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August 17, 1995
VIA HAND DELIVERY
Name~
SUMMIT FAMILY RESTAURANTS INC.
440 Lawndale Drive
Salt Lake City, Utah 84115-2917
Re: Change of Control
Dear Salutation~:
The Board of Directors considers you a key member of the management
team of Summit Family Restaurants Inc., formerly JB's Restaurants, Inc., (the
"Company"). The Company is desirous of retaining well qualified executives and
key personnel and to assure both itself and you of continuity of management in
the event of any actual or threatened change in control of the Company. The
persons in control of the Company subsequent to change in control of the Company
may be unwilling to recognize fully your past contributions or reward you upon
your termination from employment with severance payments that the Board of
Directors would normally deem appropriate in such extraordinary circumstances.
Further, any change in control of the Company is likely to occur pursuant to a
tender offer for the Company's stock at a substantial premium over the market
price for said stock. Your contributions in the past have, and after the
signing of this agreement will have, largely aided in creating the premium a
tender offeror is willing to pay and such contributions should be rewarded by
the Company. Finally, the Board of Directors recognizes that the threat of a
major change in the control of the Company would be of significant concern to
you. The purpose of this letter is to set forth our mutual agreement regarding
your eligibility to receive termination pay under certain specified conditions,
as set forth below, in order to foster and encourage your continued attention
and dedication to your assigned duties in the event of such potentially
disturbing and disruptive circumstances. The Company shall be bound, in
consideration of your continued service, to do the following:
1. Upon the occurrence of any of the following events between August 17,
1995 and September 30, 1996, and successive one year periods
thereafter, if renewed by the Company, the Company will thereupon pay
to an escrow account at Zions First National Bank (the "Escrow Agent")
one and one-half (1 1/2) times your "base salary" (as hereinafter
defined), or at the discretion of the Company, deliver to the Escrow
Agent, and maintain, an irrevocable letter of credit in an equal face
amount issued by a bank with assets of at least $1,000,000,000,:
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August 17, 1995
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(a) The Company enters into an agreement or letter of intent, the
consummation of which would result in the occurrence of an
event enumerated in Section 2(a);
(b) any person (including the Company) publicly announces an
intention to take or to consider taking actions which if
consummated would constitute an event enumerated in Section
2(a);
(c) any person, other than a trustee or other fiduciary holding
securities under an employee benefit plan of the Company, who
is or becomes the beneficial owner, directly or indirectly, of
securities of the Company representing 25% or more of the
combined voting power of the Company's then outstanding
securities; or
(d) the Board adopts a resolution to the effect that, for purposes
of this agreement, an event requiring funding has occurred.
2. (a) If, after the occurrence of any event enumerated in Section 1
above but before the occurrence of any event enumerated in
this Section 2(a), your employment by the Company (1)
terminates involuntarily for any reason other than for cause,
disability, retirement on or after the date you reach normal
retirement age, or death, or (2) materially changes (as
defined herein) and you voluntarily terminate your employment
with the Company within sixty (60) days immediately following
such material change, the Escrow Agent will pay to you, or, if
you fail to survive, to your beneficiaries on your behalf, the
amount required to be deposited or secured by a letter of
credit as described in paragraph 1 above in the manner and
subject to the conditions set forth herein, upon your written
demand.
If, after the occurrence of any event enumerated in this
Section 2(a), your employment by the Company (1) terminates
involuntarily for any reason other than for cause, disability,
retirement on or after the date you reach normal retirement
age, or death, or (2) terminates voluntarily within ninety
(90) days immediately following the occurrence of any event
enumerated in this Section 2(a), or (3) materially changes (as
defined herein) and you voluntarily terminate your employment
within sixty (60) days immediately following such material
change, the Escrow Agent will pay to you, or, if you fail to
survive, to your beneficiaries on your behalf, the amount
required to be deposited or secured by a letter of credit as
described in paragraph 1 above in the manner and subject to
the conditions set forth herein, upon your written demand.
