EXHIBIT 10.4
Buffets Holdings, Inc.
Buffets, Inc.
c/o Xxxxxx-Xxxxxx Capital, Inc.
000 Xxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
September 28, 2000
Xxx X. Xxxxxx
00000 Xxxxxxxx Xxxxx
Xxxxx Xxxxxx, XX 00000
Dear Xxx:
This letter agreement (the "Agreement") states the terms under
which Buffets Holdings, Inc., a Delaware corporation ("Holding Co."), and
Buffets, Inc., a Minnesota corporation ("Buffets"), have agreed to retain you as
an advisor and you have agreed to provide services to both Holding Co. and
Buffets as an advisor. Holding Co. and Buffets are hereinafter collectively
referred to as the "Companies".
1. Service Period. The "Service Period" shall mean the period
beginning on the date hereof and ending on the earlier of (i) the last day of
Buffets's fiscal year 2005, or (ii) the date this Agreement is terminated
pursuant to Section 4.
2. Advisory Services and Relationship.
(a) Services. During the Service Period, you will provide
advisory services to the Companies's boards of directors, shareholders, and
designated senior officers with respect to board of directors meetings and
preparation for board of directors meetings, and such other advisory services as
may be mutually agreed upon by you and the Companies; provided, however, in no
event shall you be required (unless you otherwise consent) to devote more than
an equivalent of 2 days per calendar month to providing advisory services,
including attending board of directors meetings. In accordance with Section 2.1
of the Buffets Holdings, Inc. Stockholders' Agreement, dated as of September 28,
2000 (the "Stockholders' Agreement"), you shall be named to the Board of
Directors of Holding Co. (the "Board") and shall initially be appointed
nonexecutive Vice Chairman thereof and shall retain such position as long as you
are a member of the Board.
(b) Relationship. You shall be an employee of the Companies
within the meaning of all federal, state and local laws and regulations
governing
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employment insurance, workers' compensation, industrial accident, labor and
taxes. Except as specifically authorized, this Agreement does not grant you any
authority to act as an agent for the Companies or any of their affiliates and
you shall not represent to the contrary to any person.
3. Fees and Other Benefits. In consideration for the services
rendered hereunder and for agreeing to the noncompetition, nonsolicitation and
confidentiality provisions set forth in the Stockholders' Agreement, Buffets
shall provide you with the fees and other benefits described below:
(a) Cash Compensation. Buffets shall pay you an amount
("Cash Compensation") equal to your current salary and bonus for the balance of
its fiscal year 2000 in accordance with its regular payroll practices, and
thereafter, you shall receive the following Cash Compensation payable in
accordance with the Buffets's normal payroll schedule:
Fiscal Year Cash Compensation
----------- -----------------
2001 $325,000
2002 $300,000
2003 $275,000
2004 $250,000
2005 $225,000
(b) Facilities. During the Service Period you shall be
provided, at no charge, with your current office and secretarial assistance as
currently provided and other staff assistance at Buffets's corporate
headquarters; provided, however, if at any time during the Service Period
Buffets or you deem it in the best interests of the Companies, Buffets may elect
to provide you with comparable office space and support services at Buffets
headquarters or at another location for the remainder of the Service Period.
(c) Business Expense Reimbursement. Reasonable business
expenses incurred by you during the Service Period, including the current auto
reimbursement program, in connection with the performance of your duties
hereunder shall be promptly reimbursed by Buffets in accordance with its
policies.
(d) Participant in Health and Welfare Plans. During the
Service Period, Buffets shall continue to provide you and your family with
health, welfare, disability and life insurance benefits on the same basis as are
from time to time provided to senior executives of Buffets. Except as provided
in the preceding sentence, during the Service Period you shall not be eligible
to participate in any pension, profit-sharing, saving, retirement, deferred
compensation, stock option, stock purchase, severance pay, bonus, incentive,
accident insurance, vacation or any other employee benefit plan, program or
arrangement sponsored, maintained or contributed to by any of the Companies.
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4. Termination; Severance Payments. Notwithstanding any other
provision of this Agreement:
(a) Termination for Cause by the Companies. This Agreement
and your service as an employee, Vice Chairman and a member of the Board may be
terminated by Holding Co. for Cause (as defined below) in accordance with this
Section 4(a). If you are terminated for Cause in accordance with this Section
4(a), all Cash Compensation, benefits and other perquisites provided to you
pursuant to this Agreement shall immediately cease and you shall be solely
entitled to receive your accrued, but unpaid, Cash Compensation, if any, through
the date of such termination, plus any previously-incurred, but unreimbursed,
business expenses in accordance with Section 3(c).
