EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement") dated April 15, 2002 by and between
Volume Services America Holdings, Inc., a Delaware corporation (the "Company")
and Lawrence E. Honig (the "Executive").
The Company desires to employ Executive and to enter into an agreement
embodying the terms of such employment;
Executive desires to accept such employment and enter into such an
agreement;
In consideration of the premises and mutual covenants herein and for other
good and valuable consideration, the parties agree as follows:
1. Term of Employment. Subject to the provisions of Section 8 of this
Agreement, Executive shall be employed by the Company for a term commencing on
April 15, 2002 (the "Commencement Date") and ending on April 14, 2004 (the
"Employment Term") on the terms and subject to the conditions set forth in this
Agreement. Unless sooner terminated under the provisions of Section 8 of this
Agreement, the Employment Term will automatically be extended for additional
one-year terms at the conclusion of the initial two-year term ("Initial Term")
and each succeeding one-year extension ("Extension Term").
2. Position.
(a) During the Employment Term, Executive shall serve as the Company's
Chief Executive Officer. In such position, Executive shall have such duties
and authority as shall be determined from time to time by the Board of
Directors of the Company (the "Board"). Executive will be nominated and,
when elected, serve as a member of, the Board.
(b) During the Employment Term, Executive will devote Executive's full
business time and best efforts to the performance of Executive's duties
hereunder and will not engage in any other business, profession or
occupation for compensation or otherwise which would conflict or interfere
with the rendition of such services either directly or indirectly, without
the prior written consent of the Board; provided that -------- nothing
herein shall preclude Executive, subject to the prior approval of the
Board, from accepting appointment to or continue to serve on any board of
directors or trustees of any business corporation or any charitable
organization; provided in each case, and in the aggregate, that such
activities do not -------- conflict or interfere with the performance of
Executive's duties hereunder or conflict with Section 9. Executive shall
perform his duties in the Company's office in Spartanburg, South Carolina.
3. Base Salary. During the Employment Term, the Company shall pay Executive
a base salary at the annual rate of $450,000, payable in regular installments in
accordance with the Company's usual payment practices. Executive shall be
entitled to such increases in Executive's base salary, if any, as may be
1
determined from time to time in the sole discretion of the Board. Executive's
annual base salary, as in effect from time to time, is hereinafter referred to
as the "Base Salary."
4. Bonus. Executive shall be eligible to earn an annual bonus award (an
"Annual Bonus") each fiscal year during the Employment Term, payable as provided
in the Company's annual bonus plan. The Annual Bonus will be targeted to at
least fifty percent (50%) of Executive's Base Salary (the "Target") based upon
the achievement of budgeted performance goals of the Company established by the
Board (the "Company's Budget") and incorporated into the existing executive
bonus plan that the Board has established for the senior executives of the
Company.
5. Options. (a) As soon as practicable (but in no event later than 180
days) following the Commencement Date, Executive shall be granted options (the
"Options"), pursuant to a stock option plan to be adopted by the Company (the
"Plan"), to purchase that number of shares (the "Shares") of the Company which
is equal to three percent (3%) of the entire number of shares of the Company
issued and outstanding on the date of the grant (the "Grant Date"). The exercise
price per share (the "Exercise Price") shall be equal to the "Established Share
Value" of a share of stock of the Company. The Established Share Value of a
share of stock in the Company shall be calculated by dividing the total value of
the Company which is established by the Company's Board of Directors for
purposes of restructuring management's equity in the Company (the "Company
Valuation") by the total number of shares of stock issued and outstanding on the
date that the restructuring is effective.
(b) The Options shall vest with respect to twenty percent (20%) of the
Shares on the first anniversary of the Grant Date and shall vest with respect to
twenty percent (20%) of the Shares on each anniversary thereafter, until all the
Shares subject to the Options are 100% vested; provided, however, that (i) if
Executive's employment is terminated (A) by the Company without Cause or (B) due
to the Executive's resignation with Good Reason, or (ii) in the event of a sale
of all or substantially all of the stock and/or assets of the Company (a
"Sale"), the Options shall immediately vest with respect to one hundred percent
(100%) of the Shares. In the case of any vesting in connection with a Sale, such
vesting shall occur such that the Options may be exercised and converted to
Shares in time to permit Executive to receive consideration for the Shares in
connection with the Sale.
