EXHIBIT 10.4
EMPLOYMENT AGREEMENT
THIS AGREEMENT dated January 21, 2005, by and between HERSHA HOSPITALITY
TRUST, a Maryland real estate investment trust (the "Company"), and XXX X. XXXX
(the "Executive").
WITNESSETH:
WHEREAS, the Company desires to employ the Executive to serve as the
President and Chief Operating Officer; and
WHEREAS, the parties desire to enter into this Employment Agreement
effective as of January 1, 2005 as set forth herein.
NOW, THEREFORE, in consideration of the premises and mutual obligations
hereinafter set forth the parties agree as follows:
1. EMPLOYMENT. The Company shall employ the Executive, and the
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Executive agrees to be so employed, as the President and Chief Operating Officer
of the Company on the terms set forth herein.
2. TERM. The term (the "Term") of the Executive's employment hereunder
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shall commence on January 1, 2005 and unless earlier terminated in accordance
with the terms hereof, shall expire on December 31, 2008, if written notice of
non-renewal is given not later than July 3, 2008 by either party to the other
party, and if no such notice is given, this Agreement shall continue until
terminated by either party upon not less than one hundred eighty (180) days'
prior notice to the other party setting forth the effective date of termination
(which may be given as early as July 4, 2008). Notwithstanding the foregoing,
termination of this Agreement and any termination of the Executive's employment
hereunder shall be subject to the provisions of Sections 9, 10 and 11 of this
Agreement.
3. SERVICES. The Executive shall devote such amount of his time and
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attention to the Company's affairs as are necessary to perform his duties to the
Company as determined by the Company's Board of Directors (the "Board"). The
Executive shall have authority and responsibility with respect to the day-to-day
operations and management of the Company and Hersha Hospitality Limited
Partnership (the "Partnership"), for which the Company currently serves as sole
general partner, and the Company's other subsidiaries ("Subsidiary")
(collectively "Affiliates"), as well as implementation of the long range growth
strategy of the Company and Affiliates consistent with direction from the Board.
4. COMPENSATION.
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(a) During the Term, the Company shall pay the Executive for his
services an initial annual base salary of two hundred fifty thousand dollars
($250,000.00), to be paid in accordance with the Company's regular payroll
procedures, subject to any increases approved by the Board.
(b) In addition to the base salary, the Executive may be entitled
to receive other incentive compensation, including but not limited to, grants of
stock options or shares of stock of the Company, which awards shall be made (if
at all) in consideration of and as an incentive for services performed solely
for the Company, in accordance with rules and criteria established by the
Compensation Committee and approved by the Board. Such criteria may include,
but not be limited to, the growth in the Company's net income per share, funds
from operations per share or other performance goals.
5. [INTENTIONALLY LEFT BLANK]
6. EXPENSES. The Company recognizes that the Executive will have to
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incur certain out-of-pocket expenses, including but not limited to travel
expenses, related to his services and the Company's business and the Company
agrees to reimburse the Executive for all reasonable expenses necessarily
incurred by him in the performance of his duties upon presentation of a voucher
or documentation indicating the amount and business purposes of any such
expenses and in accordance with applicable rules of the Internal Revenue
Service.
7. [INTENTIONALLY LEFT BLANK]
8. DEFINITIONS. For purposes of this Agreement, the following terms
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shall have the following definitions:
(a) "Voluntary Termination" means, subject to the provisions of
Section 11 hereof, the Executive's voluntary termination of his employment
hereunder, which may be effected by the Executive giving the Board not less than
sixty (60) days' prior written notice of the Executive's desire to terminate his
employment as of a specified date or the Executive's failure to provide the
services described in Section 3 hereof for a period greater than four
consecutive weeks by reason of the Executive's voluntary refusal to perform such
services as determined by the Board. Notwithstanding the foregoing, if the
Executive gives notice of Voluntary Termination and, prior to the expiration of
the notice period, the Executive voluntarily refuses or fails to provide the
services described in Section 3 hereof for a period greater than two consecutive
weeks, the Company may, in its discretion, accelerate the Voluntary Termination
effective the date on which the Executive so ceases to carry out his duties as
determined by the Board. For purposes of this Section 8, voluntary refusal to
perform services shall not include taking vacation otherwise permitted, the
Executive's failure to perform services on account of his illness or the illness
of a member of his immediate family (provided such illness is adequately
substantiated at the reasonable request of the Company), or any other absence
from service with the written consent of the Board. A Voluntary Termination
shall not include the Executive's resignation with Good Reason following a
Change in Control (as defined below).
(b) "Termination Without Cause" means the termination of the
Executive's employment by the Company for any reason other than Voluntary
Termination or Termination With Cause.
