Exhibit 10.4
SEPARATION AGREEMENT
The parties to this Agreement (the "Agreement"), entered into
this 2nd day of June 2000 are Xxxx X. Xxxxxxx ("Employee") and U.S. Franchise
Systems, Inc. (the "Company").
The Company, SDI, Inc., HSA Properties, Inc. and Meridian
Associates, L.P., have entered into a Recapitalization Agreement dated as of
June 2, 2000 (the "Recapitalization Agreement"), contemplating, among other
things, an investment by the Investors in new Preferred Stock of the Company and
an offer by the Company to purchase shares of its Common Stock.
Employee and the Company are parties to (a) the Employment
Agreement made as of October 1, 1995, as amended by the Amendment to Employment
Agreement made as of January 15, 1997 (as amended, the "Employment Agreement")
and (b) an Indemnification Agreement dated as of November ___, 1996 (the
"Indemnification Agreement"). Subject to the occurrence of the Closing Date, the
parties have agreed that Employee's employment with the Company shall end on the
terms and conditions set forth herein.
In consideration of the promises, mutual covenants and
agreements contained in this Agreement, Employee and the Company agree as
follows:
1. Capitalized words used in this Agreement as defined terms
shall have the meanings given to them in the Recapitalization Agreement, unless
otherwise defined herein.
2. Notwithstanding any of the provisions contained herein, the
Employee's obligations and resignations and releases in favor of the Company
stated in this Agreement, and the Company's obligations and releases in favor of
Employee as stated in this Agreement, shall cease to be effective if: (a) the
Offer shall have expired in accordance with its terms without the acceptance for
purchase of at least 3,000,000 Shares, (b) the Offer shall have been terminated
or withdrawn for any reason (other than a breach of any of Employee's
obligations to the Company and/or the Investor Group), (c) the Recapitalization
Agreement is earlier terminated for any reason other than a breach of any of
Employee's obligations to the Company and/or the Investor Group) in accordance
with Article 8 thereof or otherwise, (d) the Offer shall have been amended or
otherwise modified in any material respect (other than the extension of the time
for tenders of Shares), including, without limitation, to reduce the
number of Shares which the Company is offering to purchase or the price at which
the Company will purchase Shares pursuant thereto, or (e) the Restricted Stock
shall not have fully vested (and no longer be subject to forfeiture) immediately
before the Closing Date (but subject to the Closing).
3. Employee's employment pursuant to the Employment Agreement
shall end effective as of the close of business sixty (60) days after the
Closing Date (the "Ending Date"). From and after the Closing Date, Employee
shall have no further authority to act as an officer or agent of the Company or
otherwise bind the Company with respect to any obligation or undertaking, except
to the extent expressly authorized by the Company's Chief Executive Officer
after the Closing Date. Employee shall resign from any and all offices and
positions he holds with the Company effective as of the Ending Date (except with
respect to his position as a director, which resignation shall be effective as
of the Closing Date). The Employment Agreement shall continue in effect through
the Ending Date and Employee shall be entitled through such date to all salary,
bonuses, expense reimbursement, property, medical insurance, dental insurance,
life insurance, and other employment related benefits (other than severance,
holiday pay, vacation pay, stock options and other compensation and benefits on
or after the Ending Date by reason of the termination of Employee's employment
or other events) provided for in the Employment Agreement through the Ending
Date. If Employee resigns from the Company for any reason on or after the
Closing Date and prior to the Ending Date, he shall nevertheless be entitled to
receive all of the payments and other rights provided for on Schedule A (except
that the payments provided in the preceding sentence shall be through the
effective date of his resignation). For the purposes of calculating any bonus
that accrues based on the number of franchises signed during any calendar
quarter, Employee shall be entitled to the pro rata portion, calculated on a
daily basis, based on the amount of the bonus the Employee would be entitled to
if such Employee had remained employed by the Company for the full calendar
quarter.
4. After the Ending Date, the Company shall provide Employee
with such compensation, payments and benefits as are described on Schedule A,
incorporated by reference herein. Employee acknowledges and agrees that the
payments and benefits specified in this Agreement are in full and complete
satisfaction of any and all obligations of the Company to Employee on and after
the Ending Date, for salary, severance pay, bonuses, expense reimbursement,
property, holiday pay, vacation pay, stock options, medical insurance, dental
insurance, life insurance, and other employment - related benefits to which
Employee might otherwise be entitled. Employee acknowledges that a portion of
the payments and benefits may be subject to any and all applicable withholding
and other employment taxes.
