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Exhibit 10.37
July 26, 1994
Michael R. Jorgensen
1906 Hockley Drive
Hingham, MA 02043
Dear Mr. Jorgensen:
The Board of Directors of Ground Round Restaurants, Inc. (the
"Corporation") and the Compensation Committee (the "Committee") of the Board
have determined that it is in the best interests of the Corporation and its
shareholders for the Corporation to agree, as provided herein, to pay you
compensation, including termination compensation in the event you should leave
the employ of the Corporation under the circumstances described below.
The Board and the Committee recognize that the continuing possibility
of a sale or change of control of the Corporation is unsettling to you and
other senior executives of the Corporation. Therefore, these arrangements are
being made to help assure a continuing dedication by you to your duties to the
Corporation by diminishing the inevitable distraction to you from the personal
uncertainties and risks created by a pending sale or change of control of the
Corporation. In particular, the Board and the Committee believe it important,
should the Corporation receive proposals from third parties with respect to its
future, to enable you, without being influenced by the uncertainties of your
own situation, to assess and advise the Board whether such proposals would be
in the best interests of the Corporation and its shareholders and to take such
other action regarding such proposals as the Board might determine to be
appropriate, including being available to assist in any transition should there
be a sale or change of control of the Corporation. The Board and the Committee
also wish to demonstrate to executives of the Corporation that the Corporation
is concerned with the welfare of its executives and intends to see that loyal
executives are treated fairly.
1. In view of the foregoing and in further consideration of your
continued employment with the Corporation, the Corporation will pay to you as a
bonus (hereinafter referred to as the "Bonus") a lump sum amount, determined as
provided below, in the event that (a) within one hundred twenty (120) days
after a Change of Control of the Corporation has occurred (hereinafter referred
to as the "Stay Period") you terminate your employment with the Company and
such termination constitutes Good Reason within the meaning of Section 3(d)(ii)
or
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Section 3(d)(iii) of this Agreement, (b) during the Stay Period your employment
with the Corporation is terminated by the Corporation for any reason other than
Cause, or (c) upon expiration of the Stay Period you have not terminated your
employment with the Corporation (other than for on a basis which constitutes
Good Reason within the meaning of Section 3(d)(ii) or Section 3(d)(iii) of this
Agreement). The Bonus shall be equal to one-half of your current annual base
salary or, if your base salary is hereafter increased, one-half of your highest
annual base salary from time to time in effect, and shall be paid to you within
five days after the expiration of the Stay Period (hereinafter referred to as
the "Payment Date")
In further view of the foregoing and in further consideration of your
continued employment with the Corporation, the Corporation will pay to you as
termination compensation (in addition to any Bonus to which you may be
entitled), a lump sum amount, determined as provided below, in the event that
(a) within twenty-four months after a Change of Control of the Corporation has
occurred, you terminate your employment with the Corporation for Good Reason
within ninety (90) days after the event which constitutes Good Reason or (b)
within such twenty-four month period your employment with the Corporation is
terminated by the Corporation for any reason other than Cause. The lump sum
compensation so payable (hereinafter referred to as the "Severance Payment")
shall be an amount equal to the product of two (2) times the sum of (a) the
higher of (i) your current annual base salary and (ii), if your base salary is
hereafter increased, your highest annual base salary from time to time
hereafter in effect plus (b) the higher of (i) your current targeted bonus
under the Corporation's incentive bonus plan and (ii), if your targeted bonus
is hereafter increased, your highest targeted bonus from time to time hereafter
in effect. The Severance Payment shall be paid to you within five days after
the date of termination of your employment (hereinafter referred to as the
"Termination Date").
For the purposes of this Section 1, your death or disability which
prohibits you from performing your duties to the Corporation for more than 60
consecutive days shall be deemed a termination of your employment with the
Corporation.
