Exhibit 10.4
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 Peter Beaudrault
(“ 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 President and Chief
Executive Officer, 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 4 th
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
President and Chief Executive Officer of Sbarro pursuant to which
he shall have responsibility for 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) in accordance with the budgets and business
plans that have been approved by Parent’s Board of Directors
(the “ Parent Board ”) and shall perform such
other duties, commensurate with his position, as shall be specified
and designated from time to time by 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 his full business time, effort, skills and loyalty to
effectively perform his duties and further the business of Sbarro;
provided that Executive shall be permitted to
(i) invest his personal assets and (ii) serve on any
civic, community, charitable or corporate board to the extent that
such activities, individually or in the aggregate, do not
materially interfere with the conduct of Executive’s duties.
Executive
shall report directly and solely to the Boards,
and shall promptly disclose to the Boards, at appropriate times,
all material developments relating to Sbarro known to him so as to
enable Sbarro to obtain the most effective use of Executive’s
services and the business opportunities that come to
Executive’s attention.
2.2 Executive, while employed by
Sbarro as President and Chief Executive Officer, shall serve on the
Boards, initially as Chairman of each Board, and as a member of any
executive or similar committee thereof; and Executive’s
services as such (or in any other capacity with Sbarro or their
subsidiaries) shall be for no additional consideration. Upon his
termination as an employee of Sbarro, Executive shall be deemed to
have simultaneously tendered his resignation as a member of the
Boards (if serving thereon at the time), unless he has resigned
such directorships prior thereto.
2.3 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.
2.4 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.
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2.5 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 and Sbarro
understands that Executive will not be required hereby to reside in
the greater New York City metropolitan area and that Executive
presently resides in Florida.
3. Compensation .
3.1 Base Salary . In
consideration for acting as the President and Chief Executive
Officer 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 $450,000 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 ”).
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 ”). 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 Benefits . Executive (and
his eligible dependents) shall, during the Term, be entitled to
participate in all of the Company’s employee benefits plans,
to the extent permitted by the terms of each such plan, on the same
terms and conditions made available to other executive level
employees of the Company except that, with respect to life
insurance, in addition to such insurance, if any, which may be
provided under group insurance plans generally provided to
employees of the Company or insurance obtained for the benefit of
the Company, the Company shall maintain and pay the premiums for a
$1,000,000 term insurance policy on Executive’s life, as to
which Executive shall designate the beneficiary from time to time;
provided , however , that Executive is insurable at
substantially normal
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rates. If requested by the Company, Executive
shall cooperate with the Company in applying for and obtaining
key-man insurance, in such amounts as determined by the Company
from time to time, for the benefit of the Company. Except as
expressly provided herein, nothing herein shall be construed to
require the Company to establish any plans not in existence on the
date hereof, or to prevent the Company from modifying or
terminating any such plans; provided that any modification
or termination shall not adversely affect any accrued or vested
benefits at the time of the modification or termination. Executive
shall comply with the conditions attendant to coverage by such
plans (which conditions shall be the same as applicable to
participants in the plans generally). Executive affirms that, to
his knowledge, he currently is in good health, with no chronic or
recurring illness, is physically and mentally able to perform his
duties under this Agreement and is insurable at normal
rates.
3.5 Equity Compensation
.
(a) Grant . In consideration
for acting as the President and Chief Executive Officer of Parent,
Parent hereby grants Executive, as of the date hereof, 1,847.50 of
its Class B Units (the “ B Units ”) and 1,747.50
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.
(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
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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.
3.6 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,
which expenses shall include, in accordance with the
Company’s practice prior to the date hereof, the reasonable
out-of-pocket expenses (including travel, lodging and meals) of
Executive in traveling between his current Florida residence and
the Company’s locations (including its principal
headquarters) . 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).
3.7 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 as were provided to Executive by the Company
prior to the date hereof.
3.8 Automobile . During the
Term, the Company shall provide Executive, at Executive’s
option, with either (i) a leased automobile with a lease cost
of up to $1,250 per month ( provided that, if
Executive’s monthly lease payments are less than $1,250 per
month, Executive shall be entitled to receive the difference in
cash) or (ii) a monthly cash payment of $1,250 in lieu of a
leased automobile, plus, in each case, the Company shall reimburse
Executive for the costs of insurance (or, if Executive elects the
automobile, the Company shall provide insurance for such vehicle
under its automobile insurance policy in effect from time to time),
repairs and gas (or, at Executive’s option, the Company shall
provide Executive with a gasoline credit card for such
vehicle).
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 the
right to request the Medical Society of Suffolk or Nassau County to
select a qualified
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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
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 and 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 3.5 “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 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
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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
. 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.
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 3.5
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 or 3.4
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;
(g) Executive is not appointed to, or is removed from, either
of the Boards; (h) the Parent Board provides notice to
Executive pursuant to Section 1 of Sbarro’s
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