EXHIBIT 10.4
NON-COMPETE/SERVICES AGREEMENT
THIS NON-COMPETE/SERVICES AGREEMENT (the "Agreement"), dated as of
___________, 2003, is between ASHFORD HOSPITALITY TRUST, INC., a corporation
organized under the laws of the State of Maryland and having its principal place
of business at Dallas, Texas (hereinafter, the "REIT"), ASHFORD HOSPITALITY
LIMITED PARTNERSHIP, a limited partnership organized under the laws of the State
of Delaware and having its principal place of business at Dallas, Texas (the
Operating Partnership"), and XXXXXX XXXXXXX, XX., an individual residing in
Dallas, Texas (the "Director").
RECITALS:
A. The REIT and the Operating Partnership (collectively, the "Company")
desire that the Director serve in the capacities and on the terms and conditions
set out below; and
B. The Director desires to accept such service with the Company, on the
terms and conditions set forth below.
NOW, THEREFORE, the Company and the Director, in consideration of the
respective covenants set out below, hereby agree as follows:
1. DIRECTORSHIP.
(a) SERVICE. During the Term (defined below), the Director shall serve
as Chairman of the Board of Directors of the REIT (the "Board"). At the
Company's request, the Director shall serve the Company's subsidiaries and
affiliates in other offices and capacities in addition to the foregoing. If the
Director, during the Term, serves in any one or more of such additional
capacities, the Director's fee shall not be increased beyond that provided in
Sections 3, 4 or 5 below. Further, if the Director's service in one or more of
such additional capacities is terminated, the Director's compensation provided
herein shall not be reduced for so long as the Director otherwise remains on the
Board of Directors of the Company and subject to the terms of this Agreement.
(b) RESPONSIBILITIES. The Director's principal duties and
responsibilities shall be those duties and responsibilities customary for the
Chairman of the Board of Directors. The Director will be responsible for and
have authority over customary duties and responsibilities of a Chairman of the
Board and such other duties reasonably directed by the Board. The Director shall
serve in the best interest of the Company and its Shareholders.
(c) EXTENT OF SERVICES. Except for (i) the time reasonably required to
perform the Director's duties and responsibilities as Chairman of the Board and
an officer of Remington Hotel Corporation ("RHC"), Remington Lodging &
Hospitality, L.P. ("Remington Lodging") and their affiliates (so long as such
duties do not materially interfere with the performance of the Director's duties
hereunder), and (ii) illnesses, the Director shall devote substantially all of
his working time and attention and his best efforts to the performance of his
duties and responsibilities under this Agreement. However, the Director may (so
long as the following do not materially interfere with the performance of the
Director's duties hereunder) (i) make any
passive investments where he is not obligated or required to, and shall not in
fact, devote material managerial efforts (provided that the Director may make
and continue investments in accordance with the terms of that certain Mutual
Exclusivity Agreement, herein so called, among RHC, Remington Lodging and their
affiliates (herein collectively called the "Remington Affiliates"), and the
Company and its affiliates dated on or about the date hereof), (ii) participate
in charitable, academic or community activities or in trade or professional
organizations, (iii) hold directorships in charitable or non-profit
organizations, (iv) subject to Board approval (which approval shall not be
unreasonably withheld or withdrawn), hold directorships in other companies,
except only that the Board shall have the right to limit such services as a
director or such participation whenever the Board shall reasonably believe that
the time spent on such activities infringes in any material respect upon the
time required by the Director for the performance of his duties under this
Agreement or is otherwise incompatible with those duties, or (v) hold
directorships in private companies owned by the Director (or Xxxxxxxxxx X.
Xxxxxxx) consistent with the Mutual Exclusivity Agreement. Further it is agreed
that to the extent any such activities have been conducted by the Director prior
to the Effective Date, the continued reasonable conduct of such activities (or
reasonable activities similar in nature and scope thereto) subsequent to the
Effective Date shall not, subject to the conditions and limitations of the
Mutual Exclusivity Agreement, thereafter be deemed to interfere with the
performance of the Director's responsibilities to the Board and to the Company
and its Shareholders; provided, that no such activity that violates the
non-competition provisions herein shall be permitted.
2. TERM. This Agreement shall become effective as of the date of the
closing of the initial public offering of shares of the REIT's common stock (the
"Effective Date") and shall continue for a Term ending on the earlier of the end
of the Director's then current term if he is not re-nominated and elected to
serve as a director and December 31, 2006 (the "Initial Termination Date")
unless it is sooner terminated pursuant to Section 7; provided, however, that if
the Director continues to be re-nominated and elected, this Agreement shall be
automatically extended for one additional year on the Initial Termination Date
and on each subsequent anniversary of the Initial Termination Date, unless the
Company or the Director elect not to extend the Term of this Agreement by
notifying the other party in writing of such election not less than one hundred
eighty (180) days prior to the expiration of the then current Term. For purposes
of this Agreement, "Term" shall mean the actual duration of the Director's
service hereunder, taking into account any extension pursuant to this Section 2
or early termination of service pursuant to Section 7 or this Section 2.
3. FEE. The Company shall pay the Director a fee which shall be payable
once a month ("Director's Fee"). Commencing as of the Effective Date, the
Director's Fee shall be TWO HUNDRED THOUSAND DOLLARS ($200,000.00) per year,
provided that, at the election of the Board, the Company may pay $25,000 of the
annual Director's Fee in shares of common stock of the REIT. The Board or a
Compensation Committee duly appointed by the Board (the "Compensation
Committee") shall thereafter review the Director's Fee annually to determine
within its sole discretion whether and to what extent the Director's Fee may be
increased (for the purposes of this Agreement, the term "Director's Fee" shall
mean the amount established and adjusted from time to time pursuant to this
Section 3).