For purposes of this Agreement, "Cause" shall mean (i) your
material breach of the noncompetition, nonsolicitation or confidentiality
provisions set forth in the Stockholders' Agreement, whether or not such
agreement or requirement is enforceable under applicable law, (ii) your failure
or refusal after receipt of written notice to abide by, in any material respect,
the reasonable policies or directives of the Board, or (iii) your conviction of,
or pleading nolo contendere to, a crime involving moral turpitude.
Notwithstanding the foregoing, this Agreement and your service as an employee,
Vice Chairman and a member of the Board shall not be deemed to have been
terminated for Cause pursuant to clause (ii) until ten (10) days after there
shall have been delivered to you a written notice setting forth in reasonable
detail the particulars forming the basis for such termination and you shall be
given the opportunity to be heard during such ten (10) day period by the Board
respecting the matters set forth in such notice.
(b) Disability or Death. This Agreement and your service as
an employee, Vice Chairman and a member of the Board hereunder may be terminated
by you or the Companies upon your death or "Disability" in accordance with this
Section 4(b). Upon termination of this Agreement and your service as an
employee, Vice Chairman and a member of the Board for either death or Disability
in accordance with this Section 4(b), all Cash Compensation, benefits and other
perquisites provided to you pursuant to Section 3 hereof shall continue to be
provided to you or your beneficiaries or estate (as the case may be) through the
end of Buffets's fiscal year 2005.
For purposes of this Agreement, "Disability" shall mean any
event of disability under any disability insurance plan maintained by Buffets in
which you are eligible to participate, or if there shall be no such disability
plan, then your inability to perform your duties as an advisor to the Companies
and their affiliates or as a member of the Board for any period of at least 90
days during any consecutive six month period.
(c) Without Cause by the Companies. This Agreement and your
service as an employee, Vice Chairman and a member of the Board may be
terminated at any time by Holding Co. without Cause. Upon termination of this
Agreement and your service as an employee, Vice Chairman and a member of the
Board by Holding Co. without Cause in accordance with this Section 4(c), you
shall continue to receive the Cash Compensation, benefits and other perquisites
you were otherwise
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entitled to receive pursuant to Section 3 hereof through the end of Buffets's
fiscal year 2005. If you shall at any time during the Service Period not be
elected to serve as Vice Chairman and a member of the Board, you may elect to
treat such failure as a termination by the Companies without Cause.
(d) Voluntary Resignation. You may terminate this Agreement
and your service as an employee, Vice Chairman and a member of the Board at any
time by providing at least 30 days' written notice to Holding Co. Upon
termination of this Agreement and your service as an employee, Vice Chairman and
a member of the Board due to your voluntary resignation in accordance with this
Section 4(d), all benefits and other perquisites provided to you pursuant to
this Agreement shall immediately cease and you shall be solely entitled to
receive your Cash Compensation for the remainder of the calendar year in which
such termination occurs, plus any previously-incurred, but unreimbursed,
business expenses, in accordance with Section 3(c). Notwithstanding the
foregoing, Buffets may, in its sole discretion, elect to continue to provide you
with the Cash Compensation, benefits and other perquisites that you were
otherwise eligible to receive under Section 3 hereof.
5. Purchase of Committed Equity. Holding Co. is on date hereof
selling and issuing to the persons designated on Exhibit A, who you represent
are Permitted Transferees, as defined in the Stockholder Agreement, (i) 97,940
shares of Holding Co. common stock, par value $.01 per share (the "Common
Stock"), for an aggregate consideration of Nine Hundred Seventy Nine Thousand
Four Hundred Dollars ($979,400.00), and (ii) 33,705 shares of Holding Co.
preferred stock, par value $.01 per share (the "Preferred Stock"), for an
aggregate consideration of Three Million Three Hundred Seventy Thousand Five
Hundred Dollars ($3,370,500.00). The purchase price for the shares of Common
Stock and Preferred Stock shall be paid at the time and in the manner set forth
in the Buffet Holdings, Inc. Subscription Agreement, dated as of September 28,
2000 (the "Subscription Agreement"). Holding Co. shall provide you and the
persons listed on Exhibit A with the same annual and quarterly financial
information required to be provided to the holders of the senior notes pursuant
to section 7 of the Senior Note Purchase Agreement for the period in which the
persons listed on Exhibit A collectively own at least fifty percent (50%) of the
aggregate number shares of Common Stock and Preferred Stock that such persons
were issued in the aggregate pursuant to the first sentence of Section 5 of this
Agreement; provided, however, that (i) no such information shall be provided to
any Person who is, directly or indirectly, in competition with the Company or
any of its subsidiaries, and (ii) the recipient of such information shall enter
into a confidentiality agreement with the Company in form and substance
reasonably satisfactory to the Company. This sentence shall survive any
termination of this Agreement and any amendment or termination of the Senior
Note Purchase Agreement.
