EXECUTIVE EMPLOYMENT AGREEMENT
Exhibit 10.1
EXECUTIVE EMPLOYMENT AGREEMENT, is executed effective on April 12, 2007 (“Effective Date”) by
and between Red Lion Hotels Corporation, a Washington corporation (the “Company”), and Xxxxxx
Xxxxxx (the “Executive”) and is intended to replace and supercede that certain Executive Employment
Agreement between the Company and the Executive dated April 3, 2003. The Company desires to employ
the Executive in the capacities of President and Chief Executive Officer, and the Executive desires
to be so employed, on the terms and subject to the conditions set forth in this agreement (the
“Agreement”); Now, therefore, in consideration of the mutual covenants set forth herein and other
good and valuable consideration the parties hereto hereby agree as follows:
1. Employment; Term.
The Company employs the Executive, and the Executive agrees to be employed by the
Company, upon the terms and subject to the conditions set forth herein, for a term commencing on
the Effective Date and terminating on December 31, 2007 unless terminated earlier in accordance
with Section 5 of this Agreement; provided, that such term shall automatically be extended from
time to time for additional periods of one calendar year from the date on which it would otherwise
expire unless the Executive, on one hand, or the Company, on the other, gives notice to the other
party or parties not less than 120 days prior to such date that it elects to permit the term of
this Agreement to expire without extension on such date. (The initial term of this Agreement as the
same may be extended in accordance with the terms of this Agreement is hereinafter referred to as
the “Term”).
2. Positions; Conduct.
(a) During the Term, the Executive will hold the titles and offices of, and serve in the
positions of, President and/or Chief Executive Officer of the Company. The Executive shall report
to the Board of Directors of the Company and shall perform such specific duties and services
(including service as an officer, director or equivalent position of any direct or indirect
subsidiary without additional compensation) as the Board of Directors shall reasonably request
consistent with the Executive’s positions.
(b) During the Term, the Executive agrees to devote his full business time and attention to the
business and affairs of the Company and to faithfully and diligently perform, to the best of his
ability, all of his duties and responsibilities hereunder. Nothing in this Agreement shall preclude
the Executive from devoting reasonable time and attention to the following (the “Exempted
Activities”): (i) serving, with the approval of the Board of Directors of the Company, as an
officer, director, trustee or member of any organization, (ii) engaging in charitable and community
activities and (iii) managing his personal investments and affairs. In no event shall the Exempted
Activities involve any material conflict of interest with the interests of the Company or,
individually or collectively, interfere materially with the performance by the Executive of his
duties and responsibilities under this Agreement. The Board of Directors of the Company have
approved as an Exempted Activity the Executive’s employment as a director and officer of Inland
Northwest Corporation, previously a wholly-owned subsidiary of the Company, for which the Company
provides certain management and administrative services.
(c) The Executive’s office and place of rendering his services under this Agreement shall be in the
principal executive offices of the Company. During the Term, the Company shall provide the
Executive with executive office space, and administrative and secretarial assistance and other
support services consistent with his positions and with his duties
and responsibilities hereunder.
3. Board of Directors; Committees.
It is understood that the right to elect directors of the Company is by law vested in the
stockholders and directors of the Company, and it is mutually contemplated that service on the
Board of Directors or on any committee of the Board of Directors is not a condition of this
Agreement.
4. Salary; Additional Compensation; Perquisites and Benefits.
(a) During the Term, the Company and the Subsidiary will pay the Executive a base salary at an
annual rate of not less than $390,000 per annum, subject to annual review by the Compensation
Committee of the Board of Directors of the Company (the “Compensation Committee”) and in the
discretion of such Committee, increased from time to time. Once increased, such base salary may not
be decreased. Such salary shall be paid in periodic installments in accordance with the Company’s
standard practice, but not less frequently than semi-monthly.
(b) For each fiscal year during the Term, the Executive will be eligible to receive a bonus on such
terms as may from time to time be established by the Compensation Committee.
(c) During the Term, the Executive will participate in all plans now existing or hereafter adopted
by the Company for the management employees or the general benefit of the their employees, such as
stock option or other incentive compensation plans, life and health insurance plans, or other
insurance plans and benefits on the same basis and subject to the same qualifications as other
senior executive officers. To the extent permitted by law, the Executive shall be given credit for
his years of service to any predecessor entity of the Company in determining all waiting periods
and vesting periods under such plans.
(d) The Company will reimburse the Executive, in accordance with its standard policies from time to
time in effect, for all out-of-pocket business expenses as may be incurred by the Executive in the
performance of his duties under this Agreement.
