Document:

Exhibit 10.13

 

EXECUTION COPY

 

AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT

 

THIS AMENDED AND RESTATED MANAGEMENT SERVICES AGREEMENT (this “Agreement”), effective as of January 1, 2015 (the “Effective Date”), is made and entered into by and between USHG, LLC, a New York limited liability company (f/k/a Union Square Hospitality Group, LLC) (the “Service Provider”), and SSE Holdings, LLC, a Delaware limited liability company and a subsidiary of the Service Provider (the “Company” and, together with the Service Provider, the “Parties”, and each, individually, a “Party”).

 

RECITALS

 

WHEREAS, the Company is in the hospitality and retail food service operation business (such operations, the “Operations”);

 

WHEREAS, the Service Provider is experienced in the management of hospitality and retail food service operations;

 

WHEREAS, the Service Provider has provided management services to the Company pursuant to a Management Services Agreement, dated as of October 16, 2009 (the “Original Agreement”);

 

WHEREAS, the Parties hereby desire to amend the scope of services that the Service Provider will provide the Company in connection with the Operations (such services, as more fully set forth on Schedule A hereto, the “Services”);

 

WHEREAS, the Company wishes to obtain the benefits of the Services from the Service Provider and desires to retain the Service Provider to provide the Services to the Company in the manner and on the terms hereinafter set forth.

 

AGREEMENT

 

NOW, THEREFORE, in consideration of the premises and the mutual covenants of the Parties and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the undersigned Parties agree as follows.

 

1.                                      Services. Subject to the provisions of this Agreement, the Service Provider, through its officers, directors, employees, affiliates (other than the Company and its subsidiaries) and other designated representatives or agents (collectively, its “Representatives”), shall provide to the Company and any of its subsidiaries as the Company may designate to the Service Provider from time to time (collectively, the “Advisees”) the types of Services to the Company and its subsidiaries to the extent reasonably requested by the Company as set forth on Schedule A.  In its performance of the Services, the Service Provider shall exercise reasonable care and skill in performing the Services, using at least the care and skill, and with similar knowledge and expertise, as it exercises in performing similar services for itself.

 

2.                                      No Fees.  There shall be no fee payable by the Company to the Service Provider in connection with the delivery of the Services.

 

 

3.                                      Term.

 

(a)                                 This Agreement shall be effective, and the term of this Agreement (the “Term”) shall commence, as of the Effective Date and shall continue until the earlier of (i) December 31, 2019 and (ii) the date that this Agreement is terminated by mutual written consent of the Parties; provided, that this Agreement shall automatically renew for successive one (1)-year periods unless either Party provides the other with notice of its desire not to renew no later than sixty (60) days prior to the expiration of the initial Term or any renewal period.

 

(b)                                 Survival.  Notwithstanding any other provision hereof, Sections 4 through 16 hereof shall survive any termination of this Agreement.

 

4.                                      Decisions/Authority of Service Provider.

 

(a)                                 Limitation on Service Provider’s Liability. The Company reserves the right to make all decisions with regard to any matter upon which the Service Provider has rendered its advice and consultation, and, subject to Section 5 hereof, there shall be no liability to the Service Provider with regard to any matter upon which the Service Provider has rendered its advice and consultation.

 

(b)                                 Independent Contractor. The Service Provider (and, as applicable, its Representatives) shall act solely as an independent contractor and the Service Provider shall have complete charge of its personnel engaged in the performance of the Services or any other advice or services contemplated by this Agreement.  As an independent contractor, the Service Provider (and any applicable Representative) shall have authority only to act as an advisor to the Company and the other Advisees and shall have no authority to enter into any agreement or to make any representation, commitment or warranty binding upon any of the Company or any of the other Advisees or to obtain or incur any right, obligation or liability on behalf of any of the Company or any of the other Advisees.  Nothing contained in this Agreement shall cause the Service Provider, any of its Representatives or any of their respective partners or members or any of their respective affiliates, investment managers, investment advisors or partners to be deemed a partner of or joint venture with the Company or any of the other Advisees.

 

5.                                      Limitations on the Services of the Service Provider.  The Services of the Service Provider to the Company are not exclusive, and the Service Provider may engage in any other business or render similar or different services to other businesses, so long as its services to the Company hereunder are not impaired thereby.  Nothing in this Agreement shall limit or restrict the right of any manager, partner, officer or employee of the Service Provider to engage in any other business or to devote his or her time and attention in part to any other business, whether of a similar or dissimilar nature, or to receive any fees or compensation in connection therewith.  It is understood that directors, officers, employees and holders of the Company’s limited liability company interests are or may become interested in the Service Provider and its affiliates, as directors, officers, employees, partners, unit holders, members, managers or otherwise, and that the Service Provider and directors, officers, employees, partners, unit holders, members and managers and affiliates of the Service Provider are or may become similarly interested in the Company as unit holders or otherwise.

