Exhibit 10.34
SEPARATION AGREEMENT
     This Agreement, dated December 1, 2008 for reference purposes only, effects
an agreeable separation of the employment relationship between Russell Owens
(“Owens”) and P.F. Chang’s China Bistro, Inc. (“PFC”), as well as a resolution
of any claims, known and unknown, now existing between Owens and PFC. The terms
of the Agreement are as follows:
     1. Termination of Employment Relationship. Through mutual agreement, the
employment relationship between the parties will terminate effective December 5,
2008.
     2. Consideration. In consideration for each of the terms of this Agreement,
          a. PFC will pay Owens a salary replacement, lump sum amount of
$800,000.00, less all applicable federal and state withholding and income taxes
(“Separation Payment”). The Separation Payment will be made by check, delivered
to Owens’ last-known home address within ten (10) business days after the
expiration of the revocation period set forth in Paragraph 12 below; and
          b. PFC will cause Owens all unvested portions of Owens’ equity awards
to become fully vested as of December 5, 2008, and will allow Owens to exercise
such stock options for a period of two (2) years from the effective date of this
Agreement.
          c. Owens acknowledges and agrees that the consideration outlined in
Paragraphs 2(a) and 2(b) constitutes adequate legal consideration for the
promises and representations made by him in this Separation Agreement, and
represents amounts to which he is not otherwise entitled. Owens further waives
any entitlement to any severance payment, separation payment, or any other
payment or benefit under any other agreement with PFC or Pei Wei Asian Diner,
Inc. (“PW”), whether written or oral. Owens also acknowledges that PFC and PW
have paid to him all amounts due related to his employment, including but not
limited to any bonuses, salary, or severance payments.
          d. Owens acknowledges that he will be exclusively liable for the
payment of all federal, state, and local taxes, if any, which may be due as a
result of the consideration received pursuant to this Agreement. In addition, if
PFC, PW, or any affiliated entity who made payment on their behalf is required
at any time to pay any taxes or other amounts, including without limitation
penalties or interest or reasonable attorneys’ fees, for failing to withhold
sufficient federal or state income or withholding taxes on the payment made to
Owens pursuant to this Agreement, or on account of Owens failing to pay taxes on
such payment, Owens agrees to indemnify PFC, PW, or any affiliated entity and
hold them harmless from any penalties, claims, lawsuits, attorneys’ fees, and
expenses.
     3. Complete Agreement. This Agreement sets forth the entire Agreement
between the parties, except that the non-competition, non-solicitation, and
confidentiality provisions outlined in Paragraphs 9, 10, 11, and 12 of Owens’
May 2008 employment agreement, attached to this Agreement as Exhibit A
(“Employment Agreement”) remain in full force and effect and are incorporated
herein by reference. Owens acknowledges that the consideration outlined in
Paragraph 2 of this Agreement is adequate legal consideration for his continuing

1

--------------------------------------------------------------------------------

 

obligations under Paragraphs 9, 10, 11, and 12 of the Employment Agreement. The
parties hereby terminate all other provisions of the Employment Agreement and
any other previous agreements, effective on December 5, 2008. This Agreement
supersedes all previous representations, negotiations, discussions, and
agreements, whether oral or written.
     4. Cooperation. Owens shall fully cooperate with PFC and PW in connection
with matters that legitimately require Owens’ assistance, including, without
limitation, lawsuits presently pending or hereafter brought against PFC or PW,
threatened claims, tax returns, tax or other audits, financial statements, and
other finance, operational, legal, and accounting matters. Such cooperation will
include, without limitation, providing information to PFC or PW when requested
and in a prompt and thorough manner, and testifying when reasonably determined
necessary by PFC, PW, or their legal counsel. PFC will reimburse Owens for his
reasonable out-of-pocket expenses incurred in connection with such cooperation
upon submission to PFC of appropriate receipts and vouchers.
     5. Release and Covenant Not To Sue. Owens agrees that he will not initiate
or cause to be initiated against PFC, PW, or their affiliates and subsidiaries,
or any of their current, past, or future agents, attorneys, servants, employees,
partners, owners, affiliated business entities, or any person or entity acting
by, through, under or in concert with them (collectively referred to as
“Released Parties”) any lawsuit, compliance review, action, grievance proceeding
or appeal, investigation or proceeding of any kind (collectively referred to as
“claims”), or participate in same, individually or as a representative or a
member of a class, under any contract (express or implied), law or regulation
(federal, state, or local), including but not limited to claims pertaining to or
in any way related to his employment with PFC or PW.
     Owens understands and acknowledges that this release forever bars him from
suing or otherwise asserting a claim against PFC, PW, or the other Released
Parties on the basis of any event, contract, or agreement occurring on or before
the effective date of this Agreement, whether the facts are now known or
unknown, and whether the legal theory upon which such claim might be based is
now known or unknown.
     6. Release of Damages. Owens agrees that pursuant to this Agreement, he
releases and forever discharges PFC, PW, and the other Released Parties from any
and all claims, demands, damages, causes of action, and any liability
whatsoever, including but not limited to claims on account of or in any manner
arising out of Owens’ employment or termination of employment with PFC or PW. By
way of example only, and without limiting this release, Owens releases PFC, PW,
and the other Released Parties from any cause of action, right, claim or
liability under the Age Discrimination in Employment Act, Title VII of the 1964
Civil Rights Act, as amended, the Fair Labor Standards Act, the United States
Constitution, and all state counterparts, and any other equal employment
opportunity law or statute, any common law claim including wrongful discharge,
implied or express contract, the covenant of good faith and fair dealing, or any
other claim in tort or contract arising under the law, including but not limited
to any claims arising under the Employment Agreement or any other prior
agreements between the parties.
     7. Provision for Unknown Claims. Owens warrants that he does not have any
claim, charge, or complaint, either formal or informal, pending against PFC, PW,
or any of the other Released Parties with or before any court, tribunal,
administrative agency, governmental agency, or other such body. Owens further
waives any right to monetary recovery should any administrative or governmental
agency pursue any released claim on his behalf.

