1
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made as of this 12th day
of November, 1997, between SHONEY'S, INC., a Tennessee corporation, whose
principal place of business is located at 0000 Xxx Xxxx Xxxx, Xxxxxxxxx,
Xxxxxxxxx ("Employer"), and J. XXXXXXX XXXXXX, a resident of Breckenridge,
Colorado ("Employee").
1. TERM OF EMPLOYMENT.
1.1 EMPLOYMENT. Employer hereby employs Employee, and Employee
hereby accepts employment with Employer, for the Employment Term (as hereinafter
defined).
1.2 EMPLOYMENT TERM. The term of this Agreement and the
Employment Term shall commence on November 12, 1997, and terminate on December
31, 2000, unless sooner terminated as herein provided or extended pursuant to
Section 1.3 hereof or by a subsequent amendment or extension of this Agreement
executed by both parties hereto.
1.3 EXTENSION BECAUSE OF CHANGE IN CONTROL. In the event of a
Change in Control (as hereinafter defined), the Employment Term shall
automatically be extended for two (2) calendar years beyond December 31, 2000
(or such later date as the Employment Term may have been extended pursuant to a
subsequent amendment or extension of this Agreement), on the date of the Change
in Control, at which time Employee shall be entitled to exercise the rights and
receive the benefits of this Agreement that are described in Section 4.2.1 and
Section 4.3. For purposes of this Agreement, a "Change in Control" of Employer
shall mean a change in control of a nature that would be required to be reported
in response to Item 6(e) of Schedule 14A of Regulation 14A promulgated under the
Securities Exchange Act of 1934, as amended (the "Exchange Act"); provided,
however, that, without limitation, such a Change in Control shall be deemed to
have occurred if during the Employment Term: (a) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act) is or becomes the
"beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly
or indirectly, of securities of Employer representing more than fifty percent
(50%) of the combined voting power of Employer's then outstanding voting
securities; or (b) all or substantially all of the assets of Employer are sold,
exchanged or otherwise transferred (other than to secure debt owed by Employer);
or (c) Employer's shareholders approve a plan of liquidation or dissolution; or
(d) individuals who at the beginning of the Employment Term constitute members
of the Board of Directors of Employer cease for any reason other than at the
request or with the concurrence of Employee to constitute a majority thereof
unless the election, or the nomination for election by Employer's shareholders,
of each new director was approved by a vote of at least a majority of the
directors then still in office who were directors at the beginning of the
Employment Term.
2
2. DUTIES OF EMPLOYEE.
2.1 GENERAL DUTIES. Employee is hereby employed as the
President and Chief Executive Officer of Employer with such duties and
responsibilities as Employer's Board of Directors shall designate, which shall
be those duties and responsibilities customarily prescribed for persons in the
position of Employee. Employee shall do and perform all services, acts, or
things necessary or advisable to manage and conduct the business of Employer,
subject always to the policies set forth by Employer's Board of Directors, in
accordance with any and all governing rules and regulations of regulatory
agencies.
2.2 DEVOTION OF ENTIRE TIME TO EMPLOYER'S BUSINESS. Employee
will devote his entire productive time, ability, and attention during normal
business hours to the business of Employer during the Employment Term. Employee
shall not, directly or indirectly, render any services of a business,
commercial, or professional nature to any other person or organization, whether
for compensation or otherwise, without the prior written consent of Employer's
Board of Directors; provided, however, that the foregoing shall not preclude
reasonable participation as a member in community, civic, or similar
organizations, or the pursuit of personal investments that neither interfere nor
conflict with his normal business activities for Employer; provided, further,
that Employer acknowledges and agrees that Employee has an ownership interest in
the food service businesses identified on Exhibit A attached hereto and that he
will retain such interests during the Employment Term.
3. COMPENSATION AND BENEFITS OF EMPLOYER.
3.1 SALARY. As compensation for his services hereunder,
Employee shall receive a base salary (the "Base Salary"), which shall be payable
in accordance with the general payroll practices of Employer, and which during
the period from November 12, 1997 through December 31, 1998, shall be in an
annual amount (prorated as appropriate) of $500,000.
