Exhibit 10.20
EXECUTIVE EMPLOYMENT AGREEMENT
This Executive Employment Agreement ("Agreement") is made effective as of
August 6, 2002 ("Effective Date"), by and between Pei Wei Asian Diner, Inc.
("Company"), P.F. Chang's China Bistro, Inc., the parent corporation of Company
("Parent") and Russell Owens ("Executive").
The parties agree as follows:
1. Employment. Parent and Company hereby agree to continue Executive's
employment, and Executive hereby accepts such employment, upon the terms and
conditions set forth herein.
2. Duties.
2.1 Position. Executive is employed as Executive Vice President of
Parent and President of Company and shall have the duties and responsibilities
assigned by Parent and Company at the present date and as may be reasonably
assigned from time to time. Executive shall perform faithfully and diligently
all duties assigned to Executive. Parent and Company reserve the right to modify
Executive's position and duties at any time in its sole and absolute discretion,
provided that the duties assigned are consistent with the position of a senior
executive and that Executive continues to report directly to the Board of
Directors of Company.
2.2 Best Efforts/Full-time. Executive will expend Executive's best
efforts on behalf of Parent and Company, and will abide by all policies and
decisions made by Parent and Company, as well as all applicable federal, state
and local laws, regulations or ordinances. Executive will act in the best
interest of Parent and Company at all times. Executive shall devote Executive's
full business time and efforts to the performance of Executive's assigned duties
for Parent and Company.
2.3 Work Location. Executive's principal place of work shall be
located in Scottsdale, Arizona, or such other location as the parties may agree
upon from time to time.
3. Term.
3.1 Initial Term. The employment relationship pursuant to this
Agreement shall be for an initial term commencing on the Effective Date set
forth above and continuing for a period of three (3) years following such date
("Initial Term"), unless sooner terminated in accordance with section 7 below.
3.2 Renewal. On completion of the Initial Term specified in
subsection 3.1 above, this Agreement will automatically renew for subsequent
one-year terms unless either party provides ninety (90) days' advance written
notice to the other that Company/Executive does not wish to renew the Agreement
for a subsequent one-year term. In the event either party gives notice of
nonrenewal pursuant to this subsection 3.2, this Agreement will expire at the
end of the current term.
4. Compensation.
4.1 Base Salary. As compensation for Executive's performance of
Executive's duties hereunder, Company shall pay to Executive an initial Base
Salary of 325,000 per year,
payable in accordance with the normal payroll practices of Company, less
required deductions for state and federal withholding tax, social security and
all other employment taxes and payroll deductions.
4.2 Incentive Compensation. Executive will be eligible to receive
incentive compensation, the terms, amount and payment of which shall be
determined by Company in its sole and absolute discretion.
4.3 Performance and Salary Review. Company will periodically review
Executive's performance on no less than an annual basis. Adjustments to salary
or other compensation, if any, will be made by Company in its sole and absolute
discretion.
5. Customary Fringe Benefits. Executive will be eligible for all customary
and usual fringe benefits generally available to executives of Company subject
to the terms and conditions of Company's benefit plan documents. Company
reserves the right to change or eliminate the fringe benefits on a prospective
basis, at any time, effective upon notice to Executive.
6. Business Expenses. Executive will be reimbursed for all reasonable,
out-of-pocket business expenses incurred in the performance of Executive's
duties on behalf of Company. To obtain reimbursement, expenses must be submitted
promptly with appropriate supporting documentation in accordance with Company's
policies.