2

--------------------------------------------------------------------------------

 

     8. Bar. Owens agrees that this Agreement may be pleaded as a complete bar
to any action or suit before any court, with respect to any claim under federal,
state or other law relating to his employment or termination of employment from
PFC or PW.
     9. Indemnification. Owens agrees to indemnify and hold harmless PFC, PW,
and the other Released Parties from and against any and all loss, costs, damages
or expenses, including without limitation, attorneys’ fees, arising out of a
breach of this Agreement or the fact that any representation made herein was
false when made.
     10. Confidentiality and Non-Disparagement.
          10.1 Owens agrees that he will keep both the existence and terms of
this Agreement completely confidential and will not disclose the contents of
this Agreement to anyone except his tax advisor, attorney and/or spouse, unless
required to do so by force of law. Owens further agrees that he will not
disparage PFC, PW, or any of their affiliated or related entities, employees, or
partners, in any way, including but not limited to making negative statements or
implications, in written or verbal form, to current or potential customers,
vendors, or employees of PFC, PW, or their affiliates. Any disclosure or breach
of this confidentiality and non-disparagement provision shall be deemed a
material breach of this Agreement.
          10.2 Owens agrees that he will not use, remove from PFC’s premises,
make unauthorized copies of or disclose any confidential or proprietary
information of PFC, PW, or any affiliated or related entities, including but not
limited to, their trade secrets, copyrighted information, customer lists, any
information encompassed in any research and development, reports, work in
progress, drawings, software, computer files or models, designs, plans,
proposals, marketing and sales programs, financial projections, and all concepts
or ideas, materials or information related to the business or sales of PFC, PW,
and any affiliated or related entities that has not previously been released to
the public by an authorized representative of those entities.
          10.3 Within five (5) days after the date of Owens’ execution hereof,
Owens shall return to PFC all PFC, PW, and the other Released Parties’ property,
including all confidential and proprietary information, as described in
paragraph 10.2 above, and all materials and documents containing trade secrets
and copyrighted materials, including all copies and excerpts of the same.
          10.4 In the event of a breach of this Section 10, Owens agrees to pay
PFC upon demand, without proof of actual damages, the sum total of all payments
made pursuant to this Agreement, and agrees to pay PFC’s attorneys’ fees and
costs incurred in any action brought to enforce the terms of, or establish a
breach of this Section 10.
     11. Denial of Liability. No provision of this Agreement shall be construed
as an admission by Owens, PFC or the Released Parties of improper conduct,
omissions, or liability.

3

--------------------------------------------------------------------------------

 

     12. Notice of Time for Reflection and Waiver. Owens acknowledges that this
Agreement constitutes written notice from PFC that he should consult with an
attorney before signing this Agreement, and he acknowledges that he has fully
discussed all aspects of this Agreement with his attorney to the extent he
desires to do so. Owens agrees that he has carefully read and fully understands
all of the provisions of this Agreement and that he is voluntarily entering into
this Agreement. Owens agrees that, as part of this Agreement, he has been
provided with consideration in addition to anything of value to which Owens is
already entitled. Owens acknowledges that he has been advised that, prior to
waiving any claims he may have under the Age Discrimination in Employment Act,
he may take up to twenty-one (21) calendar days to consider this Agreement
before signing, and he may revoke this Agreement within seven (7) calendar days
after he signs this Agreement. Owens agrees that if he wishes to revoke this
Agreement, he or his counsel will notify PFC in writing, addressed to P.F.
Chang’s China Bistro, Inc., 7676 E. Pinnacle Peak Road, Scottsdale, Arizona
85255, Attn: Nancy Mailhot, delivered on or before the expiration of the
revocation period. In the event this Agreement is signed prior to the expiration
of 21 calendar days, Owens acknowledges that he voluntarily and knowingly agrees
to waive his entitlement to take 21 days to consider this Agreement for the
purpose of expediting the settlement. This Agreement must be signed no later
than January 24, 2009.
     13. Effective Date. This Agreement is effective after full execution by all
parties on or before January 24, 2009, and expiration of the seven-day
revocation period outlined in Paragraph 12.
     14 Arbitration of Disputes. The parties agree to arbitrate any and all
disputes arising out of or relating to the enforcement of this Separation
Agreement, or for the breach hereof, or the interpretation hereof. The
arbitration will be conducted in Scottsdale, Arizona by a single neutral
arbitrator in accordance with the then current rules for resolution of
employment disputes of the American Arbitration Association (available on-line
at www.adr.org). The arbitrator shall have the power to enter any award that
could be entered by a judge of a trial court of the State of Arizona, and only
such power, and shall follow the law. The losing party will pay the cost of the
arbitration, as well as the other party’s attorneys’ fees.
     15. Choice of Law. This Agreement shall be construed, enforced, and
governed by the laws of the State of Arizona.
     16. Section 409A Compliance. It is intended that the payments and benefits
under this Agreement comply with, or as applicable, constitute a short-term
deferral or otherwise be exempt from, the provisions of Section 409A of the
Internal Revenue Code of 1986, as amended and the regulations and other guidance
promulgated thereunder (“Section 409A”). The Agreement will be administered and
interpreted in a manner consistent with this intent, and any provision that
would cause the Agreement to fail to satisfy Section 409A will have no force and
effect until amended to comply therewith (which amendment may be retroactive to
the extent permitted by Section 409A). Notwithstanding anything contained herein
to the contrary, to the extent required in order to avoid accelerated taxation
and/or tax penalties under Section 409A, Owens shall not be considered to have
terminated employment with the Company for purposes of this Agreement and no
payments shall be due to

