Exhibit 10.7
EMPLOYMENT
AGREEMENT
This EMPLOYMENT AGREEMENT, is made
as of January 31, 2007 (this “ Agreement
”), by and among MidOcean SBR Holdings, LLC, a Delaware
limited liability company (“ Parent ”), Sbarro,
Inc., a New York corporation and a wholly-owned subsidiary of
Parent (the “ Company ” and, together with
Parent, “ Sbarro ”), and Stuart Steinberg
(“ Executive ”).
WHEREAS, Parent and Executive are
parties to a preliminary term sheet for employment (the “
Term Sheet ”) dated November 22, 2006 and desire
that this Employment Agreement supersede in its entirety said Term
Sheet;
WHEREAS, each of Parent and the
Company desire to employ Executive as its Secretary, subject to the
terms and conditions of this Agreement and its Exhibits;
and
WHEREAS, each of Parent and the
Company has determined that it is in the best interests of Parent
and the Company to enter into this Agreement with Executive and
Executive is willing to serve as an employee of Parent and the
Company.
NOW, THEREFORE, in consideration of
the mutual promises, agreements and covenants contained herein, the
parties agree as follows:
1. Term .
Executive’s employment by Sbarro hereunder shall commence
effective as of the date hereof (the “ Commencement
Date ”) and continue until the 2 nd
anniversary of the
date hereof, unless earlier terminated as provided elsewhere in
this Agreement (the period from the Commencement Date until the
relevant employment termination date is referred to herein as the
“ Term ”); provided that the Term shall
renew automatically for successive one-year periods unless either
party gives the other party written notice of its intentions not to
renew this Agreement no later than 90 days prior to the expiration
of the then current Term.
2. Duties .
2.1 Executive shall, during the
Term, use his best efforts to faithfully perform the duties of
Secretary of Sbarro pursuant to which he shall assist in the
overall management, implementation of strategy and the day-to-day
operations and business of Parent and its subsidiaries (including
the Company’s quick service, franchising, quick casual and
strip center operations) related to the office of the Secretary in
accordance with the budgets and business plans that have been
approved by Parent’s Board of Directors (the “
Parent Board ”), shall have responsibility for the
office of the Secretary of Parent and its subsidiaries, and shall
perform such other duties, commensurate with his position, as shall
be specified and designated from time to time by the President and
Chief Executive Officer, the Parent Board, or the Board of
Directors of the Company (the “ Company Board ”
and, together with the Parent Board, the “ Boards
”), as applicable. Executive shall, during the Term, devote
appropriate business time (recognizing Executive’s position
as a practicing attorney, presently with the law firm of Steinberg,
Fineo, Berger & Fischoff, P.C.), effort, skills and
loyalty to effectively perform his duties and further the business
of Sbarro.
2.2 Executive shall be subject to
the written rules, regulations and policies of Parent and the
Company involving the general conduct of business of Sbarro in
force from time to time, as applicable to senior executives of
Parent or the Company, and shall adhere in all material respects to
such applicable rules, regulations and policies; provided ,
however , that such rules, regulations and policies are not
illegal and that Executive has been made aware thereof by delivery
to him of a written document(s) containing such rules, regulations
and policies. In performing Executive’s duties hereunder,
Executive shall comply, in all material respects, with applicable
laws, rules and regulations applicable to Parent and its
subsidiaries and their businesses.
2.3 During the Term, and any time
thereafter until the expiration of applicable statute of
limitations, Executive agrees to fully cooperate in good faith and
to the best of Executive’s ability with Sbarro in connection
with all pending, potential or future claims, litigations,
arbitrations, proceedings, investigations or actions involving or
relating to Sbarro or their subsidiaries which directly or
indirectly relate to any transaction, event or activity about which
Executive has knowledge. Such cooperation shall include all
assistance that Sbarro, its counselor, its representatives may
reasonably request, including reviewing and interpreting documents,
meeting with counsel at a mutually and reasonably convenient time
and location (depending on the circumstances), providing factual
information and material, and appearing or testifying as a witness.