(c) "Termination With Cause" means the termination of the
Executive's employment by act of the Board for any of the following reasons:
(i) the Executive's conviction of a felony;
(ii) the Executive's theft, embezzlement, misappropriation of
or intentional and malicious infliction of damage to the Company's (or its
subsidiaries') property or business opportunity;
(iii) the Executive's breach of the covenants in Section 12
hereof;
(iv) the Executive's neglect of his duties or
responsibilities hereunder or his failure or refusal to follow any written
direction of the Board or any duly constituted committee thereof, which failure
continues for a period of twenty (20) calendar days after Company provides
Employee written notice (other than as a result of the Executive's physical or
mental inability to perform the services described in Section 3 above, which is
addressed in Section 10 below); and
(v) the Executive's abuse of alcohol, drugs or other
substances, or his engaging in other deviant personal activities in a manner
that, in the reasonable judgment of the Board, adversely affects the reputation,
goodwill or business position of the Company.
9. VOLUNTARY TERMINATION; TERMINATION WITH CAUSE. If (i) the Executive
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shall cease being an employee of the Company on account of a Voluntary
Termination or (ii) there shall be a Termination With Cause, the Executive shall
not be entitled to any compensation after the effective date of such Voluntary
Termination or Termination With Cause (except base salary and vacation accrued
but unpaid on the effective date of such event). In the event of a Voluntary
Termination (except for the Executive's resignation for Good Reason following a
Change in Control as defined by Paragraph 11), or Termination With Cause, the
Executive shall continue to be subject to the covenants contained in Section 12
hereof.
10. DEATH OR DISABILITY; TERMINATION WITHOUT CAUSE.
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(a) Upon (i) the death of the Executive, or (ii) Disability of the
Executive, this Agreement shall terminate and the Company shall continue to pay
the Executive or his heirs, devisees, executors, legatees or personal
representatives, as appropriate, the payments of the Executive's base salary
then in effect through the month following the month in which such event occurs
plus vacation accrued but unpaid as of the termination date. For purposes
hereof, a "Disability" means the Executive's becoming permanently disabled
within the meaning of the Company's long-term disability plan then in effect
for, or applicable to, the Executive. If the Company does not provide any such
benefit, then at the request of the Company, the Executive shall promptly make
himself available for
an examination by a physician selected by the Company who is board certified in
a practice area selected by the Company, and to follow the recommendation of
such physician regarding further examination and testing. The issue to be
presented to the physician for determination is whether the Executive suffers
from a mental or physical incapacity which materially inhibits or prevents him
from carrying out the duties of his full-time employment as described herein,
and, if so, whether such condition is more likely than not to exist for a period
in excess of one hundred twenty (120) days. The Executive intends for the
Company to be treated as Executive would be with respect to his rights regarding
the use and disclosure of his individually identifiable health information or
other medical records. This release authority applies to any information
governed by the Health Insurance Portability and Accountability Act of 1996
(a/k/a HIPAA), 42 USC 1320d and 45 CFR 160-164 and authorizes: any physician,
health-care professional, dentist, health plan, hospital, clinic, laboratory,
pharmacy or other covered health-care provider, any insurance company and the
Medical Information Bureau Inc. or other health-care clearinghouse that has
provided treatment or services to him, or that has paid for or is seeking
payment from him for such services, to give, disclose and release to the
Company, without restriction, all of his individually identifiable health
information and medical records regarding any past, present or future medical or
mental health condition, including all information relating to the diagnosis and
treatment of HIV/AIDS, sexually transmitted diseases, mental illness, and drug
or alcohol abuse.
(b) Upon a Termination Without Cause, the non-recruitment
restrictions contained in Section 12(a)(iii) shall apply, except for a
Termination Without Cause during the 12-month period following a Change of
Control (as defined below). In all other respects, upon a Termination Without
Cause (other than a Termination Without Cause during the 12 month period
following a Change of Control (as defined below), which shall be governed by the
provisions of Section 11 below) this Agreement shall terminate and the Company
shall continue to pay the Executive the payments of the Executive's base salary
then in effect through the end of the twelfth month following the month in which
the Termination Without Cause occurs (or if shorter, the base salary for the
balance of the Term), as well as accrued but unused vacation to the date of
termination.
11. CHANGE OF CONTROL COMPENSATION.
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(a) Compensation. In the event of a Termination Without Cause or
the Executive's resignation for Good Reason (as defined below) within 12 months
following a Change of Control (as defined below), the Company shall (i) fully
vest the Executive's share awards and stock options, regardless of any vesting
schedule, (ii) pay the Executive any base salary and any expenses reimbursable
to the Executive by the Company, each through the date of the termination, (iii)
pay a benefit (the "Change of Control Bonus") equal to four (4) times the
Executive's then annual base salary, and (iv) pay the insurance benefit
described below; less however, that amount, if any, which would constitute an
"excess parachute payment" under Section 280G of the Internal Revenue Code of
1986, as amended. At the Executive's election, the Change of Control Bonus may
be made in one lump sum upon Change of Control or in twenty-four (24) equal
monthly payments for the twenty-four (24) months following such termination. In
addition, the Company shall cause the Executive's insurance benefits, as in
effect immediately prior to the termination, to remain in effect for eighteen
(18) months following the date of termination upon the same terms, and at the
same cost to the
Executive, as in effect immediately prior to termination. The Executive shall
also receive accrued vacation to the date of termination.