 

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6.                                      Conflict of Interest.  The Company and the Service Provider hereby agree and acknowledge that the Service Provider shall manage, sponsor and invest in other entities and some of the directors and officers of the Company also serve as directors and officers of such other entities.  This may create actual or perceived conflicts of interest. For example, certain assets appropriate for the Company may also be appropriate for one or more of these other entities, and the Service Provider may decide to make a particular purchase through another entity than through the Company.  The Service Provider shall make asset purchase and sale decisions for the Company at the same time as asset purchase and sale decisions are being made for other affiliated entities for which the Service Provider provides management or advisory services, which could lead to conflicts of interest. The Service Provider may also engage in business opportunities in the future that may compete with the Company for business opportunities.  The Service Provider may sponsor, control or manage entities that pursue, or may themselves pursue, the same types of business opportunities as are targeted by the Company.  Nothing herein shall prevent the Service Provider or any officers or employees of any of the foregoing entities from engaging in other businesses or from rendering services of any kind to any other person or entity, including investments in, or advisory services provided to others investing in, any type of asset, including assets which may meet the principal business objectives of the Company.

 

7.                                      Confidentiality.  The parties hereto agree that each shall treat confidentially all information provided by each party to the other regarding its business and operations.  All confidential information provided by a party hereto shall be used by the other party hereto solely for the purpose of rendering services pursuant to this Agreement.  Except as may be required in carrying out this Agreement, all such confidential information shall not be disclosed to any third party without the prior consent of the providing party.  The foregoing limitation shall not apply to any information that is publicly available when provided or thereafter becomes publicly available other than through a breach of this Agreement, or that is required to be disclosed by any regulatory authority, by judicial or administrative process or otherwise by applicable law or regulation.

 

8.                                      Indemnification; Limitation of Liability.

 

(a)                                 Indemnification/Reimbursement of Expenses. The Company shall (i) indemnify the Service Provider, its Representatives and their respective affiliates, partners, members, directors, officers, employees, agents and controlling persons (each an “Indemnified Party” and collectively, the “Indemnified Parties”), to the fullest extent permitted by law, from and against any and all losses, claims, damages and liabilities, joint or several, to which any Indemnified Party may become subject, caused by, related to or arising out of the Services or any other advice or services contemplated by this Agreement or the engagement of the Service Provider pursuant to, and the performance by any Indemnified Parties of the Services or any other advice or services contemplated by, this Agreement, except to the extent arising from the gross negligence of such Indemnified Party and (ii) promptly reimburse each Indemnified Party for all costs and expenses (including reasonable and documented attorneys’ fees and expenses), as incurred, in connection with the investigation of, preparation for or defense of any pending or threatened claim or any action or proceeding arising therefrom, whether or not such Indemnified Party is a party and whether or not such claim, action or proceeding is initiated or brought by or

 

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on behalf of the Company or any of its subsidiaries and whether or not resulting in any liability. An Indemnified Party shall notify the Company in writing within twenty (20) days of becoming aware of any losses, claims, damages or liabilities with respect to which indemnification is sought under this Section 8; provided, that failure to provide such notification shall not excuse the Company’s obligations under this Section 8, except to the extent the Company proves that it is actually and materially prejudiced thereby. No Indemnified Party shall effect the settlement or compromise of, or consent to the entry of any judgment with respect to, any pending or threatened claims for which indemnification or contribution is sought from the Company under this Section 8 without the written consent of the Company, which shall not be unreasonably withheld, conditioned or delayed.

 

(b)                                 Limited Liability. The Company agrees that no Indemnified Party shall have any liability (whether direct or indirect, in contract, tort or otherwise) to the Company or any of its subsidiaries or any of their respective holders of their securities or their creditors relating to or arising out of the engagement of the Service Provider pursuant to, or the performance by any Indemnified Party of the Services or any other advice or services contemplated by, this Agreement, except to the extent that any loss, claims, damage, liability, cost or expense is found in a non-appealable judgment by a court of competent jurisdiction to have resulted from such Indemnified Party’s gross negligence.

 

9.                                      Notices. All notices, requests or other communications required or permitted hereunder shall be given in writing by hand delivery, overnight courier, registered mail, email, certified mail or other recorded delivery, return receipt requested, postage prepaid, to the Party to receive the same at its respective address set forth below, or at such other address as may from time to time be designated by such Party to the other in accordance with this Section 6:

 

	
If to the Service Provider, to:
    	
USHG,   LLC
    
	
 
    	
24 Union Square East
    
	
 
    	
6th Floor
    
	
 
    	
New York, NY 10003
    
	
 
    	
Attention: General Counsel
    
	
 
    	
 
    
	
If to the Company, to:
    	
SSE   Holdings, LLC
    
	
 
    	
24 Union Square East
    
	
 
    	
5th Floor
    
	
 
    	
Attention: Ronald Palmese, Jr., General   Counsel
    
	
 
    	
Email: rpalmese@ushgnyc.com
    

 

All such notices and communications hereunder shall be deemed given when received, as evidenced by the acknowledgment of receipt issued with respect thereto by the applicable postal authorities or the signed acknowledgment of receipt of the person to whom such notice or communication shall have been addressed.

 

10.                               Assignment.  The rights and obligations of each of the Parties shall not be assigned without the prior written consent of the other Parties.  This Agreement shall be binding upon and shall inure to the benefit of the Parties and their respective successors and permitted assigns.

 

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11.                               Amendments.  This Agreement, and the provisions hereof, may be altered, amended, modified or superseded only in a writing executed by all of the Parties.

