EMPLOYMENT AGREEMENT
This EMPLOYMENT AGREEMENT is made and entered into as of April 1, 2004, by
and between Steakhouse Partners, Inc., a Delaware corporation (the "Company"),
and Mr. A. Xxxxx Xxxxxxxx ("Executive").
In consideration of the mutual covenants contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Employment. The Company shall employ Executive, and Executive accepts
employment with the Company, upon the terms and conditions set forth in this
Agreement for the period beginning on the date hereof and ending as provided in
Section 5 hereof (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the President,
Chief Executive Officer and Chairman of the Board of Directors of the Company
and its wholly-owned subsidiaries (if any), and shall have the customary duties,
responsibilities and authority of the President, Chief Executive Officer and
Chairman of the Board of a similarly situated and sized company.
(b) Executive shall devote such time and energy to the affairs of the
Company and the discharge of his duties hereunder as shall be required in
Executive's reasonable judgment. The Company acknowledges and agrees that this
will entail less than what is typically considered to be "full-time" employment
for a similarly situated person, and further acknowledges and agrees that
Executive (i) may engage in various business and other activities unrelated to
the business of the Company during the Employment Period (subject to the first
sentence of this Section 2(b) and Section 7 hereof) and (ii) Executive is a
resident of the State of Florida, and nothing set forth herein shall prevent
Executive from spending substantial periods of time during the Employment Period
there and in such other locales in which Executive may have business or personal
interests.
3. Base Salary and Benefits.
(a) During the Employment Period, Executive's base salary shall be $200,000
per annum (the "Base Salary") payable in cash and in accordance with the
Company's general payroll practices. The Base Salary shall be reviewed annually
by the Board of Directors of the Company (the "Board") or the Compensation
Committee thereof and increased (but not decreased) in the discretion of the
Board, which shall consider in good faith not less than annually increases based
upon Executive's performance. The Base Salary shall, at a minimum, be increased
on each anniversary date of this Agreement by the amount obtained by multiplying
the then current Base Salary by the percentage by which the level of the San
Diego, California Consumer Price Index For All Urban Consumers, as reported for
the immediately preceding December 31 by the Bureau of Labor and Statistics of
the United States Department of Labor, has increased over the level thereof at
December 31 of the preceding year.
(b) In addition to the Base Salary, Executive shall be entitled to such
performance bonus (the "Bonus") as the Board (or the Compensation Committee
thereof) shall determine not less than annually based on the good faith
consideration by the Board (or such Committee) of Executive's performance during
the prior period(s).
(c) In addition to the Base Salary and any Bonuses payable to Executive
hereunder, upon execution of this Agreement, Executive shall be granted options
(the "Options") to purchase 250,000 shares of Common Stock of the Company (the
"Option Shares") pursuant to the Company's 2004 Stock Incentive Plan (the
"Plan") at a price equal to One Dollar and Eleven Cents ($1.11) per share. The
Company agrees to seek stockholder approval of the Plan at its next annual or
special meeting of stockholders. The Options shall vest and become exercisable
by Executive as to 33-1/3% of the Option Shares covered thereby on each of the
first, second and third anniversaries of the date hereof, and which will vest as
to 100% of such Option Shares upon (i) a "Change in Control" (as defined below);
(ii) any termination by the Company of this Agreement other than termination by
the Company for "Cause" (as defined below); (iii) any termination by Executive
pursuant to Paragraph 5(a)(iii) or 5(a)(v) hereof; or (iv) if the Employment
Period is terminated as a result of Executive's death or "Permanent Disability"
(as defined below). The Company covenants and agrees that it shall not enter
into any agreement providing for a Change in Control on or before the six-month
anniversary of the date upon which any Options were issued, unless provision is
made for the assumption of the Options granted to Employee, or the substitution
for such Options of new options of the successor corporation or a parent or
subsidiary thereof, with such adjustments to the number and kinds of shares and
the per-share exercise price as shall be necessary to maintain the proportionate
interest of Executive and preserve the value of the Options.
