executive's employment with the Company and for
a period equal to the period provided in Section 6.2(a), Executive shall not,
directly or indirectly:
(i) Solicit or induce, or attempt to induce, any other person
or entity having any continuing or periodic contractual relationship with the
Company to terminate, reduce or materially alter their relationship with, or
otherwise cease negotiations and/or business activity with, the Company; or
(ii) Solicit, divert or take away, or attempt to divert or to
take away, the business or patronage of any persons who had a contractual
relationship with the Company or with whom the Company was involved in
negotiating any such relationship within six (6) months of Executive's effective
date of termination.
(c) If any restriction set forth in this Section 6.2 is found by a
court of competent jurisdiction to be unenforceable because it extends for too
long a period of time or over too great a range of activities or in too broad a
geographic area, it shall be interpreted to extend only over the maximum period
of time, range of activities or geographic areas as to which it may be
enforceable.
(d) Executive acknowledges that he is under no restriction of any
nature with any third party which would limit him, in any way, whatsoever, from
fully performing his duties under this Agreement.
6.3 Proprietary Information.
------------------------
(a) Executive acknowledges and agrees that, due to the uniqueness of
his position, information is available to him which is of such a highly
confidential and proprietary nature as to constitute a trade secret, and any
conduct by him which makes use of such information (except as part of the
performance of his duties on behalf of the Company) would be a breach of his
fiduciary duty to the
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Company. Accordingly, Executive agrees that all information and know-how,
whether or not in writing, of a private, secret or confidential nature
concerning the Company's business or financial affairs or business methods
received by him from the Company or of which he became aware during the term of
his employment (collectively "PROPRIETARY INFORMATION"), is and shall be the
exclusive property of the Company. Except as may be required by law, a court of
competent jurisdiction (including pursuant to a duly issued subpoena thereof) or
a governmental agency (in any which event Executive shall promptly notify the
Company thereof), Executive shall not disclose any Proprietary Information to
others outside the Company (except as part of the performance of his proper
duties on behalf of the Company), or use the same for any unauthorized purposes,
without written approval by the Chairman or the Board, either during or after
his employment, unless and until such Proprietary Information has become public
knowledge without fault of Executive.
(b) Executive agrees that all tangible material containing Proprietary
Information, whether created by the Executive pursuant to his employment and
duties under this Agreement or otherwise, which shall come into his custody or
possession during the term of his employment, shall be and is the exclusive
property of the Company to be used by Executive only in the performance of his
duties for the Company. Executive agrees to deliver promptly to the Company on
termination of his employment, or at any other time that the Company may so
request, all memoranda, notes, records, reports and other documents (and all
copies thereof) relating to the Company's business, which Executive obtained
while employed by, or otherwise serving or acting on behalf of, the Company and
which he may then possess or have under his control.
(c) Executive agrees that he shall not disclose or use information,
know-how and records of the types set forth in paragraphs (a) and (b) of this
Section which constitute proprietary information of any third party, and that
such agreement does not, and shall not, limit him, in any way, whatsoever, from
fully performing his duties under this Agreement.
6.4 Developments. Executive shall promptly disclose to the Company all
processes, trademarks, inventions, improvements, discoveries and other
information related to the business of the Company (collectively "DEVELOPMENTS")
conceived, developed or acquired by him alone or with others during the term of
this Agreement, whether or not conceived during regular working hours, or
through the use of Company time, material or facilities or otherwise. All such
developments shall be the sole and exclusive property of the Company, and upon
request Executive shall deliver to the Company all drawings, sketches, models
and other data and records relating to such developments. In the event any such
developments shall be deemed by the Company to be patentable, Executive shall,
at the expense of the Company, assist the Company in obtaining a patent or
patents thereon and execute all documents and do all other things necessary or
proper to obtain letters patent and to vest the Company with full title thereto.
6.5 Non-disparagement. During his employment with the Company and
thereafter, neither Executive nor the Company shall publish any statement, or
make any statement under circumstances reasonably likely to become public, that
is critical of the Company or its principals, on the one hand, or Executive, on
the other, or in any way adversely affecting or otherwise maligning the
reputation and business of the Company or its principals, on the one hand, or
Executive, on the other.
