Exhibit 10.2
SEPARATION AGREEMENT
The parties to this Agreement (the "Agreement"), entered into this
18th day of September 2000 are Xxxx X. Xxxxxxx ("Employee") and U.S. Franchise
Systems, Inc. (the "Company").
The Company, SDI, Inc., USFS Acquisition Co. ("Newco"), HSA
Properties, Inc. and Meridian Associates, L.P., have entered into an Acquisition
Agreement dated as of September 18, 2000 (the "Acquisition Agreement"),
contemplating, among other things, an offer by Newco to purchase shares of
Common Stock of the Company.
Employee and the Company are parties to (a) the Employment Agreement
made as of October 1, 1995, as amended by the Amendment to Employment Agreement
made as of January 15, 1997 (as amended, the "Employment Agreement") and (b) an
Indemnification Agreement dated as of November ___, 1996 (the "Indemnification
Agreement"). Subject to the completion of the Offer, the parties have agreed
that Employee's employment with the Company shall end on the terms and
conditions set forth herein.
In consideration of the promises, mutual covenants and agreements
contained in this Agreement, Employee and the Company agree as follows:
1. Capitalized words used in this Agreement as defined terms shall
have the meanings given to them in the Acquisition Agreement, unless otherwise
defined herein.
2. Notwithstanding any of the provisions contained herein, the
Employee's obligations and resignations and releases in favor of the Company
stated in this Agreement, and the Company's obligations and releases in favor of
Employee as stated in this Agreement, shall cease to be effective if: (a) the
Offer shall have expired in accordance with its terms without the acceptance for
purchase of such number of shares, that together with the Company's shares owned
by the Investors and its affiliates, represents a majority of the Company's
outstanding shares, (b) the Offer shall have been terminated or withdrawn for
any reason (other than a breach of any of Employee's obligations to the Company
and/or the Investors), (c) the Acquisition Agreement is earlier terminated for
any reason other than a breach of any of Employee's obligations to the Company
and/or the Investors) in accordance with Article 9 thereof or otherwise, or (d)
the Offer shall have been amended or otherwise modified in any material respect
(other than the extension of the time for tenders of Shares), including, without
limitation, to reduce the number of Shares which Newco is offering to purchase
or the price at which Newco will purchase Shares pursuant thereto.
3. Employee's employment pursuant to the Employment Agreement shall
end effective as of the close of business on the date (the "Ending Date") sixty
(60) days after
the date of acceptance of Shares for purchase pursuant to the Offer (the
"Completion Date"). From and after the Completion Date, Employee shall have no
further authority to act as an officer or agent of the Company or otherwise bind
the Company with respect to any obligation or undertaking, except to the extent
expressly authorized by the Company's Chief Executive Officer after the
Completion Date. Employee shall resign from any and all offices and positions he
holds with the Company effective as of the Ending Date (except with respect to
his position as a director, which resignation shall be effective as of the
Completion Date). The Employment Agreement shall continue in effect through the
Ending Date and Employee shall be entitled through such date to all salary,
bonuses, expense reimbursement, property, medical insurance, dental insurance,
life insurance, and other employment related benefits (other than severance,
holiday pay, vacation pay, stock options and other compensation and benefits on
or after the Ending Date by reason of the termination of Employee's employment
or other events) provided for in the Employment Agreement through the Ending
Date. If Employee resigns from the Company for any reason on or after the
Completion Date and prior to the Ending Date, he shall nevertheless be entitled
to receive all of the payments and other rights provided for on Schedule A
(except that the payments provided in the preceding sentence shall be through
the effective date of his resignation). For the purposes of calculating any
bonus that accrues based on the number of franchises signed during any calendar
quarter, Employee shall be entitled to the pro rata portion, calculated on a
daily basis, based on the amount of the bonus the Employee would be entitled to
if such Employee had remained employed by the Company for the full calendar
quarter.