2. In addition:
(a) Any compensation and other amounts previously deferred by
you, together with accrued interest thereon, if any, to which you are
entitled, and any accrued vacation pay not yet paid by the Corporation,
shall be paid to you on the Payment Date.
(b) All other amounts accrued or earned by you through the
Payment Date and amounts otherwise then owing under the Corporation's
plans and policies shall be paid to you on the Payment Date, other than
benefits due to you under any qualified plan(s) of the Corporation,
which benefits shall be paid in accordance with the terms of such
plan(s).
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(c) The Corporation shall pay all legal fees and expenses
incurred by you in seeking to obtain or enforce any right or benefit
provided by this Agreement, regardless of the outcome thereof.
(d) The Corporation shall maintain in full force and effect,
for the continued benefit of you and/or your family for two years after
the Termination Date, all employee welfare benefit plans and any other
employee benefit programs or arrangements (including, without
limitation, medical and dental insurance plans, disability and life
insurance plans and car allowance programs) in which you were entitled
to participate immediately prior to the Change of Control, provided
that your continued participation is possible under the general terms
and provisions of such plans and programs. In the event that your
participation in any such plan or program is barred, the Corporation
shall arrange to provide you with benefits substantially similar to
those which you are entitled to receive under such plans and programs.
At the end of the period of coverage, you shall have the option to have
assigned to you at no cost and with no apportionment of prepaid
premiums, any assignable insurance policy owned by the Corporation and
relating specifically to you.
(e) All outstanding stock options which you hold shall vest
immediately upon a Change of Control.
3. For purposes of this Agreement:
(a) "Exchange Act" means the Securities Exchange Act of 1934,
as amended.
(b) A "Change of Control" shall be deemed to have taken place
if (i) any "person" (as such term is used in Sections 13(d) and
14(d)(2) of the Exchange Act) other than HM Holdings, Inc. ("HMH") is
or becomes the beneficial owner (within the meaning of Rule 13d-3
promulgated under the Exchange Act), directly or indirectly, of
securities of the Corporation representing 25% or more of the combined
voting power of the Corporation's then outstanding securities, (ii) HMH
or any of its "affiliates" or "associates" (as such terms are used in
Rule 12b-2 promulgated under the Exchange Act), either singly or
collectively, is or becomes the beneficial owner, directly or
indirectly, of securities of the Corporation representing 50% or more
of the combined voting power of the Corporation's then outstanding
securities, (iii) the stockholders of the Corporation shall have
approved (A) a reorganization, merger or consolidation, in each case,
with respect to which persons who were stockholders of the Corporation
immediately prior to such reorganization, merger or consolidation do
not, immediately thereafter, own more than 50% of the combined voting
power
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entitled to vote generally in the election of directors of the
reorganized, merged or consolidated company's then outstanding voting
securities, (B) a liquidation or dissolution of the Corporation, or (C)
a sale of all or substantially all of the assets of the Corporation, or
(iv) as the result of a tender offer, exchange offer, merger,
consolidation, sale of assets or contested election or any combination
of the foregoing transactions (a "Transaction"), the persons who
were directors of the Corporation immediately before the Transaction
shall cease to constitute a majority of the Board of Directors of the
Corporation or of any parent of or successor to the Corporation
immediately after the Transaction occurs.
(c) "Cause" means (i) an act or acts of personal dishonesty on
your part intended to result in substantial personal enrichment at the
expense of the Corporation, or (ii) your conviction for a felony.
