EXECUTIVE EMPLOYMENT
AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT (the “
Agreement ”), by and between Real Mex Restaurants,
Inc., a Delaware corporation (the “ Company ”),
and Richard (“Dick”) Rivera (the “
Executive ”). Capitalized terms used herein but not
otherwise defined have the meaning set forth in Section 1.1
hereof.
WHEREAS, the Company wishes to employ Executive,
and Executive wishes to accept such employment, each upon the terms
and conditions set forth in this Agreement.
WHEREAS, the Company and Executive are parties
to a Term Sheet Agreement entered into on April 4, 2009 which
includes an Appendix I (“ Appendix I
,”)(together, the “ Term Sheet Agreement
”).
NOW, THEREFORE, in consideration of the mutual
undertakings contained herein and other good and valuable
consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1.1 Definitions . As used herein, the
following terms shall have the following meanings.
“ Affiliate ” shall mean, as
to any Person, any other Person which directly or indirectly
controls, or is under common control with, or is controlled by,
such Person. As used in this definition, “control”
(including, with its correlative meanings, “controlled
by” and “under common control with”) shall mean
possession, directly or indirectly, of power to direct or cause the
direction of management or policies (whether through ownership of
securities or partnership or other ownership interests, by contract
or otherwise).
“ Board ” means the board of
directors of the Company.
“ Cause ” means the Company
shall have “Cause” to terminate Executive’s
employment upon: (i) the Board’s determination of gross
misconduct or gross mismanagement by Executive that threatens
injury to the Company or that results in Executive’s
inability to substantially perform the duties of Executive’s
position; provided that, where the gross misconduct or gross
mismanagement is susceptible of being cured and the threatened harm
is susceptible of being avoided, termination does not occur until
after the Board provides Executive with five (5) calendar days
prior written notice and, within such period, (i) Executive
has failed to cure the gross misconduct or gross mismanagement and
(ii) the threatened injury has not been avoided; (ii) the
Board’s determination that Executive a) intentionally failed
in any material respect to carry out or comply with any lawful
directive of the Board consistent with the terms of this Agreement
or b) unintentionally failed in any material respect to carry out
or comply with any lawful directive of the Board consistent with
the terms of this Agreement and which caused substantial injury to
the Company (such does not include situations of poor decision
making or exercise of ordinary business judgment in attempting to
carry out or comply with the lawful directive of the Board); (iii)
Executive’s conviction, plea of no contest, plea of nolo
contendere, or imposition of unadjudicated probation for any felony
or crime involving moral turpitude, or Executive’s commission
of any act constituting such felony or crime;
(iv) Executive’s unlawful use (including being under the
influence) or possession of illegal drugs on the Company’s
(or any of its affiliates’) premises or while performing
Executive’s duties and responsibilities under this Agreement;
(v) Executive’s commission of an act of fraud,
embezzlement, misappropriation, willful misconduct, or breach of
fiduciary duty against the Company or any of its affiliates or in
connection with Executive’s employment;
(vi) Executive’s material violation of the
Company’s harassment and discrimination policies, or
Executive’s material breach of the confidentiality,
non-disparagement, or non-competition covenants to the Company or
Executive’s material breach of the representation and
warranty that Executive’s employment with the Company as CEO
and Chairman is not in conflict with any third party agreement or
obligation you may have; (vii) Executive’s willful or
prolonged, and unexcused absence from work (other than by reason of
a physical or mental disability for which leave for such absence
would be a reasonable accommodation).
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“ Company Group ” means,
collectively, the Company and its Subsidiaries and any successors
thereto.
“ EBITDA ” means the
Company’s earnings before interest, taxes, depreciation, and
amortization in accordance with the Company’s customary
practices and accounting procedures and adjusted as appropriate in
the event of an acquisition, change in accounting procedures, and
other customary adjustments.
“
Employment Period ” has the meaning set forth in
Section 2.1.
“ Good Reason ” means
Executive will have “Good Reason” to resign his
employment within ninety (90) days following the occurrence of
any of the following: (i) a reduction in Executive’s
Annual Base Salary, either through the annual review process or
otherwise, from the Annual Base Salary in effect in the prior year,
other than as part of a generalized reduction in base salaries
affecting other senior executives of the Company; or
(ii) modification of position to any other than CEO and
Chairman or required relocation of Executive’s permanent
residence outside of Sarasota, FL. (it being understood, however,
that Executive’s position requires the performance of his
duties in Cypress, California consistent with a full-time schedule
and the job responsibilities of a chief executive). Executive may
not resign his employment for Good Reason unless he provides the
Company with at least 30 days prior written notice of his
intent to resign for Good Reason and the Company has not cured the
breach within such 30-day period.
