EMPLOYMENT AGREEMENT
Effective as of February 4, 2008 between
AFC Enterprises, Inc. (the “Company”) and
Richard Lynch (“Employee”)
WHEREAS, the
Company desires to employ Employee and to enter into an agreement
embodying the terms of such employment (the
“Agreement”); and
WHEREAS, Employee
desires to accept such employment and to enter into such
agreement;
NOW, THEREFORE, in
consideration of the promises and mutual covenants contained herein
and for other good and valuable consideration, the parties agree as
follows:
This Agreement
shall be effective as of the date hereof and, unless earlier
terminated pursuant to Section 8 or Section 9 hereof,
shall be for an initial term of one (1) year (the
“Term”). The Term of this Agreement and
Employee’s employment hereunder will automatically be
extended for an additional one-year period following the expiration
of each year of employment hereunder (the “Renewal
Date”), without further action by Employee or the Company.
Such automatic one-year renewal shall continue from year to year
unless and until either the Company or Employee gives to the other
written notice not less than thirty (30) days prior to the
applicable Renewal Date of its decision not to renew for an
additional one year.
For purposes of
this Section 1 only, the first “year” of the Term
shall be deemed to begin as of the Start Date (as hereinafter
defined) and end on December 28, 2008, and each one
(1) year period thereafter shall coincide with the
Company’s fiscal year.
2.01
Position. Beginning on March 1, 2008 (the “Start
Date”), Employee shall serve as Chief Marketing Officer of
the Company and its Popeyes Chicken & Biscuits division, and
shall perform such duties consistent with his position as may be
assigned to him from time to time by the Chief Executive Officer of
the Company (the “CEO”) or the Board of Directors of
the Company (the “Board”). Employee shall perform his
duties hereunder at the Company’s offices at 5555 Glenridge
Connector, NE, Suite 300, Atlanta, Georgia, subject to such
reasonable amount of travel as is necessary to render the services
provided hereunder.
2.02 Time and
Efforts. Employee, so long as he is employed hereunder, shall
devote his full business time and attention to the services
required of him hereunder, except as otherwise agreed and for
vacation time and reasonable periods of absence due to sickness or
personal injury, and shall use his best efforts, judgment and
energy to perform, improve and advance the business and interests
of the Company in a manner consistent with the duties of his
position.
Anything herein
to the contrary notwithstanding, nothing shall preclude Employee
from (i) serving on the boards of directors of trade associations,
(ii) engaging in charitable activities and community affairs;
or (iii) managing his personal investments and affairs,
provided that the activities described in the preceding clauses
(i) through (iii) do not interfere with the proper
performance of his duties and responsibilities
hereunder.
Beginning on the
Start Date, the Company shall pay Employee, in equal installments
no less frequently than monthly, a base salary at the rate of Three
Hundred Thousand Dollars ($300,000) per annum (the “Base
Salary”) during the Term hereof. Employee’s Base Salary
shall be reviewed by the Board on an annual basis.
4.
Incentive Pay and Special Bonus Pay.
4.01 Annual
Plan. The Board, acting in its sole discretion, shall annually,
at the beginning of each fiscal year of the Company, approve an
annual incentive plan (the “Annual Incentive Plan”) for
Employee, which Plan shall contain such terms and provisions as the
Board shall determine. The Annual Incentive Plan shall set forth
the specific financial and performance goals which must be achieved
for Employee to be entitled to receive payment under such Annual
Incentive Plan. Any amounts payable to Employee pursuant to the
Annual Incentive Plan is hereinafter referred to as
“Incentive Pay”.
4.02 Target
Incentive Pay. The target Incentive Pay (“Target
Incentive Pay”) for Employee for the 2008 fiscal year of the
Company shall be as follows: One Hundred Eighty Thousand Dollars
($180,000); provided, however, that the Target Incentive Pay with
respect to any fiscal year is subject to, and may be modified by,
the Annual Incentive Plan approved by the Board pursuant to
Section 4.01 above and this Section 4.02 shall be read
accordingly. For the 2008 fiscal year, Employee’s Target
Incentive Pay, if earned, shall be prorated for the amount of time
remaining in the Company’s 2008 fiscal year by dividing the
actual number of days of Employee’s employment with the
Company hereunder during fiscal 2008 by the total number of days in
the Company’s fiscal 2008. After 2008, the Target Incentive
Pay for Employee will be set by the Board for each fiscal year and
will be included in the Annual Incentive Plan for such
year.