During the remaining term of this Agreement, Base Salary shall be in an amount
determined by the Human Resources and Compensation Committee of Employer's Board
of Directors (the "Committee"); provided the Committee shall not decrease
Employee's Base Salary for any period within the Employment Term below $500,000
per annum.
3.2 BONUSES. Employee shall be entitled to an annual bonus,
the amount of which shall be determined by the Committee; provided, however,
that the bonus during the first year of the Employment Term shall not be less
than $300,000. Promptly following the date of this Agreement, the Committee
shall engage a nationally recognized compensation consulting firm to assist
Employee and the Committee in devising a mutually agreeable bonus plan for
senior management of Employer, including Employee. The bonus payable to Employee
during the Employment Term shall be determined in accordance with a formula to
be agreed upon by Employer and Employee based upon
3
the recommendations of such compensation consultant. The parties hereto shall
use their reasonable best efforts to agree upon the bonus to be paid to Employee
hereunder within ninety (90) days of the date hereof.
3.3 RESTRICTED STOCK.
3.3.1 SHARES. Subject to all of the conditions
(including, without limitation, the time of vesting and right to receive) and
restrictions set forth in this Section 3.3.1, Employer hereby grants to Employee
an award of 120,000 shares (the "Restricted Shares") of Employer's $1.00 par
value common stock (the "Shares"). The Restricted Shares shall become vested in,
and shall be distributed to, Employee in three (3) installments on each of the
dates set forth below (each of which shall be referred to as a "Distribution
Date," with the three (3) dates being collectively referred to as the
"Distribution Dates") in the following respective amounts:
DISTRIBUTION DATE NUMBER OF SHARES
----------------- ----------------
December 31, 1998 40,000
December 31, 1999 40,000
December 31, 2000 40,000
-------
Total 120,000
=======
Immediately following each Distribution Date, Employer shall promptly cause its
transfer agent to issue a certificate to Employee evidencing the Restricted
Shares that became distributable. The issuance of any stock certificate to
Employee shall be subject to any applicable federal, state, or local tax
withholding requirements. If, prior to a Distribution Date, Employee's
employment is terminated pursuant to Section 4.1.2 or Section 4.2.2, all rights
of Employee in any Restricted Shares awarded under this Section 3.3.1 that, as
of the date of such termination, have not become distributable to Employee shall
thereupon immediately terminate and become forfeited. If, prior to a
Distribution Date, Employee's employment is terminated pursuant to Section 4.1.1
or Section 4.2.1, all rights of Employee in any Restricted Shares awarded under
this Section 3.3.1 that, as of the date of such termination, have not become
distributable to Employee shall thereupon immediately become distributable to
Employee.
Employee shall not have any rights as a shareholder with respect to any
Restricted Shares until the issuance of a stock certificate evidencing the
Restricted Shares. The number of Restricted Shares awarded Employee under this
Section 3.3.1 shall be proportionately adjusted to reflect any stock dividend,
stock split or share combination of the Shares or any recapitalization of
Employer occurring prior to a Distribution Date. Except as provided in the
preceding sentence, no adjustment shall be made on the issuance of a stock
certificate to Employee as to any dividends or other rights for which the record
date occurred prior to a Distribution Date. The right of Employee to receive the
Restricted Shares shall not be assignable or transferable otherwise than by will
or the laws of descent and distribution.
4
Upon receipt of Restricted Shares at a time when there is not in effect
under the Securities Act of 1933, as amended (the "Securities Act"), a current
registration statement relating to the Restricted Shares, Employee shall
represent and warrant in writing to Employer that the Restricted Shares are
being acquired for investment and not with a view to the distribution thereof
and shall agree to the placement of a legend on the certificate or certificates
representing the Restricted Shares evidencing the restrictions on transfer under
the Securities Act and the issuance of stop-transfer instructions by Employer to
its transfer agent with respect thereto.