(d) "Good Reason" means:
(i) The assignment to you of any duties inconsistent in any
respect with your position (including status, offices, titles and
reporting requirements), authority, duties or responsibilities as
in effect on the date of the Change of Control, or any other action
by the Corporation which results in a diminution in such position,
authority, duties or responsibilities, excluding for this purpose
an isolated, insubstantial and inadvertent action not taken in bad
faith and which is remedied by the Corporation promptly after
receipt of notice from you;
(ii) Any reduction of your base salary or the failure by the
Corporation to provide you with an incentive compensation program,
welfare benefits, retirement benefits and other benefits which in
the aggregate are no less favorable than the benefits to which you
were entitled prior to the Change of Control;
(iii) The Corporation's requiring you to be based at any
office or location more than fifty miles from the location at
which you are employed on the date of the Change of Control,
except for travel reasonably required in the performance
of your responsibilities, or the Corporation's requiring you to
move your principal residence more than fifty miles from the
location of your principal residence on the date of the Change
of Control; or
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(iv) Any action taken or suffered by the Corporation as of or
following the Change of Control (such as, without limitation,
transfer or encumbrance of assets or incurring of indebtedness)
which materially impairs the ability of the Corporation to make any
payments due or which may become due to you under this Agreement.
For purposes of this Agreement, any good faith determination of "Good
Reason" made by you shall be conclusive.
4.(a) Anything in this Agreement to the contrary notwithstanding, in
the event it shall be determined that any payment or distribution by the
Corporation to you or for your benefit (whether paid or payable or distributed
or distributable pursuant to the terms of this Agreement or otherwise) (a
"Payment") would be nondeductible by the Corporation for Federal income tax
purposes because of Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code"), then the aggregate present value of amounts payable or
distributable to you or for your benefit pursuant to this Agreement (such
payments or distributions pursuant to this Agreement are hereinafter referred
to as "Agreement Payments") shall be reduced to the Reduced Amount. The
"Reduced Amount" shall be an amount expressed in present value which maximizes
the aggregate present value of Agreement Payments without causing any Payment
to be nondeductible by the Corporation because of Section 280G of the Code.
For purposes of this Section 4, present value shall be determined in accordance
with Section 280G(d)(4) of the Code.
(b) All determinations required to be made under this Section 4
shall be made by Ernst & Young (the "Accounting Firm") which shall provide
detailed supporting calculations both to the Corporation and you within 15
business days of the date your employment with the Corporation terminates, or
such earlier time as is requested by the Corporation, and an opinion to you
that you have substantial authority not to report any Excise Tax on your
federal income tax return with respect to the Agreement Payments. Any such
determination by the Accounting Firm shall be binding upon the Corporation and
you. You shall determine which and how much of the Agreement Payments shall be
eliminated or reduced consistent with the requirements of this Section 4,
provided that, if you do not make such determination within ten business days
of the receipt of the calculations made by the Accounting Firm, the Corporation
shall elect which and how much of the Agreement Payments shall be eliminated or
reduced consistent with the requirements of this Section 4 and shall notify you
promptly of such election. Within five business days thereafter, the
Corporation shall pay to or distribute to you or for your benefit such amounts
as are then due to you under this Agreement. For purposes of this Section 4,
"Excise Tax" shall mean the excise tax imposed by Section 4999 of the Code or
any interest or penalties with respect to such excise tax.
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(c) As a result of the uncertainty in the application of Section
280G of the Code at the time of the initial determination by the Accounting
Firm hereunder, it is possible that Agreement Payments will have been made by
the Corporation which should not have been made ("Overpayment") or that
additional Agreement Payments which will not have been made by the Corporation
could have been made ("Underpayment"), in each case, consistent with the
calculations required to be made hereunder. In the event that the Accounting
Firm, based upon the assertion of a deficiency by the Internal Revenue Service
against you which the Accounting Firm believes has a high probability of
success determines that an Overpayment has been made, any such Overpayment paid
or distributed by the Corporation to you or for your benefit shall be treated
for all purposes as a loan ab initio to you which you shall repay to the
Corporation together with interest at the applicable federal rate provided for
in Section 7872(f)(2) of the Code; provided, however, that no such loan shall
be deemed to have been made and no amount shall be payable by you to the
Corporation if and to the extent such deemed loan and payment would not either
reduce the amount on which you are subject to tax under Section 1 and Section
4999 of the Code or generate a refund of such taxes. In the event that the
Accounting Firm, based upon controlling precedent or other substantial
authority, determines that an Underpayment has occurred, any such Underpayment
shall be promptly paid by the Corporation to you or for your benefit together
with interest at the applicable federal rate provided for in Section 7872(f)(2)
of the Code.
