EXECUTIVE RETENTION AGREEMENT
THIS RETENTION AGREEMENT ("Agreement") is made as of the 21st day of
January, 2003, by and between Xxxx in the Box Inc., a Delaware corporation (the
"Company"), and Xxxx X. Xxxxxxx ("Executive") in connection with the Company's
acquisition of Qdoba Restaurant Corporation ("Qdoba") by the Company (the
"Acquisition").
1. EMPLOYMENT. The Company hereby agrees to employ Executive, and Executive
hereby agrees to be employed by the Company, during the term of this Agreement,
as President and Chief Executive Officer of Qdoba Restaurant Corporation, its
wholly-owned subsidiary. Executive will perform the duties normally associated
with those offices and such other duties not inconsistent therewith as are
reasonably assigned to him by the Chief Executive Officer (CEO) of the Company.
2. RESPONSIBILITIES OF EMPLOYMENT. During the term of his employment,
Executive:
(a) shall diligently and faithfully serve the Company in the capacities
described above, and shall devote his best efforts and full business time and
attention to the advancement of the Company's interests;
(b) shall diligently and faithfully carry out the policies, programs and
directions of the CEO of the Company;
(c) shall fully cooperate with such other officers of the Company as may
be elected or appointed by the CEO of the Company; and
(d) shall report to the CEO of the Company.
3. COMPENSATION. The Company will compensate Executive for his services
during the term of this Agreement as follows:
(a) Base Compensation. The Company shall pay to Executive as initial
minimum base compensation during Qdoba's 2003 Fiscal Year (terms capitalized but
not otherwise defined are used as defined in Exhibit A) salary at the weekly
rate of $4,326.92, annualized to $225,000 per year, payable in accordance with
the Company's normal payroll schedule. Executive's salary for subsequent Fiscal
Years shall be determined by the Company's CEO.
(b) Bonus. For Fiscal Year 2003, Executive shall have the opportunity to
earn a bonus based on agreed performance levels measured by Qdoba's Earnings
Before Interest, Taxes, Depreciation and Amortization (EBITDA) for Qdoba's
fiscal year 2003 and will be calculated as follows:
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Level Bonus EBITDA (in millions)
------- -------------------- --------
Xxxxx 0 0% of Base Salary $ 2.00
Xxxxx 0 15% of Base Salary $ 2.25
Xxxxx 0 30% of Base Salary $ 2.50
Xxxxx 0 50% of Base Salary $ 2.75
Xxxxx 0 75% of Base Salary $ 3.10
Level 6 100% of Base Salary $ 3.50
Level 7 125% of Base Salary $ 4.00
Bonus will be prorated between levels but may not exceed 125% of base salary.
Executive's bonus opportunity for subsequent Fiscal Years shall be established
annually by the Company, after consultation with Executive, and shall be
communicated to Executive in writing not later than 60 days after the Fiscal
Year in respect of which the bonus may be earned. Any bonus payable under this
Agreement shall be paid to Executive in a single lump sum, subject to
appropriate withholding and payroll tax deductions, not later than the 30th day
of the Fiscal Year immediately following the year in which the bonus is earned.
(c) Benefits. Executive shall be entitled to continue his participation
in all benefit plans maintained by Qdoba Restaurant Corporation, including (with
out limitation) the health and life insurance plan, dental plan, vacation plan,
flexible spending account and the short- and long-term disability plans with the
cancer and critical illness plan. The terms of any such plan shall be determined
in the sole discretion of the Company; provided, however, that the Company will
cause any benefit provided to Executive on the date immediately preceding the
effective date of the Acquisition to be continued on a substantially equivalent
basis until September 30, 2003. During the term of this Agreement, Executive
will be entitled to the additional benefits under the following plans or
arrangements:
(i) The Xxxx in the Box Retirement Plan which is a non-
contributory defined benefit plan providing an annual single life pension at
retirement equal to 1%(all service) of final average pay (FAP)(high consecutive
five of the last 10 years), plus .4% (maximum 35 years) of FAP in excess of
covered compensation (average of participant's Social Security taxable wage base
for the 35 year period ending in the year the participant attains or will attain
Social Security retirement age) times years of service. Participation in the
Plan is automatic upon completion of one year of service and vesting occurs
after five years of service.
(ii) The Xxxx in the Box Supplemental Executive Retirement
Plan (SERP) under which a participant receives additional retirement benefits.
