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EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made this 5th day of
October, 1996, by and between Robert Taft ("Employee") and Au Bon Pain, Co.,
Inc., a Delaware corporation with a principal place of business in Boston,
Massachusetts (the "Company").
WHEREAS, the Company wishes to employ and engage the services of the
Employee in an executive capacity for the Company, upon the terms, conditions
and provisions of this Agreement; and
WHEREAS, the Employee desires to provide services to the Company in
accordance with the terms, conditions and provisions of this Agreement;
NOW, THEREFORE, in consideration of the mutual covenants set forth herein,
and other good and valuable consideration, the receipt of which is hereby
acknowledged, the Company and Employee hereby agree as follows:
1. Definitions
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For all purposes of this Agreement, the following terms shall have the
meanings specified in this Section 1 unless the context clearly requires
otherwise:
(a) "BASE SALARY" means the Employee's annualized base salary (including
car allowance) set forth in Section 3(a) of this Agreement, and such increases
thereto as may be established by the Company from time to time. In no event,
however, shall Employee's Base Salary be less than the amount set forth in
Section 3(a) of this Agreement. "Base Salary" shall not include any bonus,
incentive compensation or employee benefits;
(b) "BENEFITS" means all employee benefits provided to the Employee by the
Company, including medical, dental, long-term disability, life insurance, and
such other benefits as may be provided from time to time by the Company
generally to its employees;
(c) "INCENTIVE COMPENSATION" means any compensation provided to the
Employee by the Company during the term of this Agreement, other than Base
Salary and Benefits, pursuant to Section 3(b) of this Agreement;
(d) "SEVERANCE" means payments made by the Company to the Employee after
termination of employment, pursuant to this Agreement, at the rate of the
Employee's annualized Base Salary (including car allowance) as of the date of
Employee's termination. Severance is payable on a weekly basis in substantially
equal installments following Employee's termination, in such increments and for
such period(s) of time
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designated in this Agreement ("Severance Period"). Severance shall not include
any bonuses or other Incentive Compensation. Except as set forth in the
immediately preceding sentence, Severance shall also include the continuation of
Employee's Benefits existing at the time of Employee's termination for the
Severance Period. Employee shall be responsible for making all required
contributions to continue Benefits during the Severance Period on the same basis
as existed at the time of the Employee's termination. Severance shall be reduced
(dollar for dollar) by any compensation and benefits Employee receives or earns
during the Severance Period from any source other than the Company including,
without limitation, salary, employee benefits, consulting fees, income from
self-employment or otherwise.
2. Employment
----------
The Company agrees to employ the Employee to render services to the Company
in an executive capacity. Effective as of the date hereof, Employee hereby
accepts such employment subject to the terms and conditions set forth herein.
Employee agrees to devote his full attention, best talents and abilities to the
job and to perform faithfully his duties and responsibilities hereunder.
3. Compensation
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(a) Base Salary and Benefits
The Company shall pay Employee a Base Salary at the rate of $250,000.00
annualized, a car allowance of $96.16 per week, Incentive Compensation, and
Benefits, subject to federal and state withholdings and customary payroll
deductions. The Company shall conduct a review of Employee's performance no
later than March 15, 1998, and increases, if any, in Employee's compensation at
that time shall be retroactive to January 1, 1998.
(b) Incentive Compensation
The Company shall pay Employee Incentive Compensation as follows:
(i) 1996
The Employee will be included in the Company's Pay for Performance Program
from the beginning of Employee's employment until December 31, 1996. Employee's
1996 Incentive Compensation will be contingent on Employee's continued
employment by the Company through the payment date of March 15, 1997. The 1996
Incentive Compensation payment will be calculated by dividing $110,000.00 by 52
weeks ($2,115.00) and multiplying this number by the total number of full weeks
Employee is employed in calendar year 1996.
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(ii) 1997
Employee's 1997 Incentive Compensation will be 5.0% of the calculated
incremental ABP NBT. ABP NBT will be calculated as follows:
1. Net ABP Division store operating contribution, plus ABP production
contribution on products manufactured by ABP Manufacturing, less:
a) ABP Retail overhead expense;
b) allocated corporate overhead expense calculated as ABP stores
gross sales divided by total gross sales multiplied by corporate
overhead expense;
c) allocated ABP manufacturing overhead expense based on the
proportion of the ABP manufacturing transfer sales to the total
manufacturing transfer sales; and
d) a 12% cost of capital charge or credit based on the fiscal year's
net capital generation or usage versus the 1996 Base Year.