For purposes of this Agreement, a "Change in Control" of the Company shall
be deemed to have occurred if (i) any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), other than a trustee or other fiduciary holding securities of
the Company under an employee benefit plan of the Company, becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Company representing 50% or
more of (A) the outstanding shares of Common Stock of the Company or (B) the
combined voting power of the Company's then-outstanding securities entitled to
vote generally in the election of directors; (ii) during any period of not more
than two consecutive years, not including any period prior to the date of this
Agreement, individuals who at the beginning of such period constitute the Board,
and any new director (other than a director designated by a person who has
entered into an agreement with the Company to effect a transaction described in
paragraph (i) or (iii) of this paragraph 3(c)) whose election by the Board or
nomination for election by the Company's stockholders was approved by a vote by
at least two-thirds of the directors still in office who either were in office
at the beginning of such period or whose election or nomination for election was
previously so approved, ceases for any reason to constitute a majority of the
Board; or (iii) the stockholders of the Company approve a merger or
consolidation which would result in the holders of voting securities of the
Company outstanding immediately prior thereto failing to continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 50% of the combined voting power of the voting
securities of the Company or such surviving entity outstanding immediately after
such merger or consolidation, or 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 any transaction having a similar effect.
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(d) In addition to the Base Salary and any Bonuses payable to Executive
pursuant to this Section 3, Executive shall be entitled to the following
benefits during the Employment Period, unless otherwise increased by the Board:
(i) Health insurance, related medical insurances, disability insurance
and such coverage as is made generally available to the senior executives
of the Company, term life insurance with a policy value of $1,000,000
naming Executive's as beneficiary a person of Executive's selection;
participation in the Company's executive medical reimbursement program; and
an automobile allowance payable at the Company's executive reimbursement
rate.
(ii) Six weeks vacation each year with salary; and
(iii) Participation in any profit sharing plan, retirement plan, group
life insurance plan, or other insurance plan, medical expense plan or other
benefit arrangement maintained by the Company for its senior executives
generally and, if applicable, their family members.
(e) The Company shall reimburse Executive for all reasonable expenses
incurred by him in the course of performing his duties under this Agreement,
including, without limitation, upgrades for first class air travel, which are
consistent with the Company's policies in effect from time to time with respect
to travel, entertainment and other business expenses, subject to the Company's
requirements with respect to reporting and documentation of such expenses.
Without limiting the generality of the foregoing, the Company agrees that it
shall reimburse Executive the costs and expenses incurred by Executive in
maintaining a residence and an automobile in the locale of the Company's
headquarters.
4. Board Membership. With respect to all regular elections of directors
during the Employment Period, the Company shall nominate, and use its best
efforts to elect, Executive to serve as a member of the Board. Upon the
termination of the Employment Period for any reason, upon written request of the
Board, Executive shall resign as a director of the Company and its Subsidiaries,
as the case may be. For purposes of this Agreement, "Subsidiaries" shall mean
any corporation of which the securities having a majority of the voting power in
electing directors are, at the time of determination, owned by the Company,
directly or through one or more Subsidiaries.
5. Term.
(a) The Employment Period shall end on the third anniversary hereof;
provided that (i) if not sooner terminated in accordance herewith, the
Employment Period shall be automatically renewed for successive one (1) year
periods, unless either party gives written notice to the other party of
nonrenewal at least sixty (60) days in advance of the expiration date for the
applicable period, (ii) the Employment Period shall terminate upon Executive's
death or "Permanent Disability" (defined as the expiration of a continuous
period of 180 days during which Executive is unable to perform his assigned
duties due to physical or mental incapacity) or resignation other than for
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"Good Reason" (as defined below); (iii) the Employment Period may be
terminated by Executive at any time for Good Reason; (iv) the Employment Period
may be terminated by the Company at any time for Cause and (v) the Employment
Period may be terminated by written notice from Executive to the Company within
six months following a Change in Control.
