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EXHIBIT 10.6
EMPLOYMENT AGREEMENT
BETWEEN
XXXXXX LODGING COMPANY
AND
XXXXXXX X. XXXXXXXX
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EMPLOYMENT AGREEMENT
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THIS EMPLOYMENT AGREEMENT is entered into as of the ___ day of ___________,
1996, between Xxxxxx Lodging Company, an Ohio corporation (the "Company"), and
Xxxxxxx X. Xxxxxxxx (the "Executive").
W I T N E S S E T H:
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WHEREAS, the Company desires to employ the Executive, and the Executive
desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein contained,
the parties agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive as its Chief Financial
Officer and Treasurer and the Executive hereby accepts such employment, on the
terms and subject to the conditions hereinafter set forth.
(b) During the term of this Employment Agreement and any renewal hereof
(all references herein to the term of this Employment Agreement shall include
references to the period of renewal hereof, if any), the Executive shall be and
have the titles of Chief Financial Officer and Treasurer and shall devote such
business time and all reasonable efforts to his employment as the Executive
deems appropriate and perform diligently such duties as are customarily
performed by Chief Financial Officers of publicly-held real estate investment
trusts, together with such other duties as may be reasonably requested from
time to time by the Board of Directors of the Company (the "Board"), which
duties shall be consistent with his positions as set forth above and as
provided in Paragraph 2.
2. TERM AND POSITIONS.
(a) Subject to the provisions for renewal and termination hereinafter
provided, the term of this Employment Agreement shall begin on the date hereof
and shall continue until December 31, 1997. As of June 1, 1997, and the June 1
of each succeeding calendar year thereafter such term automatically shall be
extended for one (1) additional calendar year, beginning with the calendar year
commencing January 1, 1998, unless: (i) this Employment Agreement is terminated
as provided in Paragraph 4(a)(i) or 4(a)(ii) or (ii) either the Company or the
Executive shall give at least 180 days written notice of termination of this
Employment Agreement to the other (for example, unless such written notice of
termination is given on or prior to June 1, 1997, the term of this Employment
Agreement automatically will be extended, effective January 1, 1998, until
December 31, 1998.
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(b) The Executive shall be entitled to serve as the Chief Financial
Officer and Treasurer of the Company. Without limiting the generality of any
of the foregoing, except as hereafter expressly agreed in writing by the
Executive: (i) the Executive shall be required to report only to the Chief
Executive Officer and the Board as an entire body, and (ii) no other individual
shall be elected or appointed as Chief Financial Officer of the Company. For
service as an officer and employee of the Company, the Executive shall be
entitled to the full protection of applicable indemnification provisions of the
articles of incorporation and code of regulations of the Company, as the same
may be amended from time to time.
(c) If:
(i) the Company materially changes the Executive's duties and
responsibilities as set forth in Paragraph 1(b) or 2(b) without his consent
(including, without limitation, by violating any of the provisions of clause
(i) and (ii) of Paragraph 2 (b));
(ii) the Executive's place of employment or the principal executive
offices of the Company are moved to a location more than fifty (50) miles
from the geographical center of Cleveland, Ohio;
(iii) there occurs a material breach by the Company of any of its
obligations under this Employment Agreement (other than those specified in
this Section 2(c)), which breach has not been cured in all material respects
within ten (10) days after the Executive gives notice thereof to the Company;
or
(iv) there occurs a "change in control" (as hereinafter defined) of
the Company,
then the Executive shall have the right to terminate his employment with the
Company, but such termination shall not be considered a voluntary resignation
or termination of such employment or of this Employment Agreement by the
Executive but rather a discharge of the Executive by the Company without
"cause" (as defined in Paragraph 4(a)(ii)).
(d) The Executive shall be considered not to have consented to any
written proposal calling for a material change in his duties and
responsibilities unless he shall give written notice of his consent thereto to
the Board within fifteen (15) days after receipt of such written proposal. If
the Executive shall not have given such consent, the Company shall have the
opportunity to withdraw such proposed material change by written notice to the
Executive given within ten (10) days after the end of said fifteen (15) day
period.