4. INITIAL RESTRICTED STOCK AWARD. Effective upon execution of this
Agreement, the Company shall grant to the Director, within thirty (30) days
after the Effective
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Date, a restricted stock award of 0.71% of the fully-diluted shares of the
common stock outstanding on the forty-fifth (45th) day after closing of the
initial public offering of shares of the REIT's common stock, excluding shares
issued to the underwriters as compensation to the underwriters. Such stock shall
be subject to restrictions on transfer by the Director and repurchase by the
Company such that the Director shall not be permitted to transfer such shares
(other than succession by will or by operation of laws of descent and
distribution) and the Company shall have the right to repurchase or recover such
shares for the amount of cash paid therefor, if any, if the Director shall
resign from his service as Chairman of the Board, provided that such transfer
and repurchase restrictions shall lapse with respect to 33.33% of such initial
shares on the one-year anniversary date of the issuance of the shares and on
each subsequent anniversary of the issuance of the shares that the Director
shall remain continuously as the Chairman of the Board of Directors of the
Company as of such date.
5. INCENTIVE, SAVINGS AND RETIREMENT PLANS. During the Term, to the
extent permitted by law, the Director shall be entitled to participate in all
other incentive plans, stock and option plans, practices, policies and other
programs, and all savings and retirement plans, practices, polices and programs,
in each case that may be allowed from time to time by the Company's Compensation
Committee; provided, however, that the Director may not participate in any
qualified employee pension benefit plan.
6. EXPENSE REIMBURSEMENTS/D&O INSURANCE.
(a) EXPENSES. The Director will be entitled to reimbursement of all
reasonable expenses, including, without limitation, business class airfare and
other travel expenses for board meetings, committee meetings and corporate
business, telephone and facsimile expenses, and expenses for part-time
secretarial support incurred by the Director in connection with the business of
the Board and the Company, promptly upon the presentation by the Director of
appropriate documentation. The Company shall maintain an office at the Company's
headquarters for the Director and shall provide administrative support to the
Director at such office.
(b) D&O INSURANCE COVERAGE. During and for a period three (3) years
after the Term, the Director shall be entitled to director and officer insurance
coverage for his acts and omissions while a director of the Company on a basis
no less favorable to him than the coverage provided current officers or
directors.
7. TERMINATION. The services of the Director and this Agreement (except
as otherwise provided herein) shall terminate upon the occurrence of any of the
following:
(a) DEATH OR DISABILITY. Immediately upon death or Disability of the
Director. As used in this Agreement, "Disability" shall mean an inability to
perform the essential functions of his duties, with or without reasonable
accommodation, for a period of 90 consecutive days or a total of 180 days,
during any 365-day period, in either case as a result of incapacity due to
mental or physical illness which is determined to be total and permanent. A
determination of Disability shall be made by a physician satisfactory to both
the Director and the Company, provided that if the Director (or his guardian)
and the Company do not agree on a physician, the Director (or his guardian) and
the Company shall each select a physician and these
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two together shall select a third physician, whose determination as to
Disability shall be binding on all parties. The appointment of one or more
individuals to carry out the service of the Director during a period of the
Director's inability to perform such service and pending a determination of
Disability shall not be considered a breach of this Agreement by the Company.
(b) FOR CAUSE. At the election of the Company, for Cause, immediately
upon written notice by the Company to the Director unless the Director fully
corrects the circumstances constituting Cause within the cure periods provided
below, if applicable. For purposes of this Agreement, "Cause" for termination
shall be deemed to exist solely in the event of the following:
(i) The conviction of the Director of, or the entry of a plea
of guilty or nolo contendere by the Director to, a felony (exclusive of
a conviction, plea of guilty or nolo contendere arising solely under a
statutory provision imposing criminal liability upon the Director on a
PER SE basis due to the services provided under this Agreement by the
Director, so long as any act or omission of the Director with respect
to such matter was not taken or omitted in contravention of any
applicable policy or directive of the Board);
(ii) willful breach of duty of loyalty which is materially
detrimental to the Company which is not cured to the reasonable
satisfaction of the Board within fifteen (15) days following written
warning to the Director from the Board describing the alleged
circumstances;
(iii) willful failure to perform or adhere to explicitly
stated directives of the Board which continues for fifteen (15) days
after written warning to the Director that it will be deemed a basis
for a "For Cause" termination;
(iv) gross negligence or willful misconduct in the performance
of the Director's duties (which is not cured by the Director within
thirty (30) days after written warning from the Board);
(v) the Director's willful commission of an act of dishonesty
resulting in economic or financial injury to the Company or willful
commission of fraud; or
(vi) the Director's chronic absence from Board or committee
meetings for reasons other than illness.
For purposes of this Section, no act, or failure to act, on the
Director's part will be deemed "willful" unless done, or omitted to be done, by
the Director not in good faith and without a reasonable belief that the
Director's act, or failure to act, was in the best interest of the Company. Any
act, or failure to act, based upon authority given pursuant to a resolution duly
adopted by the Board or based upon the advise of counsel for the Company shall
be conclusively presumed to be done, or omitted to be done, by the Director in
good faith and in the best interests of the Company. The cessation of the
services to be provided by the Director shall not be deemed to be for Cause
until there shall have been delivered to the Director a copy of a resolution
duly adopted by the affirmative vote of not less than 2/3rds of the entire
membership of the Board at a meeting of the Board called and held for such
purpose (after reasonable notice is provided to the Director and the Director is
given an opportunity, together with counsel for the
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Director, to be heard before the Board), finding that, in the good faith opinion
of the Board, the Director is guilty of any of the conduct described in this
Section 7(b), and specified in the particulars thereof in detail; provided that
neither the Director nor any family member of the Director shall vote on such
resolution nor shall they be counted in determining the "Entire Membership" of
the Board.
(c) WITHOUT CAUSE OR GOOD REASON. At the election of the Company,
without Cause, and at the election of the Director, without Good Reason, in
either case upon sixty (60) days' prior written notice to the Director or to the
Company, as the case may be. Provided, however, that if the Director gives
notice, without Good Reason, the Company may waive all or a portion of the sixty
(60) days' written notice and accelerate the effective date of the termination.