(b) If the Employment Period is terminated by the Company for Cause or is
terminated by Executive's resignation without Good Reason, Executive shall be
entitled to receive all amounts due to him through the date of termination,
payable as a lump sum within thirty (30) days of the date of such termination or
as required by law.
(c) If the Employment Period is terminated as a result of Executive's death
or Permanent Disability or pursuant to Section 5(a)(v) above, the Company shall
pay all amounts due to Executive through the date of termination and for the
period of one-year following the date of termination (without regard to the
termination of the Employment Period thereby), payable as a lump sum within
thirty (30) days of the date of such termination.
(d) If the Employment Period is terminated by the Company other than for
Cause or by Executive pursuant to Section 5(a)(v) above, Executive shall be
entitled to receive his Base Salary through the third anniversary of the date
hereof (or, if longer, for a period of 12 months after the date of termination),
payable in accordance with the Company's general payroll practices. The Company
shall also continue coverage for Employee under the Company's life insurance,
medical, health, disability and similar welfare benefit plans and the term life
insurance plan described in Section 3(d)(i) through the third anniversary of the
date hereof (or, if longer, for a period of twelve months after the date of
termination). If the aggregate of all payments or benefits made or provided to
the Executive under this Section and under all other plans and programs of the
Company (the "Aggregate Payment") is determined to constitute a Parachute
Payment within the meaning of Section 280G(b)(2) of the Code, the Company shall
pay to the Executive, prior to the time any excise tax imposed by Section 4999
of the Code ("Excise Tax") is payable with respect to such Aggregate Payment, an
additional amount which, after the imposition of all income, employment, excise
and other taxes thereon, is equal to the Excise Tax on the Aggregate Payment.
(e) Except as otherwise set forth above, all of Executive's rights to
fringe benefits and bonuses hereunder (if any) accruing after the termination of
the Employment Period shall cease upon such termination.
(f) For purposes of this Agreement, "Cause" shall mean (i) the willful
failure or refusal by Executive to perform his duties hereunder (other than any
such failure resulting from Executive's incapacity due to physical or mental
illness), which has not ceased within 10 business days after written demand for
substantial performance is delivered to Executive by the Company, which demand
identifies the manner in which the Company believes that Executive has not
performed such duties and the steps required to cure such failure to perform;
(ii) Executive shall intentionally and willfully engage in misconduct toward the
Company which is materially injurious to the Company and its Subsidiaries,
monetarily or otherwise (including, but not limited to, conduct in material
violation of Sections 6 or 7 hereof that has not been cured within ten (10)
business days following written notice of such violation delivered to Executive
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by the Company), or (iii) the conviction of Executive of or the entering of a
plea of nolo contendere by Executive with respect to, a felony involving moral
turpitude. Notwithstanding the foregoing, Executive's Employment hereunder shall
not be deemed to be terminated for Cause unless and until there shall have been
delivered to Executive a copy of a resolution duly adopted by an affirmative
vote of not less than a majority of the entire membership of the Board at a
meeting of the Board (after written notice to Executive and a reasonable
opportunity for Executive, together with Executive's counsel, to be heard before
the Board), finding that in the good faith opinion of the Board, Executive
should be terminated for Cause.