(b) A "Change of Control", for purposes of this Agreement, shall
be deemed to have occurred if, at any time during the Term, any of the following
events occurs:
(i) any "person", as that term is used in Section 13(d) and
Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), becomes, is discovered to be, or files a report on Schedule 13D
or 14D-1 (or any successor schedule, form or report) disclosing that such person
is, a beneficial owner (as defined in Rule 13d-3 under the Exchange Act or any
successor rule or regulation), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting power of the Company's
then outstanding securities entitled to vote generally in the election of
directors;
(ii) individuals who, as of the election to the Board of
Directors of the Company, without the recommendation or approval of the
incumbent Board of Directors constituting a majority of the numbers of directors
of Company then in office;
(iii) the Company is merged, consolidated or reorganized into
or with another corporation or other legal person, or securities of the Company
are exchanged for securities of another corporation or other legal person, and
immediately after such merger, consolidation, reorganization or exchange less
than a majority of the combined voting power of the then-outstanding securities
of such corporation or person immediately after such transaction are held,
directly or indirectly, in the aggregate by the holders of securities entitled
to vote generally in the election of directors of the Company immediately prior
to such transaction;
(iv) the Company in any transaction or series of related
transactions, sells all or substantially all of its assets to any other
corporation or other legal person and less than a majority of the combined
voting power of the then-outstanding securities of such corporation or person
immediately after such sale or sales are held, directly or indirectly, in the
aggregate by the holders of securities entitled to vote generally in the
election of directors of the Company immediately prior to such sale;
(v) the Company and its affiliates shall sell or transfer of
(in a single transaction or series of related transactions) to a non-affiliate
business operations or assets that generated at least two-thirds of the
consolidated revenues (determined on the basis of the Company's four most
recently completed fiscal quarters for which reports have been filed under the
Exchange Act) of the Company and its subsidiaries immediately prior thereto;
(vi) the Company files a report or proxy statement with the
Securities and Exchange Commission pursuant to the Exchange Act disclosing in
response to Form 8-K (or any successor, form or report or item therein) that a
change in control of the Company has occurred; or
(vii) any other transaction or series of related transactions
occur that have substantially the effect of the transactions specified in any of
the preceding clauses in this sentence.
(c) Certain Transactions. Notwithstanding the provisions of
Section 11(b)(i) or 11(b)(vi) hereof, unless otherwise determined in a specific
case by majority vote of the Board of Directors of the Company, a Change of
Control shall not be deemed to have occurred for purposes of this Agreement
solely because (i) the Company, (ii) an entity in which the Company directly or
indirectly beneficially owns 20% or more of the voting securities or (iii) any
Company-sponsored employee stock ownership plan, or any other employee benefit
plan of the Company, either files or becomes obligated to file a report or a
proxy statement under or in response to Schedule 13D, Schedule 14D-1, Form 8-K
or Schedule 14A (or any successor schedule, form or report or item thereon)
under the Exchange Act, disclosing beneficial ownership by it of shares of stock
of the Company, or because the Company reports that a Change of Control of the
Company has or may have occurred or will or may occur in the future by reason of
such beneficial ownership.
(d) Good Reason. "Good Reason," for purposes of this Agreement,
shall be deemed to mean any of the following:
(i) a change in the Executive's position or responsibilities
(including reporting responsibilities) which materially diminishes the
Executive's position or responsibilities as in effect immediately prior to a
Change of Control; the assignment to the Executive of any duties or
responsibilities which are materially inconsistent with such position or
responsibilities; or any removal of the Executive from or failure to reappoint
or reelect the Executive to any of such positions, except in connection with a
Termination with Cause as defined in Section 8(c) as a result of the Executive's
death or Disability, or by Voluntary Termination;
(ii) a reduction (unless performance justified) in the
Executive's base salary bonus arrangement as in effect on the date hereof or as
the same may be increased from time to time;
(iii) the Company's requiring the Executive to be based at
any place other than a location within a thirty-mile radius of New Cumberland,
Pennsylvania or Philadelphia, Pennsylvania, except for reasonably required
travel on the Company's business which is not materially greater than such
travel requirements prior to the Change of Control;
(iv) the failure by the Company to continue to provide the
Executive with compensation and benefits provided for under this agreement or
benefits substantially similar to those provided to the Executive under any of
the employee benefit plans in which the Executive is or becomes a participant,
or the taking of any action by the Company which would directly or indirectly
materially reduce any of such benefits or deprive the Executive of any material
fringe benefit enjoyed by the Executive at the time of the Change of Control;
(v) any material breach by the Company of any provision of
this Agreement; or
(vi) the failure of the Company to obtain a satisfactory
agreement from any successor or assign of the Company to assume and agree to
perform this Agreement.
