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EXHIBIT 10.19
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") by and between Woodroast
Systems, Inc., a Minnesota corporation (the "Company"), and Xxxxxxx X. Xxxxxx
("Employee") is hereby entered into and effective as of January 1, 1998. This
Agreement hereby supersedes any other employment agreements or understandings;
written or oral, between the Company and Employee.
RECITALS:
As of the date of this Agreement, the Company is engaged primarily in
the business of owning and operating restaurants and cigar parlors.
Employee is employed hereunder by the Company in a confidential
relationship wherein Employee, in the course of his employment with the Company,
has and will continue to become familiar with and aware of information as to the
Company's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by the Company, and future plans with
respect thereto, all of which has been and will be established and maintained at
great expense to the Company; this information is a trade secret and constitutes
the valuable goodwill of the Company.
Therefore, in consideration of the mutual promises, terms covenants and
conditions set forth herein and the performance of each, it is hereby agreed as
follows:
AGREEMENTS:
1. EMPLOYMENT AND DUTIES.
(a) The Company hereby employs Employee as Chief Executive Officer
effective January 1, 1998. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Chief Executive Officer
and will report directly to the Board of Directors (the "Board") of the Company.
Employee hereby accepts this employment upon the terms and conditions herein
contained and, subject to paragraph 1(b), agrees to devote his working time,
attention and efforts to promote and further the business of the Company.
(b) Employee shall not, during the term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage; provided however, the foregoing limitation shall not be
construed as prohibiting Employee from making personal investments in such form
or manner as will not require his services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of paragraph 3 hereof.
2. COMPENSATION. For all services rendered by Employee, the Company shall
compensate Employee as follows:
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(a) BASE SALARY. The base salary payable to Employee shall be Two
Hundred Twenty Five Thousand Dollars ($225,000) per year, payable on a regular
basis in accordance with the Company's standard payroll procedures but not less
than twice monthly. On at least an annual basis, the Board of Directors of the
Company (the "Board") will review Employee's performance and may make increases
to such base salary if, in its discretion, any such increase is warranted. Such
recommended increase would, in all likelihood, require approval by the Board or
a duly constituted committee thereof.
(b) INCENTIVE BONUS PLAN. Employee shall be eligible for a bonus to be
awarded at the discretion of the Board and based upon such criteria as may from
time to time be determined by the Board.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION.
Employee shall be entitled to receive additional benefits and compensation from
the Company in such form and to such extent as specified below:
(i) Payment of premiums for coverage for Employee and his
spouse and children under health, hospitalization, disability, life and other
employee benefit plans that the Company may have in effect from time to time,
with benefits provided to Employee under this clause (i) to be not less
favorable than the benefits provided to other Company executives.
(ii) Reimbursement for all business travel and other out-of-pocket
expenses reasonably incurred by Employee in the performance of his services
pursuant to this Agreement. All reimbursable expenses shall be appropriately
documented in reasonable detail by Employee upon submission of any request for
reimbursement, and in a format and manner consistent with the Company's expense
reporting policy.
(iii) Four (4) weeks paid vacation for each year during the period of
employment. Earned and unused paid vacation for each year shall not carry
forward to subsequent years.
(iv) The Company shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee by the
Board and participation in all other Company-wide employee benefits as available
from time to time.
(v) Employee shall be eligible for stock options and
restricted and deferred stock grants under the Company's 1994 Stock Plan as the
Board may from time to time grant to Employee in its sole discretion.