6.6 Rights and Remedies upon Breach. Executive acknowledges and agrees
that his breach of any provision of Article 6 (the "RESTRICTIVE COVENANTS")
would result in irreparable injury and damage for which money damages do not
provide an adequate remedy. Therefore, if Executive breaches or threatens to
commit a breach of any Restrictive Covenant, the Company shall have the
following rights and remedies (upon compliance with any necessary prerequisites
imposed by law upon the availability of such remedies), each of which rights an
remedies shall be independent of the other and severally enforceable, and all of
which right and remedies shall be in addition to, and not in lieu of, any
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other rights and remedies available to the Company under law or in equity
(including, without limitation, the recovery of damages):
(a) To have the Restrictive Covenants specifically enforced
(without posting bond and without the need to prove damages) by any court having
jurisdiction, including, without limitation, the right to an entry against
Executive of restraining orders and injunctions (preliminary, mandatory,
temporary and permanent) against violations, threatened or actual, and whether
or not then continuing, of such covenants; and
(b) To require Executive to account for and pay over to the
Company all compensation, profits, monies, accruals, increments or other
benefits (collectively "PROFITS") derived or received by him as the result of
any transactions constituting a breach of the Restrictive Covenants.
The existence of any claim or cause of action by Executive, whether predicated
on this Agreement or otherwise, shall not constitute a defense to the
enforcement of the Restrictive Covenants.
6.7 Definition of Company. For purposes of this Article 6, the word
"Company" shall include all of the Company's parents, subsidiaries, and
affiliates (including joint venture operations) and their respective successors
and assigns, and "affiliate" shall mean any entity that, directly of indirectly,
through one or more intermediaries, controls or is controlled by or is under
common control with the Company. As used in herein, "control" shall mean the
possession, directly or indirectly, of the powers to direct or cause the
direction of the management and policies of such entity, whether though the
ownership of voting securities, by contract or otherwise. Executive agrees that
each such parent, subsidiary, affiliate, successor and assign is a third-party
beneficiary of this Article 6.
7. Other Provisions
----------------
7.1 Severability. Executive acknowledges and agrees that (i) he has had
an opportunity to seek advice of counsel in connection with this Agreement; and
(ii) the Restrictive Covenants are reasonable in geographical and temporal scope
and in all other respects. If it is determined that any provision of this
Agreement, including, without limitation, any Restrictive Covenant, or any part
thereof, is invalid or unenforceable, the remainder of the Agreement shall not
thereby be affected and shall be given full effect, without regard to the
invalid provisions. The parties hereto will substitute for the invalid or
unenforceable provision a new valid and enforceable provision of like economic
effect.
7.2 Subchapter S Status. The Company represents that it has elected to
be, and currently is, treated as a subchapter S corporation for federal income
tax purposes, and that neither the Company nor any of its stockholders has any
present intention to change such status.
7.3 Enforcement. Any action brought to enforce any of the provisions of
this Agreement shall be brought solely in the New York State Supreme Court,
Suffolk County, and the parties consent and agree to the exclusive jurisdiction
of such Court.
7.4 Indemnification. Executive (and his Estate after his death) shall
be entitled to indemnification in all instances in which Executive is acting
within the scope of his authority in accordance with Company policy and
applicable state law. During the Term, the Company shall maintain directors' and
officers' insurance in an amount of at least $1,000,000.
7.5 Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been duly given if delivered personally,
sent by facsimile transmission (with written confirmation of receipt) or
reputable overnight courier, or mailed (certified or registered mail, return
receipt requested):
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If to the Company to:
Sbarro, Inc.
000 Xxxxx Xxxxxx Xxxx
Xxxxxxxx, Xxx Xxxx 00000
Attention: Xxxxx Xxxxxx, Chairman of the Board
With a copy to: Xxxxxxx Xxxxxxxx Xxxxx Xxxxxxxxxxx & Kuh, LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxx, Esq.