No Restricted Shares shall be issued hereunder unless and until the
then applicable requirements of the Securities Act, the Tennessee Business
Corporation Act, the Tennessee Securities Act of 1980, as any of the same may be
amended, the rules and regulations of the Securities and Exchange Commission and
any other regulatory agencies and laws having jurisdiction over or applicability
to Employer, and the rules and regulations of any securities exchange on which
the Shares may be listed, shall have been fully complied with and satisfied.
Employer shall use its best efforts to cause all such requirements to be
promptly and completely satisfied. If in the opinion of its counsel, the
issuance of any Shares hereunder shall not be lawful for any reason, including
the inability of Employer to obtain from any regulatory body having jurisdiction
or authority deemed by such counsel to be necessary for such issuance, then
Employer shall not be obligated to issue any such Restricted Shares, but, in
such event, shall be obligated to provide Employee with cash or non-cash
consideration having equivalent after tax value which is acceptable to Employee
in the exercise of Employee's reasonable discretion.
3.3.2 CASH COMPONENT. Upon the issuance of a
certificate for any Restricted Shares pursuant to Section 3.3.1, Employee shall
be paid a cash bonus by Employer. The bonus payable pursuant to the preceding
sentence shall be determined by subtracting the Restricted Share Value (as
defined below) from the Restricted Share Gross Up (as defined below).
"Restricted Share Value" shall mean the fair market value of any Restricted
Shares on the date that they become distributable to Employee. "Restricted Share
Gross Up" shall mean an amount equal to the result derived by dividing: (a) the
Restricted Share Value by (b) the Tax Factor (as defined below). "Tax Factor"
shall mean the greater of: (i) sixty-four percent (64%); or (ii) the difference
between one hundred percent (100%) and the highest marginal individual income
tax rate set forth in the Internal Revenue Code of 1986, as amended, in the year
in which Employee receives the portion of the Restricted Shares with respect to
which this bonus is being calculated.
5
3.4 OPTIONS TO PURCHASE STOCK. Employee shall be granted, on
the date hereof, the following options to purchase an aggregate of 1,000,000
Shares at the indicated exercise prices per share:
NUMBER OF SHARES EXERCISE PRICE
SUBJECT TO OPTION PER SHARE
----------------- --------------
500,000 FMV(1)
166,667 $5.40
166,667 $6.50
166,666 $7.75
Of the options granted pursuant to this Section 3.4,
twenty-five percent (25%) shall vest, on a cumulative basis, on each of December
31 of 1998, 1999, 2000, and 2001, and all such options that shall have vested
shall be exercisable for a period of 10 years from the date hereof. Except as
the terms of such options as set forth in this Section 3.4 may be inconsistent
therewith, the terms and conditions applicable to the options to be granted
pursuant to this Section 3.4 shall otherwise be those contained in the Shoney's,
Inc. 1981 Stock Option Plan, the terms and conditions of which are incorporated
herein by this reference.
3.5 RELOCATION.
3.5.1 RELOCATION EXPENSES. In connection with the
relocation of Employee from Breckenridge, Colorado to Nashville, Tennessee,
Employer shall pay and/or reimburse Employee for all reasonable expenses paid or
incurred for the following:
(a) Moving the personal effects and household goods of Employee and
Employee's family to Employee's new residence in Nashville, Tennessee, together
with any other reasonable expenses incurred by Employee in connection with
relocating to Nashville, Tennessee.
(b) Storing the personal effects and household goods of Employee and
Employee's family for a period not to extend beyond August 31, 1998.
(c) All reasonable out-of-pocket costs of relocating Employee and
Employee's family that are mutually agreed upon in advance between Employee and
the Chairperson of the Committee, it being the intent that Employee not incur
any unreimbursed cost that results directly from his relocation.
--------
1 "FMV" means the closing price of the Shares on the grant date of the option as
reported by the New York Stock Exchange ("NYSE").
6
(d) All reasonable out-of-pocket costs of Employee for travel between
Nashville, Tennessee and Breckenridge, Colorado, every other weekend from
November , 1997, until August 31, 1998, in order to visit with his family, and
the reasonable out-of-pocket costs of Employee's family for travel between
Breckenridge, Colorado and Nashville, Tennessee on each alternate weekend to
visit with Employee in Nashville, Tennessee.