7. Termination of Executive's Employment.
7.1 Termination for Cause by Company. Although Company anticipates a
mutually rewarding employment relationship with Executive, Company may terminate
Executive's employment immediately at any time for Cause. For purposes of this
Agreement, "Cause" is defined as: (a) Executive's theft, dishonesty, or
falsification of any Company documents or records; (b) Executive's improper use
or disclosure of Company's confidential or proprietary information; (c) any
action by Executive which has a detrimental effect on the Company's reputation
or business; (d) Executive's failure to perform any reasonable assigned duties
after written notice from Company of, and a reasonable opportunity to cure, such
failure; (e) any material breach by Executive of this Agreement, which breach is
not cured after written notice from Company of, and a reasonable opportunity to
cure such breach; or (f) Executive's conviction (including any plea of guilty or
nolo contendere) of any criminal act which impairs Executive's ability to
perform Executive's duties with Company. In the event Executive's employment is
terminated in accordance with this subsection 7.1, Executive shall be entitled
to receive only the Base Salary then in effect, prorated to the date of
termination. All other Company obligations to Executive pursuant to this
Agreement will become automatically terminated and completely extinguished.
Executive will not be entitled to receive the Severance Packages described in
subsections 7.2(a) and 7.4(a) below.
7.2 Termination Without Cause by Company/Severance. Company may
terminate Executive's employment under this Agreement without Cause at any time
on thirty (30) days' advance written notice to Executive. In the event of such
termination, Executive will receive the Base Salary prorated to the date of
termination and the Severance Package described in subsection 7.2(a) below,
provided Executive complies with all of the conditions described in subsection
7.2(b) below.
(a) Severance Package. The Severance Package shall consist of
the following:
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(i) a severance payment equal to: (a) the greater of one
and one-half (1-1/2) times Executive's Base Salary then in effect on the date of
termination or the balance of Executive's Base Salary due for the remainder of
the current term, payable in accordance with Company's regular payroll cycle;
plus (b) one and one-half (1-1/2) times the average cash bonus paid to Executive
for each of the years completed under the terms of this Agreement, payable no
later than February 15 of the calendar year following Executive's termination;
(ii) accelerated vesting of all unvested portions of
Executive's stock options; and
(iii) continuation of group health insurance benefits on
the same terms as during Executive's employment for the remainder of the current
term (the "Continuation Period"), provided Company's insurance carrier allows
for such benefits continuation. In the event Company's insurance carrier does
not allow such coverage continuation, Company agrees to pay the premiums
required to continue Executive's group health care coverage for the Continuation
Period, under the applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), provided that Executive elects to continue
and remains eligible for these benefits under COBRA, and does not obtain health
coverage through another employer during this period.
(b) Conditions To Receive Severance Package. Executive will
receive the Severance Package described in subsection 7.2(a) above, provided
that Executive: (i) complies with all surviving provisions of this Agreement as
specified in subsection 15.8 below; (ii) executes a full general release,
releasing all claims, known or unknown, that Executive may have against Company
arising out of or any way related to Executive's employment or termination of
employment with Company; and (iii) agrees to act as a consultant for Company,
without further compensation, for thirty (30) days following the termination of
the employment relationship, if requested to do so by Company. All other Company
obligations to Executive will be automatically terminated and completely
extinguished.
7.3 Voluntary Resignation by Executive. Executive may voluntarily
resign Executive's position with Company at any time after the Initial Term, on
thirty (30) days' advance written notice. In the event of such resignation,
Executive will be entitled to receive only the Base Salary for the thirty-day
notice period and no other amount for the remaining months of the subsequent
one-year term, if any. All other Company obligations to Executive pursuant to
this Agreement will become automatically terminated and completely extinguished.
In addition, Executive will not be entitled to receive the Severance Packages
described in subsection 7.2(a) above or subsection 7.4(a) below.
7.4 Termination Upon A Change In Control. If Executive's employment
is terminated by Company without Cause (as defined in subsection 7.1 above) or
Executive resigns for Good Reason (as defined in subsection 7.4(c) below) within
twenty-four (24) months after a Change in Control (as defined in subsection
7.4(d) below), Executive shall be entitled to receive the Severance Package
described in subsection 7.4 (a) below, provided Executive complies with all of
the conditions described in subsection 7.2(b) above.
