EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the
“
Agreement ”)
is entered into as of July 8, 2008, between Chanticleer Holdings,
Inc., a Delaware corporation (the “
Company ”)
and Michael Herrick (“
Executive ”).
WHEREAS,
Wise Acquisition Corp., a Delaware corporation, the Company,
Hooters, Inc., a Florida corporation (the “
HI ”),
and certain other entities and selling stockholders have entered
into that certain Stock Purchase Agreement (the “
SPA ”),
dated March 7, 2008, pursuant to which the Company will acquire,
directly or indirectly, all of the outstanding shares of capital
stock of HI and certain of its affiliates;
WHEREAS,
Owl Acquisition Holdings Corp., a Delaware
corporation, the Company, certain
related entities that have executed and delivered a
joinder thereto, and
Texas
Wings Incorporated, a Texas corporation ("
TW ")
,
have
entered into
that certain Asset Purchase Agreement (the “
APA ”),
dated as of the date hereof, pursuant to which the Company
will indirectly acquire, certain Hooters restaurants or rights
related thereto of TW and certain of its affiliates as set
forth in the APA;
WHEREAS,
it is contemplated that the closing of the transactions
contemplated by the SPA will occur immediately prior to
the closing of the transactions contemplated by the APA
(collectively, the “
Closings ”),
and upon the Closings the Company and Executive desire that,
immediately at the effective time of the Closings (the
“
Effective Time ”),
the Company shall employ Executive, and Executive shall accept such
employment, on the terms and subject to the conditions set forth
herein; and
WHEREAS,
this Agreement will become effective only if the Closings
occurs and only if Exhibit A has been agreed to by July 14,
2008;
NOW,
THEREFORE, in consideration of the mutual agreements set forth
herein and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the
parties hereto hereby agree as follows:
1.
Employment Period .
Subject to earlier termination as hereinafter provided,
Executive’s employment hereunder shall be for a period (the
“
Employment Period ”)
commencing at the Effective Time and ending on the third
anniversary of the date of the Closings (the “
Initial Termination Date ”).
If not previously terminated, the Employment Period shall
automatically be extended for one additional year on the Initial
Termination Date and on each subsequent anniversary of the Initial
Termination Date, unless either Executive or the Company elects not
to so extend the Employment Period by notifying the other party, in
writing, of such election not less than ninety (90) days prior to
the last day of the then-current Employment Period.
2.
Position, Duties and Responsibilities .
(a)
Position .
Effective at the Effective Time, the Company shall employ
Executive, and Executive hereby agrees to serve the Company, as
Co-Chief Operating Officer, West of the Company reporting to the
Company’s Chief Executive Officer. In addition, during the
Term, the Company shall
use its best efforts to cause Executive
to be nominated to serve on the Company’s Board of Directors
(the “
Board ”)
;
provided
,
however
, that the Company shall not be obligated to cause such nomination
if circumstances constituting Cause for Executive’s
termination of employment exist or Executive is no longer employed
as Chief Executive Officer of HI. Provided that if
Executive is so nominated and elected, Executive hereby agrees to
serve as a member of the Board. Executive shall perform such
employment duties as are usual and customary for such position. At
the Company’s request, Executive shall serve the Company
and/or its subsidiaries and affiliates in such other offices and
capacities in addition to the foregoing (consistent with
Executive’s position with the Company) as the Company shall
designate. In the event that Executive serves in any one or more of
such additional capacities, Executive’s compensation will not
be increased on account of such additional service beyond that
specified in this Agreement.
(b)
Place of Employment .
During the Employment Period, Executive shall perform the services
required by this Agreement at the Company’s offices in
Dallas, TX. Notwithstanding the foregoing, the Company may from
time to time require Executive to travel temporarily to other
locations for the Company’s business.
(c)
Exclusivity .
Except with the prior written approval of the Board (which the
Board may grant or withhold in its sole discretion), Executive,
during the Employment Period, shall devote his entire working time,
attention and energies to the business of the Company and will not
(A) accept any other employment or consultancy, (B) serve
on the board of directors or similar body of any other for-profit
entity (other than the Company or any subsidiary of the Company),
or (C) engage, directly or indirectly, in any other business
activity (whether or not pursued for pecuniary advantage) that is
or may be competitive with, or that might place him in a competing
position to, that of the Company or any of its subsidiaries or
affiliates.
(a)
Base Salary .
