CHANGE IN CONTROL BENEFITS AGREEMENT
EXHIBIT
10.31
This
Change in Control Benefits Agreement (“Agreement”) is made and entered into as
of November 7, 2007, by and between The Steak N Shake Company, an Indiana
corporation (hereinafter referred to as the “Company”), and Xxxxxxx X. Blade
(hereinafter referred to as “Executive”).
WITNESSETH
WHEREAS,
Executive is an executive officer of the Company and/or its subsidiaries;
and
WHEREAS,
the Company believes that Executive has made and will continue to make valuable
contributions to the productivity and profitability of the Company;
and
WHEREAS,
the Company desires to encourage Executive to continue to make such
contributions and not to seek or accept employment elsewhere; and
WHEREAS,
the Company, therefore, desires to assure Executive of certain benefits in
the
event there is a Change in Control of the Company or in the case of any
termination or significant redefinition of the terms of his employment with
the
Company subsequent to any Change in Control of the Company;
NOW,
THEREFORE, in consideration of the foregoing and of the mutual covenants herein
contained and the mutual benefits herein provided, the Company and Executive
hereby agree as follows:
1. The
term of this Agreement shall be from the date hereof through December 31,
2010; provided, however, that such term shall be automatically extended for
an
additional year each year thereafter unless either party hereto gives written
notice to the other party not to so extend prior to June 30 of the final
year of the Agreement prior to such extension, in which case no further
automatic extension shall occur.
2. As
used in this Agreement, “Change in Control” of the Company means:
(A) The
acquisition, within a 12-month period ending on the date of the most recent
acquisition, by any individual, entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the Securities Exchange Act of 1934,
as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the
meaning of Rule 13d-3 promulgated under the Exchange Act as in effect from
time to time) of fifty percent (50%) or more of the combined voting power of
the
then outstanding voting securities of the Company entitled to vote generally
in
the election of directors; provided, however, that the following acquisitions
shall not constitute an acquisition of control: (i) any
acquisition by a Person who, immediately before the commencement of the 12-month
period, already held beneficial ownership of fifty percent (50%) or more of
that
combined voting power; (ii) any acquisition directly from the Company (excluding an acquisition by virtue of
the exercise of a
conversion privilege), (iii) any acquisition by the Company, (iv) any
acquisition by any employee benefit plan (or related trust) sponsored or
maintained by the Company or any corporation controlled by the Company, or
(v) any acquisition by any corporation pursuant to a reorganization, merger
or consolidation, if, following such reorganization, merger or consolidation,
the conditions described in clauses (i), (ii) and (iii) of
subsection (C) of this definition are satisfied;
(B) The
replacement of a majority of members of the Board of Directors during any
12-month period, by members whose appointment or election is not endorsed by
a
majority of the members of the Board of Directors prior to the date of the
appointment or election;
(C) A
reorganization, merger or consolidation, in each case, unless, following such
reorganization, merger or consolidation, (i) more than sixty percent (60%)
of, respectively, the then outstanding shares of common stock of the corporation
resulting from such reorganization, merger or consolidation and the combined
voting power of the then outstanding voting securities of such corporation
entitled to vote generally in the election of directors is then beneficially
owned, directly or indirectly, by all or substantially all of the individuals
and entities who were the beneficial owners, respectively, of the outstanding
Company common stock and outstanding Company voting securities immediately
prior
to such reorganization, merger or consolidation in substantially the same
proportions as their ownership, immediately prior to such reorganization, merger
or consolidation, of the outstanding Company stock and outstanding Company
voting securities, as the case may be, (ii) no Person (excluding the
Company, any employee benefit plan or related trust of the Company or such
corporation resulting from such reorganization, merger or consolidation and
any
Person beneficially owning, immediately prior to such reorganization, merger
or
consolidation, directly or indirectly, twenty-five percent (25%) or more of
the
outstanding Company common stock or outstanding voting securities, as the case
may be) beneficially owns, directly or indirectly, twenty-five percent (25%)
or
more of, respectively, the then outstanding shares of common stock of the