SERP benefits are payable if the single life equivalent of Company-
sponsored plans (JIB Retirement; EDCP) is less than 60% of final average pay
(FAP) (Average of highest 5 of last 10 years) times service divided by twenty.
(iii) As a highly compensated employee, Executive is eligible
to participate in the Executive Deferred Compensation Plan (EDCP) which is a
non-qualified, pre-tax deferred contribution plan. Participants may contribute
up to 50% of base salary and 100% (with applicable taxes) of bonus in whole
percentages. The Company matches 100% of the first 3% of deferred base and bonus
pay. The plan is unfunded.
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(iv) Executive is eligible for the Executive Medical
Reimbursement Plan, which reimburses deductible, co-insurance and amounts above
the usual and customary limits, for services covered under the Choice Plus Plan.
(d) Reimbursement of Expenses. Executive shall be entitled to
reimbursement of ordinary and necessary out-of-pocket expenses reasonably
incurred by him on behalf of the Company in the course of performing his duties
hereunder, upon furnishing appropriate documentation relative to such expenses
in form and substance satisfactory to the Company and subject to the Company's
expense reimbursement policies as in effect from time to time.
(e) Vacations. Executive shall be entitled to three weeks paid vacation
each Fiscal Year, subject to Qdoba's general vacation policy as in effect from
time to time.
(f) Automobile Allowance. Executive will be paid a $12,000 yearly car
allowance, payable quarterly and shall be responsible for operating and
maintenance expenses.
4. EQUITY-BASED COMPENSATION. Subject to the approval of the Company's
Board of Directors, Company and Executive shall enter into a Stock Option
Agreement of even date herewith pursuant to which the Company grants to
Executive options to purchase up to 20,000 shares of the Company's common stock
pursuant to the 2002 Employee Stock Incentive Plan. Such Stock Option Agreement
shall provide vesting in equal installments while Executive is an employee of
the Company or any of its Affiliates over a four-year period that begins with
the Effective Date of this Agreement and a per share exercise price that is the
closing price for a share of the Company's common stock on the NYSE on the
Effective Date of the Agreement. Also subject to the approval of the its Board
of Directors, the Company shall grant Executive 25,000 shares of the Company's
restricted stock subject to the terms of the Xxxx in the Box Inc. Executive
Stock Ownership Plan.
5. TERM. The initial term of this Agreement shall be for two years
commencing on the closing of the Qdoba acquisition. Thereafter, this Agreement
may, at the option of the Company, be renewed for an additional one-year term.
6. SEVERANCE. If Executive's employment with the Company is terminated
before the end of the term of this Agreement or any renewal thereof, the Company
shall pay to Executive his salary pursuant to Paragraph 3(a) through the date of
termination and shall reimburse Executive pursuant to Paragraph 3(d) for
expenses incurred prior to the termination, but shall have no obligation to pay
any severance or other compensation after the date of termination except as
specifically provided in this Section 6. If Executive's employment is terminated
prior to the end of the term of this Agreement (i) by the Company without Cause,
or (ii) by Executive following a Constructive Termination, the Company will pay
Executive severance equal to his then current salary under Paragraph 3(a) for
the "Severance Period." For that purpose, the Severance Period shall be (A) one
year after the effective date of the termination if the termination occurs under
clause (i) or (ii) of the preceding sentence and the effective date of the
termination is within 180 days after the acquisition of Qdoba Restaurant
Corporation by Xxxx in the Box Inc., (B) six months after the effective date of
the termination if the termination occurs under clause (i) or (ii) of the
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preceding sentence and the effective date of the termination is not within 180
days after the Effective Date of the acquisition of Qdoba Restaurant Corporation
by Xxxx in the Box Inc. Severance shall be payable in installments over the
Severance Period equal to the salary payments that Executive would have received
had he been employed during that period. If severance is payable, the Company
shall also continue Executive's health insurance coverage (or make COBRA
payments for Executive) for the Severance Period under such plans as are from
time to time maintained by the Company during that period. Executive shall not
be entitled to any bonus in respect of the Fiscal Year in which his employment
is terminated for any reason, but no termination shall affect Executive's right
to receive a bonus earned in respect of a prior Fiscal Year. Executive's right
to receive severance and health insurance coverage (i) shall be contingent upon
Executive's execution of a release of all claims against the Company (other than
the right to receive severance and health insurance coverage) in form and
substance and under procedures reasonably delivered by the Company to be
adequate to effectively waive all such claims under applicable laws and (ii)
shall automatically terminate upon any breach by Executive of Section 7 or 8 of
this Agreement.
