Page 1
December 3, 1997
PERSONAL AND CONFIDENTIAL
-------------------
Flagstar Corporation
000 Xxxx Xxxx Xxxxxx
Xxxxxxxxxxx, XX 00000
Dear ______________:
This letter agreement between _________________ (the "Executive") and
Flagstar Corporation (the "Company") replaces in its entirety the letter
agreement between the Company and the Executive dated January 15, 1997 (the
"Employment Agreement"); provided, however, the Change of Control and Severance
provisions contained in said prior agreement shall not be revoked, rescinded or
cancelled unless and until a stock option agreement containing terms as
described on Attachment A is signed and returned to the Company by the
Executive. This agreement is entered into as an inducement to the Executive to
continue in the employ of the Company. With respect to the period from and after
Flagstar Corporation's emergence from bankruptcy protection, the "Company" shall
also refer herein to Reorganized Flagstar as such term is used in the Plan of
Reorganization confirmed by the U. S. Bankruptcy Court as of November 7, 1997.
1. Leadership Bonus. In addition to other salary or bonus payments and
benefits to which the Executive is otherwise entitled, the Executive shall be
entitled to receive the following payments (the "Leadership 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
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
December 3, 1997 Page 2
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 Leadership Bonus shall be forfeited upon termination of the Executive's
employment for Cause, as defined herein, or upon the voluntary termination of
employment by the Executive. If the Executive's employment is terminated by the
Company for any reason other than for Cause, the Executive shall be entitled to
receive any unaccrued portion of such Leadership Bonus at the time of payment of
any other Severance Payments set forth in Section 3 hereof and any other
payments payable upon such termination of employment under the Employment
Agreement. For purposes of this letter agreement, "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.
2. Stock Options. Upon the emergence of the Company from bankruptcy
protection and the issuance of new common stock of the Company, the Executive
will be granted stock options in the new common stock in the amounts and on the
vesting schedule set forth on Attachment A. The Executive shall immediately
become one hundred percent vested in, and eligible to exercise, all stock
options that have been granted to him/her by the Company in the event of (a)
his/her actual or constructive termination as described in Section 3 (a) or (b)
below, (b) a dissolution or liquidation of the Company, (c) a sale of all or
substantially all of the Company's assets, (d) a merger or consolidation
involving the Company in which the company is not the surviving corporation, (e)
a merger or consolidation involving the Company in which the Company is the
surviving corporation but the holders of shares of common stock receive
securities of another corporation and/or other property, including cash, or (f)
a tender offer for at least a majority of the outstanding common stock of the
Company.
3. Severance Payment. The Executive shall receive a severance payment
(as described below) if either (a) the Company elects to terminate the
Executive's employment for any reason other than Cause as defined in Section 1
above, or (b) the Company takes an action that reduces the Executive's base
salary, or the Executive no longer has the position or responsibility of the
Company's ______________. If either event described in subsection (a) or (b)
above occurs then
December 3, 1997 Page 3
the Executive shall receive a single lump sum payment equal to
(i) two times the Executive's then current base pay (in no event less than
$__________ in total); plus (ii) an amount (grossed up at a total of forty-five
[45%] percent for federal, state and local income taxes) equal to the Company's
then actual benefit credits for an eighteen (18) month period (the "Severance
Payment"); plus (iii) accrued but unused vacation time. Such Severance Payment
shall be made to Executive within five (5) business days following any such
termination. The Executive will also be entitled to receive career placement
advice and counseling at the Company's expense for a period of eighteen (18)
months. In the event the Executive is terminated during a calendar year for
which an annual bonus is paid by the Company, the annual bonus to which the
Executive would have otherwise been entitled shall be prorated and included as a
part of the Severance Payment, provided the Executive was employed for at least
six (6) months during that year. This prorated bonus payment shall be paid to
the Executive at the same time as payments are made to actively employed bonus
recipients. 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.
4. Subsidiary Guaranties. The Company's payment obligations herein in
respect to the Leadership Bonus and the Severance Payment shall be
unconditionally guaranteed by the Company's subsidiaries, Denny's, Inc., DFO,
Inc., El Pollo Loco, Inc., Xxxxxx'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.
December 3, 1997 Page 4
If you are in agreement with these terms, please sign one copy of this
letter and return it to ________________.
Sincerely,
Xxxxx X. Xxxxxxx
Chairman, Chief Executive Officer
and President
cc:
Agreed and accepted:
________________________________ _________________ ___, 199__
December 3, 1997 Page 5
By authority duly obtained as of the date first above written, the
undersigned, Denny's, Inc., DFO, Inc., El Pollo Loco, Inc., Xxxxxx'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 Leadership 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:
ADDENDUM TO LETTER AGREEMENT
This Addendum To Letter Agreement ("Addendum") is attached to and made
a part of that certain letter agreement dated December 3, 1997 (the "Letter
Agreement") between Flagstar Corporation, a predecessor corporation to Advantica
Restaurant Group, Inc. ("Company") and __________________ (the "Executive").
Unless otherwise defined herein, all capitalized terms used herein shall have
the same meaning as used in the Letter Agreement. In the event of any
December 3, 1997 Page 6
inconsistency between the terms and provisions of this Addendum and the terms
and provisions of the Letter Agreement, the terms and provisions of this
Addendum shall prevail.
Notwithstanding anything to the contrary in the attached Letter
Agreement, and in the event the Company terminates the Executive's employment
for any reason other than for Cause or takes an action that reduces the
Executive's base salary or the Executive no longer has the responsibilities
referenced in the Letter Agreement, the Executive shall receive, in addition to
the severance payments referenced in Section 3 of the Letter Agreement, a single
lump sum severance payment, within five (5) business days of such termination,
in an amount equal to 200% of the Executive's target bonus for the year in which
the termination occurs (provided that the amount of such target bonus shall not
be less than 65% of the Executive's then current base salary).
It is specifically the intent of all parties to the Letter Agreement,
the Addendum and the subsidiary guaranties (the "Subsidiary Guaranties")
referenced in Section 4 of the Letter
December 3, 1997 Page 7
Agreement, that such Subsidiary Guaranties shall also guarantee the additional
severance payment set forth herein.
Advantica Restaurant Group, Inc.
___________________________ By:___________________________
(Executive's Name) Xxxxx X. Xxxxxxx
Its: Chairman, Chief Executive Officer
and President
Denny's, Inc.
By:___________________________
Xxxxxx X. Xxxxxx
Its: Executive Vice President, General
Counsel and Secretary
DFO, Inc.
By:___________________________
Xxxxxx X. Xxxxxx
Its: Executive Vice President, General
Counsel and Secretary
El Pollo Loco, Inc.
By:___________________________
Xxxxxx X. Xxxxxx
Its: Executive Vice President, General
Counsel and Secretary