“ Permanent Disability ”
means either Executive is, or in the good faith determination of
the Board will likely be, unable to substantially perform, by
reason of illness, accident, injury, physical or mental incapacity
or other disability, any of his essential duties or obligations
under this Agreement for a period of ninety (90) consecutive
days or for shorter periods aggregating 120 days during any
period of twelve (12) consecutive months; provided, that such
disability constitutes a disability for purposes of
Section 409A.
“ Person ” means an
individual, a partnership, a corporation, an association, a joint
stock company, a limited liability company, a trust, a joint
venture, an unincorporated organization or a governmental entity or
any department, agency or political subdivision thereof.
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“ Subsidiary ” means, with
respect to any Person, any corporation, partnership, association or
other business entity of which (i) if a corporation, a
majority of the total voting power of shares of stock entitled
(without regard to the occurrence of any contingency) to vote in
the election of directors, managers or trustees thereof is at the
time owned or controlled, directly or indirectly, by that Person or
one or more of the other Subsidiaries of that Person or a
combination thereof, or (ii) if a partnership, association or
other business entity, a majority of the partnership or other
similar ownership interests thereof is at the time owned or
controlled, directly or indirectly, by any Person or one or more
Subsidiaries of that Person or a combination thereof. For purposes
hereof, a Person or Persons shall be deemed to have a majority
ownership interest in a partnership, association or other business
entity if such Person or Persons shall be allocated a majority of
partnership, association or other business entity gains or losses
or shall be or control the managing director or general partner of
such partnership, association or other business entity.
“ Change in Control ” means
the occurrence of a “change in the ownership” or
“sale of assets” for the Company. A “change in
the ownership” of the Company shall occur on the date on
which any one person, or more than one person acting as a group,
other than the “Permitted Holders” (defined below),
acquires ownership of stock of the Company or its parent company,
RM Restaurant Holding Corp. (“Holdings”) that, together
with stock held by such person or group, constitutes more than 50%
of the total fair market value or total voting power of the stock
of such company, as determined in accordance with Treas. Reg.
§1.409A-3(i)(5)(v). If a person or group is considered either
to own more than 50% of the total fair market value or total voting
power of the stock of such corporation, or to have effective
control of the Company within the meaning of Treas. Reg.
§1.409A-3(i)(5)(vi), and such person or group acquires
additional stock of the Company, the acquisition of additional
stock by such person or group shall not be considered to cause a
“change in the ownership” of the Company. A
“change in the ownership” shall not occur in the event
the “Permitted Holders,” or any of them, continue to
own (directly or indirectly through ownership of more than 50% of
each class of issued and outstanding stock of Holdings that carries
voting rights and/or economic interests), more than 50% of each
class of issued and outstanding stock of the Company that carries
voting rights and/or economic
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interests. A
“sale of assets” shall occur upon the direct or
indirect sale, lease, transfer, conveyance or other disposition
(other than by way of merger or consolidation), in one or a series
of related transactions, of all or substantially all of the
properties or assets of the Company and its subsidiaries taken as a
whole to any person or group other than the Permitted Holders, any
related parties of the Permitted Holders, or any of them. The
Permitted Holders are: (a) Cocina Funding Corp., LLC
(“Cocina”); KKR Financial CLO 2007-1, Ltd., KKR
Strategic Capital Overseas Fund, Ltd., KKR Strategic Capital Fund,
L.P., and KKR Strategic Capital Institutional Fund, Ltd.
(collectively “KKR”); and Canpartners Investments IV,
LLC (“Canpartners”), (b) H.I.G. Sun Partners,
Inc., SCSF Cantinas, LLC and any of their Control Investment
Affiliates, and members of the management of the Company, Holdings,
and the Subsidiaries (collectively, the
“Co-Investors”), and (c) any related parties of
Cocina, KKR or Canpartners or the Co-Investors.
2.1 Employment . The Company agrees to
employ Executive, and Executive hereby accepts employment with the
Company, upon the terms and conditions set forth in this Agreement
for the period beginning on April 6, 2009 (the “
Commencement Date ”) and ending as provided in
Section 2.4 (the “ Employment Period
”).