Incremental ABP NBT shall be ABP NBT for the given fiscal year less ABP NBT for
the 1996 Base Year.
For the 1997 plan year (FY January through December), Employee is
guaranteed a minimum Incentive Compensation payment, contingent upon continued
employment with the Company until March 15, 1998. This minimum payment shall be
equivalent to the difference between the 1996 Incentive Compensation payment, as
set forth above, and $110,000.00.
(iii) 1998
The Employee's Incentive Compensation will be reviewed for the 1998 plan
year, and adjusted in the sole discretion of the Company in the context of the
business. The Company reserves the right to change, modify or revoke the
Employee's 1998 Incentive Compensation.
4. Term
----
Unless terminated as provided in Section 5, or as otherwise provided in
this Agreement, this Agreement shall continue for a two-year period from the
commencement of Employee's employment with the Company or the effective date of
this Agreement, whichever is later; thereafter, this Agreement shall
automatically renew for additional one-year periods, unless either party
notifies the other in writing of its intent not to renew this Agreement at least
twenty-six (26) weeks prior to its expiration. In the event the
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Employee gives notice of intent not to renew this Agreement, the Employee shall
not be entitled to Severance. In the event the Company gives notice of intent
not to renew this Agreement, at the expiration of the Agreement the Employee
shall be entitled to twenty-six (26) weeks' Severance.
5. Termination
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(a) Termination for Cause
---------------------
The Company may terminate Employee's employment at any time for cause, upon
written notice specifying the reasons. As used herein, the term "cause" shall
mean:
(i) The commission by Employee of any act of embezzlement, fraud, larceny,
theft, or other willful misconduct or gross negligence in connection
with the performance of Employee's duties which adversely affects the
affairs of the Company;
(ii) Employee's conviction of a felony, or conviction of a misdemeanor
involving moral turpitude;
(iii) A material breach of the terms of this Agreement which continues for
fifteen (15) days after the Company has given written notice to the
Employee specifying in reasonable detail the material breach.
(b) Termination Without Cause
-------------------------
Notwithstanding any other provision of this Agreement, the Company may
terminate Employee's employment, without cause, at any time, for any reason,
effective upon thirty (30) days' written notice to the Employee. In the event of
a termination without cause, the Employee shall be entitled to fifty-two (52)
weeks' Severance.
(c) Resignation
-----------
The Employee may at any time during the term of this Agreement resign
employment, effective upon ninety (90) days' written notice to the Company. Upon
such resignation, the Employee shall not be entitled to any Severance, and,
except as otherwise specifically set forth herein, the obligations of the
Company to the Employee under this Agreement shall terminate upon the effective
date of such resignation. Employee agrees to continue to perform his duties
hereunder, and otherwise assist the Company in an orderly transition, during
such ninety-day period.
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(d) Disability
----------
The Company may terminate Employee's employment if, at any time during the
term of this Agreement, the Employee shall become disabled so that he is unable
to perform the Employee's regular duties of employment, with reasonable
accommodation, for a period of ninety (90) days in the aggregate during any
180-day period. The determination of the Employee's disability for purposes of
this Section 5(d) shall be made by a qualified physician acceptable to both
parties. In the event that the Company and the Employee are unable to agree upon
a qualified physician, each party shall select a qualified physician, and in the
event those two physicians are unable to agree upon a determination as to the
Employee's disability, a third neutral physician ("Neutral Physician")
acceptable to the parties shall be selected. The determination of disability by
the Neutral Physician shall be final and binding for purposes of this Agreement.
In the event this Agreement is terminated pursuant to this Section 5(d), the
Employee shall be entitled to fifty-two (52) weeks' Severance. Such Severance
shall be offset dollar for dollar by any payments made in the aggregate to the
Employee under the Company's existing Salary Continuation and Long-Term
Disability Plan(s).
(e) Relocation of Employee
----------------------
Should the Company require the Employee's place of work to be relocated
outside of the Greater Boston area, the Employee may elect to terminate his
employment with the Company, upon thirty (30) days' written notice to the
Company, and the Employee shall be entitled upon such termination to fifty-two
(52) weeks' Severance.