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August 17, 1995
Page 3
The events enumerated in this Section 2(a) are as follows:
(i) any person (other than the Company, any trustee or
other fiduciary holding securities under an
employee benefit plan of the Company, or any
company owned, directly or indirectly, by the
stockholders of the Company in substantially the
same proportions as their ownership of stock of
the Company), becomes the beneficial owner,
directly or indirectly, of securities of the
Company representing 50% or more of the combined
voting power of the Company's then outstanding
securities;
(ii) during any period of two consecutive years (not
including any period prior to the execution of
this agreement), individuals who at the beginning
of such period constitute the Board, and any new
director (other than a director designated by a
person who has entered into an agreement with the
Company to effect a transaction described in
Section 2(a)(i) or (iii)) whose election by the
Board or nomination for election by the Company's
stockholders was approved, by a vote of at least
two-thirds (2/3) of the directors then still in
office who either were directors at the beginning
of the period or whose election or nomination for
election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve a merger
or consolidation of the Company with any other
Company, other than (1) a merger or consolidation
which would result in the voting securities of the
Company outstanding immediately prior thereto
continuing to represent (either by remaining
outstanding or by being converted into voting
securities of the surviving entity) more than 50%
of the combined voting power of the voting
securities of the Company or such surviving entity
outstanding immediately after such merger or
consolidation or (2) a merger or consolidation
effected to implement a recapitalization of the
Company (or similar transaction) in which no
person acquires more than 50% of the combined
voting power of the Company's then outstanding
securities;
(iv) the stockholders of the Company approve a plan of
complete liquidation of the Company or an
agreement for the sale or disposition by the
Company of all or substantially all of the
Company's assets.
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August 17, 1995
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(b) If your employment is voluntarily terminated for any reason
after the occurrence of an event enumerated in Section 1 above
(other than as a result of a material change in your
employment with the Company as referenced in Section 2 (a)
above), but prior to the occurrence of an event enumerated in
Section 2(a), you shall forfeit your right to any payment
under this agreement.
(c) The amount so deposited for you will be paid in one lump sum
as soon as practicable after your demand; provided, however,
that the Escrow Agent shall have the right to deduct any
amounts required by federal or state laws with respect to this
agreement (including, without limitation, any amount required
to be withheld in order for the Company to obtain a tax
deduction with respect to the payments made pursuant to this
agreement).
(d) Your right to make a demand hereunder shall terminate upon the
expiration of two (2) years from the date of deposit of funds
with the Escrow Agent as provided in Section 1 above or, if
earlier, one (1) year from the date of an event set forth in
Section 2(a) above, unless you have become entitled to make,
and in fact have made, a demand within that time period.
(e) The term "for cause" shall mean an act by you of dishonesty or
fraud constituting a crime under applicable state or federal
law, which act is materially damaging or materially
detrimental to the business or operations of the Company,
provided that you shall have received written notice from the
Board of such act and shall have continued to engage in such
act after thirty (30) days following receipt of such notice,
which notice shall specifically identify the manner in which
the Board believes that you have engaged in such act.
Notwithstanding the foregoing, you shall not be deemed to have
been terminated for cause unless and until there shall have
been delivered to you a copy of a resolution duly adopted by
the affirmative vote of not less than three-quarters of the
entire membership of the Board at a meeting of the Board
called and held for such purpose (after reasonable notice to
you and an opportunity for you, together with your counsel, to
be heard before the Board), finding that in the good faith
opinion of the Board you were guilty of an act of dishonesty
or fraud constituting a crime under the applicable state or
federal law, and continuing such as aforesaid after a notice
from the Board, and specifying the particulars thereof in
detail. Your conduct, in connection with actions taken in
response to a possible Section 2(a) event that were approved
by the Board prior to such event shall not, under any
circumstance, be deemed conduct giving rise to termination for
cause.
(f) The term "material change in employment" with the Company
shall mean (i) a ten percent (10%) or greater decrease in your
annual salary (ii) a diminution in
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August 17, 1995
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title (iii) a decrease in your duties and responsibilities that
results in you no longer having the duties and responsibilities
associated with your current title or that have been associated
with your title during your employment with the Company, or
(iv) a requirement that you relocate more than fifty (50) miles
from the current offices of the Company. A material change in
employment that results in your voluntary termination within
sixty (60) days immediately following the material change shall
be considered an involuntary termination for the purposes of
this letter agreement.