4. After the Ending Date, the Company shall provide Employee with
such compensation, payments and benefits as are described on Schedule A,
incorporated by reference herein. Employee acknowledges and agrees that the
payments and benefits specified in this Agreement are in full and complete
satisfaction of any and all obligations of the Company to Employee on and after
the Ending Date, for salary, severance pay, bonuses, expense reimbursement,
property, holiday pay, vacation pay, stock options, medical insurance, dental
insurance, life insurance, and other employment - related benefits to which
Employee might otherwise be entitled. Employee acknowledges that a portion of
the payments and benefits may be subject to any and all applicable withholding
and other employment taxes. Notwithstanding anything to the contrary contained
in this Agreement, the Company acknowledges that Employee shall be entitled to
(i) have his 589,865 shares of Restricted Stock vested in accordance with
Section 2.5 of the Acquisition Agreement and (ii) receive the Merger
Consideration for all of Employee's 589,865 shares of Restricted Stock at such
time that holders of the Company's Class A Common Stock shall receive such
Merger Consideration in accordance with Section 4.1(c) of the Acquisition
Agreement.
5. Notwithstanding any other provision of this Agreement,
Employee, and his beneficiaries and dependents as applicable, shall retain
his entitlement to: (a) any and all benefits to which he is entitled under
the terms of any plan maintained or contributed to by the Company which is
qualified under Section 401(a) of the Internal Revenue Code of 1986, as
amended, (b) any continuation of health or medical coverage at the
Employee's, beneficiary's or dependent's expense, to the extent required by
the relevant provisions of the Consolidated Omnibus Budget Reconciliation Act
of 1985, (c) the rights to which Employee is entitled as of the Ending Date
under any vested options not yet exercised under the Company's Amended
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and Restated 1996 Stock Option Plan or with respect to any Shares then owned by
Employee, and (d) the indemnification rights (and rights to maintenance of
directors' and officers' insurance) to which Employee is entitled as a director
or an officer of the Company or its Affiliates with respect to his services as
such prior to the Ending Date to the fullest extent provided in the Company's
certificate of incorporation, bylaws, Article 8 of the Acquisition Agreement,
the Indemnification Agreement, or Section 10 of the Employment Agreement, each
as in effect as of the date hereof. The Company confirms that the rights of
Employee under clause (d) of this Section 5 shall extend to the Stockholder
Litigation and any related lawsuits or similar litigation in accordance with the
terms and conditions of such rights.
6. Employee agrees to turn over to the Company on the Ending Date
all confidential information, materials and tangible personal property of the
Company, which are used in or pertain to the business of the Company, in each
case that are within his possession or control on that date, it being understood
that Employee shall not be precluded from retaining copies of information or
materials that reasonably relate to Employee's compensation and benefits and
other contractual rights or that Employee may reasonably require for personal
tax purposes or for litigation purposes.
7. After the Completion Date and until the Ending Date, Employee
shall (a) continue to serve the Company in pursuit of an orderly transition of
his duties, (b) make himself available, upon the request of the Company, to
render services to the Company relevant to the transition of responsibilities of
Employee to other employees of the Company and (c) receive compensation as
provided in this Agreement.