6. Purchase of Incentive Equity.
(a) Issuance of Incentive Equity. Subject to the
restrictions and conditions set forth below, Holding Co. is on the date hereof
selling and issuing to you, 65,012 shares of Holding Co. common stock, par value
$.01 per share (hereinafter
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called the "Incentive Shares"), for an aggregate consideration of Six Hundred
Fifty Thousand One Hundred Twenty Dollars ($650,120.00) (the "Purchase Price"),
which Purchase Price shall be paid at the time and in the manner set forth in
the Subscription Agreement. The Purchase Price is the fair market value of the
Incentive Shares as of the date hereof, determined without regard to any
restrictions applicable thereto.
(b) Vesting of Incentive Shares. 32,501 of the Incentive
Shares shall be fully vested as of the date hereof, and 10,837 of the Incentive
Shares shall become vested after each of the first three years of completed
service as a member of the Board (calculated from the date of this Agreement),
provided, however, in the event of your death, Disability or the termination of
this Agreement and your service as an employee, Vice Chairman and a member of
the Board by Holding Co. without Cause pursuant to Section 4(c) hereof, all of
the unvested Incentive Shares shall become fully vested.
(c) Restrictions; Repurchase Rights. The Incentive Shares
shall be held subject to all the restrictions and limitations set forth in the
Stockholders' Agreement and the repurchase and other rights set forth below:
(i) In the event this Agreement and your service as an
employee, Vice Chairman and a member of the Board is terminated by Holding Co.
for Cause in accordance with Section 4(a) hereof, Holding Co. shall have the
right (a "Call Right") exercisable for a period of one year following the date
of the termination of your service to repurchase all or a portion of the
unvested Incentive Shares at a purchase price per share to be calculated in the
manner set forth in Section 4.8(b) of the Stockholders' Agreement for the
repurchase of a Management Stockholder's Incentive Stock in the event his or her
employment is terminated for "Cause." The exercise of a Call Right and the
consummation of the repurchase shall be subject to the procedures set forth in
Section 4.8(e) and Section 4.12 of the Stockholders' Agreement.
(ii) In the event you voluntarily terminate this
Agreement and your service as an employee, Vice Chairman and a member of the
Board in accordance with Section 4(d) hereof, Holding Co. shall have a Call
Right exercisable for a period of one year following the date of the termination
of your service to repurchase all or a portion of the unvested Incentive Shares
at a purchase price per share to be calculated in the manner set forth in
Section 4.8(b) of the Stockholders' Agreement for the repurchase of a Management
Stockholder's Unvested Incentive Stock in the event his or her employment is
terminated without "Cause". Notwithstanding the preceding sentence, if a
definitive agreement respecting a sale of Holding Co. is executed within six
months following the exercise of such Call Right which agreement is at any time
consummated, and the per-share purchase price (or in the case of a sale of all
or substantially all of the assets of Holding Co., the amount available for
distribution to Holding Co.'s stockholders on a per share basis) is higher than
that determined for the Incentive Shares in accordance with the preceding
sentence, you or your beneficiaries or your estate (as the case may be) shall
receive (at such times as payments in connection with such sale are made to
stockholders of Holding Co.) an additional payment from Holding Co. equal to the
difference between such higher price and the price Holding Co.
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paid for the Incentive Shares paid when it exercised its Call Right. The
exercise of a Call Right and the consummation of the repurchase shall be subject
to the procedures set forth in Section 4.8(e) and Section 4.12 of the
Stockholders' Agreement.
(iii) In the event this Agreement and your service as an
employee, Vice Chairman and a member of the Board is terminated as a result of
your death or Disability in accordance with Section 4(b) hereof or by Holding
Co. without Cause in accordance with Section 4(c) hereof, then you (or your
estate or Permitted Transferees, if applicable) shall have the right (a "Put
Right") exercisable for a period of one year following the date of the
termination of your service to require Holding Co. to purchase all, but not less
than all, of the Incentive Shares at a purchase price per share to be calculated
in the manner set forth in Section 4.9 of the Stockholders' Agreement. The
exercise of a Put Right and the consummation of the repurchase shall be subject
to the procedures set forth in Section 4.8(e) and Section 4.12 of the
Stockholders' Agreement.
(d) Notwithstanding any provision of Section 6 of this
Agreement, the exercise of a Call Right pursuant to Sections 6(c)(i) or 6(c)(ii)
hereof or the exercise of a Put Right pursuant Section 6(c)(iii) hereof shall be
subject to all of the deferred payment provisions set forth in Section 4.10 of
the Stockholders' Agreement.