After the Term, Executive’s assistance shall be given
telephonically, unless the same is not reasonably practicable, in
which case such assistance shall be given in person (
provided reasonable advance notice of the need for his
assistance is given to the extent practicable). To the extent
reasonably practicable (as determined by Sbarro in good faith),
Sbarro will try to limit Executive’s participation to regular
business hours. In any event, in making any request for such
cooperation, Sbarro will take into consideration (i) the
significance of the matters at issue in the claim, litigation,
arbitration, proceeding, investigation or action and
(ii) after the Term, Executive’s other personal and
business commitments. Sbarro will reimburse Executive for all
reasonably incurred expenses and costs actually incurred by him in
connection with rendering assistance hereunder upon the submission
of the appropriate documentation to Sbarro. Executive’s
entitlement to reimbursement of such expenses and costs pursuant to
this Section 2.4 shall in no way affect Executive’s
rights to be indemnified and/or advanced expenses in accordance
with Sbarro’s limited liability company or corporate
documents, any applicable insurance policy, and/or in accordance
with this Agreement.
2.4 Although Executive will perform
his duties at the Company’s principal headquarters in the
greater New York City metropolitan area, he understands that his
responsibilities require substantial travel in connection with
Sbarro’s national and international operations.
3. Compensation .
3.1 Base Salary . In
consideration for acting as the Secretary of the Company, the
Company shall pay Executive during the Term a base salary, payable
in accordance with the customary payroll practices of the Company,
of $5,000 per annum, which amount may be increased (but not
decreased) from time to time at the sole discretion of the Board
(such amount, as may be so increased, the “ Base
Salary ”).
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3.2 Annual Bonus . In
addition to the Base Salary, Executive shall be eligible to earn an
annual bonus (the “ Annual Bonus ”) from the
Company pursuant to such annual bonus plans as may be adopted by
the Company Board for executive officers of the Company (as
applicable, the “ Annual Bonus Plan ”).
Executive shall be eligible to participate in the Annual Bonus Plan
at a comparable level of participation as established for other
executive officers with an annual base salary of $250,000 (the
“ Deemed Base Salary ”). The Annual Bonus Plan
shall be promptly established by the Company and shall specify
Executive’s target bonus (the “ Target Bonus
”), which shall be earned based upon the Company
Board’s determination, in its sole discretion, of the
attainment of stated objectives (to be established by the Company
Board with input from management, including Executive) and which
may vary by executive class or executive. Executive, together with
other members of management, shall develop and propose to the
Boards a strategic business plan (containing, among other items and
on a Company fiscal quarter basis, stated business objectives to be
accomplished and an EBITDA goal) and a proposed budget no later
than the regularly scheduled December meeting of the Boards of each
year for the next succeeding fiscal year and in time for the Boards
to consider, review, discuss, modify and approve for such next
ensuing year (the “ Strategic Business Plan ”).
The Annual Bonus, if any, will be paid to Executive by the Company
promptly after the Company Board determines the amount payable to
Executive, but in any event on or before May 1.
3.3 Withholding . All
payments of compensation and benefits shall be subject to
applicable withholding taxes and other legally required payroll
deductions. Executive shall provide the Company with all
information reasonably requested by the Company with respect
thereto.
3.4 Equity Compensation
.
(a) Grant . In consideration
for acting as the Secretary of Parent, Parent hereby grants
Executive, as of the date hereof, 1,108.50 of its Class B Units
(the “ B Units ”) and 1,048.50 of its Class C
Units (the “ C Units ” and, together with the B
Units, “ Incentive Units ”). Concurrently with
the execution of this Agreement, Executive shall deliver to the
Company an executed copy of the Amended and Restated Limited
Liability Company Agreement of Parent, dated as of the date hereof
(as the same may be amended from time to time, the “ LLC
Agreement ”).
(b) Vesting and Forfeiture .