3.5.2 RESIDENCE. At any time within one year after
the date of this Agreement, after having used his reasonable best efforts for a
period of not in excess of ninety (90) days to sell his personal residence in
Breckenridge, Colorado, Employee shall have the option to cause Employer to
purchase or cause to be purchased Employee's residence. The amount to be paid to
Employee for such residence shall be an amount equal to the greater of: (a)
Employee's documented cost basis in such residence; or (b) the appraised fair
market value of such residence as of the date such option is exercised by
Employee.
3.6 LIFE INSURANCE. Employer, on Employee's behalf and at
Employee's direction, shall pay the standard premiums (up to a maximum of
$35,000 per year) on a whole-life insurance policy or policies, which shall be
owned by Employee (or by Employee's irrevocable life insurance trust), and
Employee (or the trustee of Employee's irrevocable life insurance trust, as the
case may be) shall be entitled to designate the beneficiary thereof.
3.7 USE OF AUTOMOBILE. Employer shall provide to Employee, at
the option of Employee, with either the use of an automobile pursuant to
Employer's automobile policy (of make, model, and year of manufacture
commensurate with the position of Employee) or a cash car allowance of $7,100
per year. Employer shall pay all expenses of operating, maintaining and
repairing the automobile and shall procure and maintain automobile liability
insurance in respect thereof in an amount reasonably acceptable to Employee,
with such coverage insuring Employee for bodily injury and property damage.
3.8 MEDICAL BENEFITS. Employer shall provide Employee with
medical and dental insurance (which Employer may self insure) benefits in
accordance with the established benefit policies of Employer.
3.9 DISABILITY INSURANCE BENEFITS. Employer shall provide
Employee with disability insurance benefits in accordance with the established
benefit policies of Employer that provide disability insurance benefits to
Employee in an amount equal to seventy percent (70%) of Employee's annual cash
compensation (salary plus bonus).
3.10 EXPENSES. Employer shall reimburse Employee for all
reasonable and necessary business expenses of Employee incurred in the conduct
of his duties hereunder.
7
Employee shall comply with all applicable policies of Employer with respect to
documentation and approval of such expenses.
3.11 VACATIONS. Employee shall be entitled to an annual paid
vacation commensurate with Employer's established vacation policy for executive
officers. The timing of paid vacations shall be scheduled in a reasonable manner
by Employee.
3.12 OTHER BENEFIT PROGRAMS. Employee shall be entitled to
participate in all employee benefit, bonus, and similar programs, including,
without limitation, programs of insurance, deferred compensation arrangements,
and all other benefits made available by Employer to senior management
personnel. During the Employment Term, so long as any additional benefit is made
available to senior management personnel of Employer, such benefit shall be
provided to Employee.
3.13 LEGAL FEES, TAX PLANNING AND RETURNS AND FINANCIAL
PLANNING. Employer shall reimburse Employee for his reasonable legal expenses
not in excess of $5,000 in connection with the negotiation of this Agreement,
and shall provide annually to Employee an allowance for the preparation of his
tax returns and for tax and financial planning services of up to $10,000.
4. TERMINATION OF EMPLOYMENT; SEVERANCE.
4.1 BY EMPLOYER.
4.1.1 TERMINATION WITHOUT CAUSE. Employer's Board of
Directors may terminate Employee's employment, with or without cause, at any
time by giving written notice of such termination to Employee, such termination
of employment to be effective on a date specified in such notice; provided,
however, that in the event of such a termination without cause, Employee shall
be entitled to receive the greater of: (a) an amount equal to the Base Salary
and bonus paid or payable under this Agreement to Employee for the twelve full
months of Employer immediately prior to the month in which the termination took
place; or (b) the amount due Employee for Base Salary during the balance of the
then current Employment Term (as extended pursuant to Section 1.3). Payments
shall be made in the case of the preceding item (a), in fifty-two (52) equal
weekly payments using Employer's regular payroll periods or, in the case of the
preceding item (b), over the balance of the Employment Term at the same time as
current wages and bonuses are normally payable. Employee's participation in all
benefit programs shall continue until the earlier of: (a) such time as Employee
is employed by another employer and is covered or permitted to be covered by
benefit plans of another employer; or (b) the expiration of the then current
Employment Term. Bonus payments due under this Section 4.1.1 shall be
8
determined in accordance with Section 3.2, except that the amount of such bonus
shall be determined based on Employer's most recently completed 12 calendar
month period.