7. PROTECTIVE COVENANTS.
(a) Non-Competition and Non-Solicitation. Executive agrees that, with
out the Company's prior written consent, within the Territory and during the
Non-Competition Period, he will not:
(i) directly or indirectly, manage, operate, control, accept
employment with, or consult for, or otherwise advise or assist or be connected
with or own or have any other interest in or right with respect to any
individual, entity or enterprise engaged in the Business;
(ii) interfere with any contractual or other business
relationships of Company or any of its Affiliates; or
(iii) solicit for employment any employee or officer of the
Company or any of its Affiliates, or any person who had been an employee or
officer of the Company or any of its Affiliates within one year prior to such
solicitation, on behalf of Executive or any other Person (other than the Company
or one of its subsidiaries) or otherwise interfere with the employment
relationship between the Company or any of its Affiliates, on the one hand, and
any of the employees or officers of the Company or its Affiliate, on the other
hand.
(b) Judicial Modification. Executive acknowledges and agrees that the
restrictions set forth in this Agreement are reasonable and necessary in
duration and scope to protect the legitimate interests and expectations of the
Company and intends that this Agreement shall be enforceable in accordance with
its terms throughout the Territory. Without limiting the generality of the
foregoing, Executive acknowledges that the Company intends to expand its
operations, directly or through franchises, throughout the Territory and that
any breach of this Paragraph 7 anywhere in the Territory would therefore damage
the Company, whether or not it then had operations in the geographic area where
the breach occurred. If, contrary to the agreement and intent of the parties, a
court of competent jurisdiction should find that any restriction set forth
herein is unenforceable as written, whether because it is impermissibly broad in
scope or long in duration or otherwise, the parties intend and agree that such
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restriction shall be deemed modified to the minimum extent necessary to render
it enforceable and shall be enforced as so modified.
(c) Permitted Activities. Nothing herein contained shall prohibit
Executive from owning securities of a publicly traded corporation so long as
Executive's beneficial ownership, determined under the beneficial ownership
rules under the Securities Exchange Act of 1934, as amended, does not exceed 2%
of the outstanding securities of any class of such corporation.
(d) Injunctive Relief. It is acknowledged and agreed that irreparable
injury will result to the Company, its businesses and property in the event of a
breach of this Paragraph 7, that damages caused by such breach would be
difficult if not impossible to ascertain, and that any remedy at law for such
breach by Executive will be inadequate. The Company shall be entitled to
temporary and permanent injunctive relief, without the necessity of proving
actual damage to the Company, to prevent or stop any such breach.
8. CONFIDENTIALITY. As used in this Agreement, Confidential Information
means any information concerning the Company or any Affiliate of the Company
that is not ordinarily provided to Persons who are not employees of the Company
except pursuant to a confidentiality agreement, provided that any information
that is or becomes publicly known other than as a result of a breach of this
Agreement by Executive shall not be or shall cease to be Confidential
Information. Executive shall not disclose Confidential Information to any Person
other than an officer, director or employee of the Company who needs to know
such information in his or her capacity as such. Executive shall not use
Confidential Information for any purpose other than the performance of his
duties as an officer, director or employee of the Company. Nothing in this
Agreement will prohibit Executive from disclosing Confidential Information as
necessary to comply with valid legal process or to fulfill a legal duty of
Executive, but Executive shall give the Company prompt notice of such process or
Executive's intent to disclose pursuant to such legal duty (other than the
filing of a tax return or other required periodic report) so that the Company
may take such steps as it deems appropriate to limit or protect the Confidential
Information to be disclosed.
9. INDEMNITY.
(a) Indemnification. The Company and Executive have entered into an
Indemnity Agreement, attached hereto as Exhibit B and incorporated herein by
reference as if fully set forth.