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(e) The term "change in control" means the first to occur of the
following events:
(i) any person or group of commonly controlled persons owns or
controls, directly or indirectly, fifty percent (50%) or more of the voting
control or value of the equity interests in the Company following
consummation of the initial public offering of the Company's Common Shares,
without par value (the "IPO"); or
(ii) any person or group of commonly controlled persons who own less
than five percent (5%) of the voting control or value of the equity interests
in the Company during the first 30 days following the consummation of the IPO
acquire ownership or control, directly or indirectly, of more than twenty
percent (20%) of the voting control or value of the equity interests in the
Company;
(iii) the shareholders of the Company approve an agreement to merge
or consolidate with another corporation or other entity resulting (whether
separately or in connection with a series of transactions) in a change in
ownership of twenty percent (20%) or more of the voting control or value of
the equity interests in the Company, or an agreement to sell or otherwise
dispose of all or substantially all of the Company's assets (including,
without limitation, a plan of liquidation or dissolution), or otherwise
approve of a fundamental alteration in the nature of the Company's business.
Notwithstanding the foregoing provisions of this Paragraph 2, the ownership
of equity interests in the Company by Xxxxxx X. Xxxxxx, Xxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxx and their respective affiliates shall not be considered to
result in a "change in control" of the Company.
3. COMPENSATION.
During the term of this Employment Agreement the Company shall pay or
provide, as the case may be, to the Executive the compensation and other
benefits and rights set forth in this Paragraph 3.
(a) The Company shall pay to the Executive a base salary payable in
accordance with the Company's usual pay practices (and in any event no less
frequently than monthly) at the rate of One Hundred Fifty Thousand Dollars
($150,000) per annum, to be increased (but not decreased) from time to time
(based upon the performance of the Company and the Executive) in
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a manner consistent with the compensation of Chief Financial Officers of
publicly-held real estate investment trusts.
(b) The Company shall pay to the Executive bonus compensation for each
calendar year of the Company, not later than sixty (60) days following the end
of each calendar year or the termination of his employment, as the case may be,
prorated on a per diem basis for partial calendar years, and determined and
calculated in a manner set forth on Exhibit A attached hereto.
(c) The Company shall provide to the Executive and his family all the
medical, dental, and all other group insurance benefits which the Company
provides generally to employees of the Company during active employment. In
the event of disability or death of the Executive, these benefits shall be
continued by the Company for life for the Executive and his spouse.
(d) The Company shall provide to the Executive a suitable new,
air-conditioned, full-sized automobile, or other automobile of equal or lesser
value of the Executive's choice, for the exclusive use of the Executive,
together with automobile theft, casualty, and liability insurance, and payment
or reimbursement of the Executive for all maintenance, repair and gasoline or,
in lieu of the foregoing automobile, an automobile allowance as exists from
time to time under Company policy, the dollar amount of which shall be
substantially commensurate with the cost for such automobile, together with
insurance costs, maintenance, repairs and gasoline for the Executive's personal
vehicle used in lieu thereof.
(e) The Executive shall participate in all retirement and other benefit
plans of the Company generally available from time to time to employees of the
Company and for which the Executive qualifies under their terms (and nothing in
this Agreement shall or shall be considered to in any way affect the
Executive's right and benefits thereunder except as expressly provided herein).
(f) The Executive shall be entitled to such periods of vacation and sick
leave allowance each year as are determined by the Executive in his reasonable
and good faith discretion, which in any event shall be not less than as
provided generally under the Company's vacation and sick leave policy for
executive officers.
(g) The Executive shall be entitled to participate in any option or other
employee benefit compensation plan that is generally available to senior
executive officers, as distinguished from general management, of the Company.
The Executive's participation in and benefits under any such plan
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shall be on the terms and subject to the conditions specified in the governing
document of that plan.
(h) The Company shall reimburse the Executive or provide him with an
expense allowance during the term of this Employment Agreement for travel,
entertainment and other expenses reasonably and necessarily incurred by the
Executive in connection with the Company's business. The Executive shall
furnish such documentation with respect to reimbursement to be paid hereunder
as the Company shall reasonably request.
4. TERMINATION.
(a) The employment of the Executive under this Employment Agreement, and
the terms hereof, may be terminated by the Company:
(i) on the death or permanent disability (as defined below) of the
Executive;
(ii) for cause at any time by action of the Board. For purposes
hereof, the term "cause" shall mean:
(A) The Executive's fraud, commission of a felony or of an act or
series of acts which result in material injury to the business reputation
of the Company, commission of an act or series of repeated acts of
dishonesty which are materially inimical to the best interests of the
Company, or the Executive's willful and repeated failure to perform his
duties under this Employment Agreement, which failure has not been cured
within fifteen (15) days after the Company gives notice thereof to the
Executive; or
(B) The Executive's material breach of any material provision of
this Employment Agreement, which breach has not been cured in all
substantial respects within ten (10) days after the Company gives notice
thereof to the Executive; or
(iii) other than for cause at any time by actiion of the Board,
subject to the operation of Paragraph 4(d).