(e) As a condition to the receipt of the Incentive Shares
you hereby agree to elect to be taxed under Section 83 of the Internal Revenue
Code of 1986, as amended (the "Code") to the extent the fair market value of the
Incentive Shares exceeds the Purchase Price by executing and delivering a valid
election under Section 83(b) of the Code to the Internal Revenue Service and to
Holding Co. within 30 days of the date hereof.
(f) Notwithstanding anything to the contrary herein or in
the Stockholders Agreement, vested Incentive Shares shall not be subject to a
Call Right.
7. Successors.
(a) This Agreement is personal to you and shall not be
assignable by you without the prior written consent of the Companies.
(b) This Agreement shall inure to the benefit of and be
binding upon the Companies and their successors or assigns.
8. Liability; Indemnity.
(a) In no event shall you be liable to the Companies for
lost profits of the Companies, or special, incidental or consequential damages
(even if you have been advised of the possibility of such damages) except with
respect to your fraud or intentional misrepresentation.
(b) Your total liability under this Agreement, if any, for
damages, costs and expenses, regardless of cause (other than with respect to
your fraud or
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intentional misrepresentation), shall not exceed the total amount of
compensation paid to you under this Agreement.
(c) You shall not be liable for any claim or demand made
against the Companies by any third party other than with respect to your fraud
or intentional misrepresentation.
(d) The Companies shall indemnify you against all claims,
liabilities and costs, including reasonable attorney fees incurred in defending
any third party claim or suit arising out of or in connection with this
Agreement. You shall promptly notify the Companies in writing of such claim or
suit and the Companies shall have the right to fully control the defense and any
settlement of the claim or suit; provided, however, that any settlement which
would require any action or payment by you, or would require you to undertake
certain actions or to refrain from acting, shall be subject to your prior
written approval.
9. Miscellaneous.
(a) This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware, without reference to its
principles of conflict of laws or such principles of any other jurisdiction
which could cause the application of the laws of any jurisdiction other than the
State of Delaware.
(b) This Agreement, the Stockholders' Agreement, the
Subscription Agreement and a side letter relating to certain tax payments
arising from the acceleration of options to acquire stock of Buffets state the
entire agreement and understanding of the parties on the subject matter
discussed herein, and supersedes all previous agreements, arrangements,
communications and understandings relating to that subject matter.
(c) This Agreement may be amended, modified, superseded, or
canceled, and any of the terms may be waived, only by a written agreement
executed by the parties hereto or their respective successors or legal
representatives.
(d) The captions of this Agreement are not part of the
provisions hereof and shall have no force or effect.
(e) All notices and other communications hereunder shall be
in writing and shall be given by hand delivery to the other party or by
registered or certified mail, return receipt requested, postage prepaid, or by
recognized overnight courier, to the addresses listed above or to such other
address as either party shall have furnished to the other in writing in
accordance herewith.
(f) The invalidity or unenforceability of any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement.
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(g) The failure of the Companies at any time to enforce
performance by you of any provisions of this Agreement shall in no way affect
the Companies' rights thereafter to enforce the same, nor shall the waiver by
the Companies of any breach of any provision hereof be held to be a waiver of
any other breach of the same or any other provision.
(h) The Companies may withhold from any amounts payable
under this Agreement such federal, state or local taxes as shall be required to
be withheld pursuant to any applicable law or regulation.
Please sign below to indicate your agreement to the terms described
herein.
Very truly yours,
/s/ Xxxxxxxxx X. Xxxxxx
-----------------------------------------------------
Xxxxxxxxx X. Xxxxxx
President
Buffets Holdings, Inc.
/s/ R. Xxxxxxx Xxxxxxx, Jr.
-----------------------------------------------------
R. Xxxxxxx Xxxxxxx, Jr.
Executive Vice President & Chief Financial Officer
Buffets, Inc.
AGREED to by Xxx X. Xxxxxx
/s/ Xxx X. Xxxxxx
----------------------------------------
Date: September 28, 2000
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EXHIBIT A TO XXXXXX ADVISORY AGREEMENT
COMMON PREFERRED
SHARES AMOUNT SHARES AMOUNT
------ -------- --------- ----------
Xxxxxxx X. Xxxxxx, trustee for
Xxxx X. Xxxxxx Trust 22,506 $225,060
Xxxxxxx X. Xxxxxx, trustee for
Xxxx X. Xxxxxx Trust 22,506 $225,060
Xxxx X. Xxxxxx 22,506 $225,060
Eventyr Investments Ltd. Partnership 30,422 $304,220 15,760 $1,576,000
Xxxxxxx X. Xxxxxx 3,000 $ 300,000
Xxx X. Xxxxxx 14,945 $1,494,500
------ -------- ------ ----------
TOTAL 97,940 $979,400 33,705 $3,370,500
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