(c) In the event that the Company consummates a Sale prior to the second
anniversary of the Commencement Date, and the "Excess Value" (as calculated
below), multiplied by the total number of the Shares as to which Executive has
Options (the "Aggregate Excess Value") is less than One Million ($1,000,000.00)
Dollars, the Executive shall be paid the difference between the Aggregate Excess
Value and One Million ($1,000,000.00) Dollars simultaneously with the
consummation of the Sale. The Excess Value shall be calculated as follows: (a)
if the Sale is a sale of substantially all of the shares of the Company, the
Excess Value shall be the amount, if any, by which the amount received by the
shareholders for a share of the Company's stock (the "Stock Purchase Price")
exceeds the Exercise Price; and (b) if the Sale is a sale of substantially all
of the Company's assets, the Excess Value shall be the amount, if any, by which
(i) the total amount distributable to shareholders of the Company in connection
with such Sale (whether upon consummation of the Sale or otherwise, and whether
or not contingent) divided by the number of shares issued and outstanding on the
date of the Sale (the "Asset Purchase Price"), exceeds (ii) the Exercise Price.
In the event that any additional options for the Company's stock ("Additional
Options") are granted to the Executive prior to the second anniversary of the
Commencement Date, which Additional Options by their terms are exercisable in
2
connection with a Sale, the calculation of Excess Value shall include the
amount, if any, by which the Stock Purchase Price or Asset Purchase Price, as
the case may be, exceeds the exercise price per share for the Additional Options
(such amount to be referred to as the "Additional Options Excess"), and the
Aggregate Excess Value shall include the Additional Options Excess multiplied by
the number of shares as to which Executive has Additional Options.
(d) Following the termination of Executive's employment for any reason, the
unvested portion of the Options shall immediately expire (except as provided in
paragraph (b) above) and the vested portion of the Options shall expire on the
first anniversary of Executive's termination of employment; provided, however,
that if Executive is terminated by the Company for Cause, the vested portion of
the Options shall expire immediately.
(e) The Options shall be equitably adjusted, as determined by the Board of
Directors of the Company in its discretion, in the event of a stock split, stock
dividend, spin-off, reorganization, recapitalization, rights offering, share
exchange, merger, consolidation or other similar transaction, and the Board's
determination as to any such adjustment shall be conclusive.
(f) The Options shall be granted on the terms and conditions of, and shall
be subject to all the limitations set forth in, the Plan, and to all the terms
and conditions of the standard stock option agreement adopted by the Company in
connection with the Plan, including, without limitation, any voting trusts or
shareholders agreements. The Executive shall have no rights as a shareholder of
the Company, including, without limitation, voting and dividend rights, in
respect of the Shares unless and until the Shares have been issued to Executive.
If not sooner terminated pursuant to the terms of this Section 5, all of the
Options shall terminate ten (10) years from the Grant Date. The Options may not
be transferred otherwise than by will or the laws of dissent and distribution,
and the Options may be exercised, during the lifetime of the Executive, only by
the Executive. The Company shall have the right to require the payment (through
withholding from the Executive's salary or otherwise, as the Company may, in its
sole discretion, determine) of any federal, state, local or foreign taxes which
it believes are or may be required to be withheld in connection with the
transfer of Shares upon the exercise of any of the Options.
6. Employee Benefits.
(a) During the Employment Term, the Executive shall be entitled to the
coverage or benefits under any and all employee benefit plans maintained by
the Company (including, without limitation, medical insurance, life
insurance, long-term disability insurance and pension plans, if any)
(collectively, "Employee Benefits") to the extent permissible under the
terms of the plans and to all fringe benefits for which his status and
level of employment qualify him in accordance with the Company's benefit
policies governing senior executives; provided, however, that the
3
Executive's Employee Benefits shall not include the split dollar life
insurance program which is no longer being offered by the Company to new
employees.