(b) Advancement of Expenses. In the event that Executive becomes a
party, or is threatened to be made a party, to any pending, threatened or
completed action, suit or proceeding for which the Company is permitted or
required to indemnify him under this Agreement, any applicable bylaw or charter
provision of the Company, any resolution of the Company, or any applicable
statute, the Company will, to the fullest extent permitted by law, advance all
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Expenses incurred by Executive in connection with the investigation, defense,
settlement or appeal of any threatened, pending or completed action, suit or
proceeding, subject to receipt by the Company of a written undertaking from
Executive to reimburse the Company for all Expenses actually paid by the Company
to or on behalf of Executive in the event it shall be ultimately determined that
the Company is not obligated to indemnify Executive for such Expenses, and to
assign to the Company all rights of Executive to indemnification under any
policy of directors, and officers, liability insurance to the extent of the
amount of Expenses actually paid by the Company to or on behalf of Executive.
(c) Litigation. Unless precluded by an actual conflict of interest, the
Company will have the right to control the defense of any claim covered by this
Paragraph 9, using counsel selected by the Company and reasonably satisfactory
to Executive. In the event that a conflict of interest prevents the Company from
defending the claim, Executive shall do so at the Company's expense with counsel
reasonably satisfactory to the Company, but the Company shall be entitled to
participate in the defense. The Company shall not settle any claim defended by
it unless the settlement includes an unconditional release of Executive from
liability thereon or unless Executive consents to the settlement, which consent
shall not be unreasonably withheld or delayed. Executive shall not settle any
claim defended by Executive without the consent of the Company, which consent
shall not be unreasonably withheld or delayed. If the Company wishes to accept
any settlement offer with respect to a claim and Executive refuses to consent,
the Company shall not be obligated to indemnify Executive beyond the amount of
the settlement so offered. Each party shall promptly notify the other party of,
and at all times keep the other informed with respect to, any claim covered by
this Paragraph 9.
10. ARBITRATION. Any disputes arising out of this Agreement or connected
with Executive's employment shall be submitted by Executive and the Company to
arbitration in Denver, Colorado. The arbitration shall be conducted by the
Judicial Arbiter Group or, if the Judicial Arbiter Group is not available, by
the American Arbitration Association or another arbitral body selected by the
parties. The determination of the arbitrator shall be final and absolute.
Notwithstanding this arbitration provision, the Company shall be entitled to
apply to any court of competent jurisdiction for temporary or permanent
injunctive relief or other equitable relief to enforce Paragraph 7 or 8. The
decision of the arbitrator may be entered as a judgment in any court of
competent jurisdiction.
11. GOVERNING LAW; INTERPRETATION. This Agreement shall be governed by and
construed in accordance with the laws of the State of Colorado. The titles of
the paragraphs have been inserted as a matter of convenience of reference only
and shall not be construed to control or affect the meaning or construction of
this Agreement.
12. SEVERABILITY. In the event that any portion of this Agreement is found
to be in violation of or conflict with any federal or state law, the parties
agree that said portion shall be modified only to the extent necessary to enable
it to comply with such law.
13. ASSIGNMENT. This Agreement shall not be assignable by either party
without the written consent of the other; provided that the Company may, without
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such consent, assign this Agreement to any Person that acquires all or
substantially all of its assets or otherwise succeeds to all or substantially
all of its business and operations.
14. NOTICES. All notices given under this Agreement shall be in writing.
Any notice may be transmitted by any means selected by the sender. A notice that
is mailed to a party at its address given below, registered or certified mail,
return receipt requested, with all postage prepaid, will be deemed to have been
given and received on the earlier of the date reflected on the return receipt or
the third business day after it is posted. Any notice sent by facsimile
transmission to a party at its facsimile number given below shall be deemed to
have been given and received upon confirmation of transmission by the sender's
facsimile machine. Any notice transmitted by recognized overnight courier
service to a party at its address given below shall be deemed given and received
on the first business day after it is delivered to the courier. Any notice given
by any other means shall be deemed given and received only upon actual receipt.
The addresses and facsimile numbers of the parties for notice purposes are as
follows:
If to the Executive:
Xxxx X. Xxxxxxx
00000 Xxxxx Xxxxxx Xxx
Xxxxxxxx, XX 00000
Facsimile No.: 000-000-0000
If to the Company:
Xxxx in the Box Inc.
c/o Xxxxxxxx Xxxxxx G.C.
0000 Xxxxxx Xxxxxx
Xxx Xxxxx, XX 00000
Facsimile No.: 000-000-0000
Any person may change its address or facsimile number for notice purposes, or
add additional persons to whom copies of any notice should be sent, by written
notice to the other party.
