EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (the "Agreement") is entered into as of this
1st day of November, 1996, by and between CLF2, Inc., a Rhode Island corporation
with its principal place of business at 000 Xxxxxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxx
Xxxxxx 00000 (the "Company"), and Xxxxxx X. XxXxxxx, an individual with a
residence address of 000 Xxxxxxxxx Xxxxxx, Xxxxxxxx, Xxxxx Xxxxxx 00000
("Employee").
INTRODUCTION
1. The Company is in the business of operating and managing cafe
restaurants. Employee possesses skills and knowledge advantageous to the
Company.
2. The Company desires to employ Employee and Employee desires to
accept such employment on the terms and conditions set forth herein.
AGREEMENT
In consideration of the premises and mutual promises hereinbelow set
forth, the parties hereby agree as follows:
1. Employment; Duties. Subject to the terms and conditions
set forth herein, the Company hereby employs Employee, on a full-time basis, to
act as Chairman of the Board of Directors, President and Chief Executive Officer
of the Company during the Employment Period, and to perform such acts and duties
and furnish such services to the Company in connection with and related to that
position as is customary for persons with similar positions in like companies,
as the Company's Board of Directors shall from time to time reasonably direct.
Employee hereby accepts such employment and agrees to perform such acts, duties
and services for the Company diligently, competently, and in good faith manner.
2. Employment Period. The term of this Agreement (the
"Employment Period") shall commence on the date hereof and shall terminate
thirty-six (36) months thereafter, unless terminated earlier pursuant to
Sections 4 or 5 below, provided, however, that the Employment Period shall
automatically renew for additional one year periods thereafter unless the
Company shall provide Employee with not less than ninety (90) days' prior
written notice of its intention not to renew prior to the expiration of the
initial Employment Period or any annual extension thereof. In the event that the
Company shall not renew this Agreement as provided in the preceding sentence,
the Company shall continue to pay Employee's salary, at his then current rate,
for a twelve (12) month period following termination. Notwithstanding any
provision of this Agreement to the contrary, the Company shall not terminate
Employee's employment hereunder (other than for cause pursuant to Section 4.1)
unless Employee has been relieved of any and all obligations to guarantee any
indebtedness of the Company.
3. Compensation and Benefits.
3.1 Salary. During the initial 12 months of the
Employment Period, the Company agrees to pay Employee at the rate of $132,000
per year, payable in equal installments pursuant to the Company's customary
payroll policies in force at the time of payment, less required payroll
deductions. Employee's salary shall thereafter be increased annually by at least
5% in the sole discretion of the Board of Directors of the Company.
3.2 Bonus. During the Employment Period, Employee shall
receive cash bonuses as follows: (i) for the initial 12 months of the Employment
Period, a cash bonus equal to $15,000, payable on the last day of the 1997
fiscal year (September 28, 1997); (ii) for the second 12 months of the
Employment Period, a cash bonus equal to $20,000, payable on the last day of the
1998 fiscal year (September 27, 1998); and (iii) for the third 12 months of the
Employment Period, a cash bonus equal to $25,000, payable on the last day of the
1999 fiscal year (October 3, 1999). In addition, Employee shall receive an
additional cash bonus equal to 25% of his annual base salary for the 1998 fiscal
year if the Company meets its budget net income projections for the 1998 fiscal
year as determined by the Board of Directors, payable on the last day of such
fiscal year; and an additional cash bonus equal to 25% of his annual salary for
the 1999 fiscal year, payable on the last day of such fiscal year, if the
Company meets its budget net income projections for the 1999 fiscal year as
determined by the Board of Directors.
3.3 Health Benefits. During the Employment Period, the
Company agrees to pay for the cost of family health care coverage (including
dental care) for Employee as currently provided by the Company's health care
provider(s) or by such other health care provider(s) to be selected by the
Company.
3.4 Life Insurance. During the Employment Period, the
Company shall provide Employee with life insurance in such amount as the Board
of Directors may determine to provide, but in no event shall such amount be less
than that provided to other executive officers of the Company.
3.5 Vacation. Employee may take three(3) weeks paid
vacation each year during the Employment Period.
3.6 Stock Options. If the Company (or any parent or
subsidiary corporations) successfully completes an initial public offering
("IPO") of common stock during the fiscal year ending September 28, 1997,
Employee shall receive an option to purchase 200,000 shares of common stock of
the Company at the price per share of common stock offered to the public in such
IPO (subject to modification under applicable law with respect to incentive
stock options). In addition, Employee shall be entitled to participate in the
Company's stock option plan with other key employees as the Board of Directors
may determine.