(g) Upon termination of your employment under any circumstances
giving rise to a right to payment hereunder, the Company shall
provide you with appropriate notices under Section 4980B of the
Internal Revenue Code, as amended ("COBRA") (or other
applicable state or federal law) to enable you to continue your
health insurance coverage under the health insurance plan
offered by the Company to its employees at the time of your
termination. Provided that you complete both of the conditions
identified in (A) and (B) below, the Company shall continue to
pay the portion of the premiums applicable to your health
insurance benefits that the Company paid prior to your
termination through the earlier of (1) eighteen (18) months
immediately following your termination of employment or (2)
such time as you commence employment with an entity or
individual from whom health insurance benefits are available to
you, regardless of whether such benefits are comparable to the
benefits you had been receiving from the Company prior to your
termination. Nothing herein prevents you from continuing your
health insurance benefits beyond the time period referenced
above as allowed by the terms, conditions and limitations of
the applicable health insurance plan and applicable state and
federal law; provided however, that you will be responsible to
pay the entire premium to continue such coverage.
Conditions (A) and (B) are as follows:
(A) You must complete in a timely manner and
return to the Company all documents requested by
the Company for you to elect to extend your health
insurance coverage under the medical plan of the
Company as permitted by COBRA or other applicable
state or federal law or other forms requested by
the Company; and
(B) You must continue to pay in a timely manner
that portion of the premium you were obligated to
pay prior to your termination.
This provision shall not be interpreted to and is not intended
to increase the time during which health insurance benefits
are available to you under the
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August 17, 1995
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Company's health insurance plan beyond eighteen (18) months
following your termination. Your rights, if any, to health
insurance under the Company's health insurance plan pursuant to
COBRA (or any other state or federal law) shall commence
immediately upon your termination of employment and not upon
the termination of the Company's payment of any portion of your
health insurance benefit. Nothing herein is intended to limit
your right, if any, to continue your COBRA benefits, if any,
beyond eighteen (18) months as allowed by federal or state law,
subject to all conditions or limitations of the health
insurance plan and provided you pay the entire premium
necessary to continue your COBRA benefits.
(h) If your employment is terminated under any circumstances giving
rise to a right to payment hereunder, then through the earlier
of (1) eighteen (18) months after such termination or (2) until
you become employed with an entity or individual from whom such
benefits are available, regardless of whether such benefits are
comparable, the Company shall arrange to provide you with life
and disability insurance benefits substantially similar to
those which you are receiving immediately prior to your
termination of employment so long as you pay in a timely manner
any portion of such premiums for such benefits that you were
required to pay prior to your termination.
3. The Company may withdraw the amount so deposited with the Escrow Agent
pursuant to Section 1 above when and only when two (2) years have
expired from the date of deposit or, if earlier, one (1) year from the
date of an event set forth in Section 2(a) above, and no proper demand
has been made during that time, or when the conditions requiring the
deposit have ceased to exist for a period of ninety (90) days without a
demand right having been created, or when your right to a payment under
this agreement has been forfeited by you, whichever occurs first. If,
before the expiration of such period, there shall occur another event
of the kind described in Section 1 above or Section 2(a) above, the
Company will not be required to make an additional deposit (except to
the extent necessary by an increase in your base salary after the last
funding event), but the two (2) year/one (1) year period shall then be
measured from the date of the last such event. Notwithstanding a
deposit with the Escrow Agent on your behalf pursuant to Section 1
above, you shall continue to be entitled to receive all of your normal
and usual benefits from the Company until a termination of your
employment shall occur.
4. The Company agrees to pay the charges of the Escrow Agent for its
services under this agreement, and the Company will be entitled on a
monthly basis to any interest or other income arising from the amount
so deposited prior to the date of your demand hereunder. Any interest
or other income arising from the amount so deposited after the date of
your demand hereunder shall be paid to you.
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August 17, 1995
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5. The escrow arrangement will be subject to the Escrow Agent's usual
rules and procedures, and the Company will indemnify the Escrow Agent
against any loss or liability for any action taken by it in good faith
in such capacity.
6. This agreement shall be independent of any other contract or agreement
that may exist between you and the Company from time to time. This
agreement shall not restrict the Company's right to terminate your
employment with the Company nor your rights to terminate employment
with the Company. No merger or consolidation with any other entity, or
sale of all or substantially all of the Company's assets shall occur
without assumption of this agreement by the purchaser or payment by the
purchaser or Company of the sum set forth in Section 1.