(f) Stock Options
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Should the Board of Directors of the Company fail to approve the
recommended schedule of stock options to be awarded to the Employee set forth in
Section 10 of this Agreement at the next Board of Directors' meeting following
the Employee's date of hire, or each subsequent anniversary date, the Employee
may within thirty (30) days of the next Board of Directors' meeting following
Employee's date of hire or subsequent anniversary date, as the case may be,
terminate his employment with the Company, effective upon thirty (30) days'
written notice to the Company, and the Employee shall be entitled upon such
termination to fifty-two (52) weeks' Severance.
(g) Death
-----
This Agreement and all obligations of the Company hereunder shall terminate
upon the death of the Employee. In the event of a termination upon the death of
the Employee, monies or compensation owed by the Company to the Employee up to
the date of termination shall be paid to the Employee's estate or designee.
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6. Confidential Nature of this Agreement
-------------------------------------
Employee agrees to keep confidential the terms of this Agreement. A
violation of this provision shall entitle the Company to terminate this
Agreement immediately, for cause, as set forth in Section 5(a)(iii).
Notwithstanding the above, the Employee may disclose the terms of this Agreement
to his/her immediate family, bankers, accountants, attorneys, and other
financial advisers, the Internal Revenue Service, the Massachusetts Department
of Revenue, in the event that disclosure is necessary in litigation or
arbitration involving this Agreement, or in the event that such disclosures
shall be compelled by law.
7. Confidential and Proprietary Information
----------------------------------------
(a) The Employee understands and acknowledges that in the course of
employment with the Company, Employee will have access to confidential and
proprietary information of the Company and its Affiliates (which shall mean
entities controlling, controlled by or under common control with the Company,
including without limitation, Saint Louis Bread Company, Inc. and its
Affiliates) which constitute valuable, special and unique assets of the Company
and its Affiliates. For purposes of this Agreement, such confidential and
proprietary information shall include, without limitation, the following: trade
secrets; operating techniques; procedures and methods; product specifications;
customer lists; account information; price lists; discount schedules;
correspondence with customers, vendors, employees, partners or others; drawings;
software; leads from suppliers; marketing techniques; procedures and methods;
employee lists; internal financial reports of the Company and its Affiliates;
sourcing lists; and recruiting lists (collectively, "Confidential Information").
(b) The Employee agrees that during the term of this Agreement and at any
time thereafter, Employee will not, without the authorization of the Company:
(i) disclose any Confidential Information to any person or entity for any
purpose whatsoever; or (ii) make use of any Confidential Information for
Employee's own purposes or for the benefit of any other person or entity, other
than the Company and its Affiliates.
(c) The Employee agrees that upon the request of the Company or upon
termination of employment, Employee shall return to the Company all documents or
other materials, including electronic or computerized data, containing or
relating to Confidential Information, along with all other Company property.
8. Restrictive Covenant
--------------------
During the term of this Agreement, and for one year after its termination,
for whatever reason, the Employee shall not, directly or indirectly, either as
an individual, employee, partner, officer, owner, director, shareholder, advisor
or consultant, or in any
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other capacity whatsoever, on behalf of any person, firm, corporation,
partnership or entity:
(a) be employed by or retained as a consultant or advisor to a competitive
entity in the bakery/coffee/deli business. For purposes of this Agreement,
"competitive entity" includes, without limitation, the following companies doing
business as: Wall Street Deli; Paradise Bakery, Inc.; Starbucks; Vie De France;
Java City; Bruegger's Bagel Bakery; Finagle-A-Bagel; Le Boulangerie; Great
Harvest; Einstein's/Noah's; Peet's; Corner Bakery; Big Sky, and their respective
parents, subsidiaries, franchisees, affiliates, successors or assigns.
