Exhibit 10.1
EMPLOYMENT
AGREEMENT
STEPHEN E. CARLEY
EMPLOYMENT AGREEMENT (the
“Agreement”) dated as of September 27 by and
between El Pollo Loco, Inc. (the Company) and Stephen E. Carley
(the “Executive”).
WHEREAS, the Company has entered
into a Stock Purchase Agreement dated as of September 27, 2005
(the “Purchase Agreement”), among Chicken Acquisition
Corp.; EPL Holdings, Inc.; EPL Intermediate, Inc.; the Company; the
equity holders of EPL Holdings, Inc.; and American Securities
Capital Partners, L.P.
WHEREAS, is a stockholder and
executive of the Company and, Executive’s restrictive
covenants, as reflected in this Agreement, are an essential
inducement to the Company to enter into the transactions described
in the Purchase Agreement.
WHEREAS, Executive will receive
valuable consideration as part of the transactions contemplated by
the Purchase Agreement, and has agreed to the restrictive covenants
set forth herein in order to protect the transfer of goodwill as
contemplated by the Purchase Agreement.
WHEREAS, the Company considers it
essential to its best interests and the best interests of its
stockholders to foster the continued employment of Executive by the
Company following the consummation of the transaction contemplated
by the Purchase Agreement and to enter into an agreement embodying
the terms of such employment; and
WHEREAS, Executive is willing to
accept and continue Executive’s employment on the terms
hereinafter set forth in this Agreement;
NOW, THEREFORE, 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; Executive
Representation .
a. Employment Term . Subject
to the provisions of Section 8 of this Agreement, Executive
shall be employed by the Company for a period commencing on the
consummation of the transaction contemplated by the Purchase
Agreement (the “Effective Date”) and ending on the
third anniversary of the Effective Date (the “Employment
Term”) on the terms and subject to the conditions set forth
in the Agreement. Notwithstanding the preceding sentence,
commencing with January 1, 2007 and on each January 1
thereafter (each an “Extension Date”), the Employment
Term shall be automatically extended for an additional one-year
period, unless the Company or Executive provides the other party
hereto 60 days’ prior written notice before the next
Extension Date that the Employment Term shall not be so extended.
For the avoidance of doubt, the term “Employment Term”
shall include any extension that becomes applicable pursuant to the
preceding sentence. If the Purchase Agreement is terminated for any
reason or if the transaction contemplated by the Purchase Agreement
is not otherwise consummated, this Agreement shall be void in its
entirety and each be of no force and effect.
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b. 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 the 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.
2. Position .
a. During the Employment Term,
Executive shall serve as the Company’s President and Chief
Executive Officer and shall principally perform Executive’s
duties to the Company and its affiliates from the Company’s
offices in the Orange County, California metropolitan area, subject
to normal and customary travel requirements in the conduct of the
Company’s business. 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”)
and the Executive shall report directly to 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
(including in an advisory capacity, consulting capacity, or
otherwise) for compensation or otherwise which would conflict with
the rendition of such services either directly or indirectly,
without the prior written consent of the Board; provided
that Executive shall be permitted to participate in such charitable
and community-related services as Executive may choose;
provided further that such services do not materially
interfere with his duties hereunder.
3. Compensation .
a. During the Employment Term, the
Company shall pay Executive a base salary (the “Base
Salary”) at the annual rate of $372,336 (less applicable
withholding taxes), 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 determined from time to time in the sole discretion
of the Board.
b. With respect to each full
calendar year during the Employment Term, Executive shall be
eligible to earn an annual bonus award (an “Annual
Bonus”) calculated, in accordance with Exhibit A attached
hereto, with a targeted bonus equal to one-hundred percent
(100%) of Executive’s then current Base Salary (the
“Target Bonus”).
4. Equity .
a. Additional Option Grant .
On the Effective Date, Executive will receive a stock option award
to purchase a number of shares of stock of Chicken Acquisition
Corp. as set forth on Exhibit B attached hereto on terms and
conditions substantially as set forth on Exhibit B, the Puts/Calls
as set forth on Exhibit C, and such additional terms and conditions
provided for in a stock option agreement (the “Option
Agreement”).
b. Initial Equity Investment
. Subject to the execution of the Option Agreement and Stockholders
Agreement (as defined in Section 7(e) of this Agreement), each
to be negotiated in
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good faith by the Executive and Chicken
Acquisition Corp., Executive shall invest a minimum of $1.8 million
in Chicken Acquisition Corp. through a combination of Rollover
Shares and Rollover Options (each as defined in the Purchase
Agreement) the terms and conditions of which are substantially set
forth on Exhibit C.