(e) The Executive shall be entitled to vacation time to be credited and taken in accordance with
the Company’s policy from time to time in effect for senior executives, which in any event shall
not be less than a total of four weeks per calendar year.
(f) The Company shall indemnify the Executive to the fullest extent permitted under the law of the
State of Washington.
5. Termination
(a) The Term will terminate upon the Executive’s death or, upon notice by the Company or the
Executive to the other, in the case of a determination of the Executive’s Disability. As used
herein the term “Disability” means the Executive’s inability to perform his duties and
responsibilities under this Agreement for a period of more than 120 consecutive days, or for more
than 180 days, whether or not continuous, during any 365-day period, due to physical or mental
incapacity or impairment. A determination of Disability will be made by a physician satisfactory to
both the Executive and the Company; provided that if they cannot agree as to a physician, then each
shall select a physician and these two together shall select a third physician whose determination
of Disability shall be binding on the Executive and the Company. Should the Executive become
incapacitated, his employment shall continue and all base and other compensation due the Executive
hereunder shall continue to be paid through the date upon which the Executive’s employment is
terminated for Disability in accordance with this section.
(b) The Term may be terminated by the Company upon notice to the Executive upon the occurrence of
any event constituting “Cause” as defined herein.
(c) The Term may be terminated by the Executive upon notice to the Company (i) within six months of
the occurrence of any event constituting “Good Reason” as defined herein or (ii) within six months
of a “Change of Control” as defined herein.
6. Severance.
(a) If the Term is terminated by the Company for Cause, the Company will pay to the Executive
an aggregate amount equal to the Executive’s accrued and unpaid base salary through the date of
such termination, additional salary payments in lieu of the Executive’s accrued and unused vacation
time, unreimbursed business expenses, unreimbursed medical, dental and other employee benefit
expenses in accordance with the applicable plans, and any and all other benefits provided under the
terms of applicable employee plans to terminated employees (the “Standard Termination Payments”).
(b) If the Term is terminated upon the Executive’s death or Disability, the Company and the
Subsidiary will pay to the Executive’s estate or the Executive, as the case may be, (i) the
Standard Termination Payments, (ii) a lump sum payment, if applicable, equal to the Executive’s
earned but unpaid bonus under the Company’s Executive Officers Variable Pay Plan dated effective
January 1, 2005 (including any successor or replacement bonus plans, the “VPP”), for the prior
fiscal year, (iii) a lump sum payment equal to the Executive’s target bonus under the VPP for the
fiscal year in which the death or Disability occurs prorated for the portion of the year elapsed at
the time of the termination, and (iv) all death or disability payments or other employee benefits
under their employee benefit plans.
(c) If the Company terminates the Executive’s employment under this Agreement without Cause other
than by reason of his death or Disability or if the Executive terminates his employment hereunder
for Good Reason, the Company shall (i) pay the Executive the Standard Termination Payments, (ii)
pay the Executive a lump sum payment equal to the Executive’s earned but unpaid bonus under the VPP
for the previous fiscal year, if applicable, (iii) pay the Executive a lump sum payment equal to
the Executive’s target bonus under the VPP for the fiscal year in which the termination occurs
prorated for the portion of the year elapsed at the time of the termination; (iv) pay the Executive
a lump sum payment equal to twice the Executive’s total compensation for the previous fiscal year
(but not less than twice $390,000); and (v) continue in effect the Executive’s benefits with
respect to life, health and insurance plans or their equivalent for two years.
(d) If, following a Change of Control: the Executive terminates his employment hereunder within 6
months following such Change of Control; the Company shall (i) pay the Executive the Standard
Termination Payments, (ii) pay the Executive a lump sum payment equal to the Executive’s earned but
unpaid bonus under the VPP for the previous fiscal year, if applicable, (iii) pay the Executive a
lump sum payment equal to the Executive’s target bonus under the VPP for the fiscal year in which
the termination occurs prorated for the portion of the year elapsed at the time of the termination;
(iv) pay the Executive a lump sum payment equal to twice the Executive’s total cash compensation
for the previous fiscal year (but not less than twice $390,000); and (v) continue in effect the
Executive’s benefits with respect to life, health and insurance plans or their equivalent for two
years.