(d) FOR GOOD REASON. At the election of the Director, for Good Reason,
which is not cured by the Company within thirty (30) days after written notice
from the Director to the Company setting forth a description of the
circumstances constituting Good Reason. For purposes of this Agreement, "Good
Reason" shall mean any of the following actions, omissions or events occurring
without the Director's prior written consent:
(i) The assignment to the Director of any duties,
responsibilities, or reporting requirements inconsistent with his
service as Chairman of the Board of Directors of the Company, or any
material diminishment, on a cumulative basis, of the Director's overall
duties, responsibilities, or status;
(ii) a reduction by the Company in the annual Director's Fee;
(iii) the failure by the Company to honor the minimum
Incentive Bonus or to honor the initial restricted stock award
referenced in Sections 4 and 5 hereof, unless equitable alternative
compensation arrangements (embodied in ongoing substitute or
alternative plans) have been provided for the Director;
(iv) any material breach by the Company of any provision of
this Agreement; or
(v) Xxxxxxxxxx X. Xxxxxxx is removed without Cause in his
capacity as President, Chief Executive Officer and director on the
Board, as the term "Cause" is defined in that certain Employment
Agreement (the "MJB Employment Agreement") dated on or about the
Effective Date, the Company fails to renew the MJB Employment
Agreement, or Xxxxxxxxxx X. Xxxxxxx leaves for "Good Reason" as defined
in the MJB Employment Agreement.
(e) NOTICE OF TERMINATION. Any termination by the Company for Cause, or
by the Director for Good Reason, shall be communicated by Notice of Termination
to the other parties hereto given in accordance with Section 17(a) of this
Agreement. For purposes of this Agreement, a "Notice of Termination" means a
written notice which (i) indicates the specific termination provision in this
Agreement relied upon, (ii) to the extent applicable, sets forth in reasonable
detail the facts and circumstances claimed to provide a basis for termination of
the Director's services under the provision so indicated, and (iii) if the Date
of Termination (as
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defined below) is other than the date of receipt of such notice, specifies the
termination date (provided that the date specified shall not be more than thirty
(30) days after the giving of the notice). The failure by the Director or the
Company to set forth in the Notice of Termination any fact or circumstance which
contributes to a showing of Good Reason or Cause shall not waive any right of
the Director of the Company, respectively, hereunder or preclude the Director or
the Company, respectively, from asserting such fact or circumstance in enforcing
the Director's or the Company's rights hereunder.
(f) DATE OF TERMINATION. "Date of Termination" means (i) if the
Director's services are terminated by the Company for Cause, or by the Director
for Good Reason, the date of receipt of the Notice of Termination or any later
date specified in the notice (provided that the date specified shall not be more
than thirty (30) days after the giving of the notice), as the case may be, (ii)
if the Director's services are terminated by the Company other than for Cause or
Disability, the Date of Termination shall be the date on which the Company
notifies the Director of such termination or such later date specified in such
notice, (iii) if the Director's services are terminated by the Director without
Good Reason, the Date of Termination shall be the date on which the Director
notifies the Company of such termination or such later date specified in such
notice, unless otherwise agreed by the Company and the Director, and (iv) if the
Director's services are terminated by reason of death or Disability, the Date of
Termination shall be the date of death or Disability of the Director, as the
case may be.
8. EFFECTS OF TERMINATION.
(a) TERMINATION FOR DEATH OR DISABILITY FOR DEATH/DISABILITY; BY THE
COMPANY WITHOUT CAUSE AFTER INITIAL TERM; OR NON-RENEWAL BY THE COMPANY. If the
services of the Director should terminate by reason of (i) death of the Director
or Disability, (ii) termination by the Company for any reason (other than Cause)
after the initial Term ending on the Initial Termination Date or the failure of
the Company to re-nominate and elect the Director to serve as Chairman of the
Board after such initial Term, or (iii) the Company's failure to renew this
Agreement at the initial Term ending on the Initial Termination Date or any time
thereafter, then all compensation and benefits for the Director shall be as
follows:
(i) The Director shall be paid, in a single lump sum payment
within thirty (30) days after the Date of Termination, the aggregate
amount of (A) the Director's earned but unpaid Director's Fee through
the Date of Termination, and reimbursement of all expenses through the
Date of Termination as required pursuant to Section 6(a) hereof (the
"Accrued Obligations"), and (B) one (the "Severance Multiple") times
the Director's Fee in effect on the Date of Termination (the "Severance
Payment").
(ii) The Director's restricted shares awarded under Section 4
hereof shall immediately vest, and any annual performance shares or
options awarded under Section 5 hereof shall immediately vest. Without
limiting the foregoing, it is agreed that if the Director's services
are terminated pursuant to this Section 8(a), all outstanding stock
options, restricted stock and other equity awards granted to the
Director under any of the Company's equity incentive plans (or awards
substituted therefore covering the securities of a successor company)
shall become immediately vested and exercisable in full.
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(b) TERMINATION BY THE COMPANY WITHOUT CAUSE DURING INITIAL TERM OR BY
THE EXECUTIVE WITH GOOD REASON. In the event that the Director's services are
terminated for any reason other than Cause before the Initial Termination Date,
including failure to re-nominate and elect the Director to serve as Chairman of
the Board before the Initial Termination Date, or by the Director with Good
Reason, the Company will pay the Director the same Accrued Obligations and
accelerated vesting, all as provided in Sections 8(a)(i) and (ii) above at the
times as provided in such sections. In addition, the Director shall be entitled
to a Severance Payment determined and paid in accordance with Section 8(a)(i)
above; PROVIDED, HOWEVER, the Severance Multiple shall be two (2). Without
limiting the foregoing, it is agreed that if the Director's services are
terminated pursuant to this Section 8(b), all outstanding stock options,
restricted stock and other equity awards granted to the Director under any of
the Company's equity incentive plans (or awards substituted therefore covering
the securities of a successor company) shall become immediately vested and
exercisable in full.
(c) TERMINATION BY EXECUTIVE WITHOUT GOOD REASON. If the Director's
services are terminated by the Director without Good Reason including a
resignation by the Director without Good Reason and including an election not to
renew this Agreement by the Director, the Company will pay the Director the
Accrued Obligations as provided in Section 8(a)(i) above but the Director shall
not be entitled to the Severance Payment and accelerated vesting set forth in
Sections 8(a)(i) and (ii) hereof. In addition, in consideration for the
Director's agreement for honoring the non-compete and non-solicitation covenants
in Section 11 hereof for a period of one (1) year following the Date of
Termination resulting from this Section 8(c), the Company shall pay the Director
a non-compete payment (the "Non-Compete Payment") equal to the Severance Payment
determined with a Severance Multiple equal to one (1). The Non-Compete Payment
shall be paid monthly over the one-year non-compete period in equal monthly
installments of one-twelfth (1/12th) of the Non-Compete Payment.