(g) For purposes of this Agreement, "Good Reason" shall mean the occurrence
of any of the following events, unless (i) such event occurs with Executive's
express prior written consent, (ii) the event is an isolated, insubstantial or
inadvertent action or failure to act which was not in bad faith and which is
remedied by the Company within ten (10) business days after receipt of written
notice thereof given by Executive, or (iii) the event occurs in connection with
termination of Executive's employment for Cause or due to his death or
disability: (A) at any time prior to a Change in Control, the assignment to
Executive by the Company of any duties which are, in any material respect,
inconsistent with Executive's position, duty, title, office, responsibility or
status with the Company; (B) any failure by any successor or assignee of the
Company to continue this Agreement in full force and effect or any breach of
this Agreement by the Company (or any successor or assignee of the Company),
unless such breach is cured within thirty (30) days of receiving written notice
of the breach from Executive; (C) a substantial and adverse change in
Executive's status or position with the Company as the same existed at the date
hereof which is not cured within thirty (30) days after written notice thereof
to the Company from Executive; (D) a reduction (other than for Cause or by
reason of Executive's permanent Disability) by the Company of Executive's
aggregate compensation hereunder, unless such reduction is reinstated
retroactively within thirty (30) days; or (E) relocation of Executive's
principal place of employment to any place outside the greater San Diego area,
except for reasonable amounts of required travel by Executive on the Company's
business.
(h) In the event of any dispute regarding the existence of Executive's
Permanent Disability hereunder, the matter will be resolved by the determination
of a majority of three physicians qualified to practice medicine in the San
Diego, California metropolitan area, one to be selected by each of Executive and
the Board and the third to be selected by the two designated physicians. For
this purpose, Executive will submit to appropriate medical examinations.
(i) The Company and Executive agree that Executive shall have no duty of
mitigation but that if Executive furnishes his services or ideas for other
business engagements or employment after termination hereof by the Company other
than for Cause, the total compensation (if the engagement or employment is with
an entity engaged in the restaurant industry or at the same general level of
seniority as Executive's employment with the Company), or 50% of the total
compensation (for any other engagements or employment), actually earned by
Executive during any period that Executive continues to receive Base Salary,
shall reduce the Base Salary which the Company would otherwise be required to
pay or provide to Executive during such period of other engagement or
employment. Executive agrees that he shall give written notice to the Company
(promptly after accepting employment or furnishing his services after
termination of his employment with the Company) of any amounts earned (or to be
earned) by Executive and any benefits provided (or to be provided) to Executive
pursuant to his new employment arrangement or other engagement.
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6. Confidential Information. Executive acknowledges that the information,
observations and data obtained by him while employed by the Company concerning
the business or affairs of the Company or any Subsidiary ("Confidential
Information") are the property of the Company or such Subsidiary. Therefore,
Executive agrees that he shall not disclose to any unauthorized person or use
for his own account any Confidential Information without the prior written
consent of the Board, unless and to the extent required by law, rule or
regulation or pursuant to any administrative or court order. The term
"Confidential Information" shall not include (i) information which is generally
available to the public or those in the Company's industry as of the date of
execution of this Agreement or which later becomes generally available to the
public or those in the Company's industry other than as a result of Executive's
prohibited disclosure; (ii) information which comes to Executive from a bona
fide third party source so long as such source was not, to Executive's
knowledge, prohibited from providing such information to Executive by any
contractual, legal, fiduciary or other obligation; and (iii) information which
was known to Executive before such information was obtained from the Company.
7. Non-Compete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with the
Company he will become familiar with the Company's trade secrets and with other
confidential information concerning the Company and its predecessors and that
his services will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that (i) during the period in which Executive is
receiving compensation from the Company pursuant to paragraph 5 hereof, or (ii)
if the Employment Period is terminated as provided in paragraph 5(b), for a
period of one year following such termination (the "Noncompete Period"), he
shall not directly or indirectly own, manage, control, participate in, consult
with, render services for, or in any manner engage in the business of
steakhouse-oriented restaurants within any geographical area in which the
Company or its Subsidiaries materially engage or plan to materially engage in
such business. Geographic areas in which the Company plans to operate and any
businesses of the Company which exist or are in process will be identified in
writing upon request of Executive within 30 days of the date of termination of
the Employment Period. Nothing herein shall prohibit Executive from being a
passive owner of not more than 5% of the outstanding stock of any class of a
entity which is publicly traded, so long as Executive has no active
participation in the management of such entity.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce any employee of the Company or any
Subsidiary to leave the employ of the Company or such Subsidiary, or in any way
directly interfere with the relationship between the Company or any Subsidiary
and any employee thereof, (ii) directly solicit any person who was an employee
of the Company or any Subsidiary at any time within one year prior to
termination of the Employment Period, or (iii) induce or attempt to induce any
customer, supplier, licensee or other business relation of the Company or any
Subsidiary to cease doing business with the Company or such Subsidiary, or in
any way interfere with the relationship between any such customer, supplier,
licensee or business relation and the Company or any Subsidiary. The foregoing
shall not apply to any general advertising or solicitation.
