MANAGEMENT RETENTION AGREEMENT
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This Agreement is entered into as of the 14th day of June,
2000, by and between Shoney's, Inc. ("Employer"), a Tennessee corporation
with its principal place of business at 1727 Elm Hill Pike, Nashville,
Tennessee 37210 and Raymond D. Schoenbaum ("Executive").
W I T N E S S E T H:
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WHEREAS, the Executive is currently employed by Employer as the
Chairman of the Board of Employer, and Employer and Executive desire to set
forth certain rights and obligations of Employer and Executive in the event
of a change in control of Employer.
NOW, THEREFORE, in consideration of the premises hereof and of the
mutual promises and agreements contained herein, the parties hereto,
intending to be legally bound, hereby agree as follows:
1. Benefits Upon Termination of Employment Following a Change
in Control. If at any time within two years following the occurrence of a
Change in Control (as defined in Section 14 below) (i) the employment of
Executive with Employer is terminated by Employer for any reason other than
Good Cause (as defined in Section 14 below), or (ii) Executive terminates his
or her employment with Employer for Good Reason (as defined in Section 14
below), the following provisions will apply:
(a) Employer shall pay Executive an amount equal to Two
Hundred Percent (200%) of the sum of Executive's Base Salary (as defined in
Section 14 below) and Incentive Plan Payments (as defined in Section 14
below). Such amount will be paid to Executive over the Coverage Period (as
defined in Section 14 below) in equal weekly payments using Employer's
regular payroll periods.
(b) During the Coverage Period, Executive and his or her
spouse and family will continue to be covered by all Welfare Plans (as
defined in Section 14 below), maintained by Employer in which Executive or
his or her spouse or family were participating immediately prior to the date
of Executive's termination as if Executive continued to be an employee of
Employer; provided that, if participation in any one or more of such Welfare
Plans is not possible under the terms thereof, Employer will provide
substantially identical benefits. If, however, Executive obtains employment
with another employer during the Coverage Period, such coverage shall be
provided until the earlier of: (i) the end of the Coverage Period or (ii) the
date on which the Executive and his or her spouse and family can be covered
under the plans of a new employer without being excluded from full coverage
because of any actual pre-existing condition. Nothing contained herein is
intended to in any way limit Executive's rights under COBRA.
(c) All stock options granted to Executive shall be
completely vested.
(d) Employer will pay Executive an amount (the
"Additional Amount") equal to the excise tax under the United States Internal
Revenue Code of 1986, as amended (the "Code"), if any, incurred by Executive
by reason of the payments under this Agreement constituting excess
parachute payments under Section 280G of the Code (or any successor provision
thereof). In addition, Employer will pay Executive an amount equal to all
excise taxes and federal, state and local income taxes incurred by Executive
with respect to receipt of the Additional Amount. All determinations
required to be made under this Section 1, including whether an Additional
Amount is required and the amount of any Additional Amount, will be made by
the independent auditors engaged by Employer immediately prior to the Change
in Control (the "Accounting Firm"), which will provide detailed supporting
calculations to Employer and Executive. In computing taxes, the Accounting
Firm will use the highest marginal federal, state and local income tax rates
applicable to Executive and will assume the full deductibility of state and
local income taxes for purposes of computing federal income tax liability,
unless Executive demonstrates non-entitlement to such a deduction for the
year of payment. The Additional Amount will be paid to Executive at the in
proportion to the and at the times that the other payments under Section 1
are made to Executive.
Compensation under Section 1 hereof is contingent upon Executive's
compliance with Section 4 hereof.
2. SETOFF. With respect to Section 1, no payments or benefits
payable to or with respect to Executive pursuant to this Agreement shall be
reduced or affected by any amount or benefit Executive or his or her spouse
may earn or receive from employment with another employer or from any other
source, except as expressly provided in Section 1(b).
3. DEATH. If Executive dies during the Coverage Period:
(a) All amounts not theretofore paid described in
Section 1(a) shall be paid to his or her estate over the time remaining in
the Coverage Period.
(b) The spouse and family of Executive shall, during the
remainder of the Coverage Period, be covered under all Welfare Plans made
available by Employer to Executive or his or her spouse immediately prior to
the date of Executive's death; provided that, if participation in any one or
more of such plans and arrangements is not possible under the terms thereof,
Employer will provide substantially identical benefits.
Any benefits payable under this Section 3 are in addition to any
other benefit due to Executive or his or her spouse or beneficiaries from
Employer, including, but not limited to, payments under any Incentive Plans.
4. RESTRICTIVE COVENANTS.
(a) Confidential Information. Executive agrees not to
disclose, either during or following termination of his or her employment
hereunder under the circumstances described in Section 1 hereof, to any
person (other than to any person specifically authorized by the Board of
Directors of Employer) any material confidential information concerning the
Employer or any of its Affiliates, including, but not limited to, strategic
plans, contract terms, financial costs, pricing terms, sales data or business
opportunities whether for existing, new or developing businesses.