During the Employment Period, the Company shall pay Executive an
annual base salary of $325,000 per year, which shall be paid to
Executive in accordance with the Company’s standard payroll
practices, as in effect from time to time (such base salary, as may
be increased pursuant to the following sentence, the “
Base Salary ”).
The Base Salary shall be reviewed annually for increase as
determined by the Board or the Compensation Committee thereof in
its sole discretion.
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i.
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Quarterly Bonuses .
During the Employment Period, Executive shall be eligible to
participate in the Company’s incentive bonus plan applicable
to the Company’s senior executives and to earn a target bonus
of 58% of Base Salary paid during each quarter of a fiscal year
(the “
Target Bonus ”),
based on the attainment of Company budgeted EBITDA for each such
quarter, as contained in the annual budget presented by executive
management of the Company and approved by the Board or the
Compensation Committee thereof (and for the remainder of 2008, to
be agreed to and set forth on
Exhibit A hereto
no later than July 14, 2008). The amount of each Target Bonus will
be increased or decreased by the same percentage that actual EBITDA
is greater or less than budgeted EBITDA for a given fiscal quarter,
provided that if actual EBITDA is less than 50% of budgeted EBITDA,
no Target Bonus will be payable for such quarter. Any quarterly
bonus shall be paid by the Company to Executive as soon as
practicable following the quarter-end determination of such bonus,
but in any event within thirty (30) days after the end of the
fiscal quarter in which such bonus is earned, subject to and
conditioned upon Executive’s continued employment with the
Company through the date on which such bonus is paid (the
“
Bonus Payment Date ”).
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ii.
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Discretionary Bonuses .
In addition to the quarterly bonus, during the Employment Period,
Executive shall be eligible to receive additional discretionary
cash and/or equity incentive bonus awards based on significant
acquisitions, significant corporate achievements and/or the
attainment of other objectives. The award of any bonus under this
Section 3(b)(ii) (if any) shall be made in the sole discretion of
the Board and shall be paid, if at all, at such time or times and
in such form as the Board determines.
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(a)
General .
Subject to adoption by the Board and approval by Company’s
shareholders of the Company’s 2008 Equity Incentive Plan (the
“
Plan ”)
in substantially the form attached as
Exhibit B hereto,
the Company shall grant to Executive (i) an option (“
Option ”)
to purchase shares of common stock, par value $0.0001 per share, of
the Company (“
Shares ”),
and (ii) restricted Shares (the “
Restricted Stock ”),
each as provided below in this Section 4
. To
the greatest extent permitted under applicable law, the Option
shall constitute an “incentive stock option” within the
meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “
Code ”).
If approval of the Plan is not obtained by the time any portion of
the Option or Restricted Stock are scheduled to vest, the Company
will instead grant awards that substantially replicate the terms
and economics of the Option and Restricted Stock award, payable in
cash or other awards that do not require the approval of the
Company’s shareholders.
(b)
Option .
Subject to Section 4(a) above and Section 4(g) below, as soon as
practicable following the Effective Time, the Company shall grant
to Executive an Option to purchase 195,546 Shares (subject to
adjustment for stock splits and similar changes in share capital
between the date hereof and the Effective Date). The Option shall,
subject to Sections 4(d) and 7(a) hereof, vest and become
exercisable as to one-third of the Shares subject thereto on the
first anniversary of the date of grant (the “
Grant Date ”)
of such Option and as to one-twelfth of the Shares subject thereto
on each quarterly anniversary of the Grant Date thereafter, subject
to Executive’s continued employment with the Company through
each such vesting date. The Option shall
be granted at
an exercise price per share equal to the Fair Market Value (as
defined in the Plan) of a Share on the Grant Date.
C onsistent
with the applicable provisions of this Section 4,
t he
terms and conditions of the Option, including without limitation
any applicable vesting and forfeiture conditions, shall be set
forth in a Stock Option Agreement to be entered into by the Company
and Executive in substantially the form attached hereto as
Exhibit C (the
“
Option Agreement ”).
The Option shall be governed in all respects by the terms of the
Plan and the Option Agreement.
(c)
Restricted Stock .
Subject to Section 4(a) above and Section 4(g) below, as soon as
practicable following the Effective Time, the Company shall grant
to Executive 48,886 Shares of Restricted Stock (the “
Restricted Stock ”)
(subject to adjustment for stock splits and similar changes in
share capital between the date hereof and the Effective
Date).
