EXHIBIT 10.48
January 15, 1997
PERSONAL AND CONFIDENTIAL
-------------
-------------
-------------
-------------
Dear _________:
This letter agreement supplements the existing employment agreement
dated as of between (the "Executive") and
Flagstar Corporation (the "Company"), as subsequently amended by letter
agreement dated as of (collectively, the "Employment
Agreement"), and is entered into as an inducement to the Executive to continue
in the employ of the Company.
1. RETENTION BONUS. Notwithstanding any provision to the contrary
set forth in the Employment Agreement and in addition to the payments and
benefits therein provided, the Executive shall be entitled to receive the
following payments (the "Retention Bonus") provided the Executive continues to
be employed by the Company (or a subsidiary thereof) as of the accrual date
indicated:
Accrual Date Payment Amount
------------ --------------
June 30, 1997 $ 50,000
December 31, 1997 $100,000
June 30, 1998 $ 50,000
December 31, 1998 $125,000
June 30, 1999 $ 50,000
December 31, 1999 $175,000
Each such payment shall be due and payable to the Executive on or before fifteen
(15) days following the corresponding accrual date. Any unaccrued portion of
such Retention Bonus shall be forfeited upon termination of the Executive's
employment for any reason.
2. REPRICING OF STOCK OPTIONS. The Board has also "repriced" all of
your outstanding stock options to the price of $1.25. This means that any
options you now hold at either $6.00 or $2.75 may (when vested) be exercised at
the price of $1.25. Also, your vesting will remain unchanged, meaning you will
not have to start your vesting schedule over again.
3. CHANGE OF CONTROL BENEFIT. Notwithstanding any provision to the
contrary set forth in the Employment Agreement, in the event of a Change of
Control (as defined below) of the Company, the Executive shall be entitled,
during the Election Period (as defined below), to tender his/her resignation to
the Company, in which case the Executive shall receive the sum of (i) 200% of
the Executive's base salary as in effect on the date of such resignation, plus
(ii) 200% of the Executive's target performance bonus for the year in which such
resignation occurs (provided that the amount of such target performance bonus
shall not be less than 65% of the Executive's then current base salary), plus
(iii) an amount equal to 167% of the Company's actual subsidy (as in effect at
the time of such resignation) for the Executive's (and his/her family members')
medical coverage for an 18 month period following the date of such resignation
(collectively, the "Change of Control Benefit"). The Executive shall also be
entitled to receive the Change of Control Benefit in the event of his/her
termination by the Company following a Change of Control, unless such
termination is because of death or permanent disability of Executive (in
accordance with Company policy) or for Cause as defined below, if such
termination occurs prior to the end of the Election Period.
For purposes of this agreement:
(i) a Change of Control shall occur on the date on which
designees of TW Associates, L.P. and KKR Partners II,
L.P. (collectively, "KKR") no longer constitute a
majority of the Board of Directors of Flagstar
Companies, Inc.; and
(ii) "Election Period" shall mean the period commencing
upon the effective date of the Change of Control and
ending six months thereafter.
(iii) "Cause" shall mean (A) the Executive's habitual
neglect of his material duties, (B) an act or acts by
the Executive, or any omission by him, constituting a
felony, and the Executive has entered a guilty plea or
confession to, or has been convicted of, such felony,
(C) the Executive's failure to follow any lawful
directive of the Board or Chief Executive Officer
("CEO") consistent with the Executive's position and
duties, (D) an act or acts of fraud or dishonesty by the
Executive which results or is intended to result in
financial or economic harm to the Company, or (E) breach
of a material provision of this Agreement by the
Executive; provided that the Company shall provide the
Executive (x) written notice specifying the nature of
the alleged Cause, and, with respect to Clauses (A), (C)
and (E), (y) a reasonable opportunity to appear before
the Board or CEO to discuss the matter, and (z) a
reasonable opportunity to cure any such alleged Cause.
The foregoing Change of Control Benefit shall be payable to the
Executive in a lump sum within five (5) business days following any such
triggering resignation or termination. In the event the Executive receives
payment of the Change of Control Benefit hereunder, the Executive shall not be
required to seek other employment to mitigate damages, and any income earned by
the Executive from other employment or self-employment shall not be offset
against any obligations of the Company to the Executive under this Agreement;
provided, however, such payment shall be in lieu of any severance benefits
otherwise payable to the Executive under the Employment Agreement of under any
severance plan or policy of the Company. If the Executive remains with the
Company after the expiration of the Election Period, the Executive's right to
receive the Change of Control Benefit shall terminate and his/her severance
benefits shall, subject to Sections 4 and 5 below, be governed exclusively by
the Employment Agreement.