4

--------------------------------------------------------------------------------

 

Owens under this Agreement providing for payment of amounts on termination of
employment unless Owens would be considered to have incurred a “separation from
service” from the Company within the meaning of Section 409A. To the extent
required in order to avoid accelerated taxation and/or tax penalties under
Section 409A, amounts that would otherwise be payable and benefits that would
otherwise be provided pursuant to this Agreement during the six-month period
immediately following Owens’s termination of employment shall instead be paid on
the first business day after the date that is six months following Owens’s
termination of employment (or upon Owens’s death, if earlier). In addition, for
purposes of this Agreement, each amount to be paid or benefit to be provided to
Owens pursuant to the Agreement, which constitute deferred compensation subject
to Section 409A, shall be construed as a separate identified payment for
purposes of Section 409A. With respect to any expenses eligible for
reimbursement under the terms of the Agreement, which constitute deferred
compensation subject to Section 409A, (i) the amount of such expenses eligible
for reimbursement in any taxable year shall not affect the expenses eligible for
reimbursement in another taxable year and (ii) any reimbursements of such
expenses shall be made within thirty (30) days following Owens’s submission of
such expense for reimbursement to the Company, but in any case no later than the
end of the calendar year following the calendar year in which the related
expenses were incurred; provided, however that with respect to any
reimbursements for any taxes to which Owens becomes entitled under this
Agreement, if any, the payment of such reimbursements shall be made by the
Company within thirty (30) days following a determination that a tax gross-up
payment is due, but in no later than the end of the calendar year following the
calendar year in which Owens remits the related taxes.
     17. Severability. Should any provision of this Agreement be declared or
determined by any Court to be illegal or invalid, the validity of the remaining
parts, terms or provisions shall not be affected thereby and said illegal or
invalid part, term or provision shall be deemed not to be a part of this
Agreement.
[SIGNATURES ON FOLLOWING PAGE]

5

--------------------------------------------------------------------------------

 

***WARNING DO NOT SIGN THIS AGREEMENT UNLESS YOU UNDERSTAND IT!
THIS AGREEMENT INCLUDES A WAIVER OF YOUR RIGHTS!***

         
DATE: December 10, 2008
            /s/ Russell Owens    

 
 
          Russell Owens    

     Subscribed and Sworn to before me by Russell Owens, known to me, on this 10
day of December, 2008.

         

 
 
          /s/ Anthony Summers    

 
          Notary Public
   

         

 
 
              

 
P.F. CHANG’S CHINA BISTRO, INC.
   

             
DATE: December 18, 2008
  By:             /s/ Robert Vivian    
 
     
 
          Robert Vivian, President    

6

--------------------------------------------------------------------------------

 

EXHIBIT A
AMENDED AND RESTATED
EXECUTIVE EMPLOYMENT AGREEMENT
     This Amended and Restated Executive Employment Agreement (“Agreement”) is
made, effective as of May 21, 2008 (“Effective Date”), by and between P.F.
Chang’s China Bistro, Inc. (“Company”) and Russell Owens (“Executive”).
RECITALS
     WHEREAS, Executive and Company are parties to that certain Executive
Employment Agreement dated August 6, 2002, as amended and restated effective
June 30, 2005 (the “Prior Employment Agreement”); and
     WHEREAS, Executive and Company desire to amend and restate in its entirety
the Prior Employment Agreement.
     NOW THEREFORE, the parties agree as follows:
     1. Employment. Company hereby agrees to continue Executive’s employment,
and Executive hereby accepts such employment, upon the terms and conditions set
forth herein.
     2. Duties.
          2.1 Position. Executive is employed as Executive Vice President of
Company and shall have the duties and responsibilities assigned by Company at
the present date and as may be reasonably assigned from time to time. Executive
shall perform faithfully and diligently all duties assigned to Executive.
Company reserves the right to modify Executive’s position and duties at any time
in its sole and absolute discretion, provided that the duties assigned are
consistent with the position of a senior executive and that Executive continues
to report directly to the Chief Executive Officer or the Board of Directors of
Company.
          2.2 Best Efforts/Full-time. Executive will expend Executive’s best
efforts on behalf of Company, and will abide by all policies and decisions made
by Company, as well as all applicable federal, state and local laws, regulations
or ordinances. Executive will act in the best interest of Company at all times.
Executive shall devote Executive’s full business time and efforts to the
performance of Executive’s assigned duties for Company, provided that Executive
may continue to serve on the boards of directors of other companies so long as
such service is in accordance with the Company’s policies governing such
activities.
          2.3 Work Location. Executive’s principal place of work shall be
located in Scottsdale, Arizona, or such other location as the parties may agree
upon from time to time.
     3. Term.
          3.1 Initial Term. The employment relationship pursuant to this
Agreement shall be for an initial term commencing on the Effective Date set
forth above and continuing for a period of three (3) years following such date
(“Initial Term”), unless sooner terminated in accordance with section 7 below.