(d) TERMINATION BY THE COMPANY FOR CAUSE. If the Director's service is
terminated by the Company for Cause, the Company will pay the Director the
Accrued Obligations as provided in Section 8(a)(i) above but the Director shall
not be entitled to the Severance Payment and accelerated vesting set forth in
Sections 8(a)(i) and (ii) hereof.
(e) TERMINATION OF AUTHORITY. Immediately upon the Date of Termination
or upon the expiration of this Agreement, notwithstanding anything else to the
contrary contained herein or otherwise, the Director will resign (and shall be
deemed to have resigned) his directorship and stop serving as Chairman of the
Board, and shall be without any of the authority or responsibility for such
position.
(f) RELEASE OF CLAIMS. As conditions of Director's entitlement to the
Severance Payment, Non-Compete Payment and benefits provided by this Agreement,
the Director shall be required to execute and honor the terms of a waiver and
release of claims against the Company substantially in the form attached hereto
as Exhibit "A" (as may be modified consistent with the purposes of such waiver
and release to reflect changes in law following the date hereof).
9. CHANGE OF CONTROL.
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(a) CHANGE OF CONTROL. For purposes of this Agreement, a "Change of
Control" will be deemed to have taken place upon the occurrence of any of the
following events:
(i) Any "person" (as defined in Section 3(a)(9) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and
as modified in Section 13(d) and 14(d) of the Exchange Act) other than
(A) the Company or any of its subsidiaries, (B) any employee benefit
plan of the Company or any of its subsidiaries, (C) any Remington
Affiliate, (D) a company owned, directly or indirectly, by stockholders
of the Company in substantially the same proportions as their ownership
of the Company, or (E) an underwriter temporarily holding securities
pursuant to an offering of such securities, becomes the "beneficial
owner" (as defined in Rule 13d-3 of the Exchange Act), directly or
indirectly, of securities of the Company representing 30% or more of
the shares of voting stock of the Company then outstanding;
(ii) the consummation of any merger, organization, business
combination or consolidation of the Company or one of its subsidiaries
with or into any other company, other than a merger, reorganization,
business combination or consolidation which would result in the holders
of the voting securities of the Company outstanding immediately prior
thereto holding securities which represent immediately after such
merger, reorganization, business combination or consolidation more than
50% of the combined voting power of the voting securities of the
Company or the surviving company or the parent of such surviving
company;
(iii) the consummation of the sale or disposition by the
Company of all or substantially all of the Company's assets, other than
a sale or disposition if the holders of the voting securities of the
Company outstanding immediately prior thereto hold securities
immediately thereafter which represent more than 50% of the combined
voting power of the voting securities of the acquiror, or parent of the
acquiror, of such assets; or the stockholders of the Company approve a
plan of complete liquidation or dissolution of the Company; or
(iv) individuals who, as of the Effective Date, constitute the
Board (the "Incumbent Board") cease for any reason to constitute at
least a majority of the Board; provided, however, that any individual
becoming a director subsequent to the Effective Date whose election to
the Board was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered as
though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such individual whose initial
assumption of office occurs as a result of an election contest with
respect to the election or removal of directors or other solicitation
of proxies or consents by or on behalf of a person other than the
Board.
(b) CERTAIN BENEFITS UPON A CHANGE OF CONTROL. If a Change in Control
occurs during the Term and the Director's service is terminated (i) by the
Company without Cause or by the Director for any reason on or before the one (1)
year anniversary of the effective date of the Change in Control, then the
Director shall be entitled to the Accrued Obligations, Pro-Rated Bonus, such
employee welfare benefits as may be provided in this Agreement and accelerated
vesting, all as provided in Sections 8(a)(i), (ii), (iii) and (iv) above at
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the times as provided in such sections. In addition, the Director shall be
entitled to a Severance Payment determined and paid in accordance with Section
8(a)(i) above; PROVIDED, HOWEVER, the Severance Multiple shall be two (2).
Without limiting the foregoing, it is agreed that if the Director's service is
terminated pursuant to this Section 9(b), all outstanding stock options,
restricted stock and other equity awards granted to the Director under any of
the Company's equity incentive plans (or awards substituted therefore covering
the securities of a successor company) shall become immediately vested and
exercisable in full.
(c) EXCISE TAX.
(i) In the event that any payment or benefit received or to be
received by the Director in connection with a Change of Control or the
termination of the Director's service (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a Change of Control or any
person affiliated with the Company or such person) (all such payments
and benefits being hereinafter called "Total Payments") will be subject
(in whole or part) to the excise tax (the "Excise Tax") imposed under
Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), then, subject to the provisions of Section 9(c)(ii) hereof,
the Company will pay to the Director an additional amount (the
"Gross-Up Payment") such that the net amount retained by the Director,
after deduction of any Excise Tax on the Total Payments and any
federal, state and local income tax and Excise Tax upon the payment
provided for by this Section 9(c)(i), will be equal to the Total
Payments. For purposes of determining the amount of the Gross-Up
Payment, the Director will be deemed to pay federal income taxes at the
highest marginal rate of federal income taxation in the calendar year
in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and
locality of the Director's residence on such date, net of the maximum
reduction in federal income taxes which could be obtained from
deduction of such state and local taxes.
(ii) In the event that, after giving effect to any
redeterminations described in Section 9(c)(iv) hereof, a reduction in
the Total Payments to the largest amount that would result in no
portion of the Total Payments being subject to the Excise Tax (after
taking into account any reduction in the Total Payments provided by
reason of Section 280G of the Code in such other plan, arrangement or
agreement) would produce a net amount (after deduction of the net
amount of federal, state and local income tax on such reduced Total
Payments) that would be greater than the net amount of unreduced Total
Payments (after deduction of the net amount of federal, state and local
income tax and the amount of Excise Tax to which the Director would be
subject in respect of such Total Payments), then Section 9(c)(i) hereof
will not apply and the Total Payments will be so reduced.