The Incentive Units shall be subject to vesting and forfeiture as
provided in Section 3.1(d) and (e) of the LLC
Agreement.
(c) Repurchase . If Executive
ceases to be employed by Sbarro for any reason, any vested
Incentive Units, together with any other Units (as defined in the
LLC Agreement) in Parent which Executive owns, shall be subject to
purchase by Parent, at its option, and Executive shall be required
to sell, as provided in Section 11.4 of the LLC
Agreement.
(d) Put Right . In the event
that Executive’s employment with Sbarro is terminated
(i) by Sbarro without Cause (as defined below), (ii) by
Executive with Good Reason (as defined below), (iii) as a
result of Executive’s death or disability or (iv) as a
result of the failure of Sbarro to renew the Term, as provided in
Section 1, Executive shall have the right to put all or a
portion of Executive’s Units to Parent, and Parent shall be
required to purchase such Units, as provided in Section 11.5
of the LLC Agreement.
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(e) Transfers .
Executive’s Units shall be subject to the provisions
governing transfers as provided in Article VIII of the LLC
Agreement.
(f) Section 83(b)
Election . With respect to the Incentive Units, within 30 days
after the date hereof, Executive shall make a timely election with
the Internal Revenue Service under Section 83(b) of the
Internal Revenue Code of 1986, as amended, and the regulations
promulgated thereunder (in the form attached hereto as Exhibit
B ); provided that the fair market value of such
Incentive Units for purposes of such election shall be reported as
zero.
(g) Withholding of Taxes .
Sbarro may withhold from amounts otherwise due or payable to
Executive hereunder or under the LLC Agreement any amount in
respect of taxes that Sbarro determines in good faith that it is
required to withhold, in each case in connection with (a) any
payment hereunder or pursuant to the LLC Agreement or (b) the
transfer of any Units granted hereunder. Executive shall furnish
such information as Sbarro requests to make any such determination
of taxes.
3.5 Expenses . The Company
shall pay, or reimburse Executive, in accordance with the
applicable Company policy, for all reasonable out-of-pocket
expenses actually incurred by Executive during the Term in the
performance of Executive’s services under this Agreement.
Executive shall submit proof of such expenses (including, in the
case of reimbursements, proof of payment), with the properly
completed forms as prescribed from time to time by the Company once
each month; provided , however , that such proof is
submitted within a reasonable time after such expenses have been so
incurred (and, in the case of reimbursements, have been actually
paid).
3.6 Vacation . During the
Term, Executive shall be entitled to 4 weeks of annual vacation in
accordance with the Company’s standard policies in effect
from time to time regarding vacation time and accrual thereof.
Vacation shall be taken at times when reasonably appropriate, given
Executive’s responsibilities and consistent with the needs of
Sbarro. Executive shall be entitled to sick and personal days in
accordance with the Company’s policy and shall be entitled to
such other perquisites (if any) as were provided to Executive by
the Company prior to the date hereof.
4. Disability or Death
.
4.1 Disability . If Executive
fails, due to disability or incapacity, either physical or mental,
to perform substantially and continuously all of the material and
essential duties assigned to him for a period of more than 180
consecutive days or for 270 nonconsecutive days out of any
consecutive 1 year period, Sbarro may terminate Executive’s
employment by written notice to Executive delivered at least 10
calendar days prior to the effective date of his termination. The
determination as to whether Executive is disabled or incapable of
performing his duties hereunder shall be made by a disinterested
physician jointly selected by Executive and the Parent Board;
provided , however , that if a disinterested
physician cannot be selected within 15 calendar days of
Sbarro’s written request therefore, Sbarro shall
have
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the right to request the Medical Society of
Suffolk or Nassau County to select a qualified disinterested
physician to conduct an appropriate examination and such
physician’s determination as to Executive’s disability
or incapacity shall be final and binding. Executive shall submit to
examination by such physician at such reasonable times and places
as may be requested by Sbarro, and any failure by Executive to
submit to such examination schedule shall be deemed a binding
admission by Executive of his disability or incapacity.