(a) Severance Package: The Severance Package will consist of
the following:
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(i) a severance payment payable in one lump sum and
equal to: (a) the greater of two (2) times Executive's Base Salary then in
effect on the date of termination or the balance of Executive's Base Salary due
for the remainder of the current term; plus (b) two (2) times the average cash
bonus paid to Executive for each of the years completed under the terms of this
Agreement;
(ii) accelerated vesting of all unvested portions of
Executive's stock options and the ability to exercise such stock options for a
period of three (3) years from the date of termination of employment; provided
that the options have not expired by their terms; and
(iii) continuation of group health insurance benefits on
the same terms as during Executive's employment for the remainder of the current
term (the "Continuation Period"), provided Company's insurance carrier allows
for such benefits continuation. In the event Company's insurance carrier does
not allow such coverage continuation, Company agrees to pay the premiums
required to continue Executive's group health care coverage for the Continuation
Period, under the applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 ("COBRA"), provided that Executive elects to continue
and remains eligible for these benefits under COBRA, and does not obtain health
coverage through another employer during this period.
(b) 280G. If, due to the benefits provided under subsection
7.4(a) above in connection with a Change in Control that occurs after January 1,
2004, Executive is subject to any excise tax due to characterization of any
amounts payable under subsection 7.4(a) as excess parachute payments pursuant to
Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code"),
Company shall pay to Executive an additional payment (the "Tax Gross-Up
Payment") equal to the amount of such Section 280G excise tax payable by
Executive.
(c) Definitions
(i) Good Reason. "Good Reason" shall mean any one or
more of the following: (a) without Executive's written consent, the assignment
to Executive of any duties, or any limitation of Executive's responsibilities,
substantially inconsistent with the Executive's positions, duties,
responsibilities and status with Company immediately prior to the date of the
Change in Control; (b) without Executive's written consent, the relocation of
the principal place of Executive's service to a location that is more than fifty
(50) miles from Executive's principal place of service immediately prior to the
date of the Change in Control, or the imposition of travel requirements
substantially more demanding of Executive than such travel requirements existing
immediately prior to the date of the Change in Control; (c) any failure by
Company to pay, or any material reduction by Company of, Executive's cash
compensation (including bonus) in effect immediately prior to the date of the
Change in Control; or (d) any failure by Company to provide Executive with all
other fringe benefits (or their equivalent) from time to time in effect for the
benefit of any employee or service provider group which customarily includes a
person holding the employment or service provider position or a comparable
position with Company then held by Executive.
(ii) Change of Control. A Change of Control is defined
as any one of the following occurrences:
a) Any "person" (as such term is used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934 (the "Exchange Act")),
other than a trustee or
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other fiduciary holding securities of Company under an employee benefit plan of
Company, becomes the "beneficial owner" (as defined in Rule 13d-3 promulgated
under the Exchange Act), directly or indirectly, of the securities of Company
representing more than 50% of (A) the outstanding shares of common stock of
Company or (B) the combined voting power of the Company's then-outstanding
securities;
b) the sale or disposition of all or substantially
all of Company's assets (or any transaction having similar effect is
consummated); or
c) Company is party to a merger or consolidation
that results in the holders of voting securities of 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) more than 50% of the combined voting power of the voting securities of
Company or such surviving entity outstanding immediately after such merger or
consolidation.
7.5 Termination of Employment Upon Nonrenewal. In the event either
party decides not to renew this Agreement for a subsequent one-year term in
accordance with subsection 3.2 above, this Agreement will expire, Executive's
employment with Company will terminate and Executive will only be entitled to
Executive's Base Salary paid through the last day of the current term. All other
Company obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished. In addition, Executive
will not be entitled to the Severance Packages described in subsections 7.2(a)
and 7.4(a) above.
8. Effect of Change in Control of Parent.
8.1 Acceleration of Vesting. In the event of a Change of Control of
Parent during the term of this Agreement, all unvested portions of Executive's
stock options shall immediately vest upon such Change in Control.