8. EFFECTIVE ON THE COMPLETION DATE, EMPLOYEE HEREBY RELEASES,
FOREVER DISCHARGES AND COVENANTS NOT TO XXX THE COMPANY, ANY PREDECESSOR OR
SUCCESSOR OF THE COMPANY, AND ANY AND ALL OF THEIR RESPECTIVE PAST OR PRESENT
OFFICERS, DIRECTORS, SHAREHOLDERS, AGENTS, AND EMPLOYEES (ALL COLLECTIVELY,
THE "RELEASED PARTIES"), FROM ANY AND ALL MANNER OF ACTIONS, CAUSES OF
ACTION, DEMANDS, CLAIMS, AGREEMENTS, PROMISES, DEBTS, LAWSUITS, LIABILITIES,
RIGHTS, CONTROVERSIES, COSTS, EXPENSES AND FEES WHATEVER WITH RESPECT TO THE
EMPLOYMENT AGREEMENT (COLLECTIVELY, "EMPLOYEE CLAIMS"), WHETHER ARISING IN
CONTRACT, TORT OR ANY OTHER THEORY OF ACTION, WHETHER ARISING IN LAW OR
EQUITY, WHETHER KNOWN OR UNKNOWN, XXXXXX OR INCHOATE, MATURED OR UNMATURED,
CONTINGENT OR FIXED, LIQUIDATED OR UNLIQUIDATED, ACCRUED OR UNACCRUED,
ASSERTED OR UNASSERTED, FROM THE BEGINNING OF TIME UP TO THE COMPLETION DATE,
EXCEPT FOR, IN EACH CASE, THOSE OBLIGATIONS OF THE COMPANY (a) CREATED BY OR
ARISING OUT OF THIS AGREEMENT, OR TO THE EXTENT ARISING ON OR AFTER THE
COMPLETION DATE AND PRIOR TO THE ENDING DATE, CREATED OR ARISING OUT OF THE
EMPLOYMENT AGREEMENT (OTHER THAN RIGHTS TO COMPENSATION AND BENEFITS ON OR
AFTER THE ENDING DATE BY REASON OF THE TERMINATION OF EMPLOYEE'S EMPLOYMENT
OR OTHER EVENTS, WHICH EMPLOYEE IS RELEASING), (b) TO WHICH EMPLOYEE HAS
RETAINED ENTITLEMENT UNDER SECTION 5 OF THIS
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AGREEMENT, CREATED BY OR ARISING OUT OF SECTION 10 OF THE EMPLOYMENT
AGREEMENT OR THE INDEMNIFICATION AGREEMENT OR (c) FOR SALARY AND BENEFITS
ACCRUED UNDER THE EMPLOYMENT AGREEMENT AS OF THE ENDING DATE (OTHER THAN RIGHTS
TO COMPENSATION AND BENEFITS ON OR AFTER THE ENDING DATE BY REASON OF THE
TERMINATION OF EMPLOYEE'S EMPLOYMENT OR OTHER EVENTS, WHICH EMPLOYEE IS
RELEASING). EMPLOYEE EXPRESSLY WAIVES THE BENEFIT OF ANY STATUTE OR RULE OF LAW
WHICH, IF APPLIED TO THIS AGREEMENT, WOULD OTHERWISE PRECLUDE FROM ITS BINDING
EFFECT ANY EMPLOYEE CLAIM AGAINST ANY RELEASED PARTY NOT NOW KNOWN BY EMPLOYEE
TO EXIST. EXCEPT AS NECESSARY FOR EMPLOYEE TO ENFORCE THIS AGREEMENT, THIS
AGREEMENT IS INTENDED TO BE A SPECIAL RELEASE AND A COVENANT NOT TO XXX THAT
EXTINGUISHES ALL EMPLOYEE CLAIMS AND PRECLUDES ANY ATTEMPT BY EMPLOYEE TO
INITIATE ANY LITIGATION AGAINST ANY RELEASED PARTY BASED ON EMPLOYEES CLAIMS. IF
EMPLOYEE COMMENCES OR CONTINUES ANY EMPLOYEE CLAIM IN VIOLATION OF THIS
AGREEMENT, THE RELEASED PARTY SHALL BE ENTITLED TO ASSERT THIS AGREEMENT AS A
BAR TO SUCH ACTION OR PROCEEDING AND SHALL BE ENTITLED TO RECOVER ITS ATTORNEYS'
FEES AND COSTS OF LITIGATION FROM THE PARTY COMMENCING OR CONTINUING THE
EMPLOYEE CLAIM, INCLUDING REASONABLE COMPENSATION FOR THE SERVICES OF THE
INTERNAL PERSONNEL OF THE RELEASED PARTY. EMPLOYEE IS NOT, HOWEVER, WAIVING ANY
RIGHT OR CLAIM THAT MAY ARISE AFTER THE DATE THIS AGREEMENT IS EXECUTED.