5. Notwithstanding any other provision of this Agreement,
Employee, and his beneficiaries and dependents as applicable, shall retain his
entitlement to: (a) any and all benefits to which he is entitled under the terms
of any plan maintained or contributed to by the Company which is qualified under
Section 401(a) of the Internal Revenue Code of 1986, as amended, (b) any
continuation of health or medical coverage at the Employee's, beneficiary's or
dependent's expense, to the extent required by the relevant provisions of the
Consolidated
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Omnibus Budget Reconciliation Act of 1985, (c) the rights to which Employee is
entitled as of the Ending Date under any vested options not yet exercised under
the Company's Amended and Restated 1996 Stock Option Plan or with respect to any
Shares then owned by Employee, and (d) the indemnification rights (and rights to
maintenance of directors' and officers' insurance) to which Employee is entitled
as a director or an officer of the Company or its Affiliates with respect to his
services as such prior to the Ending Date to the fullest extent provided in the
Company's certificate of incorporation, bylaws, Article 7 of the
Recapitalization Agreement, the Indemnification Agreement, or Section 10 of the
Employment Agreement, each as in effect as of the date hereof. The Company
confirms that the rights of Employee under clause (d) of this Section 5 shall
extend to the Shareholder Litigation and any related lawsuits or similar
litigation in accordance with the terms and conditions of such rights.
6. Employee agrees to turn over to the Company on the Ending
Date all confidential information, materials and tangible personal property of
the Company, which are used in or pertain to the business of the Company, in
each case that are within his possession or control on that date, it being
understood that Employee shall not be precluded from retaining copies of
information or materials that reasonably relate to Employee's compensation and
benefits and other contractual rights or that Employee may reasonably require
for personal tax purposes or for litigation purposes.
7. After the Closing Date and until the Ending Date, Employee
shall(a) continue to serve the Company in pursuit of an orderly transition of
his duties, (b) make himself available, upon the request of the Company, to
render services to the Company relevant to the transition of responsibilities of
Employee to other employees of the Company and (c) receive compensation as
provided in this Agreement.
8. EFFECTIVE ON THE CLOSING DATE, EMPLOYEE HEREBY RELEASES,
FOREVER DISCHARGES AND COVENANTS NOT TO XXX THE COMPANY, ANY PREDECESSOR OR
SUCCESSOR OF THE COMPANY, AND ANY AND ALL OF THEIR RESPECTIVE PAST OR PRESENT
OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS, AND EMPLOYEES (ALL COLLECTIVELY, THE
"RELEASED PARTIES"), FROM ANY AND ALL MANNER OF ACTIONS, CAUSES OF ACTION,
DEMANDS, CLAIMS, AGREEMENTS, PROMISES, DEBTS, LAWSUITS, LIABILITIES, RIGHTS,
CONTROVERSIES, COSTS, EXPENSES AND FEES WHATEVER WITH RESPECT TO THE EMPLOYMENT
AGREEMENT (COLLECTIVELY, "EMPLOYEE CLAIMS"), WHETHER ARISING IN CONTRACT, TORT
OR ANY OTHER THEORY OF ACTION, WHETHER ARISING IN LAW OR EQUITY, WHETHER KNOWN
OR UNKNOWN, XXXXXX OR INCHOATE, MATURED OR UNMATURED, CONTINGENT OR FIXED,
LIQUIDATED OR UNLIQUIDATED, ACCRUED OR UNACCRUED, ASSERTED OR UNASSERTED, FROM
THE BEGINNING OF TIME UP TO THE CLOSING DATE, EXCEPT FOR, IN EACH CASE, THOSE
OBLIGATIONS OF THE COMPANY (a) CREATED BY OR ARISING OUT OF THIS AGREEMENT, OR