 

12.                               Enforcement, Waiver.  No waiver of or failure to exercise any option, right or privilege under the terms of this Agreement by any of the Parties on any occasion or occasions shall be construed to be a further or continuing waiver of any such option, right or privilege or as waiver of any other option, right or privilege on any other occasion.

 

13.                               Entire Agreement.  This Agreement shall constitute the entire agreement among the Parties with respect to the subject matter and supersedes all previous agreements among the Parties relating to the subject matter hereof.

 

14.                               No Third-Party Beneficiaries.  This Agreement is for the benefit of the Parties and shall not create any third party beneficiary rights.

 

15.                               Severability.  Whenever possible, each provision of this Agreement shall be interpreted in such manner as to be effective and valid under applicable law, but if any provision of this Agreement is held to be invalid, illegal or unenforceable in any respect under any applicable law in any jurisdiction by any governmental authority, (i) such invalidity, illegality or unenforceability shall not affect the validity, legality or enforceability of any provision in any other jurisdiction, (ii) such provision shall be invalid, illegal or unenforceable only to the extent of such prohibition or invalidity, (iii) the Parties shall endeavor in good faith to exercise or modify such provision so that such provision shall be valid, legal and enforceable as originally intended to the greatest extent possible and (iv) to the extent such covenant or provision is deemed by any court or arbitrator to be illegal, invalid or unenforceable, the Parties agree that such court or arbitrator shall modify such covenant or provision so that such covenant or provision shall be valid, legal and enforceable as originally intended to the greatest extent possible.

 

16.                               Counterparts.  This Agreement may be executed in one or more counterparts each of which shall be deemed an original instrument, but all of which together shall constitute but one and the same Agreement.

 

17.                               Governing Law; No Jury Trial.  This Agreement shall be construed, performed and enforced in accordance with, and governed by, the laws of the State of New York applicable to contracts entered into and to be performed entirely within such state without regard to conflicts-of-laws principles that would require the application of any other law.  TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH PARTY HEREBY IRREVOCABLY WAIVES ALL RIGHT OF TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM, ARISING OUT OF OR IN CONNECTION WITH THIS AGREEMENT OR ANY MATTER ARISING HEREUNDER.

 

18.                               Construction and Interpretation.  This Agreement shall not be construed for or against either Party by reason of the authorship or alleged authorship of any provision hereof or by reason of the status of the respective parties.  This Agreement shall be construed reasonably to carry out its intent without presumption against or in favor of any Party.  The natural persons executing this Agreement on behalf of each Party have the full right, power and authority to do

 

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and affirm the foregoing warranty on behalf of each Party and on their own behalf.  The captions on sections are provided for purposes of convenience and are not intended to limit, define the scope of or aid in interpretation of any of the provisions hereof.  All pronouns and singular or plural references as used herein shall be deemed to have interchangeably (where the sense of the sentence requires) a masculine, feminine or neuter, and/or singular or plural meaning, as the case may be.

 

19.                               Further Assurances.  The Parties covenant and agree that they will sign such further agreements, assurances, waivers and documents, attend such meetings, and do and perform or cause to be done and performed such further and other acts and things as may be reasonably necessary or desirable from time to time in order to give full effect to this Agreement and every part hereof.

 

[Signature page follows]

 

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IN WITNESS WHEREOF, the Parties have caused this Amended and Restated Management Services Agreement to be executed by their duly authorized persons as of the date hereof.

 

 

	
 
    	
USHG,   LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Jeff Flug
    
	
 
    	
 
    	
Name:   Jeff Flug
    
	
 
    	
 
    	
Title:   President
    
	
 
    	
 
    	
 
    
	
 
    	
 
    	
 
    
	
 
    	
SSE   HOLDINGS, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
By
    	
/s/   Randy Garutti
    
	
 
    	
 
    	
Name:   Randy Garutti
    
	
 
    	
 
    	
Title:   Chief Executive Officer
    

 

 

SCHEDULE A

 

SERVICES

 

The Services described herein shall be provided in a manner and scope consistent with the services provided by the Service Provider to the Company in periods prior to the date of this Agreement.

 

1.                                      Executive Leadership Services.

 

Executive leadership and strategic services shall be provided by the Service Provider through the services of its Chief Executive Officer, Daniel Meyer; President, Jeff Flug; Chief Financial Officer, Ashley Campbell; Chief Culture Officer, Erin Moran; and other members of the Services Provider’s senior management, including to draw upon the position and reputation of the Service Provider as a leading provider of restaurant management services and of the executive leaders, as individuals, to advance the goals of the Company.

 

2.                              Menu Innovation Advisory Services.

 

Menu innovation advisory services shall be provided by Daniel Meyer.  Mr. Meyer shall work with the Company’s “menu innovation committee”, including attending tastings and providing input on menu content and pricing selections.

 

3.                                Strategic Development Advisory Services.

 

Strategic development services shall be provided by Daniel Meyer.  Mr. Meyer shall advise the Company on its growth strategies, including new territories and expansion of new and existing markets.

 

4.                                Leadership Development Services.

 

Service Provider will provide training, testing and team and culture development programs and classes for the Company’s employees and management, including the Company’s New Leader Orientation, through December 31, 2015.  Thereafter, leadership development services will be reduced in scope and duration, as mutually agreed upon by the Parties.