15. ENTIRE AGREEMENT. This Agreement is the entire agreement and
understanding of the parties hereto with respect to the subject matter hereof
and supersedes any and all prior and contemporaneous negotiations,
understandings and agreements with regard to the subject matter hereof, whether
oral or written, including the prior Executive Employment Agreement. No
representation, inducement, agreement, promise or understanding altering,
modifying, taking from or adding to the terms and conditions hereof shall have
any force or effect unless the same is in writing and validly executed by the
parties hereto or part of a formal benefit plan.
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IN WITNESS WHEREOF, the parties hereto have executed this Employment
Agreement as of the day and year first above written.
XXXX IN THE BOX INC.
By: /S/ XXXXXX X. XXXXXX
----------------------------------------
Name: Xxxxxx X. Xxxxxx
----------------------------------------
Title: Chief Executive Officer and President
----------------------------------------
EXECUTIVE
/S/ XXXX X. XXXXXXX
-------------------------------------------------
Xxxx X. Xxxxxxx
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EXHIBIT A
Definitions
As used in the Executive Employment Agreement between Xxxx in the Box Inc.
and Xxxx X. Xxxxxxx dated as of January 21, 2003 (the "Agreement"), the
following terms have the indicated meanings:
"Affiliate" means any Person directly or indirectly controlling, controlled
by or under direct or indirect common control with the Company. For purposes of
this definition, "control" means the power to direct the management and policies
of a Person, directly or through one or more intermediaries, whether through
ownership of voting securities, by contract, or otherwise.
"Business" means the ownership, franchising or operation of any Mexican
concept restaurant, whether similar or dissimilar to the concept of the
Company's restaurants.
"Cause" means (i) a material breach of this Agreement by Executive which,
if curable, has not been cured within 15 days after notice from the Company,
(ii) theft from or other dishonesty involving the Company by the Executive,
(iii) the commitment of a crime involving moral turpitude or constituting a
felony, (iv) gross negligence or willful misconduct with respect to the business
of the Company, (v) the failure of Executive to perform his duties under this
Agreement with the same degree of skill, attention and care that he has
exercised in the performance of his duties to the Company prior to the date of
this Agreement, and (vi) death.
"Change of Control" means the occurrence of one or more of the following
events:
(i) any person or entity or group (as that term is used in Section 13
(d)(3) of the Securities Exchange Act of 1934, as amended) of persons or
entities (in each case, a "Beneficial Owner"), in a single transaction or
through a series of related transactions, shall have become the beneficial owner
of a majority (by voting power or otherwise) of the securities of the Company
ordinarily having the right to vote in the election of directors;
(ii) any sale, lease, exchange or other transfer (in one transaction or
a series of related transactions) of all, or substantially all, the assets of
the Company to any Beneficial Owner (other than any wholly owned subsidiary of
the Company);
(iii) the merger or consolidation of the Company with or into another
corporation or the merger of another corporation into the Company with the
effect that immediately after such transaction any Beneficial Owner shall have
become the beneficial owner of securities of the surviving corporation of such
merger or consolidation representing a majority of the combined voting power of
the outstanding securities of the surviving corporation ordinarily having the
right to vote in the election of directors; or
(iv) the adoption of a plan leading to the liquidation or dissolution
of the Company.
A-1
"Constructive Termination" means (i) a reduction in Executive's salary
below the minimum amount required by Paragraph 3(a) of the Agreement, (ii) the
removal of Executive from or the failure to appoint Executive to either of the
offices described in Paragraph 1 of the Agreement, (iii) the reduction or
reassignment of duties and responsibilities normally associated with the offices
described in Paragraph 1 of the Agreement, without Executive's consent, to an
extent that makes it impracticable for Executive to perform the functions of
these offices, (iv) any other material breach of the Agreement by the Company
which, if curable, has not been cured within 15 days after notice from Executive
or (v) any requirement by the Company that Executive office outside the Denver,
Colorado metropolitan area.
"Fiscal Period" means a 28-day fiscal period used by Qdoba for financial
reporting purposes.
"Fiscal Year" means the fiscal year of Qdoba for financial reporting
purposes, consisting of 13 Fiscal Periods.
"Non-Competition Period" means the period beginning on the date of this
Agreement and ending on the first anniversary of the termination of Executive's
employment with the Company.
"Person" means any individual and any corporation, partnership, trust,
unincorporated organization, association, limited liability company or other
entity.
"Territory" means the United States of America and Canada.
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