(e) If the Term is not extended pursuant to the proviso to Section 1 as a result of the Company
giving notice thereunder that it elects to permit the term of this Agreement to expire without
extension, the Company shall (i) pay the Executive the Standard Termination Payments, (ii) pay the
Executive a lump sum payment equal to the Executive’s earned but unpaid bonus under the VPP for the
previous fiscal year, (iii) pay the Executive a lump sum payment equal to the Executive’s target
bonus under the VPP for the fiscal year in which the termination occurs prorated for the portion of
the year elapsed at the time of the termination; (iv) pay the Executive a lump sum payment equal to
twice the Executive’s total compensation for the previous fiscal year (but not less than twice
$390,000); and (v) continue in effect the Executive’s benefits with respect to life, health and
insurance plans or their equivalent for two years.
(f) If the Company terminates the Executive’s employment under this Agreement without Cause other
than by reason of his death or Disability, or if the Term is not extended as a result of the
Company giving notice that it elects to permit the term of this Agreement to expire without
extension, or if there is a Change of Control, or if the Executive terminates his employment
hereunder for Good Reason pursuant to Section 5(c.): all stock options granted to the Executive
shall immediately vest and be exercisable and any stock grant to the Executive shall immediately
vest and all Company imposed restrictions on restricted stock issued to the Executive shall be
terminated.
(g) As used herein, the term “Cause” means: (i)the Executive’s willful and intentional failure or
refusal to perform or observe any of his material duties, responsibilities or obligations set forth
in this Agreement, if such breach is not cured within 30 days after notice thereof to the Executive
by the Company, which notice shall state that such conduct shall, without cure, constitute Cause
and makes specific reference to this Section 6(g); (ii) any willful and intentional act of the
Executive involving fraud, theft, embezzlement or dishonesty affecting the Company; or (iii) the
Executive’s conviction of (or a plea of nolo contendere to) an offense which is a felony in the
jurisdiction involved.
(h) As used herein, the term “Good Reason” means: (i) assignment of the Executive of duties
materially inconsistent with the Executive’s positions as described in Section 2(a), provided,
however, it shall not be Good Reason if the Company separates the positions of Chief Executive
Officer and President so long as Executive continues to hold the position and duties of Chief
Executive Officer; (ii) the removal of the Executive from the positions as described in Section
2(a), provided, however, it shall not be Good Reason if the Company separates the positions of
Chief Executive Officer and President so long as Executive continues to hold the position and
duties of Chief Executive Officer; (iii) the change in the location of the Company’s principal
executive offices to a location outside the Spokane, Washington metropolitan area without the
Executive’s consent which may be withheld at his sole discretion; or (iv) any material breach of
this Agreement by the Company which is continuing.
(i) As used herein, the term “Change of Control” means the occurrence of any one of the following
events: (i) the majority of the Board of Directors of the Company consists of individuals other
than Incumbent Members, which shall mean the members of such Boards on the Effective Date; provided
that any person becoming a director subsequent to the Effective Date whose election or nomination
for election was supported by the Executive or a majority of the directors who then comprised the
Incumbent Directors shall be considered an Incumbent Director; (ii) the Company adopts a plan of
liquidation providing for the distribution of all or substantially all of the assets of the Company
on a consolidated basis; (iii) the Company ceases to act as the general partner of Red Lion Hotels
Limited Partnership, provided, however, the foregoing shall not apply if substantially all of the
assets of the partnership are transferred to and owned by the Company or its Affiliates. As used
herein, an Affiliate of a person or other entity means a person or other entity that directly or
indirectly controls, is controlled by or is under common control with the person or other entity
specified (including without limitation any investment entity managed by the person or other entity
specified or a person or entity that directly or indirectly controls, is controlled by or under
common control with the person or other entity specified).
(j) The amounts required to be paid and the benefits required to be made available to the Executive
under this Section 6 are absolute. Under no circumstances shall the Executive, upon the termination
of his employment hereunder, be required to seek alternative employment and, in the event that the
Executive does secure other employment, no compensation or other benefits received in respect of
such employment shall be set-off or in any other way limit or reduce the obligations of the Company
and the Subsidiary under this Section 6.
7. Confidential Information.
(a) The Executive acknowledges that the Company and its subsidiaries or affiliated ventures
(“Company Affiliates”) own and have developed and compile, and will in the future own, develop and
compile certain Confidential Information and that during the course of his rendering services to
the
Company Confidential Information has and will be disclosed to the Executive by the Company and its Affiliates. The
Executive hereby agrees that, during the Term (except as required to conduct the business of the
Company) and for a period of three years thereafter, he will not use or disclose, furnish or make
accessible to anyone, directly or indirectly, any Confidential Information of the Company or its
Affiliates.