5 . You shall not be required to mitigate the amount of any payment
provided for in this Agreement by seeking other employment or otherwise, nor
shall the amount of any payment provided for in this Agreement be reduced by
any compensation earned by you as the result of employment by another employer
after the Termination Date, or otherwise. The Corporation's obligation to make
the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any set-off, counterclaim,
recoupment, defense or other claim, right or action which it may have against
you or others.
6 . Anything in this Agreement to the contrary notwithstanding, if your
employment with the Corporation is terminated prior to the date on which a
Change of Control occurs, and it is reasonably demonstrated by you that such
termination (a) was at the request of a third party who has taken steps
reasonably calculated to effect a Change of Control or (b) otherwise arose in
connection with or in anticipation of a Change of Control, then for all
purposes of this Agreement, a Change of Control shall be deemed to have
occurred the date immediately prior to the date of such termination.
7 . This Agreement shall be binding upon and inure to the benefit of
you, your estate and the Corporation and any successor or assign of the
Corporation, but
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neither this Agreement nor any rights arising hereunder may be assigned or
pledged by you.
8. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
registered mail, return receipt requested, postage prepaid, addressed to the
respective addresses set forth on the first page of this Agreement (all notices
to the Corporation to be directed to the attention of the President of the
Corporation with a copy to the Secretary of the Corporation) or to such other
address as either party may have furnished to the other in writing in
accordance herewith, except that notices of change of address shall be
effective only upon receipt. The failure by you to set forth in any notice of
termination of employment any fact or circumstances which contributes to a
showing of Good Reason shall not waive any of your rights hereunder or preclude
you from asserting such fact or circumstance in enforcing your rights
hereunder.
9. No provisions of this Agreement may be modified, waived or
discharged unless such waiver, modification or discharge is agreed to in
writing signed by you and such officer as may be specifically designed by the
Board of Directors of the Corporation (which shall in any event include the
Corporation's President). No waiver by either party hereto at any time of any
breach by the 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 time or at
any prior or subsequent time. No agreements or representations, oral or
otherwise, express or implied, with respect to the subject matter hereof have
been made by either party which are not set forth expressly in this Agreement.
The validity, interpretation, construction and performance of this Agreement
shall be governed by the laws of the Commonwealth of Massachusetts without
regard to principles of conflicts of laws.
10. The Corporation will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business and/or assets of the Corporation to expressly
assume and agree to perform this Agreement in the same manner and to the same
extent that the Corporation would be required to perform it if no such
succession had taken place. As used in this Agreement, "Corporation" shall
mean the Corporation as hereinbefore defined and any successor to its business
and/or assets as aforesaid which assumes and agrees to perform this Agreement
by operation of law, or otherwise.
11. Nothing in this Agreement shall prevent or limit your continuing or
future participation in any benefit, bonus, incentive or other plan or program
provided by the Corporation and for which you may qualify. Amounts which are
vested benefits or which you are otherwise entitled to receive under any plan
or program
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of the Corporation at or subsequent to any Change of Control shall be payable in
accordance with such plan or program.
12. 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.
13. This Agreement may be executed in one or more counterparts, each of
which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
If you are in agreement with the foregoing, please so indicate by
signing and returning to the Corporation the enclosed copy of this letter,
whereupon this letter shall constitute a binding agreement under seal between
you and the Corporation.
Very truly yours,
GROUND ROUND RESTAURANTS, INC.
By /s/ Michael P. O'Donnell
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Michael P. O'Donnell
Agreed:
/s/ Michael R. Jorgensen
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Michael R. Jorgensen
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