The exercise by the Company of its rights of termination under this Paragraph
4 shall be the Company's sole remedy in the event of the occurrence of the
event as a result of which such right to terminate arises. Upon any
termination of this Employment Agreement, the Executive shall be deemed to
have resigned from all offices and directorships held by the Executive in the
Company.
(b) For purposes of this Employment Agreement, the Executive's "permanent
disability" shall be deemed to have
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occurred after one hundred twenty (120) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive days,
during which one hundred twenty (120) or ninety (90) days, as the case may be,
the Executive, by reason of his physical or mental disability or illness, shall
have been unable to discharge his duties under this Employment Agreement. The
date of permanent disability shall be such one hundred twentieth (120th) or
ninetieth (90th) day, as the case may be. In the event either the Company or
the Executive, after receipt of notice of the Executive's permanent disability
from the other, dispute that the Executive's permanent disability shall have
occurred, the Executive shall promptly submit to a physical examination by the
chief of medicine of any major accredited hospital in the Cleveland, Ohio, area
and, unless such physician shall issue his written statement to the effect that
in his opinion, based on his diagnosis, the Executive is capable of resuming
his employment and devoting his full time and energy to discharging his duties
within thirty (30) days after the date of such statement, such permanent
disability shall be deemed to have occurred.
(c) In the event of a termination claimed by the Company to be for
"cause" pursuant to Paragraph 4(a)(ii), the Executive shall have the right to
have the justification for said termination determined by arbitration in
Cleveland, Ohio. In order to exercise such right, the Executive shall serve on
the Company within thirty (30) days after termination a written request for
arbitration. The Company immediately shall request the appointment of an
arbitrator by the American Arbitration Association and thereafter the question
of "cause" shall be determined under the rules of the American Arbitration
Association, and the decision of the arbitrator shall be final and binding on
both parties. The parties shall use all reasonable efforts to facilitate and
expedite the arbitration and shall act to cause the arbitration to be completed
as promptly as possible. During the pendency of the arbitration, the Executive
shall continue to receive all compensation and benefits to which he is entitled
hereunder, and if at any time during the pendency of such arbitration the
Company fails to pay and provide all compensation and benefits to the Executive
in a timely manner, the Company shall be deemed to have automatically waived
whatever rights it then may have had to terminate the Executive's employment
for cause. Expenses of the arbitration shall be borne equally by the parties.
(d) In the event of termination for any of the reasons set forth in
subparagraph (a)(i) or (a)(ii) of this Paragraph 4, except as otherwise provided
in Paragraph 3(e), the Executive shall be entitled to no further compensation or
other benefits under this Employment Agreement, except as to that portion of any
unpaid salary and other benefits accrued and earned by him hereunder up to and
including the effective date of such termination. If the Company terminates the
Executive's employment other than pursuant
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to subparagraph 4(a)(i) 4(a)(ii) or the Executive terminates his employment
pursuant to subparagraph 2(c), all of the compensation and benefits payable to
the Executive pursuant to this Employment Agreement shall be paid to the
Executive for the remainder of the term of this Employment Agreement (as that
term is defined in subparagraph 2(a)).
5. COVENANTS AND CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges the Company's reliance and expectation of
the Executive's continued commitment to performance of his duties and
responsibilities during the term of this Employment Agreement. In light of
such reliance and expectation on the part of the Company, during the term of
this Employment Agreement and for a period of two (2) years thereafter (and, as
to clause (ii) of this subparagraph (a), at any time during and after the term
of this Employment Agreement), the Executive shall not, directly or indirectly,
do or suffer either of the following:
(i) Own, manage, control or participate in the ownership, management,
or control of, or be employed or engaged by or otherwise affiliated or
associated as a consultant, independent contractor or otherwise with, any
other corporation, partnership, proprietorship, limited liability company,
firm, association or other business entity engaged in the business of, or
otherwise engage in the business of, acquiring, owning or developing hotel
properties; except that the Executive may (A) own not more than one percent
(1%) of any class of publicly traded securities of any entity, and own
interests in the Company and in Xxxxxx Hotel Properties, L.P. (the
"Partnership"), subject only to any restriction imposed by any agreement or
instrument other than this Agreement, and (B) have such an interest in, or
participation, employment, engagement, affiliation, association or
relationship with, any entity that manages hotel properties, so long as that
entity is not engaged in the business of acquiring, owning or developing
hotel properties; or
(ii) Disclose, divulge, discuss, copy or otherwise use or suffer to
be used in any manner, in competition with, or contrary to the interests of,
the Company, any confidential information relating to the Company's
operations, properties or otherwise to its particular business or other trade
secrets of the Company, it being acknowledged by the Executive that all such
information regarding the business of the Company compiled or obtained by, or
furnished to, the Executive while the Executive shall have been employed by
or associated with the Company is confidential
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information and the Company's exclusive property; provided, however, that the
foregoing restrictions shall not apply to the extent that such information:
(A) is clearly obtainable in the public domain, (B) becomes obtainable in the
public domain, except by reason of the breach by the Executive of the terms
hereof, (C) was not acquired by the Executive in connection with his
employment or affiliation with the Company, (D) was not acquired by the
Executive from the Company or its representatives, or (E) is required to be
disclosed by rule of law or by order of a court or governmental body or
agency.