(iii) The determination of whether any of the Total Payments
will be subject to the Excise Tax and the amount of such Excise Tax
will be made by the Company's independent auditors. The Company will
provide the Director with its calculation of the amounts referred to in
this Section 9(c) and such supporting materials as are reasonably
necessary for the Director to evaluate the Company's calculations. If
the Director
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disputes the Company's calculations (in whole or in part), the
reasonable opinion of the Company's independent auditors with respect
to the matter in dispute will prevail.
(iv) In the event that (A) the Excise Tax is subsequently
determined to be less than the amount taken into account hereunder at
the time of payment of the Total Payments and (B) after giving effect
to such redetermination, the Total Payments are reduced pursuant to
Section 9(c)(ii) hereof, the Director will repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally
determined, the portion of the Gross-Up Payment attributable to such
reduction (plus that portion of the Gross-Up Payment attributable to
the Excise Tax and federal, state and local income tax imposed on the
Gross-Up Payment being repaid by the Director to the extent that such
repayment results in a reduction in the Excise Tax and/or a federal,
state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in Section 1274(b)(2)(B) of the
Code. In the event that (X) the Excise Tax is determined to exceed the
amount taken into account hereunder at the time of the termination of
the Director's service (including by reason of any payment the
existence or amount of which cannot be determined at the time of the
Gross-Up Payment) and (Y) after giving effect to such redetermination,
the Total Payments are not reduced pursuant to Section 9(c)(ii) hereof,
the Company will make an additional Gross-Up Payment in respect of such
excess and in respect of any portion of the Excise Tax with respect to
which the Company had not previously made a Gross-Up Payment (plus any
interest, penalties or additions payable by the Director with respect
to such excess and such portion) at the time that the amount of such
excess is finally determined.
(v) The Director shall notify the Company in writing of any
claim that, if successful, would require the payment by the Company of
a Gross-Up Payment or might entitle the Company to the refund of all or
part of any previous Gross-Up Payment. Such notification shall be given
as soon as practicable but no later than ten (10) business days after
the Director is informed in writing of such claim and shall apprise the
Company of the nature of such claim and the date on which such claim is
required to be paid. The Director shall not pay such claim prior to the
expiration of the thirty (30) day period following the date on which he
gives such notice to the Company. If the Company notifies the Director
in writing prior to the expiration of such period that it desires to
contest such claim, the Director shall: (i) give the Company any
information reasonably requested by the Company relating to such claim;
(ii) take such action in connection with contesting such claim as the
Company shall reasonably request in writing from time to time,
including, without limitation, accepting legal representation with
respect to such claim by an attorney jointly selected by the Director
and the Company; (iii) cooperate with the Company in good faith in
order to effectively contest such claim; and (iv) permit the Company to
participate in any proceedings relating to such claim. The Company
shall bear and pay directly all costs and expenses (including legal
fees and additional interest and penalties) incurred in connection with
such contest and shall indemnify and hold the Director harmless, on an
after-tax basis, for any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of such
representation and payment of costs and expenses.
-10-
(vi) Without limitation on the foregoing, the Company shall
control all audits and proceedings taken in connection with any claim,
audit or proceeding involving Excise Taxes or Gross-Up Payments and, at
its sole option, may pursue or forego any and all administrative
appeals, proceedings, hearings and conferences with the taxing
authority in respect of any such claim, audit or proceeding and may, at
its sole option, either direct the Director to pay the tax claimed and
xxx for a refund or contest the tax in any permissible manner, and the
Director agrees to prosecute such contest to a determination before any
administrative tribunal, in a court of initial jurisdiction and in one
or more appellate courts, as the Company shall determine; PROVIDED,
HOWEVER, that if the Company directs the Director to pay such tax and
xxx for a refund, the Company shall advance the amount of such payment
to the Director, on an interest-free basis, from any Excise Tax or
income tax (including interest or penalties with respect thereto)
imposed with respect to such advance or with respect to any imputed
income with respect to such advance. The Company's control of the
contest shall be limited to issues with respect to which such a
Gross-Up Payment would be payable or refundable hereunder and the
Director shall be entitled to settle or contest, as the case may be,
any other issue.
10. CONFIDENTIAL INFORMATION. The Director recognizes and acknowledges
that the Director has and will have access to confidential and proprietary
information of the Company which constitute valuable, special, and unique assets
of the Company. The term "Confidential Information" as used in this Agreement
shall mean all information which is known only to the Director, the Company, the
Remington Affiliates with respect to a Remington Transaction (as defined in the
Mutual Exclusivity Agreement), other employees of the Company, or others in a
confidential relationship with the Company, and relating to the Company's
business (including, without limitation, information regarding clients,
customers, pricing policies, methods of operation, proprietary company programs,
sales, acquisitions, products, profits, costs, conditions (financial or other),
cash flows, key personnel, formulae, product applications, technical processes,
and trade secrets, as such information may exist from time to time, which the
Director acquired or obtained by virtue of work performed for the Company, or
which the Director may acquire or may have acquired knowledge of during the
performance of said work.
The Director acknowledges that the Company has put in place certain
policies and practices to keep such Confidential Information secret, including
disclosing the information only on a need-to-know basis. The Director further
acknowledges that the Confidential Information has been developed or acquired by
the Company through the expenditure of substantial time, effort, and money and
provides the Company with an advantage over competitors who do not know such
Confidential Information. Finally, the Director acknowledges that such
Confidential Information, if revealed to or used for the benefit of the
Company's competitors or in a manner contrary to the Company's interests, would
cause extensive and immeasurable harm to the Company and to the Company's
competitive position.
The Director shall not, during the Term or at any time after this
Agreement ends, for a period of two (2) years thereafter, use for personal gain
or detrimentally to the Company all or part of the Confidential Information, or
disclose or make available all or any part of the Confidential Information to
any person, firm, corporation, association, or any other entity for any
-11-
reason or purpose whatsoever, directly or indirectly, except as may be required
for the benefit of the Company pursuant to his service hereunder, unless and
until such Confidential Information becomes publicly available other than as a
consequence of the breach by the Director of his confidentiality obligations
hereunder.