The Restricted Stock shall vest and the restrictions thereon shall
lapse, subject
to Sections 4(d) and 7(a) hereof
, with
respect to one-third of the Shares subject thereto on the first
anniversary of the Grant Date of such Restricted Stock and as to
one-twelfth of the Shares subject thereto on each quarterly
anniversary of such Grant Date thereafter, subject to
Executive’s continued employment with the Company through
each such vesting date. Consistent with the applicable provisions
of this Section 4, the terms and conditions of the Restricted Stock
shall be set forth in a Restricted Stock Agreement to be entered
into by the Company and Executive in substantially the form
attached hereto as
Exhibit D which
shall evidence the grant of the Restricted Stock (the
“
Restricted Stock Agreement ”).
The Restricted Stock shall be governed in all respects by the terms
of the Plan and the Restricted Stock Agreement.
(d)
Change in Control .
Notwithstanding anything herein to the contrary, in the event that
a Change in Control (as defined in the Plan) occurs and Executive
remains employed until at least immediately prior to the closing of
the Change in Control, then, immediately prior to such Change in
Control, 50% of the then-unvested Shares subject to each of the
Option and the Restricted Stock award shall vest.
(e)
Additional Terms .
The Option shall terminate immediately upon Executive’s
termination of employment for Cause (as defined below), without
regard to the vested status of such Option at the time of such a
termination. In the event of any other termination of employment,
the Option, to the extent vested, shall remain outstanding and
exercisable for a period of up to (i) 180 days following
Executive’s termination of employment for any reason other
than Cause or due to death or Disability (as defined below), and
(ii) one year following Executive’s termination of employment
due to death or Disability (but in no event beyond the stated
expiration date of the Option).
(f)
Additional Discretionary Equity Grants
.
During the Employment Period, Executive shall be eligible as a
senior executive of the Company to receive future grants of
equity-based awards, including, without limitation, upon
authorization of additional Shares for grant under the Plan. The
award of additional equity-based awards (if any) pursuant to this
Section 4(f) shall be made in the sole discretion of the Board or
the Compensation Committee thereof and shall be subject to such
terms and conditions as the Board or the Compensation Committee may
determine.
(g)
Equity Grant Allocation .
Notwithstanding the provisions of Sections 4(b) and 4(c) above, if,
on the Grant Date, the Fair Market Value of a Share is greater than
$7 per Share, then the parties agree to cooperate and work together
in good faith to adjust the number of Shares subject to the Option
and/or Restricted Stock grants described in Sections 4(b) and 4(c)
above to reflect the value intended to be provided to Executive
under the Options and Restricted Stock had such awards been granted
in the amounts stated in Sections 4(b) and 4(c) above with the
Options having an exercise price equal to $7 per
Share.
5.
Benefits and Vacation .
During the Employment Period, Executive shall be eligible to
participate in such group life, health, accident, disability and/or
hospitalization insurance and retirement plans as the Company may
make available generally to its senior executives as a group, which
plans shall be no less favorable in the aggregate than those
maintained for the benefit of Executive immediately prior to the
Effective Time, subject to the terms and conditions of any such
plans. In addition, Executive shall be eligible for such other
benefits, perquisites, paid vacation and holidays, to the extent
applicable generally to other senior executives of the Company,
subject to the terms and conditions of the applicable policies. In
addition, the Company agrees to consider the implementation of a
nonqualified deferred compensation plan and an executive
supplemental life insurance program. Nothing contained herein
shall, or shall be construed so as to, obligate the Company to
adopt, maintain or continue any particular plans, policies or
programs at any time.
6.
Expenses .
During the Employment Period, Executive shall be entitled to
receive prompt reimbursement of all reasonable business expenses
incurred by Executive
in accordance with the expense reimbursement policy applicable to
the Company’s senior executives, as in effect from time to
tim e.
7.
Termination of Employment .
(a)
Termination Without Cause or for Good
Reason .