4.1.2 TERMINATION FOR CAUSE. If Employee is
terminated for cause, Employer shall have no further obligation whatsoever to
Employee hereunder (with the exception of the obligation to pay Employee's Base
Salary and any earned bonus accrued through the date of termination of
employment), and Employee's participation in all benefit programs shall cease as
of the date of termination. For purposes of this Agreement, "cause" shall mean
any one of the following:
(i) Employee's willful failure to carry-out any material lawful
duties assigned by Employer's Board of Directors which duties
are commensurate with those of similarly situated employees;
(ii) breach of fiduciary duty to Employer (or any of Employer's
subsidiaries) involving personal profit by Employee;
(iii) conviction of Employee for any crime involving the Employer's
business, or of a felony; or of any other crime resulting in
his imprisonment;
(iv) intentional breach by Employee of any material provision of
this Agreement; or
(vi) unsatisfactory performance by Employee of the duties
designated for Employee by Employer's Board of Directors, if
such unsatisfactory performance is a result of alcohol or drug
abuse by Employee.
4.2 TERMINATION BY EMPLOYEE.
4.2.1 TERMINATION AFTER CHANGE IN CONTROL. In the
event a Change in Control occurs, Employee, at any time within ninety (90) days
after such Change in Control, may terminate his employment with Employer by
giving not less than thirty (30) days' prior written notice of such termination
to Employer. If Employee terminates his employment pursuant to this Section
4.2.1, he shall be entitled to receive the greater of: (a) an amount equal to
two (2) times the Base Salary and bonus paid or payable to Employee for the
twelve full months of Employer immediately prior to the month in which the
termination took place; or (b) the amount due Employee for Base Salary during
the balance of the then current Employment Term (as extended pursuant to Section
1.3). Payments shall be made in the case of the preceding item (a), in one
hundred and four (104) equal weekly payments using Employer's regular payroll
periods or, in the case of the preceding item (b), over the balance of the
Employment Term at the same time as
9
current wages and bonuses are normally payable. Employee's participation in all
benefit programs shall continue until the earlier of: (a) such time as Employee
is employed by another employer and covered or permitted to be covered by
benefit plans of another employer; or (b) the expiration of the then current
Employment Term (as extended pursuant to Section 1.3).
4.2.2 TERMINATION OTHER THAN AFTER CHANGE IN CONTROL.
Employee may terminate his employment with Employer at any time without further
obligation whatsoever by either party hereunder (with the exception of
Employer's obligation to pay Employee's Base Salary and any earned bonus accrued
through the date of termination of employment and except for the obligations and
covenants of Employee pursuant to Sections 5.1, 5.2 and 5.3, which shall survive
termination as specified therein) by giving not less than sixty (60) days' prior
written notice of such termination to Employer.
4.3 EFFECT OF TERMINATION ON STOCK OPTIONS. In the event of
any termination of this Agreement and the Employment Term pursuant to Section
4.1.2 or Section 4.2.2, all stock options held by Employee that are vested prior
to the effective date of the termination shall be exercisable in accordance with
their terms, and all stock options held by Employee that are not vested prior to
the effective date of the termination shall lapse and be void. All stock options
granted to Employee shall provide (through amendment or otherwise) that, in the
event of any termination of Employee's employment pursuant to Section 4.1.1 or
Section 4.2.1, then, in addition to any other rights of Employee hereunder, all
such options shall become fully vested and shall be exercisable in accordance
with their respective terms upon such a termination for a minimum period of
ninety (90) days immediately following the date of termination.