TO THE EXTENT ARISING ON OR AFTER THE CLOSING DATE AND PRIOR TO THE ENDING DATE,
CREATED OR ARISING OUT OF THE
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EMPLOYMENT AGREEMENT (OTHER THAN RIGHTS TO COMPENSATION AND BENEFITS ON OR AFTER
THE ENDING DATE BY REASON OF THE TERMINATION OF EMPLOYEE'S EMPLOYMENT OR OTHER
EVENTS, WHICH EMPLOYEE IS RELEASING), (b) TO WHICH EMPLOYEE HAS RETAINED
ENTITLEMENT UNDER SECTION 5 OF THIS AGREEMENT, CREATED BY OR ARISING OUT OF
SECTION 10 OF THE EMPLOYMENT AGREEMENT OR THE INDEMNIFICATION AGREEMENT OR (c)
FOR SALARY AND BENEFITS ACCRUED UNDER THE EMPLOYMENT AGREEMENT AS OF THE
TERMINATION DATE (OTHER THAN RIGHTS TO COMPENSATION AND BENEFITS ON OR AFTER THE
ENDING DATE BY REASON OF THE TERMINATION OF EMPLOYEE'S EMPLOYMENT OR OTHER
EVENTS, WHICH EMPLOYEE IS RELEASING). EMPLOYEE EXPRESSLY WAIVES THE BENEFIT OF
ANY STATUTE OR RULE OF LAW WHICH, IF APPLIED TO THIS AGREEMENT, WOULD OTHERWISE
PRECLUDE FROM ITS BINDING EFFECT ANY EMPLOYEE CLAIM AGAINST ANY RELEASED PARTY
NOT NOW KNOWN BY EMPLOYEE TO EXIST. EXCEPT AS NECESSARY FOR EMPLOYEE TO ENFORCE
THIS AGREEMENT, THIS AGREEMENT IS INTENDED TO BE A SPECIAL RELEASE AND A
COVENANT NOT TO XXX THAT EXTINGUISHES ALL EMPLOYEE CLAIMS AND PRECLUDES ANY
ATTEMPT BY EMPLOYEE TO INITIATE ANY LITIGATION AGAINST ANY RELEASED PARTY BASED
ON EMPLOYEES CLAIMS. IF EMPLOYEE COMMENCES OR CONTINUES ANY EMPLOYEE CLAIM IN
VIOLATION OF THIS AGREEMENT, THE RELEASED PARTY SHALL BE ENTITLED TO ASSERT THIS
AGREEMENT AS A BAR TO SUCH ACTION OR PROCEEDING AND SHALL BE ENTITLED TO RECOVER
ITS ATTORNEYS' FEES AND COSTS OF LITIGATION FROM THE PARTY COMMENCING OR
CONTINUING THE EMPLOYEE CLAIM, INCLUDING REASONABLE COMPENSATION FOR THE
SERVICES OF THE INTERNAL PERSONNEL OF THE RELEASED PARTY. EMPLOYEE IS NOT,
HOWEVER, WAIVING ANY RIGHT OR CLAIM THAT MAY ARISE AFTER THE DATE THIS AGREEMENT
IS EXECUTED.
9. EFFECTIVE ON THE CLOSING DATE, THE COMPANY HEREBY RELEASES,
FOREVER DISCHARGES AND COVENANTS NOT TO XXX EMPLOYEE, FROM ANY AND ALL MANNER OF
ACTIONS, CAUSES OF ACTION, DEMANDS, CLAIMS, AGREEMENTS, PROMISES, DEBTS,
LAWSUITS, LIABILITIES, RIGHTS, DUES, CONTROVERSIES, COSTS, EXPENSES AND FEES
WHATEVER, WITH RESPECT TO THE EMPLOYMENT AGREEMENT OR EMPLOYEE'S SERVICE AS AN
EMPLOYEE, DIRECTOR OR OFFICER OF THE COMPANY (COLLECTIVELY, "COMPANY CLAIMS"),
WHETHER ARISING IN CONTRACT, TORT OR ANY OTHER THEORY OF ACTION, WHETHER ARISING
IN LAW OR EQUITY, WHETHER KNOWN OR UNKNOWN, XXXXXX OR INCHOATE, MATURED OR
UNMATURED, CONTINGENT OR FIXED, LIQUIDATED OR UNLIQUIDATED, ACCRUED OR
UNACCRUED, ASSERTED OR UNASSERTED, FROM THE BEGINNING OF TIME UP TO THE CLOSING
DATE, EXCEPT FOR, IN EACH CASE, THOSE OBLIGATIONS OF EMPLOYEE (a) CREATED BY OR
ARISING OUT OF THIS AGREEMENT OR TO THE EXTENT ARISING ON OR PRIOR TO THE ENDING
DATE, CREATED OR ARISING
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OUT OF THE EMPLOYMENT AGREEMENT, (b) THOSE OBLIGATIONS ARISING UNDER SECTION 7
OF THE EMPLOYMENT AGREEMENT AND SECTION 9 OF THE EMPLOYMENT AGREEMENT TO THE
EXTENT IT RELATES TO SECTION 7 OF THE EMPLOYMENT AGREEMENT, (c) ANY ACT OR
OMISSION OF EMPLOYEE INVOLVING FRAUD, BREACH OF DUTY OF LOYALTY, OR ANY OTHER
MATTER FOR WHICH HE MAY BE HELD LIABLE TO STOCKHOLDERS OF THE COMPANY OR LIABLE
TO THE COMPANY IN A STOCKHOLDER DERIVATIVE CLAIM, (d) ANY ACT OR OMISSION NOT
TAKEN OR MADE IN GOOD FAITH AND IN A MANNER EMPLOYEE REASONABLY BELIEVES TO BE
IN OR NOT OPPOSED TO THE BEST INTERESTS OF THE COMPANY, OR (e) ANY CLAIM THE
RELEASE OF WHICH BY THE COMPANY WOULD IMPAIR THE RIGHTS OF THE COMPANY OR ITS
DIRECTORS AND OFFICERS UNDER THE COMPANY'S DIRECTORS' AND OFFICERS' INSURANCE.