(b) The Executive shall be entitled to paid vacations in accordance
with the Company's standard vacation policies governing senior executives,
but in no event less than four weeks each calendar year during the
Employment Term.
7. Business Expenses. During the Employment Term, reasonable business
expenses incurred by Executive in the performance of Executive's duties
hereunder shall be reimbursed by the Company in accordance with Company
policies.
8. Termination. The Employment Term and Executive's employment hereunder
may be terminated by either party at any time and for any reason; provided that
Executive will be required to give the Company at least 60 days advance written
notice of any resignation of Executive's employment. Notwithstanding any other
provision of this Agreement, the provisions of this Section 8 shall exclusively
govern Executive's rights upon termination of employment with the Company and
its affiliates.
(a) By the Company For Cause or By Executive Resignation Without Good
Reason.
(i) The Employment Term and Executive's employment hereunder may
be terminated by the Company for Cause (as defined below) and shall
terminate automatically upon Executive's resignation without Good
Reason (as defined in Section 8(c)).
(ii) For purposes of this Agreement, "Cause" shall mean
termination by action of at least a majority of the members of the
Board (excluding the Executive) upon (i) the Executive's breach of
Section 9 or 10 of this Agreement; (ii) the Executive's material
breach of any other provision of this Agreement if the Executive has
been given written notice and a reasonable opportunity to cure such
breach; (iii) the Executive's willful failure to adhere to any written
Company policy if the Executive has been given written notice and a
reasonable opportunity to comply with such policy or cure his failure
to comply; (iv) serious willful misconduct by the Executive in
connection with his employment; or (v) the commission of a felony or
the equivalent thereof or a misdemeanor including moral turpitude.
Such action shall take place at a meeting duly called and held upon at
least 15 days' prior written notice to the Executive specifying the
particulars of the action or inaction alleged to constitute "Cause"
(and at which meeting the Executive and his counsel are entitled to be
present and given reasonable opportunity to be heard). Action or
inaction by the Executive shall not include failure to act by reason
of total or partial incapacity due to physical or mental illness.
(iii) If Executive's employment is terminated by the Company for
Cause, or if Executive resigns without Good Reason, Executive shall be
entitled to receive:
4
(A) the Base Salary through the date of termination;
(B) any Annual Bonus earned but unpaid as of the date of
termination for any previously completed fiscal year;
(C) reimbursement for any unreimbursed business expenses
properly incurred by Executive in accordance with Company policy
prior to the date of Executive's termination; and
(D) such Employee Benefits, if any, to which Executive may
be entitled in his status as a terminated employee under the
employee benefit plans of the Company (the amounts described in
clauses (A) through (D) hereof being referred to as the "Accrued
Rights").
Following such termination of Executive's employment by the
Company for Cause or resignation by Executive without Good Reason,
except as set forth in this Section 8(a)(iii), Executive shall have no
further rights to any compensation or any other benefits under this
Agreement.
(b) Disability or Death.
(i) The Employment Term and Executive's employment hereunder shall
terminate upon Executive's death and may be terminated by the Company
if Executive becomes physically or mentally incapacitated and is
therefore unable for a period of 120 consecutive days or 180 days
during any 12 consecutive month period to perform Executive's duties
(such incapacity is hereinafter referred to as "Disability"). Any
question as to the existence of the Disability of Executive as to
which Executive and the Company cannot agree shall be determined in
writing by a qualified independent physician mutually acceptable to
Executive and the Company. If Executive and the Company cannot agree
as to a qualified independent physician, each shall appoint such a
physician and those two physicians shall select a third who shall make
such determination in writing. The determination of Disability made in
writing to the Company and Executive shall be final and conclusive for
all purposes of the Agreement.
(ii) Upon termination of Executive's employment hereunder for either
Disability or death, Executive or Executive's estate (as the case may
be) shall be entitled to receive the Accrued Rights.
