EXHIBIT 10.6
TUSCANY, INC.
EMPLOYMENT AGREEMENT
This Employment Agreement ("Agreement") is made and entered into as of
January 1, 1997, by and between Tuscany, Inc. ("Employer"), and Xxx Xxxxxxxx
("Employee").
For good and valuable consideration, the receipt and sufficiency of
which we hereby acknowledge, the parties agree as follows:
1. Term of Agreement. Employer and Employee agree that the Employee
will be employed by Employer until December 31, 1999, unless employment is
sooner terminated as provided herein. This Agreement shall be automatically
renewed for succeeding terms of one (1) year, unless at least ninety (90) days
prior to the expiration of any term, either party gives written notice to the
other of that party's intention not to renew this Agreement.
2. Position and Duties
2.1 Employer and Employee agree that Employee will be employed as
the Chief Executive Officer and President of Employer and that, in this
capacity, Employee's responsibilities will include providing overall leadership
and management of Employer, subject to the approval and oversight of the Board
of Directors.
2.2 It is further agreed and understood that, as the Chief Executive
Officer and President of Employer, the hours which Employee is required to work
will vary considerably and will sometimes be more than forty (40) hours per
week. It is understood and agreed that such work in excess of forty (40) hours
per week is a regular and normal part of Employee's responsibilities for which
he is compensated, and does not in any way constitute overtime for which
Employee is entitled to receive additional compensation.
2.3 In addition to his employment responsibilities, Employee agrees
to serve as a member of the Employer's Board of Directors according to the terms
and conditions set forth in Employer's Articles of Incorporation and By-Laws.
Nothing in this Agreement shall be deemed to limit in any way the right of the
shareholders of Employer to take an action or exercise any right in accordance
with such instruments or applicable corporate law.
2.4 Employee agrees to devote his full-time efforts to his duties
with Employer and further agrees that Employee will not directly or indirectly
engage or participate in any activities while employed with Employer that would
conflict with the best interests of Employer.
2.5 Employee's obligation to devote his full-time attention and
energy to the business of Employer shall not be construed as preventing Employee
from investing his assets so long as any such investment will not require any
services on the part of Employee in the operation of the affairs of the
company(ies) or business(es) in which such investment(s) is (are) made.
3. Employer's Covenants
3.1 Employer agrees to furnish Employee with such equipment,
employees and services as are necessary to perform Employee's obligations under
this Agreement.
3.2 Employer agrees to reimburse Employee for all reasonable
business expenses incurred by Employee while on Employer's business. Employee
shall maintain such records as will be necessary to enable Employer to properly
deduct such items as business expenses when computing Employer's federal income
tax.
3.3 Employers shall provide disability insurance to Employee, which
insurance shall pay 80% of Employee's annual compensation (as of the date of
disability) for at least two (2) years after the date of disability.
4 Compensation
4.1 For all services rendered by Employee under this Agreement
(exclusive of directors' fees, if any), Employer shall pay Employee a salary of
One Hundred Twenty Five Thousand Dollars ($125,000) per year for calendar year
1997, One Hundred Fifty Thousand Dollars ($150,000) for calendar year 1998 and
One Hundred Seventy Five Thousand Dollars ($175,000) for calendar year 1999.
Employee shall be paid this salary on the same basis as other employees of
Employer, minus all lawful and agreed upon payroll deductions.
4.2 Employer and Employee may, from time to time, mutually agree to
increase or decrease Employee's annual salary by modifying section 4 in the
manner provided in section 11.1 of this Agreement. Any change in regular
compensation shall be effective as of the date said Supplemental Agreement is
signed by both Employer and Employee or as otherwise provided in such
Supplemental Agreement.
4.3 Employer shall, effective on the date hereof, grant options
("Options") to purchase 118,000 shares of Employer Common Stock at an exercise
price equal to the price common shares are offered to the public in Employer's
contemplated initial public offering in the first quarter of 1997. The Options
will vest 50% at December 31, 1997; an additional 25% at December 31, 1998 and
the remainder at December 31, 1999 and will be exercisable for ten years. The
Options are exercisable for 180 days after termination of employment and if
termination is without cause, or by the Employee for good reason or upon a
change of control (as those terms are defined herein) options will vest for the
year in which termination of employment occurs.