9. EFFECTIVE ON THE COMPLETION DATE, THE COMPANY HEREBY RELEASES,
FOREVER DISCHARGES AND COVENANTS NOT TO XXX EMPLOYEE, FROM ANY AND ALL MANNER
OF ACTIONS, CAUSES OF ACTION, DEMANDS, CLAIMS, AGREEMENTS, PROMISES, DEBTS,
LAWSUITS, LIABILITIES, RIGHTS, DUES, CONTROVERSIES, COSTS, EXPENSES AND FEES
WHATEVER, WITH RESPECT TO THE EMPLOYMENT AGREEMENT OR EMPLOYEE'S SERVICE AS
AN EMPLOYEE, DIRECTOR OR OFFICER OF THE COMPANY (COLLECTIVELY, "COMPANY
CLAIMS"), WHETHER ARISING IN CONTRACT, TORT OR ANY OTHER THEORY OF ACTION,
WHETHER ARISING IN LAW OR EQUITY, WHETHER KNOWN OR UNKNOWN, XXXXXX OR
INCHOATE, MATURED OR UNMATURED, CONTINGENT OR FIXED, LIQUIDATED OR
UNLIQUIDATED, ACCRUED OR UNACCRUED, ASSERTED OR UNASSERTED, FROM THE
BEGINNING OF TIME UP TO THE COMPLETION DATE, EXCEPT FOR, IN EACH CASE, THOSE
OBLIGATIONS OF EMPLOYEE (a) CREATED BY OR ARISING OUT OF THIS AGREEMENT OR TO
THE EXTENT ARISING AFTER THE COMPLETION AND PRIOR TO THE ENDING DATE, CREATED
OR ARISING OUT OF THE EMPLOYMENT AGREEMENT, (b) THOSE OBLIGATIONS ARISING
UNDER SECTION 7 OF THE EMPLOYMENT AGREEMENT AND SECTION 9 OF THE EMPLOYMENT
AGREEMENT TO THE EXTENT IT RELATES TO SECTION 7 OF THE EMPLOYMENT AGREEMENT,
(c) ANY ACT OR OMISSION OF EMPLOYEE INVOLVING FRAUD, BREACH OF DUTY OF
LOYALTY, OR ANY OTHER MATTER FOR WHICH HE MAY BE HELD LIABLE TO STOCKHOLDERS
OF THE COMPANY OR LIABLE TO THE COMPANY IN A STOCKHOLDER DERIVATIVE
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CLAIM, (d) ANY ACT OR OMISSION NOT TAKEN OR MADE IN GOOD FAITH AND IN A MANNER
EMPLOYEE REASONABLY BELIEVES TO BE IN OR NOT OPPOSED TO THE BEST INTERESTS OF
THE COMPANY, OR (e) ANY CLAIM THE RELEASE OF WHICH BY THE COMPANY WOULD IMPAIR
THE RIGHTS OF THE COMPANY OR ITS DIRECTORS AND OFFICERS UNDER THE COMPANY'S
DIRECTORS' AND OFFICERS' INSURANCE. THE COMPANY EXPRESSLY WAIVES THE EMPLOYEE
COVENANT NOT TO COMPETE IN SECTION 8(b) (1) OF THE EMPLOYMENT AGREEMENT. THE
COMPANY EXPRESSLY WAIVES THE BENEFIT OF ANY STATUTE OR RULE OF LAW WHICH, IF
APPLIED TO THIS AGREEMENT, WOULD OTHERWISE PRECLUDE FROM ITS BINDING EFFECT ANY
COMPANY CLAIM AGAINST EMPLOYEE NOT NOW KNOWN BY THE COMPANY TO EXIST. EXCEPT AS
NECESSARY FOR THE COMPANY TO ENFORCE THIS AGREEMENT, THIS AGREEMENT IS INTENDED
TO BE A SPECIAL RELEASE AND A COVENANT NOT TO XXX THAT EXTINGUISHES ALL COMPANY
CLAIMS AND PRECLUDES ANY ATTEMPT BY THE COMPANY TO INITIATE ANY LITIGATION
AGAINST EMPLOYEE BASED UPON COMPANY CLAIMS. IF THE COMPANY COMMENCES OR
CONTINUES ANY COMPANY CLAIM IN VIOLATION OF THIS AGREEMENT, EMPLOYEE SHALL BE
ENTITLED TO ASSERT THIS AGREEMENT AS A BAR TO SUCH ACTION OR PROCEEDING AND
SHALL BE ENTITLED TO RECOVER HIS ATTORNEYS' FEES AND COSTS OF LITIGATION FROM
THE PARTY COMMENCING OR CONTINUING THE COMPANY CLAIM. THE COMPANY IS NOT,
HOWEVER, WAIVING ANY RIGHT OR CLAIM THAT MAY ARISE AFTER THE DATE THIS AGREEMENT
IS EXECUTED.
10. Employee represents and warrants that Employee has not assigned
or transferred, or purported to assign or transfer, to any person or entity, any
Employee Claim or any portion thereof or interest therein.
11. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed first class certified mail