5. COVENANT NOT TO COMPETE; NON-DISCLOSURE; NON-SOLICITATION.
5.1 COVENANT NOT TO COMPETE. Employee acknowledges that
Employer's business is built upon the confidence of its customers, suppliers,
employees, and the general public, and that Employee will acquire confidential
knowledge that should not be divulged or used for his own benefit. Employee
covenants and agrees that during the term hereof, and in the event of any
termination of Employee's employment pursuant to Sections 4.1.2 or 4.2.2 for a
period of one year following the termination of his employment under this
Agreement, he will not, without the prior written consent of Employer, engage
in, own, manage, operate, control, or participate in any food service business
that conducts or franchises activities which are the same as or substantially
similar to the restaurant concepts and operations of Employer determined as of
the date on which Employee's employment hereunder terminated) as an employer,
employee, principal, partner, director, agent, or otherwise, directly or
indirectly, anywhere in the United States of America; provided, however, that
Employee may own, manage, operate, or control the
10
food service businesses owned by Employee on the date hereof, as identified on
Exhibit A attached hereto.
Employee understands and acknowledges that his violation of
this covenant not to compete would cause irreparable harm to Employer, and
Employer would be entitled to an injunction by any court of competent
jurisdiction enjoining and restraining Employee from any employment, service, or
other act prohibited by this Agreement. Employee and Employer recognize and
acknowledge that the scope, area and time limitations contained in this
Agreement are reasonable. In addition, Employee and Employer recognize and
acknowledge that the scope, area and time limitations are properly required for
the protection of the business interests of Employer due to Employee's status
and reputation in the industry and the knowledge to be acquired by Employee
through his association with Employer's business and the public's close
identification of Employee with Employer and Employer with Employee.
The parties agree that nothing in this Agreement shall be
construed as prohibiting Employer from pursuing any other remedies available to
it for any breach or threatened breach of this covenant not to compete,
including, without limitation, the recovery of damages from Employee or any
other person or entity acting in concert with Employee. Employee also agrees
that, in the event he breaches this covenant not to compete, Employee will pay
reasonable attorneys' fees and expenses incurred by Employer in enforcing this
covenant not to compete and that the one (1) year period of time during which
Employee shall be restricted from certain activities hereunder shall be extended
for a period of time equal to any period(s) of time during which Employee
engages in any conduct that violates this Section 5.1, the purpose of this
provision being to secure for the benefit of Employer the entire period of time
being bargained for by Employer for the restriction upon Employee's activities.
Employee acknowledges and understands that, as consideration for his execution
of this Agreement and his agreement with the terms of this covenant not to
compete, Employee will receive employment by Employer's agreement to employ
Employee pursuant to this Agreement. If any part of this covenant not to compete
is found to be unreasonable, then, it may be amended by appropriate order of a
court of competent jurisdiction to the extent deemed necessary.
5.2 NON-DISCLOSURE OF INFORMATION. Employee recognizes and
acknowledges that, as a result of his employment by Employer, he will become
familiar with and acquire knowledge of confidential information and certain
trade secrets that are valuable, special, and unique assets of Employer.
Employee agrees that any such confidential information and trade secrets are the
property of Employer. Therefore, Employee agrees that, for and during the entire
Employment Term, any such confidential information and trade secrets shall be
considered to be proprietary to Employer and kept as the private records of
Employer and will not be divulged to any firm, individual, or institution except
pursuant to and within the course and scope of
11
Employee's employment hereunder. Further, upon termination of Employee's
employment, the Employment Term and/or this Agreement for any reason whatsoever,
Employee agrees that he will, for a period of two (2) years after such date,
continue to treat as private and proprietary to Employer any such confidential
information and trade secrets and will not, for a period of two years after such
date, release any such confidential information and trade secrets to any person,
firm, or institution, or use them to the detriment of Employer. The parties
agree that nothing in this Agreement shall be construed as prohibiting Employer
from pursing any remedies available to it for any breach or threatened breach of
this Section 5.2, including, without limitation, the recovery of damages from
Employee or any person or entity acting in concert with Employee.