Notwithstanding the above, "competitive entity" shall not include Paradise
Bakeries of Tulsa, Inc. and any of its franchises or stores (collectively, the
"PBT Franchises"). Additionally, "competitive entity" shall include, without
limitation, any company which generates in the aggregate more than 25% of its
revenues from the sale of baked goods and coffee, and their respective parents,
subsidiaries, franchisees, affiliates, successors or assigns. Notwithstanding
the above, the direct or indirect ownership of one percent (1%) or less of the
stock of a competitive entity whose shares are listed on a national securities
exchange or are quoted on the National Association of Securities Dealers
Automated Quotation System or so-called Bulletin Board shall not, in and of
itself, be deemed to be a violation of this Section 8(a);
(b) recruit, solicit, hire, or assist any other person or party in
recruiting, soliciting, or hiring any employee of the Company or any of its
Affiliates or any of their respective franchises.
In addition, Employee agrees that during the term of this Agreement, he
shall not make any investment in or contribution to any of the PBT Franchises,
except that he may invest money in the development of one additional franchise
of the PBT Franchises. However, to the extent that the Employee maintains an
ownership interest in any of the PBT Franchises during the term of this
Agreement, he shall not exert any control or influence over the management of
any of the PBT Franchises, and Employee's interest in the PBT Franchises shall
be put into a trust for the term of this Agreement with a non-family member
designated to represent his shares on any corporate matters. The Company may, in
its sole discretion, waive enforcement of the provisions of this Section 8,
which waiver shall be evidenced solely by the execution and delivery to the
Employee of a written document setting forth the terms of such waiver, executed
by an authorized representative of the Company.
9. Enforcement
-----------
Employee agrees and acknowledges that a violation of Sections 7 or 8 of
this Agreement shall entitle the Company to terminate this Agreement
immediately, which termination shall be conclusively deemed to be a termination
for cause, as set forth in Section 5(a) hereunder. In the event of a violation
of Sections 7 or 8 of this Agreement,
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any further Severance, salary continuation, Benefits or other future
compensation otherwise owed pursuant hereto shall be forfeited, and any
Severance already paid or provided to the Employee shall likewise be forfeited
and shall be immediately returned to the Company.
The Employee acknowledges and agrees that the Company's remedies at law for
a breach of Sections 7 or 8 of this Agreement are inadequate and that the harm
caused thereby is irreparable. The Employee expressly agrees that in the event
of a violation of Sections 7 or 8 of this Agreement, the Company shall be
entitled to equitable relief enforcing the terms of this Agreement, including
without limitation, specific performance, a temporary restraining order,
preliminary injunction or permanent injunction to prevent any breach or
attempted breach thereof. The provisions of Sections 7, 8 and 9 shall survive
the termination of this Agreement, in addition to any others which may survive
pursuant to the terms of this Agreement.
10. Stock Options
-------------
The Co-Chairman and CEO of the Company agrees to recommend to the Board of
Directors that the Employee be granted stock options in the Company at the next
Board of Directors' meeting following Employee's date of hire, with vesting over
a five-year period of time (25% vesting on each of the second, third, fourth and
fifth anniversaries of employment start date). The price per share depends on
the value per share from Employee's exact start date and the value per share on
each subsequent anniversary of employment, provided Employee is still employed
with the Company. Upon the first installment Employee will be awarded 50,000
shares of stock options subject to a five-year vesting period. In addition, and
contingent upon continued employment on each of Employee's anniversary dates,
consideration will be given by the Board of Directors based on the Company's
performance, Employee's performance, and availability of stock in the option
plan to award Employee additional stock options as follows. On Employee's 1997
anniversary date with the Company, Employee will be awarded options to purchase
20,000 shares of stock. For 1997 only, Employee will be granted an additional
amount of stock options calculated as 20,000 times the difference in stock price
as of that date and $8.00 divided by the stock option price as of that date. No
additional stock options beyond the first 20,000 will be granted if the value of
this calculation is less than or equal to zero.
Example:
Hire Date = 10/1/96
Anniversary Date = 10/1/97
Stock Price on 10/1/97 = $10.00
Additional Stock Granted beyond the 1st 20,000 = 20,000 times ($10.00-$8.00)
--------------
$10.00
= 4,000 stock options
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On Employee's 1998 anniversary date with the Company, Employee will be
awarded options to purchase 10,000 shares of stock; on Employee's 1999
anniversary date with the Company, Employee will be awarded 10,000 shares of
stock options; on Employee's 2000 anniversary date with the Company, Employee
will be awarded options to purchase 10,000 shares of stock. The price per share
depends on the value per share on those exact dates, and all options described
in this Section 10 are subject to a five-year vesting schedule (25% on each
second, third, fourth and fifth anniversaries of the respective dates of grant).