4.03 Payment of
Incentive Pay. If Employee is entitled to payment of any
Incentive Pay for any fiscal year, an accounting will be furnished
and payment will be made to Employee as set forth in the Annual
Incentive Plan, but in no event later than two and one-half months
following the end of each fiscal year.
4.04
Termination of Employment. If Employee’s employment
hereunder shall terminate other than pursuant to Sections 8.03
or 8.04, Employee shall receive, at the time contemplated by the
Annual Incentive Plan, such Incentive Pay, if any, to which he
would have been entitled under the terms of the Annual Incentive
Plan had Employee remained in the employ of the Company for the
entire fiscal year in which such termination occurs. If
Employee’s employment hereunder shall terminate pursuant to
(a) Section 8.03, the provisions of Section 8.03
shall
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determine the
amount of Incentive Pay payable to Employee; or
(b) Section 8.04, no Incentive Pay shall be payable to
Employee after such termination.
4.05 Special
Bonus Pay . In addition to any Annual Incentive Pay that
Employee may earn pursuant to Employee’s Annual Incentive
Plan, Employee shall receive a one-time guaranteed payment in the
amount of Twenty Five Thousand Dollars ($25,000), less applicable
withholdings, payable within thirty (30) days of
Employee’s Start Date.
4.06 Relocation
and Temporary Living Expenses . Employee shall be entitled to
receive reimbursement of miscellaneous relocation expenses in
accordance with the terms and conditions of the Company’s
executive relocation package. Additionally, Employee shall be
entitled to receive reimbursement for temporary living expenses,
personal travel expenses, and other related expenses as incurred by
Employee after the Start Date and pending Employee’s
relocation to Atlanta, Georgia. The total amount of temporary
living expenses to be reimbursed shall not exceed Twenty Five
Thousand Dollars ($25,000). Employee shall be grossed up in order
to pay all federal, state and local income tax and social security
and other employment tax on the reimbursed amounts.
5. Stock
Options and Restricted Stock Grants.
Effective upon the
Employee’s Start Date, the Company shall grant to Employee
certain restricted stock shares and stock options, pursuant to the
Company’s 2006 Incentive Stock Plan, as hereinafter set
forth.
(a) The
Company shall grant to Employee 11,500 shares of restricted stock
which shall vest 100% on the first anniversary of Employee’s
Start Date, provided he is still employed by the Company on such
anniversary date.
(b) The
Company shall grant to Employee an option to purchase 30,000 shares
of the Company’s common stock (“Stock”) which
shall have an exercise price equal to the closing price of the
Stock on the date of the grant, and shall vest over four years,
with one-fourth vesting on each anniversary date of
Employee’s Start Date, provided he is still employed by the
Company on such anniversary date.
(c) The
Company shall grant to Employee an additional option to purchase
20,000 shares of Stock which shall have an exercise price equal to
the closing price of the Stock on the date of the grant, and shall
vest over four years, with one-fourth vesting on each anniversary
date of the Employee’s Start Date provided he is still
employed by the Company on such anniversary date; further provided,
however, the option to purchase such Stock to the extent so vested,
shall only be exercisable, in whole or in part, if the Popeyes
Chicken & Biscuits domestic restaurant system achieves the
annual Board approved plan for same stores sales growth for the
applicable vesting year.
Once a performance
criterion has been satisfied, Employee shall have the right to
exercise his option with respect to those shares, notwithstanding
the satisfaction of performance criteria for subsequent vesting
years.
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The terms of this
Section 5 are subject to the applicable provisions of
Section 8 hereof.
As part of
Employee’s compensation after the foregoing grants of
restricted stock shares and stock options have been made, Employee
may be granted additional stock options, restricted stock shares
and/or other forms of equity compensation based upon
Employee’s performance as determined in the sole discretion
of the Board.
6.01 Life
Insurance. During the Term and any renewal term of this
Agreement, Employee shall be entitled to term life insurance
coverage paid by the Company with a death benefit in an amount of
$1,500,000 (the “Death Benefit”), payable solely from,
and to the extent of, the Death Benefit proceeds payable under such
life insurance policy.