3. NON-COMPETITION AGREEMENT.
(a) Employee will not, during the period of his employment by or with
the Company, and for a period of one (1) year immediately following the
termination of his employment under this Agreement, for any reason whatsoever,
directly or indirectly, for himself or on behalf of or in
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conjunction with any other person, persons, company, partnership, corporation or
business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer, or in a managerial capacity, whether as an employee,
independent contractor, consultant or advisor, or as a sales representative, in
any business selling any products or services in direct competition with the
Company's Shelly's Back Room(R) cigar parlor restaurant concept (the "Parlor"),
within the United States (the "Territory");
(ii) call upon any person who is, at that time, within the
Territory, an employee of the Company (including the subsidiaries thereof) for
the purpose or with the intent of enticing such employee away from or out of the
employ of the Company including the subsidiaries thereof);
(iii) call upon any person or entity which is, at that time,
or which has been, within one (1) year prior to that time, a tobacco supplier
(and excluding a food supplier), joint venturer, licensee, or operator of the
Company (including the subsidiaries thereof) within the Territory for the
purpose of soliciting or selling products or services in direct competition with
the Parlors within the Territory;
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor, which candidate was either
called upon by the Company (including the subsidiaries thereof) or for which the
Company made an acquisition analysis, for the purpose of acquiring such entity;
or
(v) disclose the Company's tobacco suppliers (and excluding
food suppliers), joint venturers, licensees or operators, whether in existence
or proposed, of the Company (or the Subsidiaries thereof) to any person, firm,
partnership, corporation or business for any reason or purpose whatsoever.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from acquiring as an investment not more than three percent
(3%) of the capital stock of a competing business, whose stock is traded on a
national securities exchange or over-the-counter.
(b) Because of the difficulty of measuring economic losses to the
Company as a result of a breach of the foregoing covenant and because of the
immediate and irreparable damage that could be caused to the Company for which
it would have no other adequate remedy, Employee agrees that the foregoing
covenant may be enforced by the Company in the event of breach by his by
injunctions and restraining orders.
(c) It is agreed by the parties that the foregoing covenants in this
paragraph 3 impose a reasonable restraint on Employee in light of the activities
and business of the Company (including the Company's subsidiaries) on the date
of the execution of this Agreement and the current plans of the Company
(including the Company's subsidiaries).
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(d) The covenants in this paragraph 3 are severable and separate, and
the unenforceability of any specific covenant shall not affect the provision of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this paragraph 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against the Company,
whether predicated on this Agreement or otherwise, shall not constitute a
defense to the enforcement by the Company of such covenants. It is specifically
agreed that the period of one (1) year stated at the beginning of this paragraph
3 shall be effective, shall be computed by excluding from such computation any
time during which Employee is in violation of any provision of this paragraph 3.
4. TERM; TERMINATION; RIGHTS ON TERMINATION. The term of this Agreement shall
begin on January 1, 1998 and continue through December 31, 2000 (the "Initial
Term"), and, unless terminated sooner as herein provided, shall continue
thereafter on a year-to-year basis on the same terms and conditions contained
herein. This Agreement and Employee's employment may be terminated in any one of
the following ways:
(a) DEATH. The death of Employee shall immediately terminate the
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from his full-time duties
hereunder for three (3) consecutive months, then thirty (30) days after
receiving written notice (which notice may occur before or after the end of such
three (3) month period, but which shall not be effective earlier than the last
day of such three (3) month period), the Company may terminate Employee's
employment hereunder provided Employee is unable to resume his full-time duties
at the conclusion of such notice period. Thereafter, all of Employee's rights to
compensation and other benefits hereunder shall terminate except where
continuation of such benefits is required under applicable Company benefit plans
or by law.
(c) GOOD CAUSE. The Company may terminate the Agreement ten (10) days
after written notice to Employee for good cause, which shall be: (i) Employee's
material breach of this Agreement (continuing for ten (10) days after receipt of
written notice); (ii) Employee's gross negligence in the performance or
intentional nonperformance (continuing for ten (10) days after receipt of
written notice) of any of Employee's material duties and responsibilities
hereunder; (iii) Employee's dishonesty, fraud or misconduct with respect to the
business or affairs of the Company which materially and adversely affects the
operations or reputation of the Company; (iv) Employee's conviction of a felony
or chronic alcohol abuse or illegal drug abuse by Employee. In the event of a
termination for good cause, as enumerated above, Employee shall have no right to
any severance compensation.
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(d) WITHOUT CAUSE. At any time after the commencement of employment,
the Company may, without cause, terminate this Agreement and Employee's
employment, effective thirty (30) days after written notice is provided by the
Company. Should Employee be terminated by the Company without cause, Employee
shall receive from the Company, in a lump-sum payment due on the effective date
of termination, the base salary at the rate then in effect for one (1) year.