The Director acknowledges that the Confidential Information shall
remain at all times the exclusive property of the Company, and no license is
granted. In the event of the termination of his service, whether Without or For
Cause or Good Reason whether by the Company or the Director, or within seven (7)
business days of the Company's request under any other circumstances, the
Director shall deliver to the Company all Confidential Information, in any form
whatsoever, including electronic formats, and shall not take with him any
Confidential Information or any reproductions (in whole or in part) or extracts
of any items relating to the Confidential Information. The Company acknowledges
that prior to his service with the Company, the Director has lawfully acquired
extensive knowledge of the industries in which the Company engages in business
including, without limitation, markets, valuation methods, and techniques,
capital markets, investor relationships and similar items, and that the
provisions of this Section 10 are not intended to restrict the Director's use of
such previously acquired knowledge.
In the event that the Director receives a request or is required (by
deposition, interrogatory, request for documents, subpoena, civil investigative
demand or similar process) to disclose all or any part of the Confidential
Information, the Director agrees to (a) promptly notify the Company of the
existence, terms and circumstances surrounding such request or requirement, (b)
consult with the Company on the advisability of taking legally available steps
to resist or narrow such request or requirement and (c) assist the Company in
seeking a protective order or other appropriate remedy; provided, however, that
the Director shall not be required to take any action in violation of applicable
laws. In the event that such protective order or other remedy is not obtained or
that the Company waives compliance with the provisions hereof, the Director
shall not be liable for such disclosure unless disclosure to any such tribunal
was caused by or resulted from a previous disclosure by the Director not
permitted by this Agreement.
11. NON-COMPETITION AND NONSOLICITATION. During the Term and any
Non-Compete Period (hereinafter defined), the Director will not, directly or
indirectly, either as a principal, agent, employee, employer, stockholder,
partner, or director of another company: (i) engage in any "Competitive
Business"; or (ii) employ or solicit the employment of, or assist others in
employing or soliciting the employment of, any individual employed by the
Company at any time while the Director was also so serving on the Board or as
Chairman of the Board; PROVIDED, HOWEVER, the foregoing shall not prohibit or
limit the Director's right to (i) pursue investments, transactions or businesses
allowed pursuant to the terms of the Mutual Exclusivity Agreement, (ii) continue
the Director's ownership, investment, management and operation of the Remington
Affiliates consistent with the terms of the Mutual Exclusivity Agreement, (iii)
continue the Director's ownership, investment, management and operation of all
existing investments of the Director and the Remington Affiliates as of the
Effective Date consistent with the terms of the Mutual Exclusivity Agreement,
and (iv) remain an officer and/or director of all Remington Affiliates
consistent with the terms of the Mutual Exclusivity Agreement.
-12-
For purposes of this Section 11, "Competitive Business" means
acquiring, investing in or with respect to, owning, leasing, managing
or developing hotel properties in the United States or originating or
acquiring loans in respect of hotel properties in the United States
where the Executive has duties or performs services that are the same
or similar to those services actually performed by the Executive for
the Company.
For purposes of this Section 11, the "Non-Compete Period" shall mean:
(i) In the case of a termination of the Director's service as
a result of Disability, or a termination by the Director without Good
Reason (including, without limitation, a resignation by the Director
without Good Reason or an election not to renew by the Director), a
period during the Term and ending one (1) year after the Date of
Termination;
(ii) in the case of a termination of the Director's services
as a result of a termination by the Company for Cause, a period during
the Term and ending one (1) year after the Date of Termination;
(iii) in the case of a termination of the Director's services
as a result of (i) a Change in Control, (ii) a termination by the
Director for Good Reason, or (iii) a termination by the Company for any
reason other than Cause, only during the Term; or
(iv) notwithstanding the foregoing, in all cases the
Non-Compete Period shall terminate effective on the termination of the
REIT Exclusivity Rights (as defined in the Mutual Exclusivity
Agreement) by Remington Lodging as a result of a Remington Termination
Event (and provided further that upon such termination of the
Non-Compete Period, the outstanding Non-Compete Payment shall be paid
by the Company within five (5) days of such termination to the
Director).
The Director acknowledges that the services provided by the Director
are of a special, unique, and extraordinary nature. The Director further
acknowledges that his work and experience with the Company will enhance his
value to a Competitive Business, and that the nature of the Confidential
Information to which the Director has immediate access and will continue to have
access during the course of his employment makes it difficult, if not
impossible, for him to engage in any Competitive Business or work in any
capacity similar to the Director's duties or services with the Company without
disclosing or utilizing the Confidential Information. The Director further
acknowledges that his work and experience with the Company places him in a
position of trust with the Company.
The Director agrees that restraints imposed upon him pursuant to this
Section are necessary for the reasonable and proper protection of the Company
and its subsidiaries and affiliates, and that each and every one of the
restraints is reasonable in respect to subject matter, length of time and
geographic area. The parties further agree that, in the event that any provision
of this Section shall be determined by any court of competent jurisdiction to be
unenforceable by reason of its being extended over too great a time, too large a
geographic area or too great a
-13-
range of activities, such provision shall be deemed to be modified to permit its
enforcement to the maximum extent permitted by law.
12. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent
or limit the Director's continuing or future participation in any plan, program,
policy or practice provided by the Company and for which the Director may
qualify, and on the terms under which he qualifies nor shall anything herein
limit or otherwise affect such rights as the Director may have under any
contract or agreement with the Company. Amounts which are vested benefits or
which the Director is otherwise entitled to receive under any plan, policy,
practice or program of or any contract agreement with the Company at or
subsequent to the Date of Termination shall be payable in accordance with such
plan, policy, practice or program or contract or agreement except as explicitly
modified by this Agreement.
13. FULL SETTLEMENT. The Company'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 the Company may have against the
Director or others. In no event shall the Director be obligated to take any
action by way of mitigation of the amounts payable to the Director under any of
the provisions of this Agreement and except as expressly provided, such amounts
shall not be reduced. The Company agrees to pay as incurred (within 30 days
following the Company's receipt of an invoice from the Director), to the full
extent permitted by law, all reasonable legal fees and expenses which the
Director or his beneficiaries may reasonably incur as a result of any contest
(regardless of the outcome thereof) by the Company, the Director or others of
the validity or enforceability of, or liability under, any provision of this
Agreement or any guarantee of performance thereof (including as a result of any
contest by the Director or his beneficiaries about the amount of any payment
pursuant to this Agreement), plus in each case interest on any delayed payment
at the applicable Federal rate provided for in Section 7872(f)(2)(a) of the
Code. The preceding sentence shall not apply with respect to any such contest if
the court having jurisdiction over such contest determines that the Director's
claim in such contest is frivolous or maintained in bad faith.