Notwithstanding the foregoing, if the independent accountants acting
as auditors for the Company on the date of a Change of Control determine that
the Change of Control Benefit payments as provided above would constitute
"excess parachute payments" pursuant to Section 280G of the Internal Revenue
Code of 1986, as amended, and regulations thereunder, when added to any other
parachute payments made by the Company or any affiliate thereof, then the
Executive shall receive the greater of (i) the maximum amount which may be paid
without the payments being "excess parachute payments," and (ii) the full amount
of such Change of Control Benefit without reduction pursuant to (i) above, net
of all excise taxes levied on the Executive as a result of such "excess
parachute payments," in each case as determined by such auditors. In the event
that (ii) above results in the greater benefit to the Executive, the Company
shall pay to the Executive the full amount of the Change of Control Benefit as
provided herein, and the Executive shall be fully responsible (subject to
applicable withholding requirements) for the payment of all excise taxes levied
on the Executive as a result of such "excess parachute payments." Any Change of
Control Benefit payment made pursuant to this letter agreement shall not be
considered compensation for the purpose of any plan or policy of the Company
unless such plan or policy expressly so provides.
4. SEVERANCE PAYMENT. Notwithstanding any provision to the contrary
set forth in the Employment Agreement, upon the occurrence of an event resulting
in the termination of the Executive under circumstances that would entitle the
Executive to severance benefits under the Employment Agreement (but not when the
Change of Control Benefit is payable), such severance benefits shall be payable
to the Executive in a single lump sum payment (the "Severance Payment") within
five (5) business days following any such termination. Further, should such an
event of termination of the Executive's employment occur, the Executive shall
not be required to seek other employment to mitigate damages, and any income
earned by the Executive from other employment or self-employment shall not be
offset against any obligations of the Company to the Executive under this
Agreement.
5. SUBSIDIARY GUARANTIES. The Company's payment obligations herein
in respect of the Retention Bonus, the Change of Control Benefit, and the
Severance Payment shall be unconditionally guaranteed by the Company's
subsidiaries, Denny's, Inc., DFO, Inc., El Pollo Loco, Inc., Quincy's
Restaurants, Inc., and Flagstar Enterprises, Inc., such subsidiaries being among
the principal operating subsidiaries receiving the benefits of the Executive's
continuing employment with the Company. Such subsidiary guaranties shall be
"guaranties of payment" and not "guaranties of collection."
Except as supplemented and modified hereby, the Employment Agreement
and the severance benefits therein contained shall remain in effect and binding
on the Executive and the Company. Nothing herein shall be deemed to modify in
any respect the right of the Company to terminate the services of the Executive
in accordance with the terms of the Employment Agreement and Company policies
now or hereafter in effect.
If you are in agreement with these terms, please sign one copy of
this letter and return it to Xxxxxxx Xxxx.
Sincerely,
Xxxxx X. Xxxxxxx
Chairman, Chief Executive Officer
and President
cc: Xxxxxx X. Xxxxxx
Xxxxxxx X. Xxxx
Agreed and accepted:
________________________________ _________________ ___, 199__
By authority duly obtained as of the date first above written, the
undersigned, Denny's, Inc., DFO, Inc., El Pollo Loco, Inc., Quincy's
Restaurants, Inc., and Flagstar Enterprises, Inc., indirect subsidiaries of the
Company, hereby jointly and severally guarantee the payment by the Company to
the Executive of the Retention Bonus, the Change of Control Benefit, and the
Severance Payment as provided above. In providing such guaranty, each such
guarantor acknowledges that it is receiving and will receive substantial and
meaningful benefits and services from the Executive's continued employment with
the Company. Each such guaranty shall be a guaranty of payment and not of
collection.
Denny's, Inc. Quincy's Restaurants, Inc.
By: By:
-------------------------------- -------------------------------
DFO, Inc. Flagstar Enterprises, Inc.
By: By:
-------------------------------- -------------------------------
El Pollo Loco, Inc.
By:
--------------------------------
