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EXHIBIT 10.36(b)
EMPLOYMENT AGREEMENT
AGREEMENT dated as of December 21, 1995 made and entered into by and
between Schlotzsky's, Inc., a Texas corporation (the "Company") and Xxxxxxx X.
Xxxxxx ("Xxxxxx") to be effective as of the closing of the Company's initial
public offering.
The Board of Directors of the Company has determined that it is in the
best interest of the Company to set forth the terms of employment of Xxxxxx as
President of the Company and Xxxxxx has agreed to such terms. The Company and
Xxxxxx wish to promote their mutual best interest by setting forth the terms
and conditions in writing.
NOW, THEREFORE, in consideration of the covenants and agreements set forth
in this Agreement, the parties agree as follows:
1. Employment. The Company employs Xxxxxx and Xxxxxx agrees to the terms
and conditions set forth in this Agreement. Xxxxxx agrees to serve as Senior
Vice President, General Counsel of the Company to be responsible for performing
the functions of a Vice President as described in the Bylaws of the Company,
reporting directly to the President, and to devote good faith efforts on behalf
of the Company.
2. Term of Employment. Xxxxxx'x employment with the Company shall
continue for two years after the closing of the Company's initial public
offering, provided that such term shall be extended to three years if he
remains liable on over $250,000 of guarantees in favor of the Company
(exclusive of any guarantee directly related to the flagship store location) at
the end of the first year, and provided further that such term shall be
extended to four years if he remains liable on over $100,000 of guarantees in
favor of the Company (exclusive of any guarantee directly related to the
flagship store location) at the end of the second year, unless earlier
terminated by Xxxxxx or the Company in accordance herewith.
3. Base Salary, Bonus and Other Compensation. The Company shall pay to
Xxxxxx an annual base salary of $100,000 for 1995, $110,000 during 1996,
$120,000 during 1997, and for each year thereafter an amount equal to the
aggregate of the previous year's salary plus the greater of (i) 5% thereof, or
(ii) the percentage increase in consumer prices for the previous year, as
measured by the Consumer Price Index ("CPI") or if the CPI is no longer
calculated, an index acceptable to Xxxxxx and the Company, multiplied by such
salary. Xxxxxx'x salary shall be payable on the same schedule that salary is
paid to other employees. Xxxxxx shall be entitled to such bonuses and other
compensation as the Board of Directors shall approve.
4. Benefits. Xxxxxx shall receive, in addition to the base salary and the
bonuses set forth in Section 3 hereof, such other benefits as are provided by
the Company to its executive officers, such as, group life, medical and
disability insurance. In addition, Xxxxxx shall be entitled to receive stock
options to acquire 31,250 shares of Common Stock of the Company at an exercise
price of $12.80 per share, such shares to vest in the manner determined by the
Compensation Committee. The Company shall, within a reasonable period of time
following the
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closing of the Company's initial public offering, restructure the notes payable
from WTM Development, Inc. to provide for quarterly payments of interest only
at an annual rate of 8% per annum, and an extended maturity of five years from
such closing. In addition, the Company will commit to make additional advances
of up to $35,000 to WTM Development, Inc., such amount to be added to the
principal of the restructured notes.
5. Xxxxxx Covenants.
(a) Confidential Information. Xxxxxx acknowledges that the information,
observations and data obtained by him while employed by the Company (including
those obtained by him while employed at the Company prior to the date of this
Agreement) concerning the business or affairs of the Company ("Confidential
Information") are the property of the Company. Therefore, Xxxxxx agrees that
he shall not disclose to any unauthorized person or use for his own account any
Confidential Information, unless and to the extent that the aforementioned
matters become generally known to and available for use by the public other
than as a result of Xxxxxx'x acts or omissions to act. Xxxxxx shall deliver to
the Company at the termination of employment, or at any other time the Company
may request, all memoranda, notes, plans, records, reports and other documents
(and copies thereof) relating to the Confidential Information or the business
of the Company which he may then possess or have under his control.
(b) Inventions and Patents.
(i) Xxxxxx agrees that all inventions, innovations, improvements,
developments, methods, designs, analyses, drawings, reports, and all similar or
related information which relates to the Company's actual or anticipated
business, research and development or existing or future products or services
and which are conceived, developed or made by Xxxxxx while employed by the
Company ("Work Product") belong to the Company. Xxxxxx will promptly disclose
such Work Product to the President and perform all actions reasonably requested
by the President to establish and confirm such ownership.
(ii) Xxxxxx is hereby advised that Section 5(b)(i) of this Agreement
regarding the Company's ownership of intellectual property does not apply to
any invention for which no equipment, supplies, facilities or trade secret
information of the Company was used and which was developed entirely on
Xxxxxx'x own time, unless (i) the invention relates to the business of the
Company or to the Company's actual or demonstrably anticipated research or
development or (ii) the invention results from any work performed by Xxxxxx of
the Company.
(c) Non-Compete, Non-Solicitation.