(b) As used herein, the term “Confidential Information” means any trade secrets, confidential or
proprietary information, or other knowledge, know-how, information, documents or materials, owned,
developed or possessed by a Company Affiliate pertaining to its businesses the confidentiality of
which such company takes reasonable measures to protect, including, but not limited to, trade
secrets, techniques, know-how (including designs, plans, procedures, processes and research
records), software, computer programs, innovations, discoveries, improvements, research,
developments, test results, reports, specifications, data, formats, marketing data and business
plans and strategies, agreements and other forms of documents, expansion plans, budgets,
projections, and salary, staffing and employment information. Notwithstanding the foregoing,
Confidential Information shall not in any event include information which (i) was generally known
or generally available to the public prior to its disclosure to the Executive, (ii) becomes
generally known or generally available to the public subsequent to its disclosure to the Executive
through no wrongful act of the Executive, (iii) is or becomes available to the Executive from
sources other than the Company Affiliates which sources are not known to the Executive to be under
any duty of confidentiality with respect thereto or (iv) the Executive is required to disclose by
applicable law or regulation or by order of any court or federal, state or local regulatory or
administrative body (provided that the Executive provides the Company with prior notice of the
contemplated disclosure and reasonably cooperates with the Company, at the Company’s sole expense,
in seeking a protective order or other appropriate protection of such information).
8. Restrictive Covenants.
(a) The Executive agrees that during his employment hereunder and for a period of twelve
months thereafter the Executive will not, directly or indirectly, engage or participate or make any
financial investments in (other than ownership of up to 5% of the aggregate of any class of
securities of any corporation if such securities are listed on a national stock exchange or under
section 12(g) of the Securities Exchange Act of 1934) or become employed by, or act as an agent or
principal of, or render advisory or other management services to or for, any Competing Business in
the Territory. As used herein the term “Competing Business” means any business then conducted by
the Company which produces over 10% of the Company’s revenue and the term “Territory” means any
state of the United States or province of Canada or Mexico in which the Company conducts its
business. Notwithstanding the foregoing, nothing in this Agreement shall limit or prohibit the
Executive from engaging in the Exempted Activities.
(b) The Executive agrees that during his employment hereunder and for a period of twenty-four
months thereafter he will not solicit, raid, entice or induce any person that then is or at any
time during the twelve-month period prior to the end of the Term was an employee of the Company or
a Company Affiliate (other than a person whose employment with such Company Affiliate has been
terminated by such Company Affiliate), to become employed by any person, firm or corporation.
9. Specific Performance.
(a) The Executive acknowledges that the services to be rendered by him hereunder are of a
special, unique, extraordinary and personal character and that the Company Affiliates would sustain
irreparable harm in the event of a violation by the Executive of Section 7 or 8 hereof. Therefore,
in addition to any other remedies available, the Company shall be entitled to specific enforcement
and/or an injunction from any court of competent jurisdiction restraining the Executive from
committing or continuing any such violation of this Agreement without proving actual damages or
posting a bond or other security. Nothing herein shall be construed as prohibiting the Company from
pursuing any other remedies available to it for such breach or threatened breach, including the
recovery of damages.
(b) If any of the restrictions on activities of the Executive contained in Sections 7 or 8 shall
for any reason be held by a court of competent jurisdiction to be excessively broad as to duration,
geographical scope or activity of subject, such restrictions shall be construed so as thereafter to
be limited or reduced to be enforceable to the maximum extent compatible with the applicable law as
it shall then appear; it being understood that by the execution of this Agreement the parties
hereto regard such restrictions as reasonable and compatible with their respective rights.
(c) Notwithstanding anything in this Agreement to the contrary, in the event that the Company fails
to make any payment of any amounts or provide any of the benefits to the Executive when due as
called for under Section 6 of this Agreement and such failure shall continue for twenty (20) days
after notice thereof from the Executive, all restrictions on the activities of the Executive under
Sections 7 and 8 shall be immediately and permanently terminated.
10. Withholding/Additional Payments.
(a) The parties agree that all payments to be made to the Executive by the Company pursuant to
the Agreement shall be subject to all applicable withholding obligations of such company.
(b) The parties intend that the severance payments and other compensation provided for herein are
reasonable compensation for Executive’s services to Company and shall not constitute “excess
parachute payments” within the meaning of Section 280G(b)(1) of the Internal Revenue Code of 1986,
as amended (the “Code”). In the event the parties determine that the severance benefits or any
other benefits or payments to which Executive is entitled pursuant to this Agreement or otherwise
(collectively, the “Total Benefits”), will be subject to the excise tax imposed pursuant to Section
4999 of the Code (“Excise Tax”), Company shall pay to Executive an additional amount (the “Gross-Up
Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the
Total Benefits and any federal, state and local income taxes, Excise Tax, and FICA and Medicare
withholding taxes upon the payment provided for by this Section, will be equal to the Total
Benefits.