3.7 Automobile. During the Employment Period, the Company
will lease or purchase a late amodel automobile for Employee's use and will
reimburse Employee for all reasonable expenses related to business use of such
automobile by Employee.
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3.8 Reimbursement of Expenses. The Company shall
reimburse Employee for all reasonable expenses in connection with Employee's
duties hereunder and the promotion of the Company's business in general, upon
presentation by Employee of appropriate supporting documentation.
3.9 Miscellaneous. The Company agrees to provide Employee
with such other benefits in its discretion as it may provide to other similarly
situated employees, including but not limited to pension or other retirement
benefits and disability insurance.
3.10 Severance Payments.
3.10.1 Termination by the Company. In the event the
Company terminates this Agreement pursuant to Section 4.2 (Disability) or
Section 5 (Termination Without Cause), the Company shall, prior to the effective
date of the termination, pay Employee, in one lump sum, an amount equal to (a)
1.5 times Employee's annual salary, at his then current rate, less applicable
taxes, if termination shall occur prior to a "Change in Control" or an "Approved
Change in Control" (both as hereinafter defined) or subsequent to an Approved
Change in Control, or (b) 2.5 times Employee's annual salary, at his then
current rate, less applicable taxes, if termination shall occur after a Change
in Control. The Company shall also pay Employee's health insurance benefits as
described in Section 3.3 for a period of one year in the event of termination
pursuant to Section 4.2 or 5, and in the event of a Change in Control, all
options granted to Employee shall become fully vested as of such date of
termination in connection with such Change of Control.
3.10.2 Termination by Employee for "Good Reason".
(a) After a Change in Control and provided
Employee has "Good Reason" (as hereinafter defined), Employee may terminate his
employment hereunder upon fifteen (15) days written notice to the Company and
the Company shall continue to pay Employee his annual salary, at his then
current rate, for a thirty (30) month period.
(b) After an Approved Change in Control and
provided Employee has Good Reason, Employee may terminate his employment
hereunder upon fifteen (15) days written notice to the Company and the Company
shall continue to pay Employee his annual salary, at his then current rate, for
an eighteen (18) month period.
3.10.3 Definitions.
(a) Change in Control. A "Change in Control"
shall be deemed to have occurred in any of the following events:
(i) the stockholders of the Company approve
a merger or consolidation of the Company with any other corporation, other than
(a) a merger or consolidation which would result in the voting securities of the
Company outstanding
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immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity) more than 80% of the combined voting power of the voting securities of
the Company or such surviving entity outstanding immediately after such merger
or consolidation, (b) a merger or consolidation effected to implement a
recapitalization of the Company (or similar transaction) in which no "person" or
group (as such terms are defined in Section 13(d)(3) of the Securities Exchange
Act of 1934) acquires more than 30% of the combined voting power of the
Company's then outstanding securities, or (c) a reorganization pursuant to which
the Company creates a holding company for itself in which the stockholders of
the Company immediately prior to the reorganization (other than those exercising
dissenters' rights) become the stockholders of the holding company immediately
after the reorganization; or
(ii) the stockholders of the Company approve
a plan of complete liquidation of the Company or an agreement for the sale or
disposition by the Company of all or substantially all of the Company's assets;
or
(iii) as a result of or in connection with
any cash tender offer, merger, or other business combination, sale of assets or
contested election, or combination of the foregoing, the persons who were
directors of the Company just prior to such event shall cease to constitute a
majority of the Board; or
(iv) when any "person" or "group" (as such
terms are defined in Section 13(d)(3) of the Securities Exchange Act of 1934)
becomes a "beneficial owner" (as such term is defined in Rule 13d-3 under the
Securities Exchange Act of 1934), directly or indirectly, of securities of the
Company representing forty percent (40%) or more of the total number of votes
that may be cast for the election of directors of the Company; or
(v) the closing of a transaction or series
of transactions in which more than 50% of the voting power of the Company is
transferred; or
(vi) a tender offer or exchange offer for
the common stock of the Company, other than one made by the Company or by a
person or group (as such terms are defined in Section 13(d)(3) of the Securities
Exchange Act of 1934) that on the date hereof holds more than 5% of the
outstanding shares of the Company entitled to vote for the election of
directors, where the offeror acquires more than 40% of the outstanding shares of
common stock of the Company.
(b) Approved Change in Control. An "Approved
Change in Control" of the Company shall mean a Change in Control that is
approved by a majority of the Company's Board of Directors.