corporation resulting from such reorganization, merger or consolidation or
the
combined voting power of the then outstanding voting securities of such
corporation entitled to vote generally in the election of directors and
(iii) at least a majority of the members of the board of directors of the
corporation resulting from such reorganization, merger or consolidation were
members of the Incumbent Board at the time of the execution of the initial
agreement providing for such reorganization, merger or
consolidation;
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(D) A
complete liquidation or dissolution of the Company; or
(E) The
sale or other disposition of all or substantially all of the assets of the
Company, other than any of the following dispositions: (i) to a corporation
with
respect to which following such sale or other disposition (1) more than
sixty percent (60%) of, respectively, the then outstanding shares of common
stock of such corporation and the combined voting power of the then outstanding
voting securities of such corporation entitled to vote generally in the election
of directors is then beneficially owned, directly or indirectly, by all or
substantially all of the individuals and entities who were the beneficial
owners, respectively, of the outstanding Company common stock and outstanding
Company voting securities immediately prior to such sale or other disposition
in
substantially the same proportion as their ownership, immediately prior to
such
sale or other disposition, of the outstanding Company common stock and
outstanding Company voting securities, as the case may be, (2) no Person
(excluding the Company and any employee benefit plan or related trust of the
Company or such corporation and any Person beneficially owning, immediately
prior to such sale or other disposition, directly or indirectly, twenty-five
percent (25%) or more of the outstanding Company common stock or outstanding
Company voting securities, as the case may be) beneficially owns, directly
or
indirectly, twenty-five percent (25%) or more of, respectively, the then
outstanding shares of common stock of such corporation and the combined voting
power of the then outstanding voting securities of such corporation entitled
to
vote generally in the election of directors and (3) at least a majority of
the members of the board of directors of such corporation were members of the
Incumbent Board at the time of the execution of the initial agreement or action
of the Board providing for such sale or other disposition of assets of the
Company; (ii) to a shareholder of the Company in exchange for or with
respect to its stock; (iii) to a Person that owns, directly or indirectly,
fifty percent (50%) or more of the total value or voting power of all
outstanding stock of the Company; or (iv) to an entity, at least fifty
percent (50%) or more of the total value or voting power of which is owned,
directly or directly, by the Company or by a Person described in
(iii).
Despite
any other provision of this definition to the contrary, an occurrence shall
not
constitute a Change in Control if it does not constitute a change in the
ownership or effective control, or in the ownership of a substantial portion
of
the assets of, the Company within the meaning of Section 409A(a)(2)(A)(v) of
the
Internal Revenue Code of 1986, as amended (the “Code”) and its interpretive
regulations.
3. The
Company shall provide Executive with the benefits set forth in Section 6 of
this Agreement upon any termination of Executive’s employment by the Company
within twelve (12) months following a Change in Control for any reason except
the following:
(A) Termination
by reason of Executive’s death.
(B) Termination
by reason of Executive’s “disability.” For purposes hereof,
“disability” shall be defined as Executive’s inability by reason of illness or
other physical or mental disability to perform the duties required by his
employment for any consecutive ninety (90) day period.
(C) Termination
for “Cause.” As used in this Agreement, the term “Cause” shall mean
the occurrence of one or more of the following
events: (i) Executive’s conviction for a felony or of any crime
involving moral turpitude; (ii) Executive’s engaging in any fraudulent or
dishonest conduct in his dealings with, or on behalf of, the Company (or its
affiliates); (iii) Executive’s gross or habitual negligence in the
performance of his employment duties for the Company (or its affiliates);
(iv) Executive’s material violation of the Company’s business ethics or
conflict-of-interest policies, as such policies currently exist or as they
may
be amended or implemented during Executive’s employment with the Company; or
(v) Executive’s misuse of alcohol or illegal drugs which interferes with
the performance of Executive’s employment duties for the Company or which
compromises the reputation or goodwill of the Company.