 

--------------------------------------------------------------------------------

 

          3.2 Renewal. On completion of the Initial Term specified in
subsection 3.1 above, this Agreement will automatically renew for subsequent
one-year terms unless either party provides ninety (90) days’ advance written
notice to the other that Company/Executive does not wish to renew the Agreement
for a subsequent one-year term. In the event either party gives notice of
nonrenewal pursuant to this subsection 3.2, this Agreement will expire at the
end of the current term.
     4. Compensation.
          4.1 Base Salary. As compensation for Executive’s performance of
Executive’s duties hereunder, Company shall pay to Executive an initial Base
Salary of $442,000 per year, payable in accordance with the normal payroll
practices of Company, less required deductions for state and federal withholding
tax, social security and all other employment taxes and payroll deductions.
          4.2 Incentive Compensation. Executive will be eligible to receive
incentive compensation, the terms, amount and payment of which shall be
determined by Company in its sole and absolute discretion. A target bonus award
will be established on an annual basis for Executive as part of the annual
Officer Bonus Plan which is reviewed and approved by the Board of Directors.
          4.3 Performance and Salary Review. Company will periodically review
Executive’s performance on no less than an annual basis. Adjustments to salary
or other compensation, if any, will be made by Company in its sole and absolute
discretion.
     5. Customary Fringe Benefits. Executive will be eligible for all customary
and usual fringe benefits generally available to executives of Company subject
to the terms and conditions of Company’s benefit plan documents. Company
reserves the right to change or eliminate the fringe benefits on a prospective
basis, at any time, effective upon notice to Executive.
     6. Business Expenses. Executive will be reimbursed for all reasonable,
out-of-pocket business expenses incurred in the performance of Executive’s
duties on behalf of Company. To obtain reimbursement, expenses must be submitted
promptly with appropriate supporting documentation in accordance with Company’s
policies.
     7. Termination of Executive’s Employment.
          7.1 Termination for Cause by Company. Although Company anticipates a
mutually rewarding employment relationship with Executive, Company may terminate
Executive’s employment immediately at any time for Cause. For purposes of this
Agreement, “Cause” is defined as: (a) Executive’s theft, dishonesty, or
falsification of any Company documents or records; (b) Executive’s improper use
or disclosure of Company’s confidential or proprietary information; (c) any
action by Executive which has a detrimental effect on the Company’s reputation
or business; (d) Executive’s failure to perform any reasonable assigned duties
after written notice from Company of, and a reasonable opportunity to cure, such
failure; (e) any material breach by Executive of this Agreement, which breach is
not cured after written notice from Company of, and a reasonable opportunity to
cure such breach; or (f) Executive’s conviction (including any plea of guilty or
nolo contendere) of any criminal act which impairs Executive’s ability to
perform Executive’s duties with Company. In the event Executive’s employment is
terminated in accordance with this subsection 7.1, Executive shall be entitled
to receive only the Base Salary then in effect, prorated to the date of
termination. All other

-2-

--------------------------------------------------------------------------------

 

Company obligations to Executive pursuant to this Agreement will become
automatically terminated and completely extinguished. Executive will not be
entitled to receive the Severance Packages described in subsections 7.2(a) and
7.4(a) below.
          7.2 Termination Without Cause by Company/Severance. Company may
terminate Executive’s employment under this Agreement without Cause at any time
on thirty (30) days’ advance written notice to Executive. In the event of such
termination, Executive will receive the Base Salary prorated to the date of
termination and the Severance Package described in subsection 7.2(a) below,
provided Executive complies with all of the conditions described in subsection
7.2(b) below.
               (a) Severance Package. The Severance Package shall consist of the
following:
                    (i) a severance payment equal to: (a) the greater of one and
one-half (11/2) times Executive’s Base Salary then in effect on the date of
termination or the balance of Executive’s Base Salary due for the remainder of
the current term; plus (b) one and one-half (11/2) times the average cash bonus
paid to Executive for each of the years completed under the terms of this
Agreement, payable in a single lump sum within thirty (30) days following
Executive’s termination;
                    (ii) full vesting of all unvested portions of Executive’s
equity awards; and
                    (iii) continuation of group health insurance benefits on the
same terms as during Executive’s employment for the greater of (a) the remainder
of the current term, or (b) one and one-half (11/2) years (the “Continuation
Period”); provided Company’s insurance carrier allows for such benefits
continuation. In the event Company’s insurance carrier does not allow such
coverage continuation, Company agrees to pay the premiums required to continue
Executive’s group health care coverage for the Continuation Period, under the
applicable provisions of the Consolidated Omnibus Budget Reconciliation Act of
1985 (“COBRA”), provided that Executive elects to continue and remains eligible
for these benefits under COBRA, and does not obtain health coverage through
another employer during this period.
               (b) Conditions To Receive Severance Package. Executive will
receive the Severance Package described in subsection 7.2(a) above, provided
that Executive: (i) complies with all surviving provisions of this Agreement as
specified in subsection 14.8 below; (ii) executes and does not revoke a full
general release within the time period specified in such release, releasing all
claims, known or unknown, that Executive may have against Company arising out of
or any way related to Executive’s employment or termination of employment with
Company; and (iii) agrees to act as a consultant for Company, without further
compensation, for thirty (30) days following the termination of the employment
relationship, if requested to do so by Company. All other Company obligations to
Executive will be automatically terminated and completely extinguished.
          7.3 Voluntary Resignation by Executive. Executive may voluntarily
resign Executive’s position with Company at any time after the Initial Term, on
thirty (30) days’ advance written notice. In the event of such resignation,
Executive will be entitled to receive only the Base Salary for the thirty-day
notice period and no other amount for the remaining months of the subsequent
one-year term, if any. All other Company obligations to Executive