2.2 Position and Duties .
(a) Commencing on the date hereof and
continuing during the Employment Period, Executive shall serve in
the position of Chairman and Chief Executive Officer of the
Company, and Executive shall also be a member of the
Company’s Board, or of the board of directors of the
Company’s parent, as appropriate. Executive shall have the
typical duties, responsibilities and authority of a Person serving
in such capacities in an organization of similar size and structure
as the Company, subject in each instance to the supervision,
determination, and direction of the Board or such Person as the
Board may designate. Executive shall report directly to the Board
or to such other Person as the Board may designate.
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(b) Executive shall devote his best efforts
and his full business time and attention (except for permitted
vacation periods and reasonable periods of illness or other
incapacity) to the business and affairs of the Company and the
performance of Executive’s duties as Chairman and Chief
Executive Officer. The Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, loyal,
trustworthy, businesslike, and efficient manner.
2.3 Base
Salary, Bonus, Benefits, Long-Term Equity/Profit Sharing Plan
.
(a) Base Salary . Executive’s
total annual base salary for 2009 calendar year shall be $500,000
(“ Base Salary ”), which shall be pro-rated from
the Commencement Date. The salary shall be payable in regular
installments in accordance with the Company’s general payroll
practices and shall be subject to customary withholding.
Executive’s Base Salary will be eligible for annual review
and salary adjustment consistent with the process for similarly
situated executives.
(b) Annual Bonus Potential . During
the Employment Period, Executive shall be eligible to receive an
annual (based on the Company’s fiscal year) bonus in a range
of 0 — 150% of Base Salary, based on the Company’s
Senior Management Bonus Plan. The Senior Management Bonus Plan for
2009 is attached as Appendix “1” to this Agreement. The
Bonus shall be based upon the Company’s annual financial
results, as reflected in its audited financial statements, and,
when payable, shall consist of a single lump sum cash payment
payable within thirty (30) days after the completion of the
Company’s audited annual financial statements. The Bonus Plan
for 2010 and any subsequent fiscal year shall be determined as
follows: Within a mutually agreeable time period prior to the
beginning of each fiscal year of the Company, Executive shall
submit to the Board for its approval the Company’s
operational plan, including a fiscal budget, for the next fiscal
year of the Company. The Board shall establish financial targets
and set conditions each year based on the approved operational plan
(a “ Bonus Plan ”). The financial targets and
conditions established for Executive’s Bonus shall be
consistent with those established for other senior executives of
the Company. Executive shall receive the percentage of the maximum
Bonus specified by the applicable Bonus Plan, depending on whether
the Company attains all or a portion of the financial targets
established, and meets all of the conditions set under such Bonus
Plan for that year. Any of the Company’s financial results
that are used to calculate a Bonus shall be taken only from the
Company’s audited financial statements for the applicable
year.
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(c) Benefits . During the
Employment Period, consistent with past custom and practice,
Executive shall be entitled to: (i) participate in all of the
Company’s employee benefit programs for which senior
executive employees of the Company are generally eligible,
including, if offered by the Company to such executives, medical
surgical, hospitalization, dental, worker’s compensation
insurance and disability coverage, group retirement and welfare
benefit plans, (ii) accrue four (4) weeks of paid vacation
each year, subject to the conditions of the Company’s
vacation policy, (iii) the payment by the Company to the Executive
of a car allowance of $700 a month, payable in prorated bi-weekly
installments, plus reimbursement of all reasonable, documented
expenses related to the operation of an automobile, including gas,
repairs, maintenance, insurance and registration fees, which shall
not exceed $5,500 per year in aggregate in accordance with the
Company’s senior management benefits plan, and (iv) such
other benefits as the Board may from time to time determine. The
benefits described in Section 2.3(c)(i)-(iv) above are
collectively referred to herein as the Executive’s
“Benefits.”
(d) Relocation; Housing; Related
Expenses . During the Employment Period, in lieu of relocation
from Sarasota, Florida to California and in addition to the Base
Salary, Bonus, and the Benefits described in
Sections 2.3(a)-(c), Executive shall be reimbursed for
property lease expense on a temporary residence in the California
location, all reasonable expenses relating to travel between
Executive’s home in the Sarasota, Florida area and the
Company’s principal office in Cypress, California, and for
normal and customary related expenses up to $50,000 per annum in
the aggregate across all categories, on an after-tax
basis.
(e) Profit Sharing or Equity
Participation . The Executive will participate in an equity
and/or profit sharing plan based on EBITDA improvements, the
details and specific mechanisms of which will be set forth in a
separate stock option agreement, restricted stock agreement, profit
sharing agreement, or other agreement as appropriate, and which
will be consistent with the terms and conditions set forth in the
Term Sheet Agreement, including Appendix I thereto. The
Company and the Executive will finalize the separate agreement
within the thirty (30) days of the execution of this
Agreement, which will be integrated and become part of this
Agreement.