Following Executive's termination of employment due to death or Disability,
except as set forth in this Section 8(b)(ii), Executive shall have no further
rights to any compensation or any other benefits under this Agreement.
5
(c) By the Company Without Cause or Resignation by Executive for
Good Reason.
(i) The Employment Term and Executive's employment hereunder may
be terminated by the Company without Cause or by Executive's
resignation for Good Reason.
(ii) For purposes of this Agreement, "Good Reason" shall mean (A)
the Company's material breach of this Agreement; (B) the
assignment of the Executive, without his consent, to a position,
responsibilities or duties of a materially lesser status or
degree of responsibility than his position, responsibilities or
duties as of the date hereof; or (C) the failure to elect the
Executive to serve as a member of the Board; provided that the
events described in this Section 8(c)(ii) shall constitute Good
Reason only if the Company fails to cure such event within 30
days after receipt from Executive of written notice of the event
which constitutes Good Reason; provided, further, that "Good
Reason" shall cease to exist for an event on the 60th day
following the later of its occurrence or Executive's knowledge
thereof, unless Executive has given the Company written notice
thereof prior to such date.
(iii) If Executive's employment is terminated by the Company
without Cause (other than by reason of death or Disability) or if
Executive resigns for Good Reason, Executive shall be entitled to
receive:
(A) the Accrued Rights;
(B) subject to Executive's continued compliance with the
provisions of Sections 9 and 10, continued payment of the
Base Salary until the later of (i) one year following such
termination of employment and (ii) the expiration of the
Initial Term determined as if such termination had not
occurred; provided that the aggregate amount described in
this clause (B) shall be reduced by the present value of any
other cash severance or termination benefits payable to
Executive under any other plans, programs or arrangements of
the Company or its affiliates; and
(C) continued Employee Benefits (to the extent permissible
under the terms of the plans providing such Employee
Benefits) for Executive and Executive's spouse and minor
children until the later of (i) one year following such
termination of employment; and (ii) the expiration of the
Initial Term determined as if such termination had not
occurred, provided that such Employee Benefits shall cease
on the date the Executive becomes eligible for comparable
coverage from a subsequent employer.
6
Following Executive's termination of employment by the Company without
Cause (other than by reason of Executive's death or Disability) or by
Executive's resignation for Good Reason, except as set forth in this
Section 8(c)(iii), Executive shall have no further rights to any
compensation or any other benefits under this Agreement.
(d) Continued Employment Beyond Employment Term. Unless the
parties otherwise agree in writing, continuation of
Executive's employment with the Company beyond the
Employment Term shall be deemed an employment at-will and
shall not be deemed to extend any of the provisions of this
Agreement and Executive's employment may thereafter be
terminated at will by either Executive or the Company;
provided that the provisions of Sections 9 and 10 of this
Agreement shall survive any termination of this Agreement or
Executive's termination of employment hereunder.
(e) Notice of Termination. Any purported termination of
employment by the Company or by Executive (other than due to
Executive's death) shall be communicated by written Notice
of Termination to the other party hereto in accordance with
Section 12(g) hereof. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which shall
indicate the specific termination provision in this
Agreement relied upon and shall set forth in reasonable
detail the facts and circumstances claimed to provide a
basis for termination of employment under the provision so
indicated.
(f) Board/Committee Resignation. Upon termination of
Executive's employment for any reason, Executive shall be
deemed to have resigned, as of the date of such termination,
and to the extent applicable, from the Board (and any
committees thereof) and the Board of Directors (and any
committees thereof) of any of the Company's affiliates, and
Executive shall execute such documents as may be necessary
to reflect such resignations.