6.02 Disability
Insurance.
(a) During
the Term and any renewal term of this Agreement, Employee shall be
entitled to disability insurance coverage in an amount not less
than his disability coverage on the Start Date of this Agreement
and the Company shall maintain in full force and effect during the
Term a Supplemental Disability Policy which will supplement the
benefits payable under any disability benefit provided to Employee
by the Company under its basic employee health care benefit
program. Subject to Section 6.06 below, with respect to a
disability as defined in the Supplemental Disability Policy (a
“Policy Disability”) occurring after the Company has
obtained the Supplemental Disability Policy, the total monthly
disability benefit (the “Disability Benefit”) payable
to Employee under all disability policies maintained by the
Company, after a maximum elimination period of ninety
(90) days, shall be in accordance with the terms and
conditions of the Company’s executive disability
program.
(b) Notwithstanding
anything herein to the contrary, if the premiums for the
Supplemental Disability Policy for Employee shall exceed regular,
non-rated premiums, the Company may, but shall have no obligation
to, fund such excess. In the event the Company determines not to
fund such excess it shall promptly notify Employee and Employee
may, at his option, elect to pay the excess. If Employee fails to
pay such excess or if for any other reason the Company, after
reasonable efforts, is not able to obtain the Supplemental
Disability Policy required herein, then Employee shall not be
entitled to the Supplemental Disability Policy Benefit hereunder
except as may otherwise be determined in the discretion of the
Company and set forth in writing.
(c) If the
definition of a Policy Disability does not satisfy the requirements
for a payment based on a “disability” under § 409A
of the Code and the related tax regulations, the payment of his
Disability Benefit shall begin when he has a Separation from
Service (as defined in Section 8.01) as a result of his being
Disabled or, if he is a Specified Employee (as defined in Section
8.01), shall begin on his Delayed Payment Date (as defined in
Section 8.01), and the payment made on his Delayed Payment
Date shall include all the payments which would have
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been made on
and after the date of his Separation from Service but for his
status as a Specified Employee.
6.03 Employee
Medical Benefit. The Company, at its expense, shall provide
Employee with an annual physical examination to be conducted by a
physician or physicians as determined by Employee, subject to the
reasonable approval of the Company.
6.04 Other
Benefits. Employee shall be provided additional employee
benefits in addition to those identified in Sections 6.01
– 6.03, including, without limitation, participation in the
Company’s 401(k) plan beginning on the Start Date with
immediate full vesting in the Company’s matching
contributions beginning with any matching contribution made for
fiscal year 2008, health, accident and disability insurance under
the Company’s regular and ongoing plans, policies and
programs available, from time to time, to senior officers of the
Company, in accordance with the provisions of such plans, policies
and programs governing eligibility and participation; provided,
however, that such benefits may be modified, amended or rescinded
by
the Board subject
to applicable law and the terms of such plans. The Company shall
also pay Employee’s initiation fee as well as monthly
membership dues at the Ashford Club, Atlanta, Georgia.
6.05
Vacation. Employee shall be entitled to four (4) weeks
paid vacation and three (3) days of paid personal business
time each year during the Term hereof and any renewal hereof. Any
vacation or personal business days not used in any year shall be
subject to forfeiture or accrual pursuant to the Company’s
then-current vacation policy.
6.06 Paramount
Provisions .
(a) Notwithstanding
anything in Sections 6.01 and 6.02 above or any other
provision of this Agreement to the contrary, if the Company has met
all of its obligations under this Agreement (and provided that such
obligations are not relieved in accordance with the terms hereof),
with respect to obtaining and maintaining in force (i) the
life insurance policy described in Section 6.01 hereof on the
life of Employee to fund the minimum death benefit, or
(ii) the Supplemental Disability Policy maintained for
Employee pursuant to Section 6.02 hereof to fund such
Employee’s Disability Benefit, but all or any portion of the
proceeds under any such policy are not actually received by the
Employee for any reason whatsoever, including without limitation
the insolvency of the insurer or any misrepresentation made by
Employee in the application for such insurance, then the right of
Employee or his designated beneficiary to receive a Disability
Benefit or a death benefit, as the case may be, shall be reduced
(but not below zero) by the amount by which the Disability Benefit
or death benefit otherwise payable exceeds the insurance proceeds
actually received. The Company agrees that any insurance company
issuing the life insurance policy described in Section 6.01
shall have at least an “A” rating by the Best Rating
Service.