8.2 Put Option. In the event of a Change of Control of Parent during
the term of this Agreement or within two (2) years thereafter, Executive shall
have the right, exercisable for a period of 90 days after such Change in
Control, to put to Company or Parent all (but not less than all) shares of
Company stock (the "Shares") then owned by Executive (the "Put Option"). The
purchase price of the Shares subject to the Put Option shall be equal to the
fair market value of such Shares at the time the Put Option is exercised as
shall be determined by an independent investment banker mutually acceptable to
both Company and Executive. The purchase price shall be payable, at the option
of Company, in cash or in unrestricted, readily salable securities of Parent or
a successor corporation to Parent.
9. No Conflict of Interest. During the term of Executive's employment with
Company, Executive must not engage in any work, paid or unpaid, that creates an
actual or potential conflict of interest with Company. Such work shall include,
but is not limited to, directly or indirectly competing with Company in any way,
or acting as an officer, director, employee, consultant, stockholder, volunteer,
lender, or agent of any business enterprise of the same nature as, or which is
in direct competition with, the business in which Company is now engaged or in
which Company becomes engaged during the term of Executive's employment with
Company, as may be determined by the Company in its sole discretion. If Company
believes such a conflict exists during the term of this Agreement, Company may
ask Executive to choose to discontinue the other work or resign employment with
Company. In addition, Executive agrees not to refer any client or potential
client of Company to competitors of
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Company, without obtaining Company's prior written consent, during the term of
Executive's employment.
10. Post-Termination Non-Competition.
10.1 Consideration For Promise To Refrain From Competing. Executive
agrees that Executive's services are special and unique, that Company's
disclosure of confidential, proprietary information and specialized training and
knowledge to Executive, and that Executive's level of compensation and benefits
and post-termination severance, as applicable, are partly in consideration of
and conditioned upon Executive not competing with Company. Executive
acknowledges that such consideration for Executive's services under this
Agreement is adequate consideration for Executive's promises contained within
this section 10.
10.2 Promise To Refrain From Competing. Executive understands
Company's need for Executive's promise not to compete with Company is based on
the following: (a) Company has expended, and will continue to expend,
substantial time, money and effort in developing its proprietary information;
(b) Executive will in the course of Executive's employment develop, be
personally entrusted with and exposed to such proprietary information; (c) both
during and after the term of Executive's employment, Company will be engaged in
the highly competitive casual dining industry; (d) Company provides services
nationally and may provide services internationally in the future; and (e)
Company will suffer great loss and irreparable harm if Executive were to enter
into competition with Company. Therefore, in exchange for the consideration
described in subsection 10.1 above, Executive agrees that for the period equal
to the greater of the remainder of the current term under this Agreement or one
(1) year following the date Executive ceases to render services to Company (the
"Covenant Period"), Executive will not either directly or indirectly, whether as
a owner, director, officer, manager, consultant, agent or employee: (i) work for
a competitor, which is defined to include any company in the business of
preparation and distribution of Chinese food or other Asian food concepts
existing during the Covenant Period, within a one hundred (100) mile radius of
any P.F. Chang's China Bistro or Pei Wei Asian Diner or any planned location of
such restaurants ("Restricted Business"); or (ii) make or hold any investment in
any Restricted Business in the United States, whether such investment be by way
of loan, purchase of stock or otherwise, provided that there shall be excluded
from the foregoing the ownership of not more than 5% of the listed or traded
stock of any publicly held corporation. For purposes of this section 10, the
term "Company" shall mean and include Company, any subsidiary or affiliate of
Company, any successor to the business of Company (by merger, consolidation,
sale of assets or stock or otherwise) and any other corporation or entity of
which Executive may serve as a director, officer or employee at the request of
Company or any successor of Company.
10.3 Reasonableness of Restrictions. Executive represents and agrees
that the restrictions on competition, as to time, geographic area, and scope of
activity, required by this section 10 are reasonable, do not impose a greater
restraint than is necessary to protect the goodwill and business interests of
Company, and are not unduly burdensome to Executive. Executive expressly
acknowledges that Company competes on a nationwide basis and that the
geographical scope of these limitations is reasonable and necessary for the
protection of Company's trade secrets and other confidential and proprietary
information. Executive further agrees that these restrictions allow Executive an
adequate number and variety of employment alternatives, based on Executive's
varied skills and abilities. Executive represents that Executive is willing and
able to compete in other employment not prohibited by this Agreement.