The Company may terminate Executive’s employment without
Cause (as defined below) at any time during the Employment Period
upon ten (10) days’ written notice provided to Executive in
accordance with Section 8 below or, in the Company’s sole
discretion, payment of Executive’s Base Salary for such
period in lieu of notice. In addition, Executive may terminate his
employment for Good Reason (as defined below) at any time during
the Employment Period in accordance with the terms of Section
7(i)(ii) hereof. If Executive experiences
a “separation from service” (within the meaning of
Section 409A(a)(2)(A)(i) of the Code, and Treasury Regulation
Section 1.409A-1(h)) (“
Separation from Service ”)
due
to a termination by the Company without Cause or by Executive for
Good Reason, the Company shall promptly or, in the case of
obligations described in clause (iv) below, as such obligations
become due, pay or provide to Executive, (i) Executive’s
earned but unpaid Base Salary accrued through the date of such
Separation from Service (the “
Termination Date ”),
(ii) accrued but unpaid vacation time through the Termination Date,
(iii) reimbursement of any unreimbursed business expenses incurred
by Executive prior to the Termination Date that are reimbursable
under Section 6 above, (iv) any vested benefits and other amounts
due to Executive under any plan, program or policy of the Company,
(v) if the Termination Date occurs after the end of a fiscal
quarter but before the Bonus Payment Date in respect of such
quarter, the quarterly bonus that would have been paid pursuant to
Section 3(b)(i) had Executive remained employed until the Bonus
Payment Date, and (vi) any payment in lieu of notice of termination
under this Section 7(a) (together, the “
Accrued Obligations ”).
In addition, subject to Section 7(f) below and Executive’s
execution and non-revocation of a binding release in accordance
with Section 7(g) below, in the event of a termination of
Executive’s employment by the Company without Cause or by
Executive for Good Reason, the Company shall pay or provide to
Executive the following (the “
Severance ”):
(x)
a lump-sum payment equal to the greater of (A) the Base Salary
that would have been payable over the remainder of the
Employment Period (without regard to any subsequent extensions
thereof) had Executive not incurred a Separation from Service
at the rate in effect as of the Termination Date, or (B) 200%
of the Base Salary in effect as of the Termination
Date;
provided that
200% shall be replaced by 250% if such termination occurs within
the one year period after either of (I) a Change in Control or (II)
the consummation of an Excluded Acquisition (as defined in the
Plan) that, but for the Change in Control Exceptions (as defined in
the Plan), would constitute a Change in Control;
provided further ,
that if within the six month period following such termination, an
event described in clause (I) or (II) occurs, Executive shall be
entitled to an additional payment on the six month anniversary of
such termination so that the total payments received pursuant to
this Section 7(a)(x) equals 250% of the Base Salary in effect as of
the Termination Date; and
(y)
50% of the then-unvested Shares subject to each of the Option
and the Restricted Stock award shall vest immediately prior to
such termination,
provided, that
if such termination occurs within the one year period after either
of (A) a Change in Control or (B) the consummation of an Excluded
Acquisition (as defined in the Plan) that, but for the Change in
Control Exceptions (as defined in the Plan), would constitute a
Change in Control, in either case, then all of the then-unvested
Shares subject to each of the Option and the Restricted Stock award
shall vest immediately prior to such termination;
provided further ,
if the preceding proviso is not applicable, then the portion of the
Option and Restricted Stock award that did not vest immediately
prior to such termination shall conditionally remain outstanding
and unvested, and if within the six month period following such
termination, an event described in clause (A) or (B) occurs, such
unvested portion shall vest upon such event, and as to the Option,
shall remain exercisable for at least 30 days thereafter (unless
canceled in connection with such Change in Control), and if within
the six month period following such termination, an event described
in clause (A) or (B) does not occur, such unvested portion shall be
forfeited on the six-month anniversary of the Termination Date;
notwithstanding the foregoing, in no event shall any portion of any
such award remain outstanding beyond its stated expiration date;
and
(z)
at the Company’s expense, continuation of group
healthcare coverage for Executive and his legal dependents
until the earlier of (i) eighteen months after the Termination
Date, or (ii) such time as Executive becomes eligible to
receive comparable benefits under another employer’s
group health plan, provided, in any case, that Executive
properly elects continuation healthcare coverage under COBRA;
following such continuation period, any further continuation
of coverage under applicable law shall be at Executive’s
sole expense.
Subject
to Section 7(g) below and except as expressly provided in
Section 7(a)(x) above, the Severance amounts described in
Section 7(a)(x) above shall be paid to Executive no later than
fifteen calendar days following the Termination Date. In no
event shall an election not to extend the Employment Period in
accordance with Section 1 hereof constitute a termination of
employment without Cause or for Good Reason.
(b)
Resignation without Good Reason
.
Executive may terminate his employment at any time without Good
Reason upon thirty (30) days’ written notice provided to the
Company in accordance with Section 8 hereof,
provided ,
that the Company may, in its sole discretion, waive such notice
period without payment in lieu thereof. If Executive so resigns his
employment, Executive shall be entitled to receive the Accrued
Obligations promptly or, in the case of benefits described in
Section 7(a)(iv) above, as such obligations become due, provided
the Ex
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