4. Subject
to the procedural conditions prescribed below, the Company shall also provide
Executive with the benefits set forth in Section 6 of this Agreement upon
any voluntary resignation of Executive if any one of the following events occurs
within twelve (12) months following a Change in Control:
(A) A
material diminution in Executive’s base compensation from the level of such base
compensation immediately prior to the Change in Control;
(B) A
material diminution in Executive's authority, duties, or responsibilities from
his authority, duties, or responsibilities immediately prior to the Change
in
Control;
(C) A
material change in the geographic location at which Executive is assigned to
perform his duties and responsibilities on behalf of the Company from such
geographic location immediately prior to the Change in Control;
(D) A
material diminution in the budget over which Executive has authority from such
budget immediately prior to the Change in Control; or
(E) Any
other material breach by the Company of its obligations to Executive under
this
Agreement or any other agreement prescribing the terms and conditions of his
employment.
For
the
Executive to be entitled to benefits because of his resignation following the
occurrence of one of the listed events, each of the following procedural
conditions must be satisfied: (i) within ninety (90) days of the initial
occurrence of the event, the Executive must give written notice to the Company
of such occurrence; (ii) the Company must have failed to remedy that occurrence
within thirty (30) days after receiving such notice, and (iii) the Executive
must resign no later than one hundred eighty (180) days after the initial
occurrence of the event.
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5. Any
termination by Company of Executive’s employment as contemplated by
Section 3 hereof (except subsection 3(A)) or any resignation by
Executive as contemplated by Section 4 hereof shall be communicated by a
written notice to the other party hereto. Any notice given by
Executive in connection with a voluntary resignation pursuant to Section 4
or given by the Company in connection with a termination as to which the Company
believes it is not obligated to provide Executive with benefits set forth in
Section 6 hereof shall indicate the specific provisions of this Agreement
relied upon and shall set forth in reasonable detail the facts and circumstances
claimed to provide a basis for such termination.
6. Subject
to the conditions and exceptions set forth in Section 3 and Section 4
hereof, the following benefits, less any amounts required to be withheld
therefrom under any applicable federal, state or local income tax, other tax,
or
social security laws or similar statutes, shall be paid to
Executive:
(A) On
the next regular payday following such a termination, Executive shall be paid,
at his then-effective salary, for services performed through the date of his
termination. In addition, any earned but unpaid amount of any bonus
or incentive payment (which, for purposes of this Agreement, shall mean that
amount computed in a fashion consistent with the manner in which Executive’s
bonus or incentive plan for the year preceding the year of termination was
computed, if Executive received a bonus or incentive payment during such
preceding year in accordance with a plan or program of the Company, or, if
not,
then the total bonus or incentive payment received by the Executive during
such
preceding year, in either case prorated through the date of termination) shall
be paid to Executive within thirty (30) days following the termination of his
employment.
(B) Within
thirty (30) days following such a termination, Executive shall be paid a lump
sum payment of an amount equal of Executive’s current base salary (which shall
not be lower than the Executive’s base salary on the date of this
Agreement).
(C) Within
thirty (30) days following the last day of any computation period under an
incentive bonus plan or similar plan following such a termination, Executive
shall be paid a lump sum payment equal to any bonus to which Executive would
have been entitled had all requirements for earning the bonus been met,
multiplied by a fraction, the denominator of which will be the number of days
in
any such computation period and the numerator of which shall be the number
of
days during the computation period the Executive was employed by the
Company. By way of example, should the computation period be one
year, during which the Executive worked 75 days before the termination, then
the
fraction would be 75/365.
(D) Should
Executive be provided with the use of an automobile owned or leased by the
Company, Executive shall be entitled to continue to use such automobile on
the
same terms and conditions as he/she did prior to the termination for a period
of
up to sixty (60) days following such termination.
(E) For
up to
twelve (12) months following such a termination, the Company shall reimburse
Executive for any amounts paid by Executive for COBRA insurance continuation
coverage, reduced by an amount equal to the payments Executive made for such
coverage immediately prior to such termination;
(F) At
any time within the first twelve (12) months following such a termination,
the
Company shall, upon request, either pay for directly or reimburse Executive
for
up to $15,000 for outplacement services on Executive’s behalf.