(e) TERMINATION BY EMPLOYEE FOR GOOD REASON. The Employee may terminate
his employment hereunder for "Good Reason." As used herein, "Good Reason" shall
mean the continuance of any of the following after 10 days' prior written notice
by Employee to the Company, specifying the basis for such Employee's having Good
Reason to terminate this Agreement:
(i) the assignment to Employee of any duties materially and
adversely inconsistent with the Employee's position as specified in paragraph 1
hereof, including status, offices, responsibilities or persons to whom the
Employee reports as contemplated under paragraph 1 of this Agreement, or any
other action by the Company which results in a material and adverse change in
such position, status, offices, titles or responsibilities;
(ii) Employee's removal from, or failure to be reappointed or
re-elected to, Employee's position under this Agreement, except as contemplated
by paragraphs 4(a), (b) and (c); or
(iii) any other material breach of this Agreement by the
Company, including the failure to pay Employee on a timely basis the amounts to
which he is entitled under this Agreement.
In the event of any termination by the Employee for Good Reason, as
determined by a court of competent jurisdiction or pursuant to the provisions of
paragraph 14 below, the Company shall pay to Employee in a lump-sum payment the
base salary at the rate then in effect for one (1) year.
(f) TERMINATION BY EMPLOYEE WITHOUT CAUSE. If Employee resigns or
otherwise terminates his employment without Good Reason pursuant to paragraph
4(e), Employee shall receive no severance compensation.
Upon termination of this Agreement for any reason provided in clauses
(a) through (f) above, Employee shall be entitled to receive all compensation
earned and all benefits vested and reimbursements due through the effective date
of termination. Additional compensation subsequent to termination, if any, will
be due and payable to Employee only to the extent and in the manner expressly
provided above. All other rights and obligations of the Company and Employee
under this Agreement shall cease as of the effective date of termination, except
that the Company's obligations under paragraph 8 herein and Employee's
obligations, if any, under paragraphs 3, 5, 6, 7 and 9 herein shall survive such
termination in accordance with their terms.
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5. RETURN OF COMPANY PROPERTY. All records, designs, patents, business plans,
financial statements, manuals, memoranda, lists and other property delivered to
or compiled by Employee by or on behalf of the Company shall be and remain the
property of the Company and be subject at all times to its discretion and
control. Likewise, all correspondence, reports, records, charts, advertising
materials and other similar data pertaining to the business, activities or
future plans of the Company which is collected by Employee shall be delivered
promptly to the Company without request by it upon termination of Employee's
employment.
6. INVENTIONS. Employee shall disclose promptly to the Company any and all
significant conceptions and ideas for inventions, improvements and valuable
discoveries, whether patentable or not, which are conceived or made by Employee,
solely or jointly with another, during the period of employment and which are
directly related to the business or activities of the Company. Employee hereby
assigns and agrees to assign all his interests therein to the Company or its
nominee. Whenever requested to do so by the Company, Employee shall execute any
and all applications, assignments or other instruments that the Company shall
deem necessary or apply for and obtain Letters of Patent of the United States or
any foreign country or to otherwise protect the Company's interest therein. This
paragraph 6 does not apply to an invention for which no equipment, supplies,
facility or trade secret or confidential information of the Company was used and
which invention was developed entirely on the Employee's own time, and (i) which
does not relate (a) directly to the business of the Company, or (b) to the
Company's actual or demonstrably anticipated research or development, or (ii)
which invention does not result from any work performed by the Employee for the
Company.
7. TRADE SECRETS. Employee agrees that he will not, during the term of this
Agreement with the Company, disclose the specific terms of the Company's
relationships or agreements with its significant vendors or customers or any
other significant and material trade secret of the Company, whether in existence
or proposed, to any person, firm, partnership, corporation or business for any
reason or purpose whatsoever, except as is disclosed in the ordinary course of
business, unless compelled by court order.
8. INDEMNIFICATION. In the event Employee is made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by the Company against
Employee), by reason of the fact that he is or was performing services under
this Agreement or is or was an officer of the Company, then the Company shall
indemnify Employee against all expenses (including attorney's fees), judgments,
fines and amounts paid in settlement, as actually and reasonably incurred by
Employee in connection therewith to the fullest extent authorized by Minnesota
law. In the event that both Employee and the Company are made a party to the
same thirty-party action, complaint, suit or proceeding, the Company agrees to
engage competent legal representation, and Employee agrees to use the same
representation, provided that if counsel selected by the Company shall have a
conflict of interest that prevents such counsel from representing Employee,
Employee may engage separate counsel and the Company shall pay all attorneys'
fees of such separate counsel. Further, while Employee is expected at all times
to use his best efforts to faithfully discharge his duties under this Agreement,
Employee cannot
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be held liable to the Company for errors or omissions made in good faith where
Employee has not exhibited gross, willful and wanton negligence and misconduct
or performed criminal and fraudulent acts which materially damage the business
of the Company.