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10.4 Reformation if Necessary. In the event a court of competent
jurisdiction determines that the geographic area, duration, or scope of activity
of any restriction under this section 9 and its subsections is unenforceable,
the restrictions under this section and its subsections shall not be terminated
but shall be reformed and modified to the extent required to render them valid
and enforceable. Executive further agrees that the court may reform this
Agreement to extend the one-year period of this covenant not to compete by an
amount of time equal to any period in which Executive is in breach of this
covenant.
11. Confidentiality and Proprietary Rights. Executive agrees to read, sign
and abide by Company's Employee Innovations and Proprietary Rights Assignment
Agreement, which is provided with this Agreement and incorporated herein by
reference.
12. Nonsolicitation.
12.1 Nonsolicitation of Customers or Prospects. Executive
acknowledges that information about Company's customers is confidential and
constitutes trade secrets. Accordingly, Executive agrees that during the
Covenant Period Executive will not, either directly or indirectly, separately or
in association with others, interfere with, impair, disrupt or damage Company's
relationship with any of its customers or customer prospects by soliciting or
encouraging others to solicit any of them for the purpose of diverting or taking
away business from Company.
12.2 Nonsolicitation of Company's Employees. Executive agrees that
during the Covenant Period, Executive will not, either directly or indirectly,
separately or in association with others, interfere with, impair, disrupt or
damage Company's business by soliciting, encouraging or attempting to hire any
of Company's employees or causing others to solicit or encourage any of
Company's employees to discontinue their employment with Company.
13. Injunctive Relief. Executive acknowledges that Executive's breach of
the covenants contained in sections 9-12 (collectively "Covenants") would cause
irreparable injury to Company and agrees that in the event of any such breach,
Company shall be entitled to seek temporary, preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting any
bond or other security.
14. Agreement to Arbitrate. To the fullest extent permitted by law,
Executive and Company agree to arbitrate any controversy, claim or dispute
between them arising out of or in any way related to this Agreement, the
employment relationship between Company and Executive and any disputes upon
termination of employment, including but not limited to breach of contract,
tort, discrimination, harassment, wrongful termination, demotion, discipline,
failure to accommodate, family and medical leave, compensation or benefits
claims, constitutional claims; and any claims for violation of any local, state
or federal law, statute, regulation or ordinance or common law. Claims for
injunctive relief pursuant to section 13 above are excluded. For the purpose of
this agreement to arbitrate, references to "Company" include all parent,
subsidiary or related entities and their employees, supervisors, officers,
directors, agents, pension or benefit plans, pension or benefit plan sponsors,
fiduciaries, administrators, affiliates and all successors and assigns of any of
them, and this agreement shall apply to them to the extent Executive's claims
arise out of or relate to their actions on behalf of Company.
14.1 Consideration. The mutual promise by Company and Executive to
arbitrate any and all disputes between them (except for those referenced above)
rather than
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litigate them before the courts or other bodies, provides the consideration for
this agreement to arbitrate.
14.2 Initiation of Arbitration. Either party may exercise the right
to arbitrate by providing the other party with written notice of any and all
claims forming the basis of such right in sufficient detail to inform the other
party of the substance of such claims. In no event shall the request for
arbitration be made after the date when institution of legal or equitable
proceedings based on such claims would be barred by the applicable statute of
limitations.
14.3 Arbitration Procedure. The arbitration will be conducted in
Phoenix, Arizona by a single neutral arbitrator and in accordance with the then
current rules for resolution of employment disputes of the American Arbitration
Association ("AAA"). The parties are entitled to representation by an attorney
or other representative of their choosing. The arbitrator shall have the power
to enter any award that could be entered by a judge of the trial court of the
State of Arizona, and only such power, and shall follow the law. The parties
agree to abide by and perform any award rendered by the arbitrator. The
arbitrator shall issue the award in writing and therein state the essential
findings and conclusions on which the award is based. Judgment on the award may
be entered in any court having jurisdiction thereof.