-3-

--------------------------------------------------------------------------------

 

pursuant to this Agreement will be automatically terminated and completely
extinguished. In addition, Executive will not be entitled to receive the
Severance Packages described in subsection 7.2(a) above or subsection 7.4(a)
below.
          7.4 Termination Upon A Change In Control. If Executive’s employment is
terminated by Company without Cause (as defined in subsection 7.1 above) or
Executive resigns for Good Reason (as defined in subsection 7.4(c) below) within
twenty-four (24) months after a Change in Control (as defined in subsection
7.4(d) below), Executive shall be entitled to receive the Severance Package
described in subsection 7.4(a) below, in lieu of the Severance Package described
in subsection 7.2(a) above, provided Executive complies with all of the
conditions described in subsection 7.2(b) above.
               (a) Severance Package: The Severance Package will consist of the
following:
                    (i) a severance payment payable in one lump sum within
thirty (30) days following the date of Executive’s termination of employment and
equal to: (a) the greater of two (2) times Executive’s Base Salary then in
effect on the date of termination or the balance of Executive’s Base Salary due
for the remainder of the current term (in each case, Base Salary shall be
determined without regard to any reduction thereof which would constitute “Good
Reason” as defined in Section 7.4(c)), plus (b) the greater of two (2) times
(i) the average cash bonus paid to Executive for each of the years completed
under the terms of this Agreement or (ii) Executive’s annual bonus target;
                    (ii) full vesting of all unvested portions of Executive’s
equity awards and the ability to exercise stock options for a period of three
(3) years from the date of termination of employment; provided that such
extension does not cause the option exercise period to be extended beyond the
expiration of the option term; and
                    (iii) continuation of group health insurance benefits on the
same terms as during Executive’s employment for the greater of (a) the remainder
of the current term, or (b) two (2) years (the “Continuation Period”); provided
Company’s insurance carrier allows for such benefits continuation. In the event
Company’s insurance carrier does not allow such coverage continuation, Company
agrees to pay the premiums required to continue Executive’s group health care
coverage for the Continuation Period, under the applicable provisions of the
Consolidated Omnibus Budget Reconciliation Act of 1985 (“COBRA”), provided that
Executive elects to continue and remains eligible for these benefits under
COBRA, and does not obtain health coverage through another employer during this
period.
               (b) 280G. If, due to the benefits provided under
subsection 7.4(a) above, Executive is subject to any excise tax due to
characterization of any amounts payable under subsection 7.4(a) as excess
parachute payments pursuant to Section 4999 of the Internal Revenue Code of
1986, as amended (the “Code”), Company shall pay to Executive an additional
payment (the “Tax Gross-Up Payment”) equal to the amount of such Section 280G
excise tax payable by Executive. The Tax Gross-Up Payment will be made to
Executive by December 31 following the Executive’s taxable year in which
Executive remits the related taxes.
               (c) Good Reason. “Good Reason” shall mean any one or more of the
following without Executive’s written consent: (i) the assignment to Executive
of any duties, or any limitation of Executive’s responsibilities, substantially
inconsistent with the Executive’s positions, duties, responsibilities and status
with Company immediately prior to the date of the

-4-

--------------------------------------------------------------------------------

 