 

5.                                Human Resource Services.

 

Service Provider will, at the Company’s request: (1) manage and administer employee benefit programs, (2) assist the Company in managing corporate human resources compliance, (3) manage human resources information systems data and (4) build reports and analyze the data.  In addition, at such time that the Company brings the above services in-house, Service Provider will provide the necessary support to the Company to ensure a seamless transition of such services.

 

7Exhibit 10.14

 

EXECUTION COPY

 

SPECIAL BONUS AGREEMENT

 

This Special Bonus Agreement (“Agreement”) is made and entered into on March 11, 2011 by and between Union Square Hospitality Group, LLC, a New York limited liability company (“USHG”), and Randall Garutti (the “Participant”).

 

WITNESSETH:

 

WHEREAS, the Participant is the Chief Operating Officer of SSE Holdings, LLC, a Delaware limited liability company (the “Company”), a majority-owned subsidiary of USHG; and

 

WHEREAS, USHG wishes to encourage the Participant to remain in the employment of the Company by providing the Participant with a bonus upon the occurrence of certain events as described herein.

 

NOW, THEREFORE, in consideration of the promises and agreements of the parties set forth in this Agreement, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereby agree, intending to be legally bound, as follows:

 

Section 1.                                           Definitions.  The following terms shall have the meanings set forth below:

 

(a)                                 “Affiliate” means, with respect to any Person, any other Person that is directly or indirectly controlling, controlled by or under common control with such first Person.  For purposes of this definition, the term “control” (including with correlative meanings, the terms “controlling,” and “controlled”) shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of the applicable Person, whether through the ownership of voting securities, by contract or otherwise.  For the avoidance of doubt, the Company and USHG shall be deemed to be Affiliates for purposes of this Agreement.

 

(b)                                 “Base Amount” means $15,900,000.

 

(c)                                  “Board” means the board of directors of USHG.

 

(d)                                 “Business” means the business of developing and/or operating premium fast-casual burger, shakes, fries and specialty ice creams or similarly themed restaurants.

 

(e)                                  “Cause” means (i) the willful misconduct or an act of dishonesty of the Participant with regard to the Company or any of its Affiliates, which in either case, results in material harm to the Company or such Affiliate; (ii) the willful and continued failure of the Participant to attempt to perform his duties with the Company or any of its Affiliates (other than any such failure resulting from incapacity), which failure is not remedied within 30 days after receiving written notice thereof; (iii) the conviction of the Participant of (or the plea by the Participant of guilty or nolo contendere to) any felony

 

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involving moral turpitude (other than traffic related offenses or as a result of vicarious liability); or (iv) a material breach by the Participant of any material provision of this Agreement, which breach is not remedied within 10 days after receiving written notice thereof.

 

(f)                                   “Change in Control” means (i) a “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than (a) a trustee or other fiduciary holding securities under an employee benefit plan of the Company or (b) Meyer or any Meyer Affiliated Parties, becomes the “beneficial owner” (as defined in Rule 13D-3 under the Exchange Act), directly or indirectly, of securities of the Company representing more than 50% of the combined voting power of the Company’s then outstanding voting securities; provided that such transaction satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(v), (ii) the acquisition by any “person” (as such term is used in Sections 13(d) and 14(d) of the Exchange Act), other than Meyer and/or any Meyer Affiliated Parties, of all or substantially all of the Company’s assets during any period of 12 consecutive months; provided that such transaction satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(vii) or (iii) a merger or consolidation involving the Company, other than a merger or consolidation (a) in which the equityholders of the Company immediately prior to such merger or consolidation, own immediately following such merger or consolidation, at least 50% of the voting power of the surviving entity or (b) with an entity in which Meyer and/or any Meyer Affiliated Parties beneficially own more than 50% of the voting securities; provided that any such merger or consolidation satisfies the requirements of Treasury Regulation Section 1.409A-3(i)(5)(v).

 

(g)                                  “Code” means the Internal Revenue Code of 1986, as amended.

 

(h)                                 “Confidential Information” means all confidential, proprietary, or non-public information (in whatever form) heretofore or hereafter developed or used by USHG, the Company or any of their respective Affiliates relating to the Business, and/or the operations, employees, assets, properties, capitalization, customers, suppliers and distributors of USHG, the Company or any of their respective Affiliates, including, but not limited to, the names of the investors in USHG, the Company or any of their respective Affiliates, customer lists, customer orders, purchase orders, financial data, pricing information and price lists, business plans and market strategies and arrangements, business techniques, all books, records, manuals, advertising materials, catalogues, correspondence, mailing lists, production data, sales materials and records, purchasing materials and records, personnel records, quality control records and procedures included in or relating to the Business or any of the assets of USHG, the Company or any of their respective Affiliates, all trademarks, tradenames (including all rights to the tradename and trademark “Shake Shack” or any similar names or slogans), copyrights and patents, and applications therefor, all inventions, processes, procedures, research records, market surveys and marketing know-how and other technical papers, irrespective of whether any of the foregoing constitute a trade secret under any applicable law, in any case, of USHG, the Company or any of their respective Affiliates, and all other non-public information regarding USHG, the Company or any of their respective Affiliates.  Information that becomes generally available to the public as a result of a

 

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breach by the Participant of this Agreement shall be deemed “Confidential Information” for purposes of this Agreement.