For purposes of this Section, Executive will be deemed to pay federal income taxes at the highest
marginal rate of federal income taxation in the calendar year in which the Excise Tax is (or would
be) payable and state and local income taxes at the highest marginal rate of taxation in the state
and locality of Executive’s residence on the Date of Termination, net of the reduction in federal
income taxes that could be obtained from deduction of such state and local taxes (calculated by
assuming that any reduction under Section 68 of the Code in the amount of itemized deductions
allowable to Executive applies first to reduce the amount of such state and local income taxes that
would otherwise be deductible by Executive).
In the event that the Excise Tax is subsequently determined to be less than the amount taken into
account hereunder at the time of termination of Executive’s employment, Executive shall repay to
Company, at the time the amount of such reduction in Excise Tax is fully 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, federal, state and local income taxes and FICA and Medicare
withholding taxes imposed on the Gross-Up Payment being repaid by Executive to the extent that such
repayment results in a reduction in Excise Tax, FICA and Medicare withholding taxes 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 the Excise Tax is determined
to exceed the amount taken into account hereunder at the time of the termination of Executive’s
employment (including by reason of any payment the existence or amount of which cannot be
determined at the time of the Gross-Up Payment), Company shall make an additional Gross-Up Payment
to Executive in respect of such excess (plus any interest, penalties or additions payable by
Executive with respect to such excess) at the time that the amount of such excess is finally
determined.
The
parties’ obligations under this Section shall survive termination of this Agreement.
11. Notices.
All notices required or permitted hereunder shall be in writing and shall be deemed given
and received when delivered personally, four days after being mailed if sent by registered or
certified mail, postage pre-paid, or by one day after delivery if sent by air courier (for next-day
delivery) with evidence of receipt thereof or by facsimile with receipt confirmed by the addressee.
Such notices shall be addressed respectively:
If to the Executive, to:
Xx. Xxxxxx Xxxxxx
South 00000 Xxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
South 00000 Xxxxxx Xxxxxx Xxxx
Xxxxxxxxxx, XX 00000
If to the Company, to:
Red Lion Hotels Corporation
000 X. Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Chairman of Board of Directors
000 X. Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn: Chairman of Board of Directors
With copy to:
Red Lion Hotels Corporation
000 X. Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn. Corporate Counsel
Red Lion Hotels Corporation
000 X. Xxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Attn. Corporate Counsel
or to any other address of which such party may have given notice to the other parties in the
manner specified above.
12. Miscellaneous.
(a) This Agreement is a personal contract calling for the provision of unique services by the
Executive, and the Executive’s rights and obligations hereunder may not be sold, transferred,
assigned, pledged or hypothecated by the Executive. The rights and obligations of the Company
hereunder will be binding upon and run in favor of their respective successors and assigns.
(b) This Agreement shall be governed by and construed and enforced in accordance with the internal
laws of the State of Washington.
(c) Any controversy arising out of or relating to this Agreement or any breach hereof shall be
settled by arbitration in Spokane, Washington by a single neutral arbitrator who shall be a retired
federal or state court judge in accordance with the Commercial Arbitration Rules of the American
Arbitration Association and judgment upon any award rendered may be entered in any court having
jurisdiction thereof, except in the event of a controversy relating to any alleged violation by the
Executive of Section 7 or 8 hereof, the Company and the Subsidiary shall be entitled to seek
injunctive relief from a court of competent jurisdiction without the requirement to seek
arbitration. In addition to all other relief, the substantially prevailing party in any arbitration
or court action shall be entitled to their reasonable attorney fees and costs incurred by reason of
the controversy (including any appellate review and bankruptcy or enforcement proceedings).
(d) The headings of the various sections of this Agreement are for convenience of reference only
and shall not define or limit any of the terms or provisions hereof.
(e) The provisions of this Agreement which by their terms call for performance subsequent to the
expiration or termination of the Term shall survive such expiration or termination.
(f) Upon the Effective Date, this Agreement supersedes any existing employment agreements between
the Employee and the Company and any of its Affiliates all of which shall be terminated upon the
Commencement Date of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the Effective Date
first above written.
| EXECUTIVE: | COMPANY: | |||
| RED LION HOTELS CORPORATION | ||||
| By | ||||
Xxxxxx X. Xxxxxx
|
On behalf of the Board of Directors | |||