(postage prepaid and return receipt requested) or sent by reputable overnight
courier service (charges prepaid) to any other recipient at the address
indicated on the signature pages hereof, or at such address or to the attention
of such other person as the recipient party has specified by prior written
notice to the sending party. Notices will be deemed to have been given hereunder
when delivered personally, when received if sent by U.S. mail and one day after
deposit with a reputable overnight courier service.
12. This Agreement, together with the other agreements dated the
date hereof to which Employee is a party relating to the transactions
contemplated by the Recapitalization Agreement, shall serve as the entire
agreement of the parties concerning the subject matter of this Agreement and
supersedes and preempts any prior understandings, agreements or representations
by or among the parties, written or oral, which may have related to the subject
matter hereof in any way, including, but not limited to, the Separation
Agreement dated June ___, 2000, executed and delivered in connection with the
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Recapitalization Agreement, which Separation Agreement is hereby terminated and
is of no force and affect.
13. Each party agrees that such party shall not make or publish any
statement (orally or in writing), or instigate or assist or participate in the
making or publication of any statement that would libel, slander, or disparage
(whether or not such disparagement legally constitutes libel or slander) or
expose to contempt or ridicule the other party. For purposes of the preceding
sentence, the Company shall be deemed to have made (and shall be deemed to be
responsible for) all statements made by its Chief Executive Officer or its Chief
Operating Officer or any other authorized officer or agent speaking on behalf of
the Company in the capacity of an authorized representative or any authorized
officer or agent of Meridian, HSA Properties, Newco, or SDI speaking on their
behalf in the capacity of an authorized representative. The provisions of this
Section 13 shall not apply to any statement made in connection with any legal or
administrative proceeding or otherwise required by law.
14. This Agreement shall be binding upon and inure to the benefit of
the respective successors, heirs, assigns, administrators, executors and legal
representatives of the parties and other Persons described in this Agreement.
15. This Agreement shall be deemed to have been executed and
delivered within the State of Georgia and the rights and obligations of the
parties shall be construed and enforced in accordance with, and governed by, the
laws of the State of Georgia without regard to that state's rules regarding
conflict of laws. The language of all parts of this Agreement shall in all cases
be construed as a whole, according to its fair meaning and not strictly for or
against any of the parties.
16. The parties agree that any dispute relating to this Agreement or
Employee's employment with the Company or the termination thereof shall be
submitted by the parties to, and decided by, the courts in Atlanta, Georgia.