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2.4 Term;
Termination; Severance .
(a) The Employment Period of this Agreement
shall be for a two-year term from the Commencement Date with a
one-year “evergreen” renewal unless either party
provides notice of its intent not to renew ninety (90) days
prior to renewal date. The Employment Period is subject to earlier
termination (i) by reason of Executive’s death or
Permanent Disability, (ii) by the Company at any time with or
without Cause, subject to the definition of Cause above and the
Severance provision set forth below, (iii) by Executive due to
a Change in Control or for Good Reason, subject to the definition
of Change in Control and Good Reason above and the Severance
provision set forth below, or (iv) upon Executive’s
resignation with 60-days’ advance notice to the Company
(which notice the Company may accept in its discretion by providing
regular pay and benefits in lieu of continued active employment)
without Good Reason.
(b) If the Employment Period is terminated
by the Board for Cause, or by reason of Executive’s death
with six months or less of employment or Permanent Disability, or
by Executive’s voluntary resignation without Good Reason and
not due to a Change in Control, or if the Employment Period expires
without renewal, the Executive shall be entitled to his Base Salary
and Benefits up to the date of termination or expiration, but shall
not be entitled to any further Base Salary or Benefits or any then
unpaid Bonus for that fiscal year, any prior year, or any future
year, or to any severance compensation of any kind, nature or
amount.
(c) If the Executive’s employment is
terminated as a result of his death after more than six months of
employment, in addition to any entitlements provided by law, the
Company shall pay or cause to be paid to Executive’s Estate
(i) unpaid Base Salary and Benefits up to the date of such
termination, and (ii) six (6) months of Executive’s
Base Salary. The Estate shall not be entitled to any further
Benefits or Bonus for that year or any future year, or to any other
severance compensation of any kind, nature or amount.
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(d) Subject to paragraph 2.4(e), if the
Employment Period is terminated by the Board 1) without Cause for a
reason other than Executive’s death or Permanent Disability
or 2) by Executive’s voluntary resignation for Good Reason or
within thirty (30) days following a Change in Control,
Executive shall be entitled to (i) unpaid Base Salary and
Benefits up to the date of such termination, (ii) payment of
coverage continuation costs for COBRA eligible benefits (medical,
dental, and executive medical reimbursement plan) for twelve
(12) months, (ii) six (6) months of
Executive’s Base Salary (payable in accordance with the terms
of Section 2.4(g) below), and (v) vesting in the long-term
equity and/or profit sharing plan on a 3-year straight line monthly
basis pro rata through the date of termination as specified in the
separate agreement to be entered into between the Company and
Executive pursuant to Section 2.3(e). Executive shall not be
entitled to any further Base Salary, Benefits or then unpaid Bonus
for that year, any prior year, or any future year, or to any
further severance compensation of any kind, nature or amount except
as herein provided.
(e) Executive agrees that Executive shall
be entitled to the payments provided for in Section 2.4(d) if and
only if Executive has not materially breached as of the date of
termination of the Employment Period the provisions of
Sections 2.5, 2.6 and 2.7 hereof and does not breach such
Sections at any time during the severance period, and the Company
will be relieved of any obligation to make such payments during any
portion of the severance period in which the Executive is in breach
of any such obligation; provided that the Company will resume
making such payments to Executive during the severance period at
such time as the Board determines in good faith that any such
breach has ceased or otherwise been cured and any damage to the
Company remedied. Furthermore, if said breaches are cured and the
damages to the Company have been remedied as set forth above in
this Section, any payments that were withheld during the breach
will be paid retroactively to the Executive.
(f) Any severance payments pursuant to
Section 2.4(c) and (d) shall be made in installments on
the payment dates on which Executive’s Base Salary would have
otherwise been paid if the Employment Period had continued (net of
any withholding taxes), and as of the date of the final such
payment none of the Company or any other member of the Company
Group shall have any further obligation to Executive pursuant to
this Section 2.4 except as provided by law.
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(g) Executive hereby agrees that no
severance compensation of any kind, nature or amount shall be
payable to Executive in connection with any termination of the
Employment Period, except as expressly set forth in this
Section 2.4, and Executive hereby irrevocably waives any claim
for any other severance compensation.