(c) Good Reason. "Good Reason" shall mean
without Employee's written consent, the occurrence after a Change in Control of
any of the circumstances set forth in subparagraphs (1) through (8) below. For
purposes hereof, Employee's continued employment shall not constitute consent
to, or a waiver of rights with
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respect to, any circumstance constituting "Good Reason" hereunder, and any good
faith determination of "Good Reason" made by Employee shall be conclusive. Good
Reason shall mean any of the following:
(1) a significant change in the nature or
scope of the Employee's responsibilities, authorities, powers, functions or
duties from the responsibilities, authorities, powers, functions or duties
exercised by the Employee immediately prior to the Change in Control;
(2) a reasonable determination by Employee
that, as a result of a Change in Control, he is unable to exercise the
responsibilities, authorities, powers, functions or duties exercised by the
Employee immediately prior to such Change in Control;
(3) a reduction in the Employee's annual
base salary as in effect on the date hereof or as the same may be increased from
time to time except for across-the-board salary reductions similarly affecting
all management personnel of the Company and all management personnel of any
person in control of the Company; or
(4) the failure by the Company to continue
in effect any material compensation, incentive, bonus or benefit plan in which
Employee participated immediately prior the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative plan)
has been made with respect to such plan, or the failure by the Company to
continue Employee's participation therein (or in such substitute or alternative
plan) on a basis not materially less favorable, both in terms of the amount of
benefits provided and the level of Employee's participation relative to other
participants, as existed at the time of the Change in Control; or
(5) the failure by the Company to continue
to provide the Employee with benefits substantially similar to those available
to the Employee under any of the life insurance, medical, health and accident,
or disability plans or any other material benefit plans in which the Employee
was participating at the time of the Change in Control, or the taking of any
action by the Company which would directly or indirectly materially reduce any
of such benefits, or the failure by the Company to provide the Employee with the
number of paid vacation days to which the Employee is entitled on the basis of
years of service with the Company in accordance with the Company's normal
vacation policy in effect at the time of the Change in Control; or
(6) any requirement by the Company or of
any person in control of the Company that Employee establish a permanent
residence in a state other than Rhode Island or Massachusetts or any requirement
that Employee's principal duties for the Company require Employee to spend
substantial time at a location other than Rhode Island or Massachusetts; or
(7) the failure by the Company to pay
Employee any portion of Employee's current compensation within seven (7) days
after such compensation is due; or
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(8) any requirement by the Company or any
person in control of the Company that Employee travel on an overnight basis to
an extent not substantially consistent with Employee's business travel
obligations immediately prior to the Change in Control.
4. Termination for Cause; Disability
4.1 Termination for Cause. The Company may discharge
Employee and terminate his employment under this Agreement for cause without
further liability to the Company by a majority vote of the Board of Directors of
the Company, except that Employee, if a Director, shall not be entitled to vote
thereon. As used in this Section 4.1, "cause" shall mean any or all of the
following: (i) gross or willful misconduct of Employee during the course of his
employment; (ii) conviction of a fraud or felony or any criminal offense
involving dishonesty, breach of trust or moral turpitude during the Employment
Period; or (iii) Employee's breach of any of the material terms of this
Agreement.
4.2 Disability. If during the Employment Period, Employee
shall become ill, disabled or otherwise incapacitated so as to be unable to
perform his usual duties (a) for a period in excess of one hundred twenty (120)
consecutive days or (b) for more than one hundred eighty (180) days in any
consecutive twelve (12) month period, then the Company shall have the right to
terminate this Agreement without further liability except as set forth in
Section 3.10 on thirty (30) days' prior notice to Employee.
5. Termination without Cause. Upon ninety (90) days prior written
notice, the Company may terminate this Agreement without cause and without
further liability to the Company except as set forth in Section 3.10 by a
majority vote of the Board of Directors except that Employee, if a Director,
shall not be entitled to vote thereon.
6. Non-Competition. Employee, during the Employment Period and for
a period of one (1) year thereafter in exchange for a payment of $100,000 from
the Company for such one (1) year period, shall not directly or indirectly enter
into or engage in or have a proprietary interest (except with respect to the
ownership of less than 2% of securities of publicly-held companies) in any
cafe-related business located in New England, which competes with the Company or
its affiliates, either as an individual, partner, joint venturer, employee or
agent for any person, company, corporation or association or as an officer,
director or stockholder of a corporation or otherwise. Employee expressly agrees
that the character, duration and geographical scope of this 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 this covenant not to compete is
unreasonable in light of the circumstances as they then exist, then it is the
intention of both Employee and the Company that this covenant not to compete
shall be construed by the court in such a manner as to impose only those
restrictions on the conduct of Employee which are reasonable in light of the
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circumstances as they then exist and necessary to assure the Company of the
intended benefit of this covenant not to compete.