(b) The Executive agrees and understands that the remedy at law for any
breach by him of this Paragraph 5 will be inadequate and that the damages
flowing from such breach are not readily susceptible to being measured in
monetary terms. Accordingly, it is acknowledged that, upon adequate proof of
the Executive's violation of any legally enforceable provision of this
Paragraph 5, the Company shall be entitled to immediate injunctive relief and
may obtain a temporary order restraining any threatened or further breach.
Nothing in this Paragraph 5 shall be deemed to limit the Company's remedies at
law or in equity for any breach by the Executive of any of the provisions of
this Paragraph 5 which may be pursued or availed of by the Company.
(c) The Executive has carefully considered the nature and extent of the
restrictions upon him and the rights and remedies conferred upon the Company
under this Paragraph 5, and hereby acknowledges and agrees that the same are
reasonable in time and territory, are designed to eliminate competition which
otherwise would be unfair to the Company, do not stifle the inherent skill and
experience of the Executive, would not operate as a bar to the Executive's sole
means of support, are fully required to protect the legitimate interests of the
Company and do not confer a benefit upon the Company disproportionate to the
detriment to the Executive.
6. TAX ADJUSTMENT PAYMENTS. If all or any portion of the amounts payable
to the Executive under this Employment Agreement (together with all other
payments of cash or property, whether pursuant to this Employment Agreement or
otherwise, including, without limitation, the issuance of common stock of the
Company, or the granting, exercise or termination of options therefor)
constitutes "excess parachute payments" within the meaning of Section 280G of
the Code that are subject to the excise tax imposed by Section 4999 of the Code
(or any similar tax or assessment), the amounts payable hereunder shall be
increased to the extent necessary to place the Executive in the same after-tax
position as he would have been in had no such tax assessment been imposed on
any such payment paid or payable to the Executive under this Employment
Agreement or any other
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payment that the Executive may receive in connection therewith. The
determination of the amount of any such tax or assessment and the incremental
payment required hereby in connection therewith shall be made by the accounting
firm employed by the Executive within thirty (30) calendar days after such
payment and said incremental payment shall be made within five (5) calendar
days after determination has been made. If, after the date upon which the
payment required by this Paragraph 6 has been made, it is determined (pursuant
to final regulations or published rulings of the Internal Revenue Service,
final judgment of a court of competent jurisdiction, Internal Revenue Service
audit assessment, or otherwise) that the amount of excise or other similar
taxes or assessments payable by the Executive is greater than the amount
initially so determined, then the Company shall pay the Executive an amount
equal to the sum of: (i) such additional excise or other taxes, PLUS (ii) any
interest, fines and penalties resulting from such underpayment, PLUS (iii) an
amount necessary to reimburse the Executive for any income, excise or other tax
assessment payable by the Executive with respect to the amounts specified in
(i) and (ii) above, and the reimbursement provided by this clause (iii), in the
manner described above in this Paragraph 6. Payment thereof shall be made
within five (5) calendar days after the date upon which such subsequent
determination is made.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Ohio, and has all requisite
corporate power and authority to enter into, execute and deliver this
Employment Agreement, fulfill its obligations hereunder and consummate the
transactions contemplated hereby.
(b) The execution and delivery of, performance of obligations under, and
consummation of the transactions contemplated by, this Employment Agreement
have been duly authorized and approved by all requisite corporate action by or
in respect of the Company, and this Employment Agreement constitutes the
legally valid and binding obligation of the Company, enforceable by the
Executive in accordance with its terms.