(b) Anything
in Sections 6.01, 6.02, 6.03, and 6.04 to the contrary
notwithstanding, the amount of the benefits provided for in
Section 6 are subject to adjustment as shall be provided for
in the plan or insurance contract, as the case may be, pursuant to
which such benefit is being paid and the Employee will be given
written notice of any such change. Anything in
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this Agreement
to the contrary notwithstanding, the Board shall have full
authority to make all determinations deemed necessary or advisable
for the administration of the benefits described in this
Section 6. The good faith interpretation and construction by
the Board of the terms of this Section 6 or the benefit
programs described herein shall be final, conclusive and binding on
Employee.
All reasonable and
customary business expenses incurred by Employee in the performance
of his duties hereunder shall be paid or reimbursed by the Company
in accordance with the Company’s policies in effect, from
time to time. The amount of reasonable business expenses eligible
for reimbursement in any taxable year of Employee shall not affect
the amount of reasonable business expenses eligible for
reimbursement in any other taxable year of Employee.
8.
Termination of Employment.
8.01
Definitions. For purposes of this Agreement, the following
terms shall have the following meanings:
The term
“Cause” shall mean (i) Employee commits fraud or
is convicted of a crime involving moral turpitude,
(ii) Employee, in carrying out his duties hereunder, has been
guilty of gross neglect or gross misconduct resulting in harm to
the Company or any of its subsidiaries or affiliates,
(iii) Employee shall have failed to materially comply with the
policies of the Company or shall have refused to follow or comply
with the duly promulgated directives of the Chief Executive Officer
of the Company or the Board, (iv) Employee has breached any of
the provisions of Sections 10.02 through and including 10.04
or (v) Employee otherwise materially breaches a material term
of this Agreement.
The term
“Code” shall mean the Internal Revenue Code of 1986, as
amended.
The term
“Constructive Discharge” shall mean a Separation from
Service by the Employee on account of a material diminution of or
change in his responsibilities or duties; provided, however, that
no Separation from Service by the Employee shall be considered a
Constructive Discharge unless, within one hundred eighty
(180) days of the initial existence of such diminution or
change Employee has first provided written notice to the Chairman
of the Company’s Board of Directors of the factual
circumstances forming the basis for the claim of constructive
discharge and of his intent to treat those circumstances as a
Constructive Discharge under this Agreement, and has further
provided the Company with a period of at least thirty
(30) days in which to cure such alleged breach.
The term
“Delayed Payment Date” shall mean the date that is six
(6) months and one (1) day after the date of
Employee’s Separation from Service.
The term
“Disability” shall mean the good faith determination by
the Chief Executive Officer of the Company or the Board that
Employee has failed to or has been unable to perform
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his duties as
the result of any physical or mental disability for a period of
ninety (90) consecutive days during any one period of
Disability.
The term
“Separation from Service” shall mean a
“separation from service” with the Company within the
meaning of § 409A of the Code and the related income tax
regulations.
The term
“Specified Employee” shall mean a “specified
employee” within the meaning of § 409A of the Code and
the related income tax regulations.
8.02
Termination upon Death or Disability. If Employee has a
Separation from Service due to his death or Disability, the Company
shall pay to the estate of the Employee or to the Employee, as the
case may be, within fifteen (15) days following
Employee’s death or upon his termination in the event of
Disability, all amounts then payable to Employee pro rated through
the date of termination pursuant to Section 3, and the amount
of any accrued but unused vacation under Section 6.05 for the
year in which such termination occurs and any reimbursable amounts
owed Employee under Section 7. However, if the definition of a
Disability does not satisfy the requirements for a payment based on
a “disability” under § 409A of the Code and the
related tax regulations, any payments due hereunder shall begin
when he has a Separation from Service as a result of his being
Disabled or, if he is a Specified Employee, shall begin on his
Delayed Payment Date, and the payment made on his Delayed Payment
Date shall include all the payments which would have been made on
and after the date of his Separation from Service but for his
status as a Specified Employee. Finally, the Company shall pay to
Employee any Incentive Pay payable pursuant to Section 4.03
hereof. Such payment shall be made in a lump sum in cash at
Employee’s Separation from Service or
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