14. DISPUTES.
(a) EQUITABLE RELIEF. The Director acknowledges and agrees that upon
any breach by the Director of his obligations under Sections 10 or 11 hereof,
the Company will have no adequate remedy at law, and accordingly will be
entitled to specific performance and other appropriate injunctive and equitable
relief.
(b) ARBITRATION. Excluding only requests for equitable relief by the
Company under Section 14(a) of this Agreement, in the event that there is any
claim or dispute arising out of or relating to this Agreement, or the breach
thereof, and the parties hereto shall not have resolved such claim or dispute
within 60 days after written notice from one party to the other setting forth
the nature of such claim or dispute, then such claim or dispute shall be settled
exclusively by binding arbitration in Dallas, Texas in accordance with the
Commercial Arbitration Rules of the American Arbitration Association by an
arbitrator mutually agreed upon by the parties hereto or, in the absence of such
agreement, by an arbitrator selected according to such Rules. Notwithstanding
the foregoing, if either the Company or the Director shall request,
-14-
such arbitration shall be conducted by a panel of three arbitrators, one
selected by the Company, one selected by the Director and the third selected by
agreement of the first two, or, in the absence of such agreement, in accordance
with such Rules. Neither party shall have the right to claim or recover punitive
damages. Judgment upon the award rendered by such arbitrator(s) shall be entered
in any Court having jurisdiction thereof upon the application of either party.
15. INDEMNIFICATION. The Company will indemnify the Director, to the
maximum extent permitted by applicable law, against all costs, charges and
expenses incurred or sustained by the Director, including the cost of legal
counsel selected and retained by the Director in connection with any action,
suit or proceeding to which the Director may be made a party by reason of the
Director being or having been a director of the Company or any subsidiary or
affiliate of the Company.
16. COOPERATION IN FUTURE MATTERS. The Director hereby agrees that, for
a period of one (1) year following termination of his directorship, he shall
cooperate with the Company's reasonable requests relating to matters that
pertain to the Director's service as Chairman of the Board by the Company,
including, without limitation, providing information or limited consultation as
to such matters, participating in legal proceedings, investigations or audits on
behalf of the Company, or otherwise making himself reasonably available to the
Company for other related purposes. Any such cooperation shall be performed at
times scheduled taking into consideration the Director's other commitments,
including business and family matters, and the Director shall be compensated at
a reasonable hourly or PER DIEM rate to be agreed by the parties to the extent
such cooperation is required on more than an occasional and limited basis. The
Director shall not be required to perform such cooperation to the extent it
conflicts with any requirements of exclusivity of services for an employer or
otherwise, nor in any manner that in the good faith belief of the Director would
conflict with his rights under or ability to enforce this Agreement.
17. GENERAL.
(a) NOTICES. All notices and other communications hereunder shall be in
writing or by written telecommunication, and shall be deemed to have been duly
given if delivered personally or if sent by overnight courier or by certified
mail, return receipt requested, postage prepaid or sent by written
telecommunication or telecopy, to the relevant address set forth below, or to
such other address as the recipient of such notice or communication shall have
specified to the other party hereto in accordance with this Section 17(a).
If to the Company, to: Ashford Hospitality Trust, Inc.
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Board of Directors
with a copy to: Ashford Hospitality Trust, Inc.
00000 Xxxxxx Xxxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Chief Legal Officer
-15-
If to the Director, at his last residence shown on the records of the
Company,
with a copy to:
----------------------------
----------------------------
----------------------------
----------------------------
----------------------------
Any such notice shall be effective (i) if delivered personally, when received,
(ii) if sent by overnight courier, when receipted for, and (iii) if mailed, two
(2) days after being mailed as described above.
(b) SEVERABILITY. If any provision of this Agreement is or becomes
invalid, illegal or unenforceable in any respect under any law, the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired.
(c) WAIVERS. No delay or omission by either party hereto in exercising
any right, power or privilege hereunder shall impair such right, power or
privilege, nor shall any single or partial exercise of any such right, power or
privilege preclude any further exercise thereof or the exercise of any other
right, power or privilege.
(d) COUNTERPARTS. This Agreement may be executed in multiple
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument. In making proof of this
Agreement, it shall not be necessary to produce or account for more than one
such counterpart.
(e) ASSIGNS. This Agreement shall be binding upon and inure to the
benefit of the Company's successors and the Director's personal or legal
representatives, executors, administrators, heirs, distributees, devisees and
legatees. This Agreement shall not be assignable by the Director, it being
understood and agreed that this is a contract for the Director's personal
services. This Agreement shall not be assignable by the Company except in
connection with a transaction involving the succession by a third party to all
or substantially all of the Company's business and/or assets (whether direct or
indirect and whether by purchase, merger, consolidation, liquidation or
otherwise), in which case such successor shall assume this Agreement and
expressly agree to perform this Agreement in the same manner and to the same
extent as the Company would be required to perform it in the absence of a
succession. For all purposes under this Agreement, the term "Company" shall
include any successor to the Company's business and/or assets that executes and
delivers the assumption agreement described in the immediately preceding
sentence or that becomes bound by this Agreement by operation of law.
(f) ENTIRE AGREEMENT. This Agreement contains the entire understanding
of the parties, supersedes all prior agreements and understandings, whether
written or oral, relating to the subject matter hereof and may not be amended
except by a written instrument hereafter signed by the Director and a duly
authorized representative of the Board.
(g) GOVERNING LAW. This Agreement and the performance hereof shall be
construed and governed in accordance with the laws of the State of Texas,
without giving effect
-16-
to principles of conflicts of law. Jurisdiction and venue shall be solely in the
federal or state courts of Dallas County, Texas. This provision should not be
read as a waiver of any right to removal to federal court in Dallas County.