5. Employee Benefits . During
the Employment Term, Executive shall be provided, in accordance
with the terms of the Company’s employee benefit plans as in
effect from time to time, health insurance, retirement benefits and
fringe benefits (collectively “Employee Benefits”) on
the same basis as those benefits are generally made available to
other senior executives of the Company. Executive shall be provided
with annual vacation of four weeks per each 12-month period on a
basis consistent with Company policy. During the Employment Term,
the Company shall lease a Lexus RX or an equivalent vehicle to be
used by the Executive during the Employment Term and shall pay for
the Executive’s routine operating expenses, including
maintenance and fuel, incurred in the use of such
vehicle.
6. Business Expenses . During
the Employment Term, reasonable, documented business expenses
incurred by Executive in the performance of Executive’s
duties hereunder shall be reimbursed by the Company in accordance
with Company policies.
7. 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 30 days advance written notice of any resignation of
Executive’s employment. Notwithstanding any other provision
of this Agreement, the provisions of this Section 7 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’s Resignation without Good Reason .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company for Cause (as defined below) or by Executive’s
resignation without Good Reason (as defined below).
(ii) For purposes of this Agreement,
“Cause” shall mean action by the Executive that
constitutes misconduct, dishonesty, the failure to comply with
specific directions of the Board of Directors that are consistent
with the terms hereof (after having been given a reasonably
detailed written notice of, and a period of 20 days to cure, such
misconduct or failure), a deliberate and premeditated act against
the Company or its Affiliates, the commission of a felony,
substance abuse or alcohol abuse which renders the Executive unfit
to perform his duties, or any breach of the covenants set forth in
Section 8 of this Agreement. Any voluntary termination of
employment by the Executive in anticipation of an involuntary
termination of the Executive’s employment for Cause shall be
deemed to be a termination for Cause.
(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:
(A) the Base Salary through the date
of termination;
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(B) any Annual Bonus earned but
unpaid as of the date of termination for any previously completed
calendar 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,
as to which Executive may be entitled 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 7(a), 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 if Executive
becomes physically or mentally incapacitated and is therefore
unable for a period of six (6) consecutive months or for an
aggregate of nine (9) months in any twenty-four
(24) 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:
(A) the Accrued Rights;
and
(B) a pro rata portion of any Annual
Bonus that the Executive would have been entitled to receive
pursuant to Section 4 hereof in such year based upon the
percentage of the calendar year that shall have elapsed through the
date of Executive’s termination of employment, payable when
such Annual Bonus would have otherwise been payable had the
Executive’s employment not terminated,
Following Executives termination of
employment due to death or Disability, except as set forth in this
Section 7(b), Executive or Executive’s estate (as the
case may be) shall have no further rights to any compensation or
any other benefits under this Agreement.
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c. By the Company Without Cause or by
Executive’s Resignation with Good Reason .
(i) The Employment Term and
Executive’s employment hereunder may be terminated by the
Company without Cause or by Executive with Good Reason.
(ii) For purposes of this Agreement,
“Good Reason” shall mean:
(A) Executive’s relocation by
the Company outside Orange County, California;
(B) A reduction of Executive’s
title of President and Chief Executive Officer;
(C) Removal of Executive from the
Company’s Board of Directors or the failure of Executive to
be reelected to the Board of Directors at any time during the
Employment Term; or
(D) the failure of the Company to
provide or cause to be provided to Executive any of the employee
benefits described in Section 5 hereof; provided that
none of the events described in clauses (A) or (B) of
this Section 7(c)(ii) shall constitute Good Reason unless
Executive shall have notified the Company in writing describing the
events which constitute Good Reason and then only if the Company
shall have failed to cure such event within thirty days after the
Company’s receipt of such written notice.
(E) the election of the Company to
not renew the Employment Term pursuant to Section 1(a) of this
Agreement; provided, however, that the Executive shall not have
Good Reason to terminate his employment pursuant to this provision
until the expiration of the Employment Term in effect at the time
that the Company provides the Executive with notice that it does
not intend to renew the Employment Term.
(iii) If Executive’s
employment is terminated by the Company without Cause (other than
by reason of death or Disability), or by Executive with Good
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