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(b) Non-Competition. In the event of any termination of
Executive's employment pursuant to Section 1 hereby, Executive covenants and
agrees that, for so long as Executive is receiving payments pursuant to
Section 1. Executive will not engage in, own, manage, operate, control, or
participate in any food service business that conducts or franchises
activities which are the same as or similar to the restaurant concepts and
operations of Employer as an employer, employee, principal, partner,
director, agent, or otherwise, directly or indirectly, anywhere in the United
States of America. This time period shall be extended by any period of
noncompliance with this covenant not to compete.
(c) Enforcement. Executive and the Employer acknowledge
and agree that any of the covenants contained in this Section 4 may be
specifically enforced through injunctive relief but such right to injunctive
relief shall not preclude the Employer from other remedies which may be
available to it.
5. EXECUTIVE ASSIGNMENT. No interest of Executive or his or her
spouse or any other beneficiary under this Agreement, or any right to receive
any payment or distribution hereunder, shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other
alienation or encumbrance of any kind, nor may such interest or right to
receive a payment or distribution be taken, voluntarily or involuntarily, for
the satisfaction of the obligations or debts of, or other claims against,
Executive or his or her spouse or other beneficiary, including claims for
alimony, support, separate maintenance, and claims in bankruptcy proceedings.
6. BENEFITS UNFUNDED. All rights of Executive and his or her
spouse or other beneficiary under this Agreement shall at all times be
entirely unfunded and no provision shall at any time be made with respect to
segregating any assets of Employer for payment of any amounts due hereunder.
Neither Executive nor his or her spouse or other beneficiary shall have any
interest in or rights against any specific assets of Employer, and Executive
and his or her spouse or other beneficiary shall have only the rights of a
general unsecured creditor of Employer.
7. COST OF ENFORCEMENT; INTEREST. In the event that Executive
collects any part or all of the payments or benefits due hereunder or
otherwise enforces the terms of this Agreement following a dispute with
Employer regarding the terms of this Agreement by or through a lawyer or
lawyers, Employer will pay all costs of such collection or enforcement,
including reasonable attorneys' and accountants' fees and other out-of-pocket
expenses incurred by the Executive, up to that point when Employer offers to
settle the dispute for an amount equal to the amount which the Executive
actually recovers; provided, however, that if the Executive violates any
provision of Section 4, this Section 7 shall be void and of no further force
and effect.
8. NOTICES. Any notice required or permitted to be given under
this Agreement shall be sufficient if in writing and sent by registered or
certified mail to Executive's residence in the case of Executive, or to its
principal office in the case of the Employer and the date of mailing shall be
deemed the date which such notice has been provided.
9. WAIVER OF BREACH. The waiver by either party of any
provision of this Agreement shall not operate or be construed as a waiver of
any subsequent breach by the other party.
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10. ASSIGNMENT; SUCCESSORS. The rights and obligations of the
Employer under this Agreement shall inure to the benefit of and shall be
binding upon the successors and assigns of the Employer, including the
surviving entity in any merger, consolidation, share exchange or other
transaction described in Section 14(c)(ii) hereof or any person, entity or
group that has acquired a majority of the outstanding shares of Common Stock
(or securities convertible into Common Stock) of Employer or all, or
substantially all, of the assets of Employer. The Executive acknowledges
that the services to be rendered by him or her are unique and personal, and
Executive may not assign any of his or her rights or delegate any of his or
her duties or obligations under this Agreement.
11. ENTIRE AGREEMENT. This instrument contains the entire
agreement of the parties and supersedes all other prior agreements,
employment contracts and understandings, both written and oral, express or
implied with respect to the subject matter of this Agreement and may not be
changed orally but only by an agreement in writing signed by the party
against whom enforcement of any waiver, change, modification, extension or
discharge is sought.
12. APPLICABLE LAW. This Agreement shall be governed by the laws
of the State of Tennessee, without giving effect to the principles of
conflicts of law thereof.
13. HEADINGS. The sections, subjects and headings of this
Agreement are inserted for convenience only and shall not affect in any way
the meaning or interpretation of this Agreement.
14. DEFINITIONS. For purposes of this Agreement:
(a) "Affiliate" shall have the meaning set forth in the
Securities Exchange Act of 1934, as amended (the "Exchange Act").
(b) "Base Salary" means the higher of (i) Executive's
annual base salary in effect immediately prior to the occurrence of the
Change in Control giving rise of an obligation on the part of Employer to
make any payments under this Agreement or (ii) Executive's annual base salary
in effect immediately prior to the termination of Executive's employment
under the circumstances described in Section 1 above.