14.4 Costs of Arbitration. Company shall bear the costs of the
arbitration filing and hearing fees and the cost of the arbitrator.
15. General Provisions.
15.1 Successors and Assigns. The rights and obligations of Company
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. Executive shall not be entitled to assign any
of Executive's rights or obligations under this Agreement.
15.2 Waiver. Either party's failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
or prevent that party thereafter from enforcing each and every other provision
of this Agreement.
15.3 Attorneys' Fees. Each side will bear its own attorneys' fees in
any dispute unless a statutory section at issue, if any, authorizes the award of
attorneys' fees to the prevailing party.
15.4 Severability. In the event any provision of this Agreement is
found to be unenforceable by an arbitrator or court of competent jurisdiction,
such provision shall be deemed modified to the extent necessary to allow
enforceability of the provision as so limited, it being intended that the
parties shall receive the benefit contemplated herein to the fullest extent
permitted by law. If a deemed modification is not satisfactory in the judgment
of such arbitrator or court, the unenforceable provision shall be deemed
deleted, and the validity and enforceability of the remaining provisions shall
not be affected thereby.
15.5 Interpretation; Construction. The headings set forth in this
Agreement are for convenience only and shall not be used in interpreting this
Agreement. This Agreement has been drafted by legal counsel representing
Company, but Executive has participated in the negotiation of its terms.
Furthermore, Executive acknowledges that Executive has had an opportunity to
review and revise the Agreement and have it reviewed by legal counsel, if
desired, and, therefore, the normal rule of construction to the effect that any
ambiguities are to
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be resolved against the drafting party shall not be employed in the
interpretation of this Agreement.
15.6 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the United States and the State of Arizona. Each
party consents to the jurisdiction and venue of the state or federal courts in
Phoenix, Arizona, if applicable, in any action, suit, or proceeding arising out
of or relating to this Agreement.
15.7 Notices. Any notice required or permitted by this Agreement
shall be in writing and shall be delivered as follows with notice deemed given
as indicated: (a) by personal delivery when delivered personally; (b) by
overnight courier upon written verification of receipt; (c ) by telecopy or
facsimile transmission upon acknowledgment of receipt of electronic
transmission; or (d) by certified or registered mail, return receipt requested,
upon verification of receipt. Notice shall be sent to the addresses set forth
below, or such other address as either party may specify in writing.
15.8 Survival. Sections 9 ("Post-Termination Non-Competition"), 10
("Confidentiality and Proprietary Rights"), 12 ("Nonsolicitation"), 13
("Injunctive Relief"), 14 ("Agreement to Arbitrate"), 15 ("General Provisions")
and 16 ("Entire Agreement") of this Agreement shall survive Executive's
employment by Company.
16. Entire Agreement. This Agreement, including the Company Employee
Innovations and Proprietary Rights Assignment Agreement incorporated herein by
reference and Company's and any documents related to Executive's stock options,
constitutes the entire agreement between the parties relating to this subject
matter and supersedes all prior or simultaneous representations, discussions,
negotiations, and agreements, whether written or oral. This Agreement may be
amended or modified only with the written consent of Executive and the President
of Company. No oral waiver, amendment or modification will be effective under
any circumstances whatsoever.
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THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.
RUSSELL OWENS
Dated: August 6, 2002 /s/ Russell Owens
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PEI WEI ASIAN DINER, INC.
Dated: August 6, 2002 By: /s/ Richard L. Federico
-------------------------------
Richard L. Federico
Chief Executive Officer
15210 N. Scottsdale Road,
Suite 250
Phoenix, AZ 85254
P.F. CHANG'S CHINA BISTRO, INC.
Dated: August 6, 2002 By: /s/ Robert T. Vivian
-------------------------------
Robert T. Vivian
President
15210 N. Scottsdale Road,
Suite 300
Phoenix, AZ 85254
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