THE COMPANY EXPRESSLY WAIVES THE EMPLOYEE COVENANT NOT TO COMPETE IN SECTION
8(b) (1) OF THE EMPLOYMENT AGREEMENT. THE COMPANY EXPRESSLY WAIVES THE BENEFIT
OF ANY STATUTE OR RULE OF LAW WHICH, IF APPLIED TO THIS AGREEMENT, WOULD
OTHERWISE PRECLUDE FROM ITS BINDING EFFECT ANY COMPANY CLAIM AGAINST EMPLOYEE
NOT NOW KNOWN BY THE COMPANY TO EXIST. EXCEPT AS NECESSARY FOR THE COMPANY TO
ENFORCE THIS AGREEMENT, THIS AGREEMENT IS INTENDED TO BE A SPECIAL RELEASE AND A
COVENANT NOT TO XXX THAT EXTINGUISHES ALL COMPANY CLAIMS AND PRECLUDES ANY
ATTEMPT BY THE COMPANY TO INITIATE ANY LITIGATION AGAINST EMPLOYEE BASED UPON
COMPANY CLAIMS. IF THE COMPANY COMMENCES OR CONTINUES ANY COMPANY CLAIM IN
VIOLATION OF THIS AGREEMENT, EMPLOYEE SHALL BE ENTITLED TO ASSERT THIS AGREEMENT
AS A BAR TO SUCH ACTION OR PROCEEDING AND SHALL BE ENTITLED TO RECOVER HIS
ATTORNEYS' FEES AND COSTS OF LITIGATION FROM THE PARTY COMMENCING OR CONTINUING
THE COMPANY CLAIM. THE COMPANY IS NOT, HOWEVER, WAIVING ANY RIGHT OR CLAIM THAT
MAY ARISE AFTER THE DATE THIS AGREEMENT IS EXECUTED.
10. Employee represents and warrants that Employee has not
assigned or transferred, or purported to assign or transfer, to any person or
entity, any Employee Claim or any portion thereof or interest therein.
11. Any notice provided for in this Agreement shall be in
writing and shall be either personally delivered, or mailed first class
certified mail (postage prepaid and return receipt requested) or sent by
reputable overnight courier service (charges prepaid) to any other recipient at
the address indicated on the signature pages hereof, or at such address or to
the attention of such other person as the recipient party has specified by prior
written notice to the sending party. Notices will be deemed to have been given
hereunder when delivered personally, when received if sent by U.S. mail and one
day after deposit with a reputable overnight courier service.
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12. This Agreement, together with the other agreements dated
the date hereof to which Employee is a party relating to the transactions
contemplated by the Recapitalization Agreement, shall serve as the entire
agreement of the parties concerning the subject matter of this Agreement and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way.
13. Each party agrees that such party shall not make or
publish any statement (orally or in writing), or instigate or assist or
participate in the making or publication of any statement that would libel,
slander, or disparage (whether or not such disparagement legally constitutes
libel or slander) or expose to contempt or ridicule the other party. For
purposes of the preceding sentence, the Company shall be deemed to have made
(and shall be deemed to be responsible for) all statements made by its Chief
Executive Officer or its Chief Operating Officer or any other authorized officer
or agent speaking on behalf of the Company in the capacity of an authorized
representative or any authorized officer or agent of Meridian, HSA Properties or
SDI speaking on their behalf in the capacity of an authorized representative.
The provisions of this Section 13 shall not apply to any statement made in
connection with any legal or administrative proceeding or otherwise required by
law.
14. This Agreement shall be binding upon and inure to the
benefit of the respective successors, heirs, assigns, administrators, executors
and legal representatives of the parties and other Persons described in this
Agreement.