 

(i)                                     “Exchange Act” means the Securities Exchange Act of 1934, as amended.

 

(j)                                    “Good Reason” shall mean, without the Participant’s consent (i) any material adverse change by the Company in the Participant’s base salary, position, duties, responsibilities, authority, title or reporting obligations, or the assignment of duties to the Participant by the Company that are materially inconsistent with the Participant’s position; (ii) a relocation of the Participant’s principal business location to an area outside of the greater Manhattan area; or (iii) any other material breach by USHG of this Agreement or any other agreement with the Participant.  Notwithstanding the foregoing, no termination for Good Reason will be effective unless: (x) the Participant provided the Company or USHG, as the case may be, with at least thirty (30) days prior written notice of his intent to resign for Good Reason (which notice must be provided within sixty (60) days following the occurrence of the event(s) purported to constitute Good Reason); (y) the Company or USHG, as the case may be, has not remedied the alleged violation(s) within the thirty (30) day period; and (z) the Participant’s resignation becomes effective no later than thirty (30) days after the Company or USHG, as the case may be, has either failed to cure such event or indicated that it will not cure such event

 

(k)                                 “Initial Public Offering” means any firm commitment underwritten initial public offering of equity securities of the Company or any successor thereto (including any holding company formed for purposes of effecting any such transaction) pursuant to a registration statement declared effective by the Securities and Exchange Commission and following which such equity securities are listed on a national or international securities exchange.

 

(l)                                     “Maximum Special Bonus Amount” means $2,450,000.

 

(m)                             “Meyer” means Daniel Meyer, the Chairman of the Board of Directors of the Company and the Chief Executive Officer of USHG as of the date of this Agreement.

 

(n)                                 “Meyer Affiliated Parties” means (i) Meyer’s spouse, (ii) any minor descendants of Meyer, (iii) any trust as to which Meyer has the right to direct the vote of securities held by such trust, (iv) any corporation, partnership, or limited liability company controlled by Meyer or as to which Meyer otherwise has the right to direct the vote of securities held by such entity and (v) as of the date of this Agreement, each (A) owner of more than 5% of the Company’s voting securities, (B) member of USHG and their respective Affiliates and (C) partner of SEG Partners, L.P., SEG Partners II, L.P. or SEGPO Investment Corp. LLC, and their respective Affiliates.

 

(o)                                 “Person” means any individual, corporation, partnership, trust, limited liability company, organization, association, government (or any department or agency thereof) or any other business entity.

 

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(p)                                 “Special CIC Bonus” means an amount equal to the product of (x) 3.5%, (y) the Vested Percentage and (z) the difference between the Value of the Company on the date of a Change in Control and the Base Amount; provided, however, that in no event shall the Special CIC Bonus payable hereunder exceed the Maximum Special Bonus Amount (regardless of the Value on the date of determination).

 

(q)                                 “Special IPO Bonus” means an amount equal to the product of (x) 3.5%, (y) the Vested Percentage (as of the Special IPO Bonus payment date) and (z) the difference between the Value of the Company on the date of an Initial Public Offering and the Base Amount; provided, however, that in no event shall the Special IPO Bonus payable hereunder exceed the Maximum Special Bonus Amount (regardless of the Value on the date of determination)

 

(r)                                    “Value” means the fair market value of the Company, as determined either (a) by agreement of the Participant and USHG, or (b) if no such agreement is reached within 30 days after the occurrence of an event requiring valuation, by an appraiser selected in accordance with the following procedures. If USHG and the Participant are unable to mutually select an independent appraiser within fifteen days after either party is requested to do so by the other, each party shall submit the names of four nationally recognized firms that are engaged in the business of valuing securities, and each party shall be entitled to strike two names from the other party’s list of firms, and the appraiser shall be selected by lot from the remaining firms. The determination of the selected appraiser shall be final and binding upon the parties. If the aggregate valuation made by the appraiser is more than 110% of USHG’s determination, the full cost of appraisal shall be borne by USHG, otherwise the Participant shall bear the cost of such appraisal.

 

(s)                                   “Vested Percentage” means:

 

(i)                                     0%, if the Participant’s employment with the Company terminates before February 1, 2011;

 

(ii)                                  33 and 1/3%, if the Participant’s employment with the Company terminates on or after February 1, 2011 but before February 1, 2012;

 

(iii)                               66 and 2/3%, if the Participant’s employment with the Company terminates on or after February 1, 2012 but before February 1, 2013; or

 

(iv)                              100%, if, notwithstanding clauses (i), (ii) and (iii) above, any of the following events occur:

 

(1)                                 the Participant remains continuously employed with the Company from the date of this Agreement through and including February 1, 2013;

 

(2)                                 with respect to the Special CIC Bonus, the Participant remains continuously employed by the Company from the date of this Agreement through and including the date of a Change in Control; or

 

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(3)                                 with respect to the Special IPO Bonus, the Participant remains continuously employed by the Company from the date of this Agreement through and including the 6-month anniversary of an Initial Public Offering (or in the event that following an Initial Public Offering and prior to the 6-month anniversary thereof, the Company terminates the Participant’s employment without Cause, the Participant terminates his employment for Good Reason or the Participant dies).