5.3 NON-SOLICITATION. Employee recognizes and acknowledges
that, as a result of his employment by Employer, he will become familiar with
and acquire knowledge of confidential information and certain other information
regarding Employees of Employer. Therefore, Employee agrees that, during the
term hereof, and for a period of two (2) years from the date of termination of
Employee's employment, the Employment Term and/or this Agreement, whichever is
later, Employee shall not encourage, solicit or otherwise attempt to persuade
any person in the employment of Employer to end his/her employment with
Employer. The parties agree that nothing in this Agreement shall be construed as
prohibiting Employer from pursing any remedies available to it for any breach or
threatened breach of this Section 5.3, including, without limitation, the
recovery of damages from Employee or any person or entity acting in concert with
Employee. Employer shall receive injunctive relief without the necessity of
posting bond or other security, such as bond or other security being hereby
waived by Employee.
6. DEATH OR DISABILITY OF EMPLOYEE.
6.1 DEATH OF EMPLOYEE. In the event Employee dies during the
Employment Term, this Agreement and the Employment Term shall terminate upon
Employee's death. Employee's estate shall be entitled only to any Base Salary
earned but not paid plus any bonus accrued by Employer for Employee through the
date of death, plus an amount equal to the Base Salary and bonus paid or payable
on Employee's behalf for the twelve months of Employer immediately prior to the
month in which Employee's death occurred. Such payment shall be paid in lump sum
to Employee's estate within ninety (90) days after Employee's death.
6.2 DISABILITY OF EMPLOYEE. Employer has disability insurance
insuring its officers, and Employee is included under such disability insurance.
In the event of the Disability (as hereinafter defined) of Employee, this
Agreement and the Employment Term shall terminate. Upon a termination resulting
from the Disability of Employee, Employee shall be entitled to receive (i) any
Base Salary earned but not paid through the date that Employee becomes eligible
12
for disability payments under such disability insurance, and (ii) an amount
equal to the Base Salary and bonus received by Employee in the last twelve
months of Employer immediately prior to the month in which such Disability of
Employee occurs which amount shall be payable, at the option of Employee, in a
lump sum payment or in equal installments paid in accordance with the general
payroll policies of Employer over a period not to exceed three (3) years from
the effective date of termination due to the Disability of Employee; provided,
however, that Employee shall not be entitled to any payments under this Section
6.2 in the event this Agreement is terminated pursuant to Section 4.1.2
regardless of whether the "cause" for which this Agreement is terminated
pursuant to Section 4.1.2 also may constitute a Disability. For purposes of this
Agreement, a "Disability" of Employee shall occur if (i) Employee suffers any
mental or physical condition that materially impairs Employee's ability to
perform the essential functions of his duties hereunder for a period of 180
consecutive days, and (ii) thereafter, Employee, within fifteen (15) days after
Employee receives written notice from Employer requesting that Employee resume
his duties hereunder, is unable or refuses to do so.
7. GENERAL PROVISIONS.
7.1 INDEMNIFICATION. Employer shall indemnify and hold
harmless Employee to the maximum extent permitted by Tennessee law with respect
to all claims, demands, actions, proceedings, investigations, damages, costs,
and expenses (including without limitation reasonable attorneys' fees) by reason
of the fact that he is or was a director or officer of Employer or any of its
subsidiaries. Further, Employer shall, to the maximum extent permitted by
Tennessee law, pay any and all expenses (including without limitation reasonable
attorneys' fees and disbursements, court costs and expert witness fees) incurred
by Employee in defending any claim, demand, action, proceeding or investigation
arising by reason of the fact that Employee is or was an officer or director of
Employer or any of its subsidiaries. In addition, Employer shall obtain and
maintain directors and officers liability insurance on behalf of Employee which
is comparable in amount and coverage to the director and officer liability
insurance maintained by similarly-situated companies. In the event it is
necessary for the Employer or its shareholders to take any action in order for
Employee to receive the maximum benefit of this provision, the Employer will
make a good faith effort to take such action and to secure the approval of its
shareholders, in the event such approval is required.