15. This Agreement shall be deemed to have been executed and
delivered within the State of Georgia and the rights and obligations of the
parties shall be construed and enforced in accordance with, and governed by, the
laws of the State of Georgia without regard to that state's rules regarding
conflict of laws. The language of all parts of this Agreement shall in all cases
be construed as a whole, according to its fair meaning and not strictly for or
against any of the parties.
16. The parties agree that any dispute relating to this
Agreement or Employee's employment with the Company or the termination thereof
shall be submitted by the parties to, and decided by, the courts in Atlanta,
Georgia.
17. In the event that either party shall initiate legal action
to enforce the terms and conditions of this Agreement, in addition to any other
legal or equitable relief to which the prevailing party in such action may be
entitled, the prevailing party in such action shall be entitled to recover from
the other party its legal fees and other expenses reasonably incurred in
connection with such action; in the event that a party shall prevail as to some
but not all matters at issue in such action, each party shall be entitled to a
recovery of its or his legal fees and other expenses reasonably incurred with
respect to the matters as to which such party prevailed, as shall be determined
by the court upon application of any party.
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18. The remedy for a breach of this Agreement shall be limited
to an action for damages, and no party shall assert as a right or remedy for
breach of any provision of this Agreement, the validity or unenforceability of
any other provision of this Agreement.
19. EMPLOYEE HAS BEEN ADVISED AND ENCOURAGED BY THE COMPANY TO
CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT. EMPLOYEE AFFIRMS THAT HE
HAS CAREFULLY READ AND FULLY UNDERSTANDS THIS AGREEMENT, HAS HAD SUFFICIENT TIME
TO CONSIDER IT, HAS HAD AN OPPORTUNITY TO ASK QUESTIONS AND HAVE IT EXPLAINED,
AND IS ENTERING INTO THIS AGREEMENT FREELY AND VOLUNTARILY, WITH AN
UNDERSTANDING THAT THE GENERAL RELEASE WILL HAVE THE EFFECT OF WAIVING ANY
ACTION OR RECOVERY HE MIGHT PURSUE FOR ANY CLAIMS ARISING ON OR PRIOR TO THE
DATE OF THE EXECUTION OF THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have executed this Agreement
on this date or dates set forth below.
U.S. FRANCHISE SYSTEMS, INC.
/s/ Xxxx Xxxxxxx
--------------------------- By: /s/ Xxxxxxx X. Xxxxxxx
Xxxx Xxxxxxx ---------------------------------
Name: Xxxxxxx X. Xxxxxxx
------------------------------
Its: VP/General Counsel
-------------------------------
[Address] 00 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Subscribed and sworn to before Subscribed and sworn to before
me this 2nd day of me this 2nd day of
June 2000. June 2000.
/s/ Hilary Xxx Xxxx /s/ Hilary Xxx Xxxx
-------------------------- --------------------------------
Notary Public Notary Public
SCHEDULE A
1. Medical insurance plan coverage for Employee and his dependents continued
at the cost of the Company for a period of 16 months from and after the
Ending Date; provided, however, that such coverage shall cease if
Employee becomes eligible for similar coverage provided by another
employer.
2. A cash payment in the amount of $350,000.00 payable on the Ending Date.
3. Reimbursement for any and all documented employee business expenses not
yet reimbursed as of the Ending Date, subject to the Company's normal
reimbursement policies.
4. Employee shall be entitled to request and receive from the Company at the
Company's expense office space determined by the Company at the Company's
headquarters, use of phone services and customary office support services
for a period of 30 days following the Ending Date.
5. Reimbursement of the reasonable out-of-pocket costs of travel relating to
pursuit of other employment opportunities for a period beginning on the
date of this Agreement and ending 60 days after the Ending Date, up to a
maximum aggregate reimbursement of $15,000.00.
6. Reimbursement of legal fees in connection with this Agreement up to a
maximum amount of $10,000.00.
7 Reimbursement of relocation expenses incurred in connection with one
relocation incident to his next employment position to the extent not
reimbursed by such employer, up to a maximum reimbursement of $15,000.00.
8. The Company shall assign to Employee, as of the Closing Date, the
Company's interest in the split-dollar life insurance insuring Employee's
life and the Company shall not be obligated for any further payments with
respect thereto, it being understood that neither Employee, his estate or
beneficiaries shall be required to reimburse the Company (out of the
proceeds of such life insurance or otherwise) for any premiums paid by
the Company prior to the Ending Date.