9. Non-Competition.
(a) Executive acknowledges and recognizes the highly competitive
nature of the businesses of the Company and its affiliates and accordingly
agrees as follows:
(i) During the Employment Term and for a period of two years
following the termination of Executive's employment for any
or no reason, Executive agrees that, without the prior
written consent of the Company, (A) Executive will not,
directly or indirectly, either as principal, manager, agent,
consultant, officer, stockholder, partner, investor, lender
or employee or in any other capacity, carry on, be engaged
in or have any financial interest in, any business which is
in competition with the business of the Company or any of
its affiliates and (B) Executive shall not, on his own
behalf or on behalf of any person, firm or company, directly
or indirectly, solicit or offer employment to any person,
who has been employed by the Company or any of its
affiliates at any time during the 12 months immediately
preceding such solicitation.
7
(ii) For purposes of this Section 9, a business shall be
deemed to be in competition with the business of the Company
and its affiliates if it is involved in the sale or
provision of catering, concession or other food services or
venue management services at stadiums, ballparks, convention
centers, concert halls, theaters, seaports, golf courses,
arenas, race tracks, parks, bandstands, or other
recreational venues.
(iii) Nothing in this Section 9 shall prohibit the Executive
from acquiring or holding not more than one percent (1%) of
any class of publicly traded securities of any business.
(b) It is expressly understood and agreed that although Executive and
the Company consider the restrictions contained in this Section 9 to be
reasonable, if a final judicial determination is made by a court of
competent jurisdiction that the time or territory or any other restriction
contained in this Agreement is an unenforceable restriction against
Executive, the provisions of this Agreement shall not be rendered void but
shall be deemed amended to apply as to such maximum time and territory and
to such maximum extent as such court may judicially determine or indicate
to be enforceable. Alternatively, if any court of competent jurisdiction
finds that any restriction contained in this Agreement is unenforceable,
and such restriction cannot be amended so as to make it enforceable, such
finding shall not affect the enforceability of any of the other
restrictions contained herein.
10. Confidentiality. The Executive acknowledges that Executive has acquired
and will acquire information respecting the business and affairs of the Company,
its subsidiaries and affiliates, including, but not limited to, business and
strategic plans, forecasts and projections, profits, information regarding the
identity, address and key contacts of Company customers, prospects and
suppliers, their needs, preferences and any pricing or bidding constraints,
customer and supplier agreements and the terms thereof, policy and procedure
manuals, recipes, menus and accounting forms and procedures ("Confidential
Information"). Accordingly, the Executive shall keep confidential and not
disclose to any person or use (except as required in the conduct of the business
of the Company in the ordinary course and consistent with past practice) all
such Confidential Information, except as required by law (provided prior written
notice thereof is given by the Executive to the Company) or with the Company's
written consent, unless such information is known generally to the public or the
trade (through sources other than the Executive's unauthorized disclosure). Upon
termination of his employment for any reason, the Executive shall deliver to the
Company all Confidential Information (in any form, including, but not limited
to, electronic media) in his possession or subject to his control that belongs
to the Company.
11. Specific Performance. Executive acknowledges and agrees that the
Company's remedies at law for a breach or threatened breach of any of the
provisions of Section 9 or Section 10 would be inadequate and the Company would
suffer irreparable damages as a result of such breach or threatened breach. In
recognition of this fact, Executive agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, the Company, without
posting any bond, shall be entitled to cease making any payments or providing
8
any benefit otherwise required by this Agreement and obtain equitable relief in
the form of specific performance, temporary restraining order, temporary or
permanent injunction or any other equitable remedy which may then be available.
12. Miscellaneous.
(a) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without regard to
conflicts of laws principles thereof.
(b) Entire Agreement/Amendments. This Agreement contains the entire
understanding of the parties with respect to the employment of Executive by
the Company. There are no restrictions, agreements, promises, warranties,
covenants or undertakings between the parties with respect to the subject
matter herein other than those expressly set forth herein. This Agreement
may not be altered, modified, or amended except by written instrument
signed by the parties hereto.
(c) No Waiver. The failure of a party to insist upon strict adherence to
any term of this Agreement on any occasion shall not be considered a waiver
of such party's rights or deprive such party of the right thereafter to
insist upon strict adherence to that term or any other term of this
Agreement. A waiver or consent shall only be effective if in writing and
signed by the party against whom the waiver or consent is to be enforced.