 

Notwithstanding anything contained herein to the contrary, if the Participant’s employment is terminated by the Company for Cause prior to the payment of any amounts hereunder, the Vested Percentage shall be 0% and no amounts shall be payable to the Participant hereunder.

 

Section 2.                                           Bonus Payment.  The Special CIC Bonus shall be payable to the Participant by USHG within 30 days after the occurrence of a Change in Control.  Such CIC Bonus shall be payable in a lump sum payment in the same form of consideration (or proportions thereof) received by USHG for its interest in the Company in such Change in Control; provided, however, in the event of the payment of any non-cash consideration, the Participant’s rights with respect to such consideration will be substantially similar to USHG’s rights with respect to the non-cash consideration it receives in connection with such Change in Control.  The Special IPO Bonus shall be payable to the Participant by USHG in a lump sum cash payment on the 7th anniversary of the date of this Agreement, provided that an Initial Public Offering shall have occurred on or prior to such date.

 

Section 3.                                           Restrictive Covenants.  In consideration for the potential payments to the Participant hereunder, and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Participant agrees to the following:

 

(a)                                 Confidentiality.  The Participant shall not, at any time during his employment with the Company or at any time thereafter, directly or indirectly, use for the benefit of himself or any third party or disclose to any person, firm, company or other entity (other than USHG, the Company or any of their respective Affiliates) any Confidential Information without the prior written consent of the Board, except (i) as required in the performance of his duties to the Company and its Affiliates, (ii) to the extent that the Participant is required by law, subpoena or court order to disclose any Confidential Information (provided that in such case, the Participant shall (1) provide the Board with the earliest notice possible that such disclosure is or may be required, (2) reasonably cooperate with USHG, the Company and their respective Affiliates, at the Company’s expense, in protecting, to the maximum extent legally permitted, the confidential or proprietary nature of such Confidential Information and (3) disclose only that Confidential Information which he is legally required to disclose), (iii) disclosing information that has been or is hereafter made public through no act or omission of the Participant in violation of this Agreement or any other confidentiality obligation or duty owed to USHG, the Company or their respective Affiliates, (iv) disclosing information and documents to his attorney or tax adviser for the purpose of securing legal or tax advice (provided that such Persons agree to keep such information confidential) or (v) disclosing only the post-employment restrictions in this Agreement in confidence to any potential new employer.  The Participant shall take all actions necessary to protect the

 

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integrity of the business plans, customer lists, statistical data and compilations, agreements, contracts, manuals or other materials, in whatever form, of USHG, the Company and their respective Affiliates that contain Confidential Information, and upon the termination of the Participant’s employment, the Participant agrees that all Confidential Information in his possession or under his control, directly or indirectly, that is in writing, computer generated or other tangible form (together with all duplicates thereof) will forthwith be returned to the Company and will not be retained by the Participant or furnished to any person or entity, either by sample, facsimile, film, audio or video cassette, electronic data, verbal communication or any other means of communication.  The Participant agrees that the provisions of this Section 3 are reasonable and necessary to protect the proprietary rights of USHG, the Company and their respective Affiliates in the Confidential Information and trade secrets, goodwill and reputation.  In addition, the terms and conditions of this Agreement shall remain strictly confidential, and the Participant shall not disclose the terms and conditions hereof to any person or entity, other than immediate family members, legal advisors or personal tax or financial advisors, provided that each such person agrees to keep such terms and conditions confidential.

 

(b)                                 Non-Competition.  The Participant shall not, during his employment with the Company and for a period of one-year thereafter (the “Non-Compete Period”), directly or indirectly, whether for himself or on behalf of any other person or entity, engage in, own, manage, operate, advise, provide financing to, control or participate in the ownership, management or control of, or be connected as an officer, employee, partner, director, or otherwise with, or have any financial interest (whether as a stockholder, director, officer, partner, consultant, proprietor, agent or otherwise) in, or aid or assist anyone else in the conduct of, any business that competes, directly or indirectly, with USHG, the Company or their respective Affiliates in the Business or is otherwise engaged in activities competitive with USHG, the Company or their respective Affiliates in the Business, in any jurisdiction in the United States of America (including, without limitation, the state of New York) or any other country in the world where USHG, the Company or their respective Affiliates are engaged in the Business (the “Restricted Area”).  The Participant agrees that the Restricted Area is reasonable taking into consideration the nature and scope of the operations of USHG, the Company and their respective Affiliates in the Business and the Participant’s role in such operations.  It shall not be a violation of this Section 3(b) for the Participant to own less than one percent (1%) of the outstanding shares of a corporation that is engaged in the Business whose shares are listed on a national stock exchange or traded in accordance with the automated quotation system of the National Association of Securities Dealers.  Nothing herein shall prevent the Participant from engaging in any activity with, or holding any financial interest in, a non-competitive affiliate of an entity engaged in the Business, provided that no such activity or financial interest would otherwise cause the Participant to breach his obligations under Section 3 of this Agreement.