Change in Control; (ii) the relocation of the principal place of Executive’s
service to a location that is more than fifty (50) miles from Executive’s
principal place of service immediately prior to the date of the Change in
Control, or the imposition of travel requirements substantially more demanding
of Executive than such travel requirements existing immediately prior to the
date of the Change in Control; or (iii) any material failure by Company to pay,
or any material reduction by Company of, Executive’s base compensation in effect
immediately prior to the date of the Change in Control. Good Reason shall not
exist unless Executive notifies Company in writing of the existence of the
applicable condition specified above not later than ninety (90) days after the
initial existence of the condition, and Company fails to remedy such condition
within thirty (30) days after receipt of such notice.
               (d) Change of Control. A Change of Control is defined as any one
of the following occurrences:
                    (i) Any “person” (as such term is used in Sections 13(d) and
14(d) of the Securities Exchange Act of 1934 (the “Exchange Act”)), other than a
trustee or other fiduciary holding securities of Company under an employee
benefit plan of Company, becomes the “beneficial owner” (as defined in
Rule 13d-3 promulgated under the Exchange Act), directly or indirectly, of the
securities of Company representing more than 50% of (A) the outstanding shares
of common stock of Company or (B) the combined voting power of the Company’s
then-outstanding securities;
                    (ii) the sale or disposition of all or substantially all of
Company’s assets (or any transaction having similar effect is consummated); or
                    (iii) Company is party to a merger or consolidation that
results in the holders of voting securities of Company outstanding immediately
prior thereto failing to continue to represent (either by remaining outstanding
or by being converted into voting securities of the surviving entity) more than
50% of the combined voting power of the voting securities of Company or such
surviving entity outstanding immediately after such merger or consolidation.
          7.5 Termination of Employment Upon Nonrenewal. In the event either
party decides not to renew this Agreement for a subsequent one-year term in
accordance with subsection 3.2 above, this Agreement will expire, Executive’s
employment with Company will terminate and Executive will only be entitled to
Executive’s Base Salary paid through the last day of the current term. All other
Company obligations to Executive pursuant to this Agreement will be
automatically terminated and completely extinguished. In addition, Executive
will not be entitled to the Severance Packages described in subsections 7.2(a)
and 7.4(a) above.
     8. No Conflict of Interest. During the term of Executive’s employment with
Company, Executive must not engage in any work, paid or unpaid, that creates an
actual or potential conflict of interest with Company. Such work shall include,
but is not limited to, directly or indirectly competing with Company in any way,
or acting as an officer, director, employee, consultant, stockholder, volunteer,
lender, or agent of any business enterprise of the same nature as, or which is
in direct competition with, the business in which Company is now engaged or in
which Company becomes engaged during the term of Executive’s employment with
Company, as may be determined by the Company in its sole discretion. If Company
believes such a conflict exists during the term of this Agreement, Company may
ask Executive to choose to discontinue the other work or resign employment with
Company. In addition, Executive agrees not to refer any client or potential
client of Company to competitors of Company, without obtaining Company’s prior
written consent, during the term of Executive’s employment.

-5-

--------------------------------------------------------------------------------

 

     9. Post-Termination Non-Competition.
          9.1 Consideration For Promise To Refrain From Competing. Executive
agrees that Executive’s services are special and unique, that Company’s
disclosure of confidential, proprietary information and specialized training and
knowledge to Executive, and that Executive’s level of compensation and benefits
and post-termination severance, as applicable, are partly in consideration of
and conditioned upon Executive not competing with Company. Executive
acknowledges that such consideration for Executive’s services under this
Agreement is adequate consideration for Executive’s promises contained within
this section 9.
          9.2 Promise To Refrain From Competing. Executive understands Company’s
need for Executive’s promise not to compete with Company is based on the
following: (a) Company has expended, and will continue to expend, substantial
time, money and effort in developing its proprietary information; (b) Executive
will in the course of Executive’s employment develop, be personally entrusted
with and exposed to such proprietary information; (c) both during and after the
term of Executive’s employment, Company will be engaged in the highly
competitive casual dining industry; (d) Company provides services nationally and
may provide services internationally in the future; and (e) Company will suffer
great loss and irreparable harm if Executive were to enter into competition with
Company. Therefore, in exchange for the consideration described in subsection
9.1 above, Executive agrees that for the period equal to the greater of the
remainder of the current term under this Agreement or one (1) year following the
date Executive ceases to render services to Company (the “Covenant Period”),
Executive will not either directly or indirectly, whether as a owner, director,
officer, manager, consultant, agent or employee: (i) work for a competitor,
which is defined to include any company in the business of preparation and
distribution of Chinese food or other Asian food concepts existing during the
Covenant Period, within a one hundred (100) mile radius of any P.F. Chang’s
China Bistro or Pei Wei Asian Diner or any planned location of such restaurants
(“Restricted Business”); or (ii) make or hold any investment in any Restricted
Business in the United States, whether such investment be by way of loan,
purchase of stock or otherwise, provided that there shall be excluded from the
foregoing the ownership of not more than 5% of the listed or traded stock of any
publicly held corporation. For purposes of this section 9, the term “Company”
shall mean and include Company, any subsidiary or affiliate of Company, any
successor to the business of Company (by merger, consolidation, sale of assets
or stock or otherwise) and any other corporation or entity of which Executive
may serve as a director, officer or employee at the request of Company or any
successor of Company.
          9.3 Reasonableness of Restrictions. Executive represents and agrees
that the restrictions on competition, as to time, geographic area, and scope of
activity, required by this section 9 are reasonable, do not impose a greater
restraint than is necessary to protect the goodwill and business interests of
Company, and are not unduly burdensome to Executive. Executive expressly
acknowledges that Company competes on a nationwide basis and that the
geographical scope of these limitations is reasonable and necessary for the
protection of Company’s trade secrets and other confidential and proprietary
information. Executive further agrees that these restrictions allow Executive an
adequate number and variety of employment alternatives, based on Executive’s
varied skills and abilities. Executive represents that Executive is willing and
able to compete in other employment not prohibited by this Agreement.