(d) Severability. In the event that any one or more of the provisions of
this Agreement shall be or become invalid, illegal or unenforceable in any
respect, the validity, legality and enforceability of the remaining
provisions of this Agreement shall not be affected thereby.
(e) Assignment. This Agreement shall not be assignable by Executive. This
Agreement may be assigned by the Company to a person or entity which is an
affiliate or a successor in interest to substantially all of the business
operations of the Company, whether in connection with a Sale, or otherwise.
Upon such assignment, the rights and obligations of the Company hereunder
shall become the rights and obligations of such affiliate or successor
person or entity.
(f) Successors; Binding Agreement. This Agreement shall inure to the
benefit of and be binding upon personal or legal representatives,
executors, administrators, successors, heirs, distributees, devises,
legatees and permitted assigns.
(g) Notice. For the purpose of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall
be deemed to have been duly given when delivered by hand or overnight
courier or three (3) days after it has been mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as
either party may have furnished to the other in writing in accordance
herewith, except that notice of change of address shall be effective only
upon receipt.
9
If to the Company:
Volume Services America Holdings, Inc.
201 East Broad Street
Spartanburg, SC 29306
Attention: General Counsel
If to Executive:
Lawrence E. Honig
515 Guildhall Place
Alpharetta, GA 30022-8535
(h) Indemnification. The Executive shall be entitled to be indemnified for
acting as an officer and director in accordance with the Company's
Certificate of Incorporation and By-Laws. The Company agrees specifically
that it shall maintain provisions in its Certificate of Incorporation and
By-Laws relating to exculpation or indemnification of officers and
directors thereof (unless prohibited by law) such that the Executive shall
continue to be entitled to such exculpation and indemnification as was in
effect immediately prior to the date hereof under the Certificate of
Incorporation and By-Laws of the Company (or any equally favorable
arrangement) to the fullest extent permitted under the laws of the
applicable jurisdiction of incorporation. The Company also shall maintain
directors and officers liability insurance coverage for the Executive.
(i) Arbitration. Any and all disputes or controversies arising out of or
relating to this Agreement, other than claims brought pursuant to Section 9
or 10, shall be resolved by arbitration at the American Arbitration
Association (the "AAA") at its New York City offices before a panel of
three arbitrators under the then existing rules of the AAA. The parties
agree that in any such arbitration, the arbitrators shall not have the
power to reform or modify this Agreement in any way and to that extent
their powers are so limited. The determination of the arbitrators shall be
final and binding on the parties and judgment on it may be entered in any
court of competent jurisdiction. The prevailing party in arbitration in
connection with the enforcement of this Agreement shall be entitled to
recover from the other party all reasonable out-of-pocket costs and
disbursements (including, without limitation, counsel fees and expenses)
and any and all charges that may be made in the cost of the arbitration and
the fees of the arbitrators or any other enforcement thereof. THE PARTIES
HERETO HEREBY WAIVE A JURY TRIAL IN ANY LITIGATION WITH RESPECT TO THIS
AGREEMENT.
(j) Executive Representation. Executive hereby represents to the Company
that the execution and delivery of this Agreement by Executive and the
Company and the performance by Executive of Executive's duties hereunder
shall not constitute a breach of, or otherwise contravene, the terms of any
employment agreement or other agreement or policy to which Executive is a
party or otherwise bound.
10
(k) Cooperation. Executive shall provide his reasonable cooperation in
connection with any action or proceeding (or any appeal from any action or
proceeding) which relates to events occurring during Executive's employment
hereunder. This provision shall survive any termination of this Agreement.
(l) Withholding Taxes. The Company may withhold from any amounts payable
under this Agreement such Federal, state and local taxes as may be required
to be withheld pursuant to any applicable law or regulation.
(m) Counterparts. This Agreement may be signed in counterparts, each of
which shall be an original, with the same effect as if the signatures
thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
VOLUME SERVICES AMERICA
HOLDINGS, INC.
- ------------------------------- ----------------------------
By: Lawrence E. Honig
Title:
11