7. As used in this agreement, "person" shall be deemed to have the same
meaning as when used in Sections 13(d) and 14(d) of the Securities
Exchange Act of 1934 (the "Exchange Act"), and "beneficial owner" shall
have the same meaning as when used in Rule 13d-3 promulgated pursuant
to the Exchange Act. As used in this agreement, "Company" refers not
only to Summit Family Restaurants Inc. but also to its successors by
merger or otherwise.
8. As used herein, "base salary" shall mean the average of the base salary
paid to you on a bi-weekly basis during the twelve (12) months
immediately preceding the occurrence of the event enumerated in Section
1(a), (b) or (c), and shall exclude any bonuses, profit sharing
payments, car allowance, and other items of compensation. If your
"base salary" should increase after the occurrence of an event
described in Section 1(a), (b) or (c), and prior to the occurrence of
an event described in Section 2(a), the amount which must be deposited
with the Escrow Agent pursuant to Section 1 shall be adjusted
appropriately by including the increased amount when determining the
average twelve month base salary.
9. Notwithstanding anything to the contrary in this agreement, if the
total amounts payable by the Escrow Agent under this agreement,
together with any other amounts to which you are entitled hereunder and
under any plan, program, arrangement of, or agreement with the Company
would in the aggregate result in the payment of an "excess parachute
payment" as defined in Section 280G(b)(1) of the Internal Revenue Code
of 1986, as amended ("Code"), the total amounts payable under this
agreement and such other payments shall be reduced, in such order and
manner as you may elect, or if you fail to so elect, as the Company
shall determine, to the largest amount which may be paid without any
portion of such amounts being subject to the excise tax imposed by
Section 4999 of the Code. The determination of any reduction in such
amounts shall be made by a public accounting firm of the Company's
choice, which may at the Company's option include the Company's
accounting firm or outside certified public accountant, and such
determination shall be conclusive and
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August 17, 1995
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binding on you and the Company. You and the Company agree to cooperate
fully with such public accounting firm or accountant to assist in
making any determination. Any excess amounts so determined shall be
returned immediately to the Company upon communication of such
information to Escrow Agent from such public accounting firm.
10. In the event that, following the creation of a demand right pursuant to
Section 2 hereof, you incur any costs or expenses, including attorneys'
fees, in the enforcement of your rights under this agreement or under
any plan for the benefit of employees of the Company, including without
limitation the Company's stock option plans, pension plan, employee
stock ownership plan, thrift and savings plan, bonus arrangement,
supplemental pension plan, then, unless the Company or the
consolidated, surviving or transferee person in the event of a
consolidation, merger or sale of assets, is wholly successful in
defending against the enforcement of such rights, the Company, or such
consolidated, surviving or transferee person, shall promptly pay to you
all such costs and expenses.
11. All notices, requests, demands and other communications which are
required to be or may be given under this agreement shall be in writing
and shall be deemed to have been duly given when delivered in person or
transmitted by telecopy or telex or upon receipt after dispatch by
certified or registered first class mail, postage prepaid, return
receipt requested, to the party to whom the same is given or made:
a. Notice to the Escrow Agent should be sent to:
Zions First National Bank
One Main Street
Salt Lake City, Utah 84111
Attention: Corporate Trust Department
b. Notice to the Company should be sent to:
President
Summit Family Restaurants Inc.
440 Lawndale Drive
Salt Lake City, Utah 84115
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August 17, 1995
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With a copy to:
General Counsel
Summit Family Restaurants Inc.
440 Lawndale Drive
Salt Lake City, Utah 84115
c. Notice to you should be sent to:
Name~
c/o Summit Family Restaurants Inc.
440 Lawndale Drive
Salt Lake City, Utah 84115
12. This agreement constitutes the entire agreement and supersedes all
prior agreements and understandings, oral and written, between the
parties hereto with respect to the subject matter hereof.
13. This agreement may not be modified or changed except by a writing,
signed by you and the Company.
Please indicate your acceptance of this agreement by signing one copy
of this letter in the space provided below and returning it to me. The other
copy is for your files.
Yours very truly,
SUMMIT FAMILY RESTAURANTS INC.
Don M. McComas
President and Chief Executive Officer
AGREED TO AND ACCEPTED this
_____ day of ____________________, 199__.
___________________________________
Name1~