4.2 Death or Disability
Termination Payments . Upon death or termination of employment
by virtue of disability or incapacity, neither Executive, nor
Executive’s estate, executors, administrators or
beneficiaries in the case of the death of Executive, shall have any
right to receive any compensation or benefit hereunder on and after
the effective date of the termination of employment other than
(i) Base Salary earned and accrued under this Agreement prior
to the effective date of termination, (ii) continuation of the
Deemed Base Salary for a period of 12 months; provided ,
however , that the Company may deduct there from any
disability payments received by Executive from the Company or from
insurance paid for by the Company, (iii) any then earned, but
unpaid, Annual Bonus with respect to the year prior to the year in
which termination occurs, and a pro rata Target Bonus for
the portion of the year in which termination occurs,
(iv) accrued benefits (including compensation for accrued
vacation, sick and personal days) in accordance with and subject to
the terms of Sbarro’s benefit plans and policies, and
(v) reimbursement, in accordance with the terms of this
Agreement, for business expenses properly incurred prior to the
effective date of termination.
4.3 Payment After Death . In
the event of Executive’s death, any payments by the Company
shall be made to the executors or administrators of
Executive’s estate upon the delivery of such documents as the
Company may reasonably request confirming such person’s
appointment and authority.
4.4 Termination of this
Agreement . In the event of termination of Executive’s
employment pursuant to this Article 4, this Agreement, except for
the provisions of Section 3.4 “Equity
Compensation” (and, for the avoidance of doubt, the
provisions of the LLC Agreement referred to in such section),
Section 4.2 “Termination Payments,”
Section 4.3 “Payment After Death,” Article 6
“Restrictive Covenants” (to the extent applicable in
accordance with its terms) and Article 7 “Other
Provisions,” shall otherwise terminate upon (a) the
effective date of the termination of employment if termination has
been effected by disability or incapacity, and (b) upon
Executive’s death, and Executive and his estate shall have no
further rights hereunder.
5. Certain Terminations of
Employment .
5.1 Termination for Cause .
Sbarro may terminate Executive for Cause; provided ,
however , that either Parent or the Company has given prior
written notice of such Cause to Executive (specifying in detail the
nature of the Cause) and the same has not been cured in all
material respects or waived by the Parent Board within 15 calendar
days after the giving of such notice. During such time period,
authorized representatives of the Parent Board will be available to
meet with Executive (and Executive’s legal counsel if
requested by Executive) upon 3 calendar days’ prior written
notice, if requested by Executive, which
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meeting, may be held telephonically. As used in
this Agreement, “ Cause ” means and shall be
deemed to exist if, without the prior written consent of the Parent
Board, Executive: (a) is convicted of, or pleads guilty or
nolo contendere to, a felony (including fraud or
embezzlement) or other crime involving moral turpitude;
(b) while acting on behalf of Sbarro or otherwise in the
performance of his duties for Sbarro, knowingly (i) submits
false reports (whether oral or in writing) or lies to either of the
Boards or (ii) commits a willful act of gross misconduct or
gross negligence; (c) knowingly partakes of illegal
substances; (d) engages in alcohol abuse to such an extent
that Executive’s ability to properly fulfill his
responsibilities to Sbarro in a manner reasonably expected is
impaired in any material respect; (e) fails in any material
respect to follow any written policy affecting all employees of
Parent and/or the Company, which policy provides that such failure
may result in termination of employment; or (f) fails to
comply in any material respect with the lawful and reasonable
written direction of either of the Boards.
5.2 Termination Without Cause or
Automatically Due to Retainer Termination . Sbarro may
terminate Executive’s employment at any time, and for any
reason or for no reason, upon 30 days’ prior written notice
to Executive, which notice shall specify the effective date of such
termination. Executive’s employment with Sbarro will
terminate automatically in the event that the retainer agreement,
dated as of the date hereof, among Parent, the Company and
Steinberg, Fineo, Berger & Fischoff, P.C. is terminated in
accordance with its terms.