17. In the event that either party shall initiate legal action to
enforce the terms and conditions of this Agreement, in addition to any other
legal or equitable relief to which the prevailing party in such action may be
entitled, the prevailing party in such action shall be entitled to recover from
the other party its legal fees and other expenses reasonably incurred in
connection with such action; in the event that a party shall prevail as to some
but not all matters at issue in such action, each party shall be entitled to a
recovery of its or his legal fees and other expenses reasonably incurred with
respect to the matters as to which such party prevailed, as shall be determined
by the court upon application of any party.
18. The remedy for a breach of this Agreement shall be limited to an
action for damages, and no party shall assert as a right or remedy for breach of
any provision of this Agreement, the validity or unenforceability of any other
provision of this Agreement.
19. EMPLOYEE HAS BEEN ADVISED AND ENCOURAGED BY THE COMPANY TO
CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS AGREEMENT. EMPLOYEE AFFIRMS THAT HE
HAS CAREFULLY READ AND FULLY
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UNDERSTANDS THIS AGREEMENT, HAS HAD SUFFICIENT TIME TO CONSIDER IT, HAS HAD AN
OPPORTUNITY TO ASK QUESTIONS AND HAVE IT EXPLAINED, AND IS ENTERING INTO THIS
AGREEMENT FREELY AND VOLUNTARILY, WITH AN UNDERSTANDING THAT THE GENERAL RELEASE
WILL HAVE THE EFFECT OF WAIVING ANY ACTION OR RECOVERY HE MIGHT PURSUE FOR ANY
CLAIMS ARISING ON OR PRIOR TO THE DATE OF THE EXECUTION OF THIS AGREEMENT.
[SIGNATURE PAGE FOLLOWS.]
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IN WITNESS WHEREOF, the parties have executed this Agreement on this
date or dates set forth below.
U.S. FRANCHISE SYSTEMS, INC.
/s/ Xxxx Xxxxxxx By: /s/ Xxxxxxx X. Xxxxxxx
-------------------- ------------------------------
Xxxx Xxxxxxx Name: Xxxxxxx X. Xxxxxxx
----------------------------
Its: VP/General Counsel
[Address] 00 Xxxxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
Subscribed and sworn to before Subscribed and sworn to before
me this __________ day of me this 18th day of
___________________ 2000. September 2000.
/s/ Xxxxxx Xxxxxxxx
----------------------------- ------------------------------
Notary Public Notary Public
SCHEDULE A
1. Medical insurance plan coverage for Employee and his dependents continued
at the cost of the Company for a period of 16 months from and after the
Ending Date; provided, however, that such coverage shall cease if Employee
becomes eligible for similar coverage provided by another employer.
2. A cash payment in the amount of $350,000.00 payable on the Ending Date.
3. Reimbursement for any and all documented employee business expenses not
yet reimbursed as of the Ending Date, subject to the Company's normal
reimbursement policies.
4. Employee shall be entitled to request and receive from the Company at the
Company's expense office space determined by the Company at the Company's
headquarters, use of phone services and customary office support services
for a period of 30 days following the Ending Date.
5. Reimbursement of the reasonable out-of-pocket costs of travel relating to
pursuit of other employment opportunities for a period beginning on the
date of this Agreement and ending 60 days after the Ending Date, up to a
maximum aggregate reimbursement of $15,000.00.
6. Reimbursement of legal fees in connection with this Agreement up to a
maximum amount of $10,000.00.
7 Reimbursement of relocation expenses incurred in connection with one
relocation incident to his next employment position to the extent not
reimbursed by such employer, up to a maximum reimbursement of $15,000.00.
8. The Company shall assign to Employee, as of the Completion Date, the
Company's interest in the split-dollar life insurance insuring Employee's
life and the Company shall not be obligated for any further payments with
respect thereto, it being understood that neither Employee, his estate or
beneficiaries shall be required to reimburse the Company for any premiums
paid by the Company prior to the Ending Date, except out of the proceeds
of such life insurance in the event of the Employee's death.