(c) "Change in Control" shall mean the occurrence of any
of the following:
(i) if any person or entity, including a
"group" as defined in Section 13(d)(3) of the Exchange Act,
other than a group of which executive is a member or an
affiliate, Employer or a wholly-owned subsidiary thereof or
any employee benefit plan of Employer or any of its
subsidiaries, becomes the beneficial owner of Employer
securities having 50% or more of the combined voting power
of the then outstanding securities of Employer that may be
cast for the election of directors of Employer; or
(ii) as the result of, or in connection with,
any cash tender or exchange offer, merger or other business
combination, sale of substantially all of the assets or
contested election, or any combination of the foregoing
transactions less than a majority of the combined voting
power of the then-outstanding securities of
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Employer or any successor corporation or entity entitled to
vote generally in the election of the directors of the
Employer or such other corporation or entity is held in the
aggregate after such transaction by the holders of Employer
securities entitled to vote generally in the election of
directors of Employer immediately prior to such transaction;
or
(iii) following the date of this Agreement,
individuals who on such date constitute the Board of
Directors of Employer cease for any reason to constitute at
least a majority thereof, unless the election, or the
nomination for election by Employer's shareholders, of each
director of Employer first elected following such date was
approved by a vote of at least two-thirds of the directors
of Employer then still in office who were directors on the
date of this Agreement.
(d) "Coverage Period" shall mean the period beginning on
the date the Executive's employment with Employer terminates under
circumstances described in Section 1 and ending on the date that is 36 months
thereafter.
(e) "Good Cause" shall mean the occurrence of any one of
the following after a Change in Control:
(i) Executive's personal dishonesty in
conjunction with Executive's performance of designated
duties;
(ii) Executive's willful misconduct in
conjunction with Executive's performance of designated
duties;
(iii) breach of fiduciary duty involving personal
profit by Executive in conjunction with Executive's
performance of designated duties;
(iv) conviction of Executive for any felony or
crime involving moral turpitude;
(v) material intentional breach by Executive of
any provision of this Agreement and such breach shall
continue for thirty (30) days after Employer gives Executive
written notice of such breach; or
(vi) unsatisfactory performance by Executive of
the duties designated for Executive as a result of drug use
or habitual, excessive and inappropriate alcohol use by
Executive.
Without limiting the generality of the foregoing, if Executive acted
in good faith and in a manner he or she reasonably believed to be in, and not
opposed to, the best interest of Employer and had no reasonable cause to
believe his or her conduct was unlawful in connection with any action taken
by Executive in connection with his or her duties, it shall not constitute
Good Cause.
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Notwithstanding anything herein to the contrary, in the event
Employer shall terminate the employment of Executive for Good Cause
hereunder, such termination shall be approved by a majority of the Board of
Directors of Employer.
(f) "Good Reason" shall exist if after the occurrence of
a Change of Control:
(i) there is a significant change in the nature
or the scope of Executive's authority;
(ii) there is a reduction Executive's rate of
base salary;
(iii) Employer changes the principal location in
which Executive is required to perform services outside a
thirty-five mile radius of such location without Executive's
consent;
(iv) there is a reasonable determination by
Executive that, as a result of a change in circumstances
significantly affecting his or her position, Executive is
unable to exercise the authority, powers, function or duties
attached to his or her position; or
(v) Employer terminates or amends any Incentive
Plan so that, when considered in the aggregate with any
substitute plan or other substitute compensation, the
Incentive Plan in which Executive is participating fails to
provide Executive with a level of benefits equivalent to at
least 75% of the value of the level of benefits provided in
the aggregate by the terminated or amended Incentive Plan
that was in effect at the date of the Change of Control;
provided, however, that Good Reason shall not be deemed to
exist under this clause (v) if the decline in Incentive Plan
compensation is related to a decline in performance.
(g) "Incentive Plan Payments" means the higher of the
sum of the compensation received, the compensation deferred and the payments
made to the Executive by the Employer pursuant to or under any and all
incentive, bonus, deferred compensation, stock option and other executive
compensation plans and arrangements (i) for the Employer's fiscal year
immediately prior to the fiscal year in which the Change in Control occurs
which gives rise to an obligation on the part of the Employer to make any
payments under this Agreement or (ii) for the fiscal year immediately prior
to the fiscal year in which the Executive's employment terminates under the
circumstances described in Section 1 above.
(h) "Welfare Plans" shall mean any health and dental
plan, disability plan, survivor income plan and life insurance plan or
arrangement currently or hereafter made available by Employer in which
Executive is eligible to participate.
15. COUNTERPARTS. This Agreement may be executed in
counterparts, each of which shall be deemed an original.
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16. SEVERABILITY; CONSTRUCTION. In the event any provision of
this Agreement is held illegal or invalid, the remaining provisions of this
Agreement shall not be affected thereby. In the event that Section 4(b) is
deemed by any court of competent jurisdiction to be invalid, such Section
4(b) shall be reduced by the Court in distance and time only to the extent
necessary to make such restriction enforceable.
17. EXCLUSIVITY. The benefits provided Executive pursuant to
this Agreement shall be the exclusive benefits to which Executive is entitled
upon termination of employment following a Change in Control notwithstanding
any other plan or agreement in effect, whether written or oral, between
Executive and Employer providing for the payment of benefits following a
termination of employment.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
day and year first written above.
/s/ Raymond D. Schoenbaum
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Raymond D. Schoenbaum
Chairman of the Board
SHONEY'S, INC.
By: /s/ J. Michael Bodnar
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Title: Chief Executive Officer
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