5. Bonuses
5.1 Bonuses. It is understood that Employer's earnings depend
largely upon the performance and productivity of Employee. Therefore,
Employer shall periodically, but not less frequently than annually, review
Employee's services rendered and Employer, shall award cash bonuses as set forth
on Exhibit A which will recognize Employee's meeting and exceeding goals set by
Employee and the Employer. Cash bonuses, if any, will be paid within 30 days
after the end of each period, unless calculations required by goals set require
a longer period.
6. Fringe Benefits
6.1 Incentive Compensation. Employer and Employee agree that, during
the term of this Agreement, Employee shall be entitled to participate in all
fringe benefits and incentive compensation plans as may be authorized and
adopted from time to time by the Employer and for which Employee is eligible,
including, for example, any pension plan, profit sharing plan, disability plan,
medical plan, group life insurance plan, or other employee benefit plans.
6.2 Sick Leave. Employee shall be entitled to a reasonable number of
paid sick leave days during each calendar year of employment, which number shall
be no less than any other employee of Employer. In determining what is a
reasonable number of days, the Employer shall take into consideration previous
periods of disability, the number of days of sick leave taken in the current
year and preceding years, and other factors it deems pertinent. Employer shall
be the sole party to determine the reasonableness of Employee's number of sick
leave days.
6.3 Parking. Employee shall be provided with a parking space at
Employer's expense.
6.4 Insurance. In the event this Agreement is terminated, Employer,
upon the request of Employee, shall assign to Employee any insurance policy
owned by Employer under which Employee is the insured and which is assignable by
the policy terms; provided, however, that if any such policy has a cash
surrender value, Employee shall pay the then cash surrender value of such policy
to Employer in exchange for its assignment to Employee under this section. Any
conversion rights which Employee may have under the terms of any such insurance
policy shall survive any termination of this Agreement.
6.5 Vacation. Employee shall be entitled to four (4) weeks' paid
vacation per calendar year, which shall roll over into subsequent years.
7. Confidential Information. It is understood and agreed that as a
result of Employee's employment with Employer, Employee will be acquiring and
making use of confidential information about Employer's business as well as
financial information about Employer. Employee agrees that he will respect the
confidences of Employer and will not at any time during or within three (3)
years following the period of his employment with Employer, directly or
indirectly divulge or disclose for any purpose whatsoever or use for his own
benefit, any confidential information that has been obtained by or disclosed to
Employee as a result of his employment with Employer. Employee may also have
signed or be asked to sign an additional agreement regarding confidential
information, including trade secrets and inventions. In the event that the
provisions of this agreement conflict with the provisions of that additional
agreement, Employee understands that he must adhere to the more restrictive
agreement.
8. Covenant Not to Compete. In view of the unique value to Employer
of Employee's services and because of the confidential information to be
obtained by or disclosed to Employee as described above, Employee agrees as
follows:
8.1 That during his employment with Employer, and for a period of
two (2) years after termination of such employment by Employee, Employee will
not directly or indirectly, within any Area (as hereinafter defined) within the
United States or outside the United States in which the Company is engaged in
business during the period of the Employee's employment or on the date of
termination of the Employee's employment, engage, have an interest in or render
any services to any business, which operates one or more specialty or gourmet
retail food establishments, primarily offering coffee beans, coffee beverages,
bagels and/or bagel products (whether as owner, manager, operator, licensor,
licensee, lender, partner, stockholder, joint venturer, employee, consultant or
otherwise) and is competitive with the Company's business activities. For
purposes of this Section 8.1, "Area" shall mean any city in which the Company
operates, as of the date of termination of employment, a retail food
establishment (i.e., a coffee and bagel cafe or coffee and bagel bar), has such
an establishment under construction or in design or has granted franchise, area
developer or other similar rights to a third party and, in each case, a 25-mile
radius from the center of such city.
8.2 That during his employment with Employer, and for a period of
one (1) years after termination of such employment by Employee, he will not
directly or indirectly solicit for employment or employ any employee of
Employer.
9. Termination. Employee's employment may be terminated before the
expiration of this agreement as follows, in which event Employee's compensation
and benefits shall terminate except as otherwise provided below:
9.1 By Employer Without Cause. Employer may terminate Employee's
employment at any time, with or without cause or advance notice. If Employer
terminates Employee's employment when neither cause nor permanent disability
exists, however, and provided that Employee releases Company and its agents from
any and all claims in a signed written release satisfactory in form and
substance to Employer, Employer shall pay to Employee termination payments as
set forth on Exhibit B hereto. These termination payments shall be paid out at
Employee's normal salary rate on regular payroll days subject to normal payroll
deductions. Employee shall not be required to mitigate the amount of these
termination payments by seeking other employment or otherwise, and no income to
Employee of any kind shall reduce the termination payments.