5.3 Termination for Any Reason or
for Good Reason by Executive . Executive shall have the right
to terminate his employment with Sbarro for any reason at any time
upon 30 days’ prior written notice to Parent, which notice
shall specify the effective date of such termination. In addition,
Executive may terminate his employment with Sbarro for Good Reason;
provided , however , that Executive has given, within
30 days of his obtaining knowledge of the event purported to
constitute Good Reason, 30 calendar days prior written notice of
such Good Reason to the Boards (specifying in detail the nature of
the Good Reason) and the same shall not have been cured in all
material respects or waived by Executive within such period of 30
calendar days. As used in this Agreement, “ Good
Reason ” means and shall be deemed to exist if, without
the prior express written consent of Executive: (a) Executive
suffers a material change in his reporting obligations;
(b) Executive suffers a material decrease in the duties or
responsibilities associated with his titles and positions, as set
forth in Section 2.1; (c) Executive’s Base Salary,
Target Bonus or any future incentive equity opportunity provided by
Sbarro after the date hereof (excluding, for the avoidance of
doubt, the Incentive Units granted pursuant to Section 3.4
hereof, which are subject to vesting, forfeiture and other terms as
set forth herein and in the LLC Agreement) is reduced; (d) the
Company fails to pay Executive’s Base Salary, Annual Bonus or
benefits to which Executive is entitled under Sections 3.2 when
due; (e) the Company’s principal headquarters is
relocated outside of the greater New York City metropolitan area;
(f) either Parent or the Company sells, transfers or otherwise
disposes of all or substantially all of its assets or business, and
transfers its obligations under this Agreement to a successor,
which successor fails to expressly assume in writing all of
Sbarro’s obligations to Executive under this Agreement; or
(g) the Parent Board provides notice to Executive pursuant to
Section 1 of Sbarro’s election not to extend the
Term.
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5.4 Effects of Termination
.
(a) Termination for Cause .
Notwithstanding any other provision of this Agreement, if Sbarro
terminates Executive’s employment for Cause, such action
shall be without prejudice to any other rights or remedies that
Sbarro may have at law or in equity; and Sbarro shall have no
further obligation to Executive and Executive shall have no right
to receive any compensation or benefit from Sbarro, on and after
the effective date of such termination, other than: (i) Base
Salary earned and accrued under this Agreement prior to such
effective date of termination; (ii) accrued benefits
(including compensation for accrued vacation) in accordance with
and subject to the terms of Sbarro’s benefit plans and
policies; (iii) any then earned, but unpaid, Annual Bonus with
respect to the year prior to the year in which termination occurs,
payable on its normal payment date; and (iv) reimbursement, in
accordance with the terms of this Agreement, for business expenses
properly incurred prior to the effective date of termination. This
Agreement, except for the provisions of Section 3.4
“Equity Compensation” (and, for the avoidance of doubt,
the provisions of the LLC Agreement referred to in such section),
this Section 5.4(a), Article 6 “Restrictive
Covenants” (to the extent applicable in accordance with its
terms) and Article 7 “Other Provisions,” shall
otherwise terminate upon the effective date of the termination of
employment and Executive shall have no further rights
hereunder.
(b) Termination Without Cause,
for Good Reason or Automatically . If Executive’s
employment with Sbarro is terminated by Sbarro without Cause, by
Executive for Good Reason, or automatically (as set forth in
Section 5.2 and as further limited below), Executive shall
have no right to receive any compensation or benefit from Sbarro,
whether under this Agreement or otherwise, on and after the
effective date of the termination of employment other than:
(i) Base Salary earned and accrued under this Agreement prior
to the effective date of termination; (ii) accrued benefits
(including compensation for accrued vacation, sick and personal
days) in accordance with and subject to the terms of Sbarro’s
benefit plans and policies; (iii) any then earned, but unpaid,
Annual Bonus with respect to the year prior to the year in which
termination occurs, payable on its normal payment dat