(h) CONSTRUCTION. The language used in this Agreement will be deemed to
be the language chosen by the parties to express their mutual intent, and no
rule of strict construction will be applied against any party. The headings of
sections of this Agreement are for convenience of reference only and shall not
affect its meaning or construction.
(i) PAYMENTS AND EXERCISE OF RIGHTS AFTER DEATH. Any amounts due
hereunder after the Director's death shall be paid to the Director's designated
beneficiary or beneficiaries, whether received as a designated beneficiary or by
will or the laws of descent and distribution. The Director may designate a
beneficiary or beneficiaries for all purposes of this Agreement, and may change
at any time such designation, by notice to the Company making specific reference
to this Agreement. If no designated beneficiary survives the Director or the
Director fails to designate a beneficiary for purposes of this Agreement prior
to his death, all amounts thereafter due hereunder shall be paid, as and when
payable, to his spouse, if she survives the Director, and otherwise to his
estate.
(j) CONSULTATION WITH COUNSEL. The Director acknowledges that he has
had a full and complete opportunity to consult with counsel or other advisers of
his own choosing concerning the terms, enforceability and implications of this
Agreement, and that the Company has not made any representations or warranties
to the Director concerning the terms, enforceability and implications of this
Agreement other than as are reflected in this Agreement.
(k) WITHHOLDING. Any payments provided for in this Agreement shall be
paid net of any applicable tax withholding required under federal, state or
local law.
-17-
IN WITNESS WHEREOF, and intending to be legally bound hereby, the
parties hereto have caused this Agreement to be duly executed under seal as of
the date first above written.
REIT:
ASHFORD HOSPITALITY TRUST, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated:
-------------------------------
OPERATING PARTNERSHIP:
ASHFORD HOSPITALITY LIMITED
PARTNERSHIP
By: Ashford OP General Partner, LLC
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
Dated:
-------------------------------
DIRECTOR:
-------------------------------------
XXXXXX XXXXXXX, XX.
Dated:
-------------------------------
-18-
EXHIBIT "A"
RELEASE AND WAIVER
THIS RELEASE AND WAIVER (the "Termination Release") is made as of the
_____ day of ___________, 2003 by XXXXXX XXXXXXX, XX. (the "Director").
WHEREAS, the Director, Ashford Hospitality Trust, Inc. (the "REIT"),
and Ashford Hospitality Limited Partnership (the "Operating Partnership") have
entered into a Non-Compete/Services Agreement (the "Agreement") dated as of
________________, 2003 and providing certain compensation and severance amounts
upon the Director not serving as Chairman of the Board of Directors of REIT (the
"Board"); and
WHEREAS, the Director has agreed, pursuant to the terms of the
Agreement, to execute a release and waiver in the form set forth in this
Termination Release in consideration of the REIT and the Operating Partnership
(collectively, the "Company") agreement to provide the Director's Fee and
severance amounts upon the Director not serving as Chairman of the Board as set
out in the Agreement; and
WHEREAS, the Company and the Director desire to settle all rights,
duties and obligations between them, including without limitation all such
rights, duties, and obligations arising under the Agreement or otherwise out of
the Director's service as Chairman of the Board of the Company;
NOW THEREFORE, intending to be legally bound and for good and valid
consideration the sufficiency of which is hereby acknowledged, the Director
agrees as follows:
1. RELEASE. (a) The Director knowingly and voluntarily releases,
acquits, covenants not to xxx and forever discharges the Company, and its
respective owners, parents, stockholders, predecessors, successors, assigns,
agents, directors, officers, employees, representatives, divisions and
subsidiaries (collectively, the "Releasees") from any and all charges,
complaints, claims, liabilities, obligations, promises, agreements, damages,
causes of action, suits, rights, costs, losses, debts and expenses of any nature
whatsoever, known or unknown, suspected or unsuspected, foreseen or unforeseen,
matured or unmatured, against them which the Director or any of his heirs,
executors, administrators, successors and assigns ever had, now has or at any
time hereafter may have, own or hold by reason of any matter, fact, or cause
whatsoever from the beginning of time up to and including the date of this
Termination Release, including without limitation all claims arising under the
Age Discrimination in Employment Act, Title VII of the Civil Rights Act of 1964,
the Americans with Disabilities Act of 1990, the Family and Medical Leave Act of
1993, the Employee Retirement Income Security Act of 1974, Texas Labor Code
Section 21.001, et seq. (Texas Employment Discrimination); Texas Labor Code
Section 61.001, et seq. (Texas Pay Day Act); Texas Labor Code Section 62.002, et
seq. (Texas Minimum Wage Act); Texas Labor Code Section 201.001, et seq. (Texas
Unemployment Compensation Act); Texas Labor Code Section 401.001, et seq.,
specifically Section 451.001 formerly codified as Article 8307c of the Revised
Civil Statutes (Texas Workers' Compensation Act and Discrimination Issues); and
Texas Genetic Information and Testing Law, each as amended, or any other
federal, state or local laws, rules, regulations, ordinances, judicial decisions
or public policies now or hereafter recognized.
A-1
(a) The Director represents that he has not filed or permitted to be
filed against the Releasee, any complaints, charges or lawsuits and covenants
and agrees that he will not seek or be entitled to any personal recovery in any
court or before any governmental agency, arbitrator or self-regulatory body
against any of the Releasees arising out of any matters set forth in Section
1(a) hereof. Nothing herein shall prevent the Director from seeking to enforce
his rights under the Agreement. The Director does not hereby waive or release
his rights to any benefits under the Company's employee benefit plans to which
he is or will be entitled pursuant to the terms of such plans in the ordinary
course.
2. ACKNOWLEDGMENT. The Company has advised the Director to consult with
an attorney of his choosing prior to signing this Termination Release and the
Director hereby represents to the Company that he has been offered an
opportunity to consult with an attorney prior to signing this Termination
Release. The Company has also advised the Director that Director has up to
twenty-one days to consider and sign the Release and Waiver and up to seven days
after signing in which to revoke acceptance by giving notice to _____________ at
__________________ by personal delivery or by mail postmarked no later than the
seventh day after the Director signs the Release and Waiver.
IN WITNESS WHEREOF, the Director has executed this Termination Release
under seal as of the day and year first above written.
-------------------------------------
XXXXXX XXXXXXX, XX.
A-2