9.2 By Employer for Cause. Employer may terminate Employee's
employment for cause. If Employer wishes to terminate Employee's employment for
cause it shall first given Employee 30 days' written notice of the circumstances
constituting cause and an opportunity to cure, unless the circumstances are not
subject to being cured. Following the notice and opportunity to cure (if cure is
not made), or immediately if notice and opportunity to cure are not required,
Employer may terminate Employee's employment for cause by giving written notice
of termination. The notice may take effect immediately or at such later date as
Employer may designate, provided that Employee may accelerate the termination
date by giving five business days' written notice of the acceleration. Any
termination of Employee's employment for cause must be approved by a majority of
the Board other than Employee. Employee must be given reasonable advance notice
of the meeting at which termination is to be considered, and a reasonable
opportunity to address the Board.
For purposes of this agreement "cause" means and is limited to
dishonesty, fraud, commission of a felony or of a crime involving moral
turpitude, destruction or theft of Employer property, physical attack to a
fellow employee, intoxication at work, use of narcotics or alcohol to an extent
that materially impairs Employee's performance of his or her duties, violation
of law in the course of employment that has a material adverse impact on
Employer or its employees.
9.3 By Employee Without Good Reason. Employee may terminate
Employee's employment at any time, with or without good reason, by giving 90
days' advance written notice of termination.
9.4 By Employee for Good Reason or Upon a Change of Control.
a. Employee may terminate Employee's employment for good reason,
in which event Employee shall be entitled to the same rights under this
agreement as if Employer had terminated Employee's employment without cause. If
Employee wishes to terminate employment for good reason Employee shall first
give Employer 30 days' written notice of the circumstances constituting good
reason and an opportunity to cure, unless the circumstances are not subject to
being cured. Following the notice and opportunity to cure (if cure is not made),
or immediately if notice and opportunity to cure are not required, Employee may
terminate employment for good reason by giving written notice of termination.
The notice may take effect immediately or at such later date as Employee may
designate, provided that Employer may accelerate the termination date by giving
five business days' written notice of the acceleration.
For purposes of this agreement, "good reason" means and is
limited to the occurrence without cause and without Employee's consent of a
material reduction in the character of Employee's duties, level of work
responsibility or working conditions, a reduction in Employee's salary below the
level initially established at the commencement of this agreement, Employer's
failure to provide compensation or benefits owed to Employee, Employer requiring
Employee to be based anywhere other than the greater Seattle area, except for
reasonable travel on Employer's business, or any material breach by Employer of
its duties or obligations to Employee that results in material harm to Employee,
but shall not include changes to Employee's title which does not include any of
the occurrences above.
b. Employee may terminate Employee's employment in the event of
a "Change of Control," in which event, Employee shall be entitled to the same
rights under this Agreement as if Employer had terminated Employee's employment
without cause. For purposes of this Agreement, a "Change of Control" shall be
deemed to occur, unless previously consented to in writing by the Employee, upon
(a) the actual acquisition or the execution of an agreement to acquire 20% or
more of the voting securities of the Employer by any person or entity not
affiliated with the Employee (other than pursuant to a bona fide underwriting
agreement relating to a public distribution of securities of the Employer), (b)
the commencement of a tender or exchange offer for more than 20% of the voting
securities of the Employer by any person or entity not affiliated with the
Employee, (c) the commencement of a proxy contest against the management for the
election of a majority of the Board of the Employer if the group conducting the
proxy contest owns, has or gains the power to vote at least 20% of the voting
securities of the Employer, (d) a vote by the Board to merger, consolidate, sell
all or substantially all of the assets of the Employer to any person or entity
not affiliated with the Employee, or (e) the election of directors constituting
a majority of the Board of Directors who have not been nominated or approved by
the Employee.
9.6 Death. Employee's employment shall terminate automatically upon
Employee's death.
9.7 Permanent Disability. Employer may terminate Employee's
employment immediately if Employee becomes permanently disabled. For purposes of
this agreement Employee will be considered "permanently disabled" if, for a
continuous period of 180 days or more, Employee has been unable to perform the
essential functions of the job (even with reasonable accommodation) because of
one or more mental or physical illnesses and/or disabilities, provided that
Employer shall grant additional unpaid leave to the extent required by law.