-6-

--------------------------------------------------------------------------------

 

          9.4 Reformation if Necessary. In the event a court of competent
jurisdiction determines that the geographic area, duration, or scope of activity
of any restriction under this section 9 and its subsections is unenforceable,
the restrictions under this section and its subsections shall not be terminated
but shall be reformed and modified to the extent required to render them valid
and enforceable. Executive further agrees that the court may reform this
Agreement to extend the one-year period of this covenant not to compete by an
amount of time equal to any period in which Executive is in breach of this
covenant.
     10. Confidentiality and Proprietary Rights. Executive agrees to read, sign
and abide by Company’s Employee Innovations and Proprietary Rights Assignment
Agreement, which is provided with this Agreement and incorporated herein by
reference.
     11. Nonsolicitation.
          11.1 Nonsolicitation of Customers or Prospects. Executive acknowledges
that information about Company’s customers is confidential and constitutes trade
secrets. Accordingly, Executive agrees that during the Covenant Period Executive
will not, either directly or indirectly, separately or in association with
others, interfere with, impair, disrupt or damage Company’s relationship with
any of its customers or customer prospects by soliciting or encouraging others
to solicit any of them for the purpose of diverting or taking away business from
Company.
          11.2 Nonsolicitation of Company’s Employees. Executive agrees that
during the Covenant Period, Executive will not, either directly or indirectly,
separately or in association with others, interfere with, impair, disrupt or
damage Company’s business by soliciting, encouraging or attempting to hire any
of Company’s employees or causing others to solicit or encourage any of
Company’s employees to discontinue their employment with Company.
     12. Injunctive Relief. Executive acknowledges that Executive’s breach of
the covenants contained in sections 9-11 (collectively “Covenants”) would cause
irreparable injury to Company and agrees that in the event of any such breach,
Company shall be entitled to seek temporary, preliminary and permanent
injunctive relief without the necessity of proving actual damages or posting any
bond or other security.
     13. Agreement to Arbitrate. To the fullest extent permitted by law,
Executive and Company agree to arbitrate any controversy, claim or dispute
between them arising out of or in any way related to this Agreement, the
employment relationship between Company and Executive and any disputes upon
termination of employment, including but not limited to breach of contract,
tort, discrimination, harassment, wrongful termination, demotion, discipline,
failure to accommodate, family and medical leave, compensation or benefits
claims, constitutional claims; and any claims for violation of any local, state
or federal law, statute, regulation or ordinance or common law. Claims for
injunctive relief pursuant to section 12 above are excluded. For the purpose of
this agreement to arbitrate, references to “Company” include all parent,
subsidiary or related entities and their employees, supervisors, officers,
directors, agents, pension or benefit plans, pension or benefit plan sponsors,
fiduciaries, administrators, affiliates and all successors and assigns of any of
them, and this agreement shall apply to them to the extent Executive’s claims
arise out of or relate to their actions on behalf of Company.
          13.1 Consideration. The mutual promise by Company and Executive to
arbitrate any and all disputes between them (except for those referenced above)
rather than litigate them before the courts or other bodies, provides the
consideration for this agreement to arbitrate.

-7-

--------------------------------------------------------------------------------

 

          13.2 Initiation of Arbitration. Either party may exercise the right to
arbitrate by providing the other party with written notice of any and all claims
forming the basis of such right in sufficient detail to inform the other party
of the substance of such claims. In no event shall the request for arbitration
be made after the date when institution of legal or equitable proceedings based
on such claims would be barred by the applicable statute of limitations.
          13.3 Arbitration Procedure. The arbitration will be conducted in
Phoenix, Arizona by a single neutral arbitrator and in accordance with the then
current rules for resolution of employment disputes of the American Arbitration
Association (“AAA”). The parties are entitled to representation by an attorney
or other representative of their choosing. The arbitrator shall have the power
to enter any award that could be entered by a judge of the trial court of the
State of Arizona, and only such power, and shall follow the law. The parties
agree to abide by and perform any award rendered by the arbitrator. The
arbitrator shall issue the award in writing and therein state the essential
findings and conclusions on which the award is based. Judgment on the award may
be entered in any court having jurisdiction thereof.
          13.4 Costs of Arbitration. Company shall bear the costs of the
arbitration filing and hearing fees and the cost of the arbitrator.
     14. General Provisions.
          14.1 Successors and Assigns. The rights and obligations of Company
under this Agreement shall inure to the benefit of and shall be binding upon the
successors and assigns of Company. Executive shall not be entitled to assign any
of Executive’s rights or obligations under this Agreement.
          14.2 Waiver. Either party’s failure to enforce any provision of this
Agreement shall not in any way be construed as a waiver of any such provision,
or prevent that party thereafter from enforcing each and every other provision
of this Agreement.
          14.3 Attorneys’ Fees. Each side will bear its own attorneys’ fees in
any dispute unless a statutory section at issue, if any, authorizes the award of
attorneys’ fees to the prevailing party.
          14.4 Severability. In the event any provision of this Agreement is
found to be unenforceable by an arbitrator or court of competent jurisdiction,
such provision shall be deemed modified to the extent necessary to allow
enforceability of the provision as so limited, it being intended that the
parties shall receive the benefit contemplated herein to the fullest extent
permitted by law. If a deemed modification is not satisfactory in the judgment
of such arbitrator or court, the unenforceable provision shall be deemed
deleted, and the validity and enforceability of the remaining provisions shall
not be affected thereby.
          14.5 Interpretation; Construction. The headings set forth in this
Agreement are for convenience only and shall not be used in interpreting this
Agreement. This Agreement has been drafted by legal counsel representing
Company, but Executive has participated in the negotiation of its terms.
Furthermore, Executive acknowledges that Executive has had an opportunity to
review and revise the Agreement and have it reviewed by legal counsel, if
desired, and, therefore, the normal rule of construction to the effect that any
ambiguities are to be resolved against the drafting party shall not be employed
in the interpretation of this Agreement.