7. Confidentiality; Conflicts of Interest. Employee agrees to
accept, perform and abide by the confidentiality and non-solicitation covenants
set forth on Exhibit A hereto.
8. Remedies. Without limiting the Company's right to claim
damages, Employee acknowledges that the Company will be irreparably harmed by a
breach of any provision of this Agreement and Employee agrees that the Company
shall be entitled to injunctive relief in the event of such breach.
9. Governing Law/Jurisdiction. This Agreement shall be governed by
and interpreted and governed in accordance with the laws of the State of Rhode
Island.
10. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter hereof
and supersedes 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.
11. Notices. All notices, requests, demands and other
communications required or permitted to be given or made under this Agreement
shall be in writing and shall be deemed to have been given if delivered by hand,
sent by generally recognized overnight courier service, telex or telecopy, or
mail,
(a) to the Company at:
000 Xxxxxxxxx Xxxxxx
Xxxxxxxxxx, Xxxxx Xxxxxx 00000
with a copy to:
Xxxxxxx X. Xxxxxxx, Esq.
Xxxxx & Xxxxxxx
000 Xxxxx Xxxx Xxxxxxxx
Xxxxxxxxxx, XX 00000
(b) to Employee at:
000 Xxxxxxxxx Xxxxxx
Xxxxxxxx, Xxxxx Xxxxxx 00000
12. 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
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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.
13. 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.
14. Survival of the Company's Obligations. The Company's
obligations hereunder shall not be terminated by reason of any liquidation,
dissolution, bankruptcy, cessation of business, or similar event relating to the
Company. This Agreement shall not be terminated by a merger or consolidation or
other reorganization of the Company. In the event any such merger,
consolidation, or reorganization shall be accomplished by transfer of stock or
by transfer of assets or otherwise, the provisions of this Agreement shall be
binding upon the surviving or resulting corporation or person. This Agreement
shall be binding upon and inure to the benefit of the executors, administrators,
heirs, successors and assigns of the parties; provided, however, that except as
herein expressly provided, this Agreement shall not be assignable either by the
Company (except to an affiliate of the Company) or by Employee.
15. Assignment. The Company may assign this Agreement to any affiliate
without the consent of Employee. For purposes of this section, "affiliate" shall
mean any individual, corporation, partnership or other business entity that
directly or indirectly through one or more intermediaries controls, or is
controlled by, or is under common control with, the Company.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
THE COMPANY:
CLF2, INC.
By: /s/Xxxxxx X. XxXxxxx
------------------------
Title: President
EMPLOYEE:
/s/ Xxxxxx X. XxXxxxx
---------------------
Xxxxxx X. XxXxxxx
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EXHIBIT A
Confidentiality Covenants. In accepting employment with CLF2, Inc. and/or
its affiliates (collectively, the "Company"), I understand that the Company may
impart to me confidential business information including, without limitation,
vendor lists, recipes, designs, software, financial information, personnel
information, real estate information, and the like (collectively "confidential
information"). I hereby acknowledge the Company's exclusive ownership of such
confidential information.
I agree: (1) only to use the confidential business information to provide
services or goods to the Company; (2) only to communicate the confidential
information to fellow employees on a need-to-know basis; and (3) not otherwise
disclose or use, at any time any confidential information. Upon demand by the
Company or upon termination of my employment, I will deliver to the Company all
blueprints, manuals, documents plans, recordings, photographs, software and any
other instrument or device by which, through which, or on which confidential
information has been recorded and/or preserved, which are in my possession,
custody or control.
I further agree that the disclosure or use of any confidential
information in breach of this understanding would cause irreparable harm to the
Company and accordingly, not only may the Company seek damages but I agree to
the issuance of a permanent injunction against me restraining such disclosure
and use, and I agree that any court of competent jurisdiction selected by the
Company shall have personal jurisdiction over me.
I agree that neither this document nor any other communication shall bind
the Company to employ me now or hereafter and that no consideration has been
furnished to the Company for my employment other than my services. I also
understand and agree that this agreement may not be modified orally, and that if
such a modification is made it must be in writing and signed by an executive
officer of the Company.
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