10. Effect of Termination. Upon termination of Employee's employment
with Employer, Employer agrees to pay Employee all salary, fringe benefits,
bonuses or other remuneration which are due and owing to Employee as of the date
of termination, less legal deductions or offsets Employee may owe to Employer,
as agreed upon in writing signed by Employee, for such items as salary
advances or loans. Employee agrees that his signature on this Agreement
constitutes his authorization for all such deductions, upon termination of
Employee's employment with Employer. Upon the termination of Employee's
employment with Employer, Employee agrees to return to Employer all of
Employer's property of any kind which may be in Employee's possession. In the
event of termination of this Agreement, the noncompetition and confidentiality
provisions provided in sections 7 and 8 above, shall continue in full force and
effect according to their terms.
11. Construction of Agreement
11.1 Essential Terms and Modification of Agreement. It is
understood and agreed that the terms and conditions described in this Agreement
constitute the essential terms and conditions of the employment arrangement
between Employer and Employee, all of which have been voluntarily agreed upon.
Employer and Employee agree that there are no other essential terms or
conditions of the employment relationship that are not described within this
Agreement, and that any change in the essential terms and conditions of this
Agreement will be written down in a supplemental agreement which shall be signed
by both Employer and Employee before it is effective.
11.2 Severability. The invalidity of all or any part of any section
of this Agreement shall not render invalid the remainder of this Agreement or
the remainder of such section. In the event a court of competent jurisdiction
should decline to enforce any provision of any section of this Agreement, such
section shall be reformed to the extent necessary in the judgment of such court
to make such provision of such section enforceable to the maximum extent which
the court shall find enforceable.
11.3 Notices. Any notice hereunder shall be sufficient if in
writing and delivered to the party or sent by certified mail, return receipt
requested and addressed as follows:
a. If to Employer:
Tuscany, Inc.
000 Xxxxx Xxxxxx - Xxxxx 0000
Xxxxxxx, XX 00000
b. If to Employee:
Xxx Xxxxxxxx
0000 00xx Xxx. X.X.
Xxxxxxx, XX 00000
Either party may change the address herein specified by giving to the other,
written notice of such change.
11.4 Governing Law. This Agreement is made and shall be construed
and performed under the laws of the State of Washington.
11.5. Venue and Attorneys' Fees. A breach of any of the terms of
this Agreement shall entitle the aggrieved party to xxx for breach of the
Agreement. In such case, venue shall be in King County, Washington. In the event
it is necessary for either party to institute suit in connection with this
Agreement or its breach, the prevailing party in said suit or proceeding shall
be entitled to reimbursement for its reasonable costs and attorney's fees
incurred.
11.6 Waiver of Agreement. The waiver by Employer or Employee of a
breach of any provision of this Agreement by the other party hereto shall not
operate or be construed as a waiver by such party of any subsequent breach by
the other party.
11.7 Captions. The captions and headings of the sections of this
Agreement are for convenience and reference only and are not to be used to
interpret or define the provisions hereof.
11.8 Assignment and Successors. The rights and obligations of
Employer under this Agreement shall inure to the benefit of and be binding upon
the successors and assigns of Employer. The rights and obligations of Employee
hereunder are nonassignable. Employer may assign its rights and obligations to
any entity in which Employer, or a company affiliated to Employer, has a
majority ownership interest.
Executed on the date first written above and effective your approval or
ratification of the Board of Directors of Employer as evidenced by corporate
resolution.
EMPLOYEE: EMPLOYER:
Xxx Xxxxxxxx Tuscany, Inc.
-------------------------------- -------------------------------------
By Xxxx Xxxxxx, Chairman of the Board
170026.M57
Exhibit A
Period Cash Bonus Amount Bonus Basis
------ ----------------- -----------
Fourth quarter 1997 Up to 50% salary during period Meeting agreed-upon goals
Each calendar year Up to 50% salary during year Meeting agreed-upon goals
commencing 1998
Up to additional 50% of Exceeding agreed-
salary during year upon goals
Exhibit B
Time of Termination Amount of Termination Payment
------------------- -----------------------------
Before 3/15/97 2 weeks' salary (at time of termination)
3/16/97 - 9/15/97 3 months' salary (at time of termination)
9/16/97 - 9/15/98 6 months' salary (at time of termination)
After 9/16/98 1 year salary (at time of termination)