If to Executive to:
Executive's most recent residence address as set forth in
Executive's records in the Company's personnel department
With a copy to: Dechert LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxxxxxx, Esq.
or to such other person or address as either party shall specify by notice in
writing to the other party. All such notices, requests, demands, waivers and
communications shall be deemed to have been given and received on the date on
which so hand-delivered or telecommunicated or delivered by overnight courier
(unless not received during a business day in which event receipt shall be
deemed to occur on the next occurring business day) or if mailed on the business
day actually delivered, except for a notice of change of address which shall be
effective only upon receipt; provided, however, that if any notice is refused,
than the date such notice shall be deemed to have been given and received shall
be on the date of refusal thereof.
7.6 Entire Agreement. This Agreement, together with Exhibit A and
Exhibit B annexed hereto, contains the entire agreement between the parties with
respect to the subject matter hereof and supersedes all prior or contemporaneous
agreements, written or oral, with respect thereto.
7.7 Waivers and Amendments. This Agreement may be amended, superseded
or canceled, and the terms hereof may be waived, only by a written instrument
signed by the parties or, in the case of a waiver, by the party waiving
compliance. No delay by either party in exercising any right, power or privilege
hereunder shall operate as a waiver thereof, nor shall any waiver on the part of
either party of any such right, power or privilege nor any single or partial
exercise as any such right, power or privilege, preclude any other or further
exercise thereof or the exercise of any other such right, power or privilege.
7.8 Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO PRINCIPLES
OF CONFLICTS OF LAW.
7.9 Assignment. This Agreement, and Executive's rights and obligations
hereunder, may not be assigned by Executive; any purported assignment by
Executive in violation hereof shall be null and void. In the event of any sale,
transfer or other disposition of all or substantially all of the Company's
assets or business, whether by merger, consolidation or otherwise, the Company
may assign this Agreement and its rights hereunder.
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7.10 Withholding. Company shall be entitled to withhold from any
payments or deemed payments any amount of withholding required by law.
7.11 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties and their respective successors, permitted assigns,
heirs, executors and legal representatives.
7.12 Survival. Anything in this Agreement to the contrary
notwithstanding, Article 6 shall survive termination of this Agreement.
7.13 Headings. The headings in this Agreement are for reference only
and shall not affect the interpretation of this Agreement.
7.14 Parachutes. Notwithstanding any other provisions of this Agreement
to the contrary, in the event that any payments or benefits received or to be
received by Executive in connection with Executive's employment with the Company
(or termination thereof) would subject Executive to the excise tax imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the "EXCISE
Tax"), and if the net-after tax amount (taking into account all applicable taxes
payable by Executive, including without limitation any Excise Tax) that
Executive would receive with respect to such payments or benefits does not
exceed the net-after tax amount Executive would receive if the amount of such
payments and benefits were reduced to the maximum amount which could otherwise
be payable to Executive without the imposition of the Excise Tax, then, only the
extent necessary to eliminate the imposition of the Excise Tax, such payments
and benefits shall be reduced.
7.15 No Conflict. Executive represents and warrants to the Company that
this Agreement is legal, valid and binding upon him and the execution of this
Agreement and the performance of his obligations hereunder does not and shall
not constitute a breach of, or conflict with, the terms or provisions of, any
agreement or understanding to which Executive is a party (including, without
limitation, any other employment agreement). The Company represents and warrants
to Executive that this Agreement is legal, valid and binding upon the Company
and the execution of this Agreement and the performance of the Company's
obligations hereunder do not and shall not constitute a breach of, or conflict
with the terms or provisions of, any agreement or understanding to which the
Company is a party.
7.16 Counterparts. This Agreement may be executed by the parties in
separate counterparts, each of which when so executed and delivered shall be an
original but both such counterparts together shall constitute one and the same
instrument. Each counterpart may consist of two copies hereof each signed by one
of the parties hereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
SBARRO, INC.
/s/ Xxxxxxx X'Xxxxxxx
-----------------------------------
XXXXXXX X'XXXXXXX By: /s/ Xxxxx Xxxxxx
----------------------------
Xxxxx Xxxxxx, Chairman
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