(G) If
as of the date his employment terminates, Executive is a “key employee” within
the meaning of Section 416(i) of the Code, without regard to paragraph 416(i)(5)
thereof, and the Company has stock that is publicly traded on an established
securities market or otherwise, any payment that constitutes deferred
compensation because of employment termination will be suspended until, and
will
be paid to Executive on, the first day of the seventh month following the month
in which Executive’s last day of employment occurs. For purposes of
this Section 6, “deferred compensation” means compensation provided under a
nonqualified deferred compensation plan as defined in, and subject to,
Section 409A of the Code.
7. Should
Executive be employed by Company on the date of any Change in Control of the
Company that occurs on or prior to November 7, 2008 then Company shall pay
to
Executive in a lump sum on the date of the Change in Control or as soon
thereafter as is reasonably practical, an amount equal to 30% of Executive’s
then-current annual salary (the “Salary”) on the date of the Change in
Control. In computing the amount to be paid, the Salary shall not be
less than Executive’s annual salary on the date of this
Agreement. The payment contemplated in this Section 7 shall be
reduced by any tax or other withholdings required by law or elected by
Executive.
8. Executive
acknowledges and agrees that the Company’s payment of the severance compensation
pursuant to Sections 6 and/or 7 of this Agreement shall be deemed to constitute
a full settlement and discharge of any and all obligations of the Company to
Executive arising out of this Agreement, Executive’s employment with the Company
and/or the termination of Executive’s employment with the Company, except for
any vested rights Executive may have under any insurance, stock option or equity
compensation plan or any other employee benefit plans sponsored by the
Company. Executive further acknowledges and agrees that as a
condition to receiving any of the severance compensation pursuant to
Section 6 or 7 of this Agreement, Executive will execute and deliver to the
Company a release agreement in form and substance reasonably satisfactory to
the
Company pursuant to which Executive will release and waive any and all claims
against the Company (and its officers, directors, shareholders, employees and
representatives) arising out of this Agreement, Executive’s employment with the
Company, and/or the termination of Executive’s employment with the Company (as
applicable under the relevant Section above), including without limitation
claims under all federal, state and local laws; provided, however, that such
Release Agreement shall not affect or relinquish (a) any vested rights
Executive may have under any insurance, stock option or equity compensation
plan, or other employee benefit plan sponsored by the Company, (b) any
claims for reimbursement of business expenses incurred prior to the employment
termination date, or (c) any rights to severance compensation under
Section 6 of this Agreement.
9. Executive
is not required to mitigate the amount of benefit payments to be made by the
Company pursuant to this Agreement by seeking other employment or otherwise,
nor
shall the amount of any benefit payments provided for in this Agreement be
reduced by any compensation earned by Executive as a result of employment by
another employer or which might have been earned by Executive had Executive
sought such employment, after the date of termination of his employment with
the
Company or otherwise.
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10. In
order to induce the Company to enter into this Agreement, Executive hereby
agrees as follows:
(A) He
will keep confidential and not improperly divulge for the benefit of any other
party any of the Company’s confidential information and business secrets
including, but not limited to, confidential information and business secrets
relating to such matters as the Company’s finances and
operations. All of the Company’s confidential information and
business secrets shall be the sole and exclusive property of the
Company.
(B) For
a period of one year after Executive’s employment with the Company ceases,
Executive shall not either on his own account or for any other person, firm
or
company solicit or endeavor to cause any employee of the Company to leave his
employment or to induce or attempt to induce any such employee to breach any
employment agreement with the Company.
In
the
event of a breach or threatened breach by Executive of the provisions of this
Section 9, the Company shall be entitled to an injunction restraining
Executive from committing or continuing such breach. Nothing herein
contained shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach including the
recovery of damages from Executive. The covenants of this
Section 9 shall run not only in favor of the Company and its successors and
assigns, but also in favor of its subsidiaries and their respective successors
and assigns and shall survive the termination of this Agreement.