9. NO PRIOR AGREEMENTS. Employee hereby represents and warrants to the Company
that the execution of this Agreement by Employee and his employment by the
Company and the performance of his duties hereunder will not violate or be a
breach of any Agreement with a former employer, client or any other person or
entity. Further, Employee agrees to indemnify the Company for any claim,
including, but not limited to, attorneys' fees and expenses of investigation, by
any such third party that such third party may now have or may hereafter come to
have against the Company based upon or arising out of any non-competition
Agreement, invention or secrecy Agreement between Employee and such third party
which was in existence as of the date of this Agreement.
10. ASSIGNMENT; BINDING EFFECT. Employee understands that he has been selected
for employment by the Company on the basis of his personal qualifications,
experience and skills. Employee agrees, therefore, he cannot assign all or any
portion of his performance under this Agreement. Subject to the preceding two
(2) sentences, this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties hereto and their respective heirs, legal
representatives, successor and assigns.
11. COMPLETE AGREEMENT. This Agreement is a promise of future employment.
Employee has no oral representations, understanding or agreements with the
Company or any of its officers, directors or representatives covering the same
subject matter as this Agreement. This written Agreement is the final, complete
and exclusive statement and expression of the agreement between the Company and
Employee and of all the terms of this Agreement, and it cannot be varied,
contradicted or supplemented by evidence of any prior or contemporaneous oral or
written agreements. This written Agreement may not be later modified except by a
further writing signed by a duly authorized officer of the Company and Employee,
and no term of this Agreement may be waived except by writing signed by the
party waiving the benefit of such term.
12. NOTICE. Whenever any notice is required hereunder, it shall be given in
writing addressed as follows:
To the Company:
Woodroast Systems, Inc.
00000 Xxxxxx Xxxx Xxxx
Xxxxx 000
Xxxx Xxxxxxx, Xxxxxxxxx 00000
Attn: Xx. Xxxxx X. Xxxxxxx
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To the Employee:
Xx. Xxxxxxx X. Xxxxxx
0000 Xxxxxxxx Xxxxx
Xxxxxx, XX 00000-0000
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt requested, or when actually received. Either party may
change the address for notice by notifying the other party of such change in
accordance with this paragraph 12.
13. SEVERABILITY; HEADINGS. If any portion of this Agreement is held invalid or
inoperative, the other portions of this Agreement shall be deemed valid and
operative and, so far as is reasonable and possible, effect shall be given to
the intent manifested by the portion held in valid or inoperative. The paragraph
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.
14. ARBITRATION. Any unresolved dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration,
conducted before a panel of three (3) arbitrators in Minneapolis, Minnesota, in
accordance with the rules of the American Arbitration Association then in
effect. The arbitrators shall not have the authority to add to, detract from, or
modify any provisions hereof nor to award punitive damages to any injured party.
The arbitrators shall have the authority to order back pay, severance
compensation, vesting of options (or cash compensation in lieu of vesting of
options), reimbursement of costs, including those incurred to enforce this
Agreement and interest thereon. A decision by a majority of the arbitration
panel shall be final and binding. Judgment may be entered on the arbitrators'
award in any court having jurisdiction. The direct expense of any arbitration
proceeding shall be borne equally by the Company and Employee.
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15. GOVERNING LAW. This Agreement shall in all respects be construed according
to the laws of the State of Minnesota.
SIGNATURES:
Date: February 19, 1998
/s/ Xxxxxxx X. Xxxxxx
---------------------------
Xxxxxxx X. Xxxxxx
"Employee"
WOODROAST SYSTEMS, INC.
Dated:February 19, 1998 By /s/ Xxxxx X. Xxxxxxx
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Xxxxx X. Xxxxxxx
President and Chief
Operating Officer "Company"
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