11. Severability
------------
If any provision of this Agreement including, without limitation, Sections
7, 8 or 9 hereof, is declared or found to be illegal, unenforceable, void,
overbroad, or unreasonable in scope, territory, or duration, in whole or in
part, then both parties will be relieved of all obligations arising under such
provision, but only to the extent it is illegal, unenforceable, void, overbroad,
or unreasonable in scope, territory or duration. The intent and agreement of the
parties to this Agreement is that this Agreement will be deemed amended by
modifying any such illegal, unenforceable, void, overbroad or unreasonable
provision to the extent necessary to make it legal and enforceable while
preserving its intent, or if such is not possible, by substituting therefor
another provision that is legal and enforceable and achieves the same
objectives. The foregoing notwithstanding, if the remainder of this Agreement
will not be affected by such declaration or finding and is capable of
substantial performance, then each provision not so affected will be enforced to
the extent permitted by law.
12. Arbitration
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Any controversy or claim arising out of or relating to this Agreement or
Employee's employment with the Company, except for claims of violation by the
Employee of Sections 7 and 8 hereof which may be enforced by the Company in a
court of competent jurisdiction pursuant to Section 9 hereof, shall be settled
exclusively by binding arbitration before a single arbitrator in the City of
Boston, in accordance with the Commercial Arbitration Rules of the American
Arbitration Association. The provisions hereof shall be a complete bar and
defense to any suit, action or proceeding instituted by the Employee in any
federal, state or local court or before any administrative tribunal with respect
to any matter which is arbitrable as herein set forth. This Section shall
survive the termination or expiration of this Agreement. Nothing herein
contained shall be deemed to give any arbitrator any authority, power, or right
to alter, change, amend, modify, add to, or subtract from any provisions of this
Agreement. The arbitrator shall have no authority to award punitive damages or
attorney's fees to any party. The decision of the arbitrator shall be final and
conclusive. Judgment on an award rendered by the arbitrator may be entered in
any court of competent jurisdiction.
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13. No Conflicting Agreements
-------------------------
Employee hereby represents and warrants that neither the entry into this
Agreement nor its performance by Employee will conflict with or result in a
breach of the terms, conditions or provisions of any other agreement or other
obligation of any nature to which Employee is a party, or by which he is
otherwise bound, including, without limitation, any other employment agreement,
non-competition agreement, or confidentiality agreement. Employee further
represents and warrants that he will: (i) execute a letter agreement dated
September 27, 1996 with Paradise Bakery, Inc. ("the Paradise Bakery Agreement");
(ii) deliver it forthwith to Paradise Bakery, Inc.; and (iii) take all steps
necessary to discharge Employee's obligations under the Paradise Bakery
Agreement capable of being fulfilled within two weeks of the date hereof. A copy
of the Paradise Bakery Agreement executed by the Employee is attached hereto as
Exhibit 1. In the event that the Employee fails to accomplish all obligations
under the Paradise Bakery Agreement that are capable of being fulfilled within
two weeks, this Agreement shall become null, void, unenforceable and without
force or effect, and all copies of the Agreement held by the Employee shall be
returned to the Company forthwith.
Additionally, Employee agrees to use his best efforts to obtain a plain,
clear and unequivocal waiver ("Waiver") of all competitive restrictions from
Paradise Bakery, Inc., Paradise Bakeries of Tulsa, Inc. and all related or
affiliated companies, including parents, subsidiaries, franchisees, successors
or assigns (collectively, "Paradise Bakery"), in a form acceptable to the
Company. Such Waiver shall be accompanied by the Certificates of the Secretaries
of Paradise Bakery, Inc. and Paradise Bakeries of Tulsa, Inc., indicating the
authority of the person(s) executing such Waiver. A form Waiver and accompanying
Secretary's Certificate(s) acceptable to the Company are attached hereto as
Exhibits 2, 3 and 4, respectively.