 

(c)                                  Non-Solicitation.  The Participant shall not, during the Non-Compete Period, either directly or indirectly, and whether for himself or on behalf of any other person, company, firm or other entity; (i) seek to persuade any employee or consultant of USHG, the Company or any of their respective Affiliates to discontinue or diminish his or her status or employment therewith or seek to persuade any employee,

 

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former employee (who was employed by USHG, the Company or any of their respective Affiliates at any time during the twelve (12) month period prior to the termination of the Participant’s employment with the Company), or exclusive consultant of USHG, the Company or any of their respective Affiliates to become employed or to provide consulting or contract services to a business competitive with USHG, the Company or their respective Affiliates in the Business; (ii) solicit, employ or engage, or cause to be solicited, employed, or engaged, any person who is or was employed by USHG, the Company or any of their respective Affiliates at any time during the twelve (12) month period prior to the termination of the Participant’s employment with the Company; or (iii) solicit, encourage, or induce any contractor, agent, client, customer, supplier, or the like of USHG, the Company or any of their respective Affiliates to terminate or diminish its/his relationship with USHG, the Company or any of their respective Affiliates, or to refrain from entering into a relationship with USHG, the Company or any of their respective Affiliates, including, without limitation, any prospective contact, contractor, agent, client, customer, or the like of USHG, the Company or any of their respective Affiliates; provided, however, that the foregoing shall not prohibit the Participant from placing any general advertisements for employees so long as such general advertisements are not directed to any employees of USHG, the Company or any of their respective Affiliates (provided that the Participant may not, during the time periods set forth in this Section 3(c), hire or engage any such Person who responds to such general advertisement).

 

(d)                                 Remedies.  In addition to whatever other rights and remedies USHG, the Company and their respective Affiliates may have at equity or in law (including, without limitation, the right to seek monetary damages), if the Participant breaches any of the provisions contained in this Section 3, (i) USHG shall have the right immediately to terminate the Participant’s right to any amounts payable under this Agreement and (ii) USHG, the Company and their respective Affiliates shall have the right to injunctive relief, without the requirement to prove actual damages or to post any bond or other security, and to obtain the costs and reasonable attorneys’ fees they incur in enforcing their rights under this Agreement.  The Participant acknowledges that his breach of this Section 3 would cause irreparable injury to USHG, the Company and/or their respective Affiliates and that money damages alone would not provide an adequate remedy for USHG, the Company or their respective Affiliates.  The Participant further acknowledges that (i) any breach or claimed breach of the provisions set forth in this Agreement shall not be a defense to enforcement of the restrictions set forth in this Section 3 and (ii) the circumstances of the Participant’s termination of employment with the Company shall have no impact on his obligations under this Sections 3.

 

(e)                                  Tolling During Periods Of Breach.  The Participant and USHG agree and intend that the Participant’s obligations under this Section 3 be tolled during any period that the Participant is in breach of any of the obligations under this Section 3, so that USHG, the Company and each Affiliate of USHG and the Company are provided with the full benefit of the restrictive periods set forth herein.

 

(f)                                   Third Party Beneficiary.  The Company and each Affiliate of the Company and USHG are intended third party beneficiaries of the terms of this Section 3

 

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and shall have the right to enforce the provisions of this Section 3 as if they were a party hereto.

 

(g)                                  Survival.  The Participant’s obligations under this Section 3 shall survive the termination of this Agreement and the termination of his employment with the Company.

 

Section 4.                                           Code Section 409A Compliance.  This Agreement is intended to comply with Code Section 409A and the parties hereto agree to interpret, apply and administer this Agreement in the least restrictive manner necessary to comply therewith and without resulting in any increase in the amounts owed hereunder by USHG. The time or schedule of any distribution of any payment hereunder shall not be accelerated, except as otherwise permitted under Code Section 409A (including without limitation Code Section 409A(a)(3)). USHG and the Participant shall work together in good faith to adopt such amendments to the Agreement as USHG and the Participant reasonably determine are necessary to cause the Agreement (and the amounts owed hereunder) to be exempt from, or in compliance with, Code Section 409A (including without limitation any related Department of Treasury guidance).  Notwithstanding anything herein to the contrary, USHG shall have no liability to the Participant or to any other person if the payments and benefits provided in this Agreement are not exempt from or compliant with Code Section 409A.

 

Section 5.                                           Assignment.  Neither the Participant, his estate, his heirs or beneficiaries, nor his legal representatives shall have any rights to commute, sell, assign, transfer or otherwise convey or encumber the right to receive any of the payments under this Agreement, which payments and the rights thereto are expressly declared to be non-assignable and nontransferable.  Any attempt to assign or transfer or encumber the right to any such payment shall be void and have no effect whatsoever.  Notwithstanding the foregoing, the Participant may, with the consent of the Board, designate in writing a beneficiary to receive the Participant’s benefits hereunder in the event of his death in accordance with such guidelines as may be determined by the Board in its sole discretion.  In the event that no such beneficiary is designated, or if such designated beneficiary predeceases the Participant, any amounts payable hereunder after the death of the Participant shall be paid to the Participant’s estate.  USHG, the Company, and each Affiliate of the Company and USHG may assign their rights and obligations under this Agreement.