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(c) If, at the time of enforcement of this paragraph 7, a court shall hold
that the duration, scope or area restrictions stated herein are unreasonable
under circumstances then existing, the parties agree that the maximum duration,
scope or area reasonable under such circumstances shall be substituted for the
stated duration, scope or area and that the court shall be allowed to revise the
restrictions contained herein to cover the maximum period, scope and area
permitted by law.
(d) In the event of the breach or a threatened breach by Executive of any
of the provisions of this paragraph 7, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance
and/or injunctive or other relief in order to enforce or prevent any violations
of the provisions thereof (without posting a bond or other security).
8. Executive and Company Representations. Executive hereby represents and
warrants to the Company that (i) the execution, delivery and performance of this
Agreement by Executive does not and will not conflict with, breach, violate or
cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound and (ii) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable in accordance with
its terms. The Company hereby represents and warrants to Executive that (i) the
execution, delivery and performance of this Agreement by the Company does not
and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which the Company
is a party or by which it is bound and (ii) upon the execution and delivery of
this Agreement by Executive, this Agreement shall be the valid and binding
obligation of the Company, enforceable in accordance with its terms.
9. Survival. Paragraphs 5, 6 and 7 shall survive and continue in full force
in accordance with their terms notwithstanding any termination of the Employment
Period.
10. Notices. All notices, requests, demands and other communications
required or permitted to be given under this Agreement shall be in writing and
shall be deemed to be delivered and receive five business days after having been
deposited in the United States mail and enclosed in a registered or certified
post-paid envelope; one business day after having been sent by overnight
courier; when personally delivered or sent by facsimile communications equipment
of the sending party on a business day, or otherwise on the next succeeding
business day thereafter; and in each case addressed to the respective party at
the address set forth below or to such other changed addresses as the party may
have fixed by notice as provided herein:
Notices to Executive:
A. Xxxxx Xxxxxxxx
#000 Xxxxx Xxxx Xxx
Xxxx Xxxxx, XX 00000
Telephone: 000-000-0000
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Notices to the Company:
Steakhouse Partners, Inc.
00000 Xxxxxx Xxxxx Xxxx
Xxx Xxxxx, Xxxxxxxxxx 00000
Attention: Secretary
Telephone: 000-000-0000
Fax: 000-000-0000
11. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
12. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way.
13. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
14. Successors and Assigns. This Agreement is intended to bind and inure to
the benefit of and be enforceable by Executive, the Company and their respective
heirs, successors and assigns, except that Executive may not assign his rights
or delegate his obligations hereunder without the prior written consent of the
Company. The Company will require any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) of all or substantially all of the
business and/or assets of the Company, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company would
be required to perform it if no such succession had taken place.
15. Attorneys' Fees and Costs. If any action at law or equity is necessary
to enforce or interpret the terms of this Agreement, the prevailing party shall
be entitled to reasonable attorneys' fees, costs and disbursements in addition
to any other relief to which that party may be entitled. In addition, the
Company shall pay on behalf of Executive the reasonable fees and expenses of his
counsel in connection with the negotiation and execution of this Agreement in an
amount not to exceed $5,000.
16. Choice of Law. This Agreement will be governed by the internal law, and
not the laws of conflicts, of the State of California.
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17. Amendment and Waiver. The provisions of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
STEAKHOUSE PARTNERS, INC.
By:
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Its:
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A. XXXXX XXXXXXXX
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