11. Should
Executive die while any amounts are payable to him hereunder, this Agreement
shall inure to the benefit of and be enforceable by Executive’s executors,
administrators, heirs, distributees, devisees and legatees and all amounts
payable hereunder shall be paid in accordance with the terms of this Agreement
to Executive’s devisee, legatee or other designee or if there be no such
designee, to his estate.
12. For
purposes of this Agreement, notices and all other communications provided for
herein shall be in writing and shall be deemed to have been given when delivered
or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed as follows:
If
to
Executive:
If
to the
Company:
The
Steak
N Shake Company
500
Century Building
00
Xxxxx
Xxxxxxxxxxxx Xxxxxx
Xxxxxxxxxxxx,
Xxxxxxx 00000
Attention: Chief
Executive Officer
Copy
to: General Counsel
or
to
such other address as any party may have furnished to the other party in writing
in accordance herewith, except that notices of change of address shall be
effective only upon receipt.
13. The
validity, interpretation, and performance of this Agreement shall be governed
by
the laws of the State of Indiana. The parties agree that all legal
disputes regarding this Agreement will be resolved in Indianapolis, Indiana,
and
irrevocably consent to service of process in such City for such
purpose.
14. No
provision of this Agreement may be modified, waived or discharged unless such
waiver, modification or discharge is agreed to in writing signed by Executive
and the Company. No waiver by any party hereto at any time of any
breach by any other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or any
prior or subsequent time. No agreements or representation, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by any party which are not set forth expressly in this
Agreement.
15. The
invalidity or unenforceability of any provisions of this Agreement shall not
affect the validity or enforceability of any other provision of this Agreement,
which shall remain in full force and effect.
16. This
Agreement may be executed in one or more counterparts, each of which shall
be
deemed an original but all of which together will constitute one and the same
Agreement.
17. This
Agreement is personal in nature and neither of the parties hereto shall, without
the consent of the other, assign or transfer this Agreement or any rights or
obligations hereunder, except as provided in Section 10
above. Without limiting the foregoing, Executive’s right to receive
payments hereunder shall not be assignable or transferable, whether by pledge,
creation of a security interest or otherwise, other than a transfer by will
or
by the laws of descent and distribution as set forth in Section 10 hereof,
and in the event of any attempted assignment or transfer contrary to this
Section 16, the Company shall have no liability to pay any amount so
attempted to be assigned or transferred.
18. Any
benefits payable under this Agreement shall be paid solely from the general
assets of the Company. Neither Executive nor Executive’s beneficiary
shall have interest in any specific assets of the Company under the terms of
this Agreement. This Agreement shall not be considered to create an
escrow account, trust fund or other funding arrangement of any kind or a
fiduciary relationship between Executive and the Company.
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19. This
Agreement shall be interpreted and applied in a manner consistent with any
applicable standards for nonqualified deferred compensation plans established
by
Section 409A of the Code and its interpretive regulations and other regulatory
guidance. To the extent that any terms of this Agreement would
subject Executive to gross income inclusion, interest, or additional tax
pursuant to Section 409A of the Code, those terms are to that extent superseded
by, and shall be adjusted to the minimum extent necessary to satisfy, the
applicable Section 409A of the Code standards.
20. This
Agreement completely supersedes and replaces any other employment agreement
or
other agreement covering the same terms and conditions of this Agreement whether
written or oral, between Company and Executive which was entered into prior
to
the date of this Agreement.
IN
WITNESS WHEREOF, the parties have caused this Agreement to be executed and
delivered as of the day and year first above set forth.
THE
STEAK
N SHAKE COMPANY
|
|
By:
/s/ Xxxx X.
Xxxxxx
|
|
|
Xxxx
X. Xxxxxx, Interim Chief Executive
Officer
|
/s/ Xxxxxxx X.
Blade
Executive
Vice President, Chief Financial and Administrative Officer
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