 

Section 6.                                           Funding/Unsecured General Creditor.  Upon the occurrence of an Initial Public Offering that occurs prior to the 7th anniversary of the date of this Agreement and prior to the date of a Change in Control, USHG shall establish a “rabbi trust” (within the meaning of Revenue Procedure 92-64) to hold any amounts owed to the Participant with respect to a Special IPO Bonus.  However, all assets held in such rabbi trust shall at all times remain subject to the claims of USHG’s general unsecured creditors and the Participant’s rights hereunder and thereunder shall be no greater than the rights of a general unsecured creditor of USHG.  Amounts held by such rabbi trust shall be invested in an interest bearing “money market” account.  In addition, all obligations hereunder shall be paid solely from the general assets of USHG or the rabbi trust described herein, as the case may be.

 

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Section 7.                                           Tax Withholding.  There shall be deducted from any payment under this Agreement the amount of any withholding taxes determined by USHG to be due in connection with any payment hereunder.

 

Section 8.                                           No Guarantee of Employment.  The Participant acknowledges and agrees that nothing contained in this Agreement shall be deemed to provide the Participant with any rights to continued employment with the Company or in any way limit or restrict the right of the Company to terminate the Participant’s employment with the Company at any time and for any reason, with or without notice and without penalty.

 

Section 9.                                           Governing Law; Venue.  All issues and questions concerning the application, construction, validity, interpretation and enforcement of this Agreement shall be governed by and construed in accordance with the laws of the State of Delaware.  Each of the parties hereto agrees that any legal action or proceeding with respect to this Agreement shall be brought exclusively in the Chancery Court of New Castle County, Delaware or the federal courts of the United States of America for the District of Delaware, unless the parties to any such action or dispute mutually agree to waive this provision.  By execution and delivery of this Agreement, each of the parties hereto irrevocably consents to service of process out of any of the aforementioned courts in any such action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, or by recognized express carrier or delivery service, to the applicable party at his, her or its address referred to herein.  Each of the parties hereto irrevocably waives any objection which he, she or it may now or hereafter have to the laying of venue of any of the aforementioned actions or proceedings arising out of or in connection with this Agreement, or any related agreement, certificate or instrument referred to above, brought in the courts referred to above and hereby further irrevocably waives and agrees, to the fullest extent permitted by applicable law, not to plead or claim in any such court that any such action or proceeding brought in any such court has been brought in any inconvenient forum.  Nothing herein shall affect the right of any party to serve process in any other manner permitted by law.

 

Section 10.                                    Severability.  In the event that any provision or portion of this Agreement shall be determined to be invalid or unenforceable for any reason, in whole or in part, the remaining provisions of this Agreement shall be unaffected thereby and shall remain in full force and effect to the fullest extent permitted by law.  Specifically, but without limitation, the parties agree that if any court of competent jurisdiction finds that any one or more of the words, phrases, sentences, clauses, sections, subdivisions, or subparagraphs contained in Section 3 is overly broad or unenforceable, then such words, phrases, sentences, clauses, sections, subdivisions, or subparagraphs shall be deemed reduced or amended to be enforceable to the maximum extent allowable under applicable law.

 

Section 11.                                    Successors; Binding Agreement.  This Agreement shall be binding on the parties hereto and shall inure to the benefit of their respective heirs, personal representatives, successors and assigns.

 

Section 12.                                    Termination.  Notwithstanding anything contained herein to the contrary, this Agreement, and USHG’s obligations and the Participant’s rights hereunder, shall terminate immediately after the first to occur of (i) a Change in Control, (ii) an

 

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Initial Public Offering and (iii) the 7th anniversary of the date of this Agreement; provided, however, that any Special CIC Bonus or Special IPO Bonus payable as the result of a Change in Control or an Initial Public Offering, as the case may be, that occurs prior to the termination of this Agreement shall remain payable in accordance with the terms of this Agreement; provided further, however, that Sections 3 through and including 13 of this Agreement shall survive such termination.

 

Section 13.                                    General.  This Agreement constitutes the entire agreement and understanding between the parties hereto with respect to the subject matter hereof and supersedes any pre-existing or other written or oral agreement or communication between the Participant and USHG concerning the subject matter hereof.  This Agreement may be executed and delivered in separate counterparts (including by means of facsimile), each of which is deemed to be an original and all of which taken together constitute one and the same agreement.  This Agreement shall become effective only when counterparts have been executed and delivered by all parties whose names are set forth on the signature page(s) hereof.  The provisions of this Agreement may be amended and waived only with the prior written consent of USHG and the Participant.

 

*      *      *      *      *

 

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IN WITNESS WHEREOF, this Agreement has been executed by the parties on the date first set forth above.

 

	
 
    	
UNION   SQUARE HOSPITALITY GROUP, LLC
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Danny Meyer
    
	
 
    	
By:   Danny Meyer
    
	
 
    	
Title:   Chief Executive Officer
    
	
 
    	
 
    
	
 
    	
Address   for Service:
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
PARTICIPANT
    
	
 
    	
 
    
	
 
    	
 
    
	
 
    	
/s/   Randall Garutti
    
	
 
    	
Randall   Garutti
    
	
 
    	
 
    
	
 
    	
Address   for Service:
    

 

 

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