7.2 NO MITIGATION. Except as expressly provided to the
contrary herein, Employee shall not be required to mitigate damages or the
amount of any payment provided for under this Agreement by seeking other
employment or otherwise, nor shall the amount of any payment provided for under
this Agreement be reduced by any compensation earned by Employee as a result of
employment by another employer after Employee's termination or resignation.
13
7.3 NOTICES. Any notices to be given hereunder by either party
to the other may be effected by personal delivery in writing or by mail,
registered or certified, postage prepaid with return receipt requested. Mailed
notices shall be addressed to the parties at the addresses appearing in the
introductory paragraph of this Agreement (to the attention of the Secretary in
the case of notices to Employer), but each party may change such address by
written notice in accordance with this Section 7.3. Notices delivered personally
shall be deemed communicated at the time of actual receipt; mailed notices shall
be deemed communicated as of the third day following deposit in the United
States Mail.
7.4 ENTIRE AGREEMENT. This Agreement supersedes any and all
other agreements, either oral or in writing, between the parties hereto with
respect to the employment of Employee by Employer and contains all of the
covenants and agreements between the parties with respect to such employment in
any manner whatsoever. Each party to this Agreement acknowledges that no
representations, inducements, promises, or agreements, orally or otherwise, have
been made by any party, or anyone acting on behalf of any party, which are not
embodied herein and that no other agreement shall be valid or binding unless in
writing and signed by the party against whom enforcement of such agreement is
sought. Any modification of this Agreement will be effective only if it is in
writing signed by the party against whom enforcement of such modification is
sought.
7.5 PARTIAL INVALIDITY. If any provision in this Agreement is
held by a court of competent jurisdiction to be invalid, void, or unenforceable,
the remaining provisions shall nevertheless continue in full force without being
impaired or invalidated in any way.
7.6 LAW GOVERNING AGREEMENT. This Agreement shall be governed
by and construed in accordance with the laws of the State of Tennessee.
7.7 WAIVER OF JURY TRIAL. Employer and Employee hereby
expressly waive any right to a trial by jury in any action or proceeding to
enforce or defend any rights under this Agreement, and agree that any such
action or proceeding shall be tried before a court and not a jury. Employee and
Employer hereby agree that any action or proceeding to enforce any claim arising
out of this Agreement shall be brought and maintained in any state or federal
court having subject matter jurisdiction and located in Nashville, Tennessee.
Employee irrevocably waives, to the fullest extent permitted by law, any
objection that he may have or hereafter have to the laying of the venue of any
such action or proceeding brought in any court located in Nashville, Tennessee,
and any claim that any such action or proceeding brought in such a court has
been brought in an inconvenient forum.
14
7.8 MISCELLANEOUS. Failure or delay of either party to insist
upon compliance with any provision hereof will not operate as and is not to be
construed to be a waiver or amendment of the provision or the right of the
aggrieved party to insist upon compliance with such provision or to take
remedial steps to recover damages or other relief for noncompliance. Any express
waiver of any provision of this Agreement will not operate and is not to be
construed as a waiver of any subsequent breach, irrespective of whether
occurring under similar or dissimilar circumstances. Employee acknowledges and
represents that the services to be rendered by him are unique and personal.
Accordingly, Employee may not assign any of his rights or delegate any of his
duties or obligations under this Agreement. The rights and obligations of
Employer under this Agreement shall inure to the benefit of and shall be binding
upon the successors and assigns of Employer.
[THIS SPACE LEFT BLANK INTENTIONALLY]
15
IN WITNESS WHEREOF, Employee has hereunto affixed his hand and Employer
has caused this Agreement to be executed by its duly authorized officer as of
the day and year first above written.
EMPLOYEE: EMPLOYER:
--------- ---------
/s/ J. Xxxxxxx Xxxxxx SHONEY'S, INC.
---------------------
J. Xxxxxxx Xxxxxx
By: /s/ Xxxxxx X. Xxxxxx
-------------------------------
Name: Xxxxxx X. Xxxxxx
Title: Chair of Human Resources
and Compensation
Committee of the Board
of Directors