(i) Xxxxxx acknowledges that in the course of his employment with the
Company he will become familiar, and during his employment with the Company he
has become familiar, with the Company's trade secrets and with other
confidential information concerning the Company and that his services will be
of special, unique and extraordinary value to the Company. Therefore, Xxxxxx
agrees that, during employment and for eighteen months
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thereafter, he shall not directly or indirectly own, manage, control,
participate in, consult with, render services for, or in any manner engage in
any business competing with the business of the Company or any foreign country
where the Company is authorized to do business. For purposes of this
Agreement, a business shall be deemed competitive if it is a restaurant,
sandwich shop or food service operation offering principal menu entrees or
items which are the same or confusingly similar to those than offered at any
Schlotzsky's restaurant or outlet worldwide. Nothing herein shall prohibit
Xxxxxx from being a passive owner of not more than 5% of the outstanding stock
of any class of a corporation which is publicly traded, so long as Xxxxxx has
no active participation in the business of such corporation.
(ii) During employment, Xxxxxx shall not (i) induce or attempt to
induce any employee of the Company to leave the employ of the Company or in any
way interfere with the relationship between the Company and any employee
thereof, (ii) hire directly or through another entity any person who was an
employee of the Company at any time during employment or (iii) induce or
attempt to induce any customer, supplier, licensee or other business relation
of the Company to ceases doing business with the Company or in any what
interfere with the relationship between any such customer, supplier, licensee
or business relation and the Company.
(d) Full-Time. Xxxxxx agrees to devote his best efforts to the business
and affairs of the Company. Xxxxxx shall seek written consent from the
Compensation Committee of the Board of Directors of the Company to provide
service to a third party for compensation. Consent to such activities may be
withheld in the sole judgment of the Compensation Committee. Consents granted
may be referenced in an addendum to this Agreement.
(e) Enforcement. If, at the time of enforcement of paragraphs 5 (a), (b),
(c) or (d) of this Agreement, a court holds that the restrictions stated herein
are unreasonable under circumstances then existing, the parties hereto agree
that the maximum period, scope or geographical area reasonable under such
circumstances shall be substituted for the stated period, scope or area.
Because Xxxxxx'x services are unique and because Xxxxxx has access to
Confidential Information and Work Product, the parties hereto agree that money
damages would be inadequate remedy for any breach of this Agreement.
Therefore, in the event a breach or threatened breach of this Agreement, the
Company or its successors or assigns may, in addition to other rights and
remedies existing in their favor, apply to any court of competent jurisdiction
for specific performance or injunction or other relief in order to enforce, or
prevent any violations of, the provisions hereof.
6. Termination. (a) The Company may terminate the employment of Xxxxxx
for cause or without cause. For purposes of this Agreement "for cause" means
termination by the Company of the employment of Xxxxxx upon any of the
following grounds and no others: (i) any act of dishonesty on the part of
Xxxxxx resulting or intended to result directly or indirectly in personal gain
or benefit at the expense of the Company; and (ii) fraud, misappropriation,
embezzlement or willful and material damage of or to property of the Company.
(b) Upon termination of Xxxxxx'x employment for any reason, he shall be
entitled to receive the base salary and any bonuses earned through the date of
termination. In
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addition, the Company shall use good faith efforts to remove Xxxxxx from all
guaranties in favor of the Company as soon as practicable.
(c) Upon termination of Xxxxxx'x employment without cause, he shall be
entitled to receive the base salary and any bonuses earned through the date of
termination, plus the base salary through the end of the term then in effect.
Xxxxxx may elect to treat a substantial reduction in responsibilities and
duties as termination without cause. In the event of any dispute between the
Company and Xxxxxx concerning the status of a reduction in responsibilities and
duties as "substantial," the dispute shall be submitted to an independent third
party arbitrator acceptable to the Company and Xxxxxx for a determination which
shall be binding on both parties.
7. Disability or Death. (a) If as a result of illness, injury or other
disability, Xxxxxx is unable to perform his duties hereunder on a substantially
full time basis for any period of twelve months or more, the Company may at its
option terminate Xxxxxx'x employment hereunder and shall pay to Xxxxxx the base
salary and any bonuses through the date of termination, plus the base salary
through the end of the term then in effect.
(b) If Xxxxxx shall die during the term of his employment by the Company,
the Company shall pay to Xxxxxx'x estate the base salary and any bonuses
through the date of his death, plus the base salary through the end of the term
then in effect.
8. Miscellaneous. This Agreement contains the entire agreement of the
parties regarding the subject matter hereof. This Agreement may not be changed
orally but only by an agreement in writing signed by the parties hereto. This
Agreement shall be binding upon and inure to the benefit of the parties and, to
their respective successors and assigns. This Agreement shall be construed
under and enforced in accordance with the laws of
the State of Texas, and shall be performable in Xxxxxx County, Texas.
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date set forth above.
COMPANY:
SCHLOTZSKY'S, INC.
By:
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Its:
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XXXXXX:
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Xxxxxxx X. Xxxxxx