(c) No provision of the Company's governing documents or any agreement to
which it is a party or by which it is bound or of any material law or
regulation of the kind usually applicable and binding upon the Company
prohibits or limits its ability to enter into, execute and deliver this
Employment Agreement, fulfill its respective obligations hereunder and
consummate the transactions contemplated hereby.
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8. MISCELLANEOUS.
(a) The Executive represents and warrants that he is not a party to any
agreement, contract or understanding, whether employment or otherwise, which
would restrict or prohibit him from undertaking or performing employment in
accordance with the terms and conditions of this Employment Agreement.
(b) The provisions of this Employment Agreement are severable and if any
one or more provisions may be determined to be illegal or otherwise
unenforceable, in whole or in part, the remaining provisions and any partially
unenforceable provision, to the extent enforceable in any jurisdiction,
nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under this Employment
Agreement shall inure to the benefit of, and shall be binding on, the Company
and its successors and assigns, and the rights and obligations (other than
obligations to perform services) of the Executive under this Employment
Agreement shall inure to the benefit of, and shall be binding upon, the
Executive and his heirs, personal representatives and assigns.
(d) Any controversy or claim arising out of or relating to this
Employment Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Rules of the American Arbitration Association then
pertaining in the City of Cleveland, Ohio, and judgment upon the award rendered
by the arbitrator or arbitrators may be entered in any court having
jurisdiction thereof. The arbitrator or arbitrators shall be deemed to possess
the powers to issue mandatory orders and restraining orders in connection with
such arbitration; provided, however, that nothing in this Paragraph 8(d) shall
be construed so as to deny the Company the right and power to seek and obtain
injunctive relief in a court of equity for any breach or threatened breach by
the Executive of any of his covenants contained in Paragraph 5 hereof.
(e) Any notice to be given under this Employment Agreement shall be
personally delivered in writing or shall have been deemed duly given when
received after it is posted in the United States mail, postage prepaid,
registered or certified, return receipt requested, and if mailed to the
Company, shall be addressed to its principal place of business, attention:
General Counsel, and if mailed to the Executive, shall be addressed to him at
his home address last known on the records of the Company, or at such other
address or addresses as either the Company or the Executive may hereafter
designate in writing to the other.
(f) The failure of either party to enforce any provision or provisions of
this Employment Agreement shall not in any way be construed as a waiver of any
such provision or
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provisions as to any future violations thereof, or prevent that party
thereafter from enforcing each and every other provision of this Employment
Agreement. The rights granted the parties herein are cumulative and the waiver
of any single remedy shall not constitute a waiver of such party's right to
assert all other legal remedies available to it under the circumstances.
(g) This Employment Agreement supersedes all prior agreements and
understandings between the parties and may not be modified or terminated
orally. No modification, termination or attempted waiver shall be valid unless
in writing and signed by the party against whom the same is sought to be
enforced.
(h) This Employment Agreement shall be governed by and construed
according to the laws of the State of Ohio.
(i) Where necessary or appropriate to the meaning hereof, the singular
and plural shall be deemed to include each other, and the masculine, feminine
and neuter shall be deemed to include each other.
XXXXXX LODGING COMPANY
By:___________________________
Title:________________________
And By:_______________________
Title:________________________
______________________________
XXXXXXX X. XXXXXXXX
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Exhibit A
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Bonus Calculation
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The amount of the bonus to be paid by the Company to the Executive under
Paragraph 3(b) of the Employment Agreement shall be based on the increase in the
"funds from operations per share" of the Company from year to year. The bonus
for the first year under this Agreement shall be based on the increase in the
"funds from operations per share" of the Company from the Company's year ended
immediately before the effective date of the Employment Agreement to the year of
the Company in which the Employment Agreement becomes effective. Each year
thereafter, the "funds from operations per share" at the end of the current year
shall be compared to the "funds from operations per share" for the immediately
preceding year. The amount of the "funds from operations per share" shall be
appropriately adjusted in connection with share dividends, share splits and
other changes in the Company's capitalization and shall be determined each year
by the Company's Compensation Committee in conjunction with such accountants or
other experts as may be appropriate. The amount of the bonus each year shall be
calculated as follows:
Growth in "Funds from Operations per share" Amount of Bonus
zero to less than 5% 5%
5% to less than 10% 10%
10% to less than 15% 20%
15% to less than 20% 30%
20% or higher 45%
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