-8-

--------------------------------------------------------------------------------

 

          14.6 Governing Law. This Agreement will be governed by and construed
in accordance with the laws of the United States and the State of Arizona. Each
party consents to the jurisdiction and venue of the state or federal courts in
Phoenix, Arizona, if applicable, in any action, suit, or proceeding arising out
of or relating to this Agreement.
          14.7 Notices. Any notice required or permitted by this Agreement shall
be in writing and shall be delivered as follows with notice deemed given as
indicated: (a) by personal delivery when delivered personally; (b) by overnight
courier upon written verification of receipt; (c) by telecopy or facsimile
transmission upon acknowledgment of receipt of electronic transmission; or
(d) by certified or registered mail, return receipt requested, upon verification
of receipt. Notice shall be sent to the addresses set forth below, or such other
address as either party may specify in writing.
          14.8 Survival. Sections 9 (“Post-Termination Non-Competition”), 10
(“Confidentiality and Proprietary Rights”), 11 (“Nonsolicitation”), 12
(“Injunctive Relief”), 13 (“Agreement to Arbitrate”), 14 (“General Provisions”)
and 16 (“Entire Agreement”) of this Agreement shall survive Executive’s
employment by Company.
     15. Code Section 409A Compliance.
          15.1 This Agreement is intended to comply with, or otherwise be exempt
from, Section 409A of the Code and any regulations and Treasury guidance
promulgated thereunder.
          15.2 Company and Executive agree that they will execute any and all
amendments to this Agreement as they mutually agree in good faith may be
necessary to ensure compliance with the provisions of Section 409A of the Code.
          15.3 The preceding provisions, however, shall not be construed as a
guarantee by Company of any particular tax effect to Executive under this
Agreement. Company shall not be liable to Executive for any payment made under
this Agreement, at the direction or with the consent of Participant, which is
determined to result in an additional tax, penalty or interest under Section
409A of the Code, nor for reporting in good faith any payment made under this
Agreement as an amount includible in gross income under Section 409A of the
Code.
          15.4 For purposes of Section 409A of the Code, the right to a series
of installment payments under this Agreement shall be treated as a right to a
series of separate payments.
          15.5 With respect to any reimbursement of expenses or any provision of
in-kind benefits to Executive specified under this Agreement, such reimbursement
of expenses or provision of in-kind benefits shall be subject to the following
conditions: (1) the expenses eligible for reimbursement or the amount of in-kind
benefits provided in one taxable year shall not affect the expenses eligible for
reimbursement or the amount of in-kind benefits provided in any other taxable
year, except for any medical reimbursement arrangements providing for the
reimbursement of expenses referred to in Section 105(b) of the Code; (2) the
reimbursement of an eligible expense shall be made no later than the end of the
year in which such expense was incurred; and (3) the right to reimbursement or
in-kind benefits shall not be subject to liquidation or exchange for another
benefit.

-9-

--------------------------------------------------------------------------------

 

          15.6 For purposes of Section 409A of the Code, the date as of which
Company and Executive reasonably anticipate that no further services would be
performed by Executive shall be construed as the date that Executive first
incurs a “separation from service” as defined under Section 409A of the Code.
          15.7 Notwithstanding anything in this Agreement to the contrary, if a
payment obligation arises on account of Executive’s separation from service
while Executive is a “specified employee” as described in Section 409A of the
Code and the Treasury Regulations thereunder and as determined by the Company in
accordance with its procedures, by which determination Executive is bound, any
payment of “deferred compensation” (as defined under Treasury
Regulation Section 1.409A-1(b)(1), after giving effect to the exemptions in
Treasury Regulation Sections 1.409A-1(b)(3) through (b)(12)) shall be made on
the first business day of the seventh month following the date of Executive’s
separation from service, or, if earlier, within fifteen (15) days after the
appointment of the personal representative or executor of Executive’s estate
following his death.
     16. Entire Agreement. This Agreement, including the Company Employee
Innovations and Proprietary Rights Assignment Agreement incorporated herein by
reference and any documents related to Executive’s equity awards, constitutes
the entire agreement between the parties relating to this subject matter and
supersedes all prior or simultaneous representations, discussions, negotiations,
and agreements, whether written or oral. This Agreement may be amended or
modified only with the written consent of Executive and the Chief Executive
Officer of Company. No oral waiver, amendment or modification will be effective
under any circumstances whatsoever.

-10-

--------------------------------------------------------------------------------

 

THE PARTIES TO THIS AGREEMENT HAVE READ THE FOREGOING AGREEMENT AND FULLY
UNDERSTAND EACH AND EVERY PROVISION CONTAINED HEREIN. WHEREFORE, THE PARTIES
HAVE EXECUTED THIS AGREEMENT ON THE DATES SHOWN BELOW.

            RUSSELL OWENS
    Dated: May 21, 2008  /s/ RUSSELL OWENS       7676 East Pinnacle Peak Road   
  Scottsdale, AZ 85255        P.F. CHANG’S CHINA BISTRO, INC.
    Dated: May 21, 2008  By:   /s/ RICHARD L. FEDERICO         Richard L.
Federico        Chief Executive Officer
7676 East Pinnacle Peak Road
Scottsdale, AZ 85255     

-11-