14. Indemnification
---------------
In the event that the Employee is unable within two weeks of the date
hereof to obtain a Waiver of competitive restrictions acceptable to the Company,
pursuant to Section 13 above, the Employee covenants and agrees to indemnify,
defend, save and hold the Company and each of its employees, officers,
directors, stockholders, consultants, attorneys and agents (collectively, the
"Company's Parties") harmless from and against one half (the other one half to
be borne by the Company) of all claims, demands, causes of action, suits,
judgments, debts, liabilities, loss, costs, expense, liability, or damages
(collectively, the "Damages") including, without limitation, reasonable fees and
disbursements of counsel and accountants and other professionals, and other
costs and expenses incident thereto (collectively, "Defense Costs") arising out
of or resulting from: (i) Employee's affiliation with Paradise Bakery including,
without limitation, his status as a present or former employee, officer,
director, shareholder or otherwise; (ii) any non-
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competition, conflict of interest or other agreements with Paradise Bakery;
(iii) the failure of the Employee to perform or observe fully any covenant,
agreement or provision to be performed or observed by him pursuant to the
Paradise Bakery Agreement dated September 27, 1996 and attached hereto as
Exhibit 1; or (iv) any actual or threatened claim, suit, action or proceeding
arising out of or resulting from the employment of the Employee by the Company,
prior to receipt by the Company of the written Waiver and accompanying
Secretary's Certificate(s) pursuant to Section 13 of this Agreement. It is the
intent of this Section 14 that the Employee and the Company shall bear an equal
50% share of all Damages and Defense Costs incurred by the Company as set forth
above, and with respect to Defense Costs, such 50% share shall be paid by the
Employee to the Company within thirty (30) days of receipt of monthly statements
from the Company evidencing such Defense Costs incurred pursuant to this Section
14. The Employee shall remain solely liable for any Damages or Defense Costs
incurred by him individually in connection with the matters identified in this
Section 14.
15. Governing Law
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The terms hereof shall be governed by, and construed and interpreted in
accordance with, the laws of the Commonwealth of Massachusetts, without giving
effect to its conflict of laws rules which may otherwise require the application
of the law of another jurisdiction.
16. Successors and Assigns
----------------------
This Agreement shall be binding upon and inure to the benefit of the
Company and the Employee and their respective successors, assigns, heirs, legal
representatives, executors and administrators.
17. Notices
-------
(i) All notices to the Employee shall be addressed to Employee at:
24 Grand Hill Drive Dover, MA 02030
or to such other place(s) as may be designated by written notice to the Company.
(ii) All notices to the Company shall be addressed to the Company at:
19 Fid Kennedy Avenue
Boston, MA 02210
Attention: C.E.O.
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With copies to:
Walter D. Wekstein, Esq.
Gadsby & Hannah LLP
125 Summer Street
Boston, MA 02110
Andrew L. Eisenberg, Esq.
Palmer & Dodge LLP
One Beacon Street
Boston, MA 02108
or to such other place(s) as may be designated by written notice to Employee.
(iii) Notice shall be sufficient if given by hand or by certified mail,
postage prepaid, return receipt requested, addressed to the party at its address
described above. Unless otherwise notified in writing, each party shall direct
all sums payable to the other party at its address for notice purposes.
18. Headings
--------
The captions and headings in this Agreement are for convenience and
reference only, and they shall in no way be held or deemed to define, modify or
add to the meaning, scope or intent of any provision of this Agreement.
19. Entire Agreement
----------------
This Agreement constitutes the entire agreement between the parties and
supersedes all prior agreements and understandings, written or oral on the
subject matter hereof including, but not limited to, offer letters, employment
letters, and agreements concerning severance pay or stock options.
20. Amendments
----------
This Agreement may be modified only by written agreement signed by both the
Employee and the Company.
21. Waiver
------
The failure of any party at any time to require the performance of any
provision(s) hereof shall in no manner affect the right(s) of such party at a
later time to require the performance of said provision(s), and shall not be
deemed a waiver of any obligations hereunder.
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IN WITNESS WHEREOF, the parties to this Agreement have executed this
Agreement under seal, as of the date first above written.
AU BON PAIN CO., INC.
By: /s/ RONALD SHAICH Date: October 16, 1996
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Witness: /s/ MARIEL CLARK Date: October 16, 1996
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[EMPLOYEE]
/s/ ROBERT TAFT Date: October 5, 1996
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Witness: /s/ ANDREW L. EISENBERG Date: October 5, 1996
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