(h) Executive acknowledges and agrees that
notwithstanding anything to the contrary set forth above, no
severance payments or severance benefits shall be made to the
Executive by the Company under Section 2.4(d) unless, if so
requested by the Company, Executive executes, does not revoke, and
delivers to the Company, within 60 days following
Executive’s termination of employment, a general release in
form satisfactory to the Company pursuant to which Executive
releases and forever discharges the Company, its then or former
parents, subsidiaries and affiliates, their respective predecessors
and successors, and their respective officers, employees, agents,
and directors, from all claims or actions of any kind arising on or
before the date of termination. This general release and waiver
shall include, but not be limited to, all claims or actions arising
out of, or relating in any way to the Executive’s employment
with the Company, including any claim for compensation, or any
claim of discrimination under any state, federal or local law or
regulation, including under the Age Discrimination in Employment
Act of 1967, as amended, or any claim for wrongful termination,
breach of contract, breach of covenant of good faith and fair
dealing, negligence or intentional infliction of emotional
distress, misrepresentation or defamation. If Executive maintains,
or participates in any claim or action, in any court or agency,
based wholly or partially upon a claim or action Executive has
released or waived under this Agreement, Executive agrees to pay
all expenses and costs (including reasonable attorney’s fees)
incurred by the Company and those associated with the Company in
defense of such claim or action. This release shall not be
construed as a waiver of any rights executive has under any pension
or other benefit plan maintained by the Company for its employees
generally.
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2.5 Confidential Information . The
Executive acknowledges that he will have access to certain
confidential, non-public and proprietary information, which
includes, but is not limited to any information or knowledge
obtained by the Executive during the course of his employment
relating to ingredients, recipes, presentation of food, naming of
menu items, all current products of the Company, any future or
proposed products or services and any descriptions or features of
any of the foregoing, customer lists, customer files, personnel
files, computer records, financial and marketing data, process
descriptions, policies and procedures, research plans, training
materials and job aids, payroll, and any information pertaining to
business plans or methods of operation, past, present or future
(the “ Confidential Information ”), concerning
the Company and other members of the Company Group and their
respective officers, directors, shareholders, employees, agents and
representatives and agrees that: (i) unless pursuant to prior
written consent by the Board, the Executive shall not disclose any
Confidential Information except as minimally necessary and
appropriate and in the Company’s interest in the performance
of Executive’s duties or unless compelled by court order or
subpoena, in which case Executive shall (A) immediately notify
the Company of any such court order or subpoena in order to enable
the Company to contest such court order or subpoena, (B) fully
cooperate with any efforts by the Company to limit the extent of
such disclosure and (C) disclose only so much of such
confidential information as is necessary to comply with such court
order or subpoena; (ii) the Executive shall treat as
confidential all Confidential Information and shall take reasonable
precautions to prevent unauthorized access to or disclosure of the
Confidential Information; (iii) the Executive shall not use
the Confidential Information in any way detrimental to the Company
or any other member of the Company Group and shall use the
Confidential Information for the exclusive purpose of effecting his
duties of employment with the Company; and (iv) the Executive
agrees that the Confidential Information obtained during his
employment with the Company shall remain the exclusive property of
the Company and any other member of the Company Group, and the
Executive shall promptly return to the Company all material which
incorporates, or is derived from, all such Confidential Information
immediately following the date of termination. It is hereby agreed
that Confidential Information does not include information
generally available and known to the public or obtained from a
source not bound by a confidentiality agreement with any member of
the Company Group.
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2.6 Inventions and Patents . The
Executive hereby agrees that all inventions, innovations or
improvements (‘ Inventions ”) in each case
conceived or made by him either in the course of his employment
with the Company, through the use of Company equipment, supplies,
facilities, trade secrets, or time, relate at the time of
conception or reduction to practice to the Company’s business
or anticipated research or development, or resulting from any work
performed by Executive for the Company, belong to the Company and
such other member of the Company Group, and Executive hereby
assigns, transfers, and conveys all rights, title, and interest of
whatever kind and nature in such Inventions to the Company. The
Executive will promptly disclose such inventions, innovation or
improvements to the Board and perform all actions reasonably
requested by the Board to establish and confirm such ownership by
the applicable member of the Company Group. Inventions include any
innovation or improvement in the method of conducting the business
(including improvements, ideas and discoveries, whether patentable
or not) of the Company or any other member of the Company Group.
Executive is hereby notified that this Agreement does not apply to
an invention which qualifies fully under the provisions of
California Labor Code § 2870.
2.7
Noncompetition, Nonsolicitation, and Non-disparagement
.
(a) The Executive acknowledges that in the
course of his employment with the Company he will become familiar,
with the trade secrets and other Confidential Information of the
Company and other members of the Company
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