12. PROTECTION OF CONFIDENTIAL INFORMATION; NONCOMPETITION;
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NON-RECRUITMENT
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(a) Covenant. The Executive acknowledges that his employment by
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the Company, will, throughout the Term, bring him into close contact with many
confidential affairs of the company, including, without limitation, information
about ownership of the company, customer lists, costs, profits, markets, sales,
key personnel, pricing polices, and other business affairs and methods and other
information not readily available to the public, and plans for future
development. The Executive further acknowledges that the services to be
performed under this Agreement are of a special, unique, unusual, extraordinary
and intellectual character. In recognition of the foregoing, Executive
covenants and agrees:
(i) the Executive shall use all reasonable efforts to protect
the confidential matters of the Company and shall keep secret all such
confidential matters, including without limitation, the terms and provisions of
this Agreement, and shall not intentionally disclose such matters to anyone
outside of the Company except as required in the performance of his duties under
this Agreement, either during or after the Term, except with the Company's
written consent, provided that: (1) Executive shall have no such obligation to
the extent such matters are or become publicly known other than as a result of
Executive's breach of his obligations hereunder; (2) Executive may, after giving
prompt written notice to the Company to the extent practicable under the
circumstances, disclose such matters to the extent required by applicable laws
or governmental regulations or judicial or regulatory proceedings; and (3)
Executive may disclose the terms and provisions of this Agreement to his spouse
and legal tax and financial advisors, provided however, they agree in writing to
be bound by the confidentiality provisions hereof;
(ii) The Executive shall deliver promptly to the Company on
termination of his employment by the Company, or at any other time the Company
may so request, at the Company's expense, all memoranda, notes, records, reports
and other documents, and all copies thereof relating to the Company's business,
which Executive obtained while employed, or otherwise serving or acting on
behalf of, the Company and which he may then possess or have under his control
other than publicly available documents or documents related to the terms and
conditions of Executive employment;
(iii) Non-Recruitment. Independent of the foregoing
provisions, the Executive agrees that, during the term of the Executive's
employment by the Company and for a period of twelve (12) months thereafter,
except for a Termination without Cause during the 12 month period following a
Change of Control or a Voluntary Termination for Good Reason during the 12 month
period following a Change of Control, the Executive shall not, without the prior
written consent of the Company: (1) directly or indirectly, cause any person
engaged or employed by the Company or any of its subsidiaries, (whether
part-time or full-time and whether as an officer, employee, consultant, agent,
adviser or independent contractor) to voluntarily leave the employ of or
engagement with, the Company or any of its subsidiaries or to cease providing
services to or on behalf of the Company or any of its subsidiaries, or (2) in
any manner seek to engage or employ any such person (whether or not for
compensation) as an officer, employee, consultant, agent, adviser or independent
contractor for any person other than the Company or any of its subsidiaries
(other than legal or accounting advisors).
(b) Noncompete. The Executive expressly covenants and agrees that
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he will not directly or indirectly, without the prior written consent of the
Board, at any time while employed by the Company and for a period of one year
(plus the length of time that Executive is in violation of this provision)
following the date of that Executive's employment terminates (1) for cause (as
defined in Section 8(c)) or (2) for voluntary termination (as defined by Section
8(a)), other than for Good Reason following a Change in Control (as defined in
Section 11), enter into or engage generally in direct or indirect competition
with the Company either as an individual on his own or as a partner or joint
venture, or as a director, officer, shareholder, employee or agent for any
person nor render any services to any person or entity that competes with the
Company or any Affiliate. For the purposes of this section, the Executive or
any person or entity shall be deemed to "compete" with the Company or any
Affiliate if the Executive personally engages, owns or provides services to any
entity engaged in the ownership or management of hospitality units located in
the United States east of the Mississippi including but not limited to Ashford
Hospitality Trust, Inc., Xxxxxx Lodging Company, Equity Inns, Inc., Highland
Hospitality Corp., Innkeepers USA Trust, LaSalle Hotel Properties and Winston
Hotels, Inc.
(c) Specific Remedy-Injunctive Relief. The parties agree that the
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restrictions outlined in sections 12 (a) and (b) are reasonable and necessary
protections of the immediate interests of the Company and that the Company would
not have entered into this Agreement without receiving additional consideration
offered by Executive and binding himself to these restrictions. In addition to
such other rights and remedies as the Company may have at equity or in law with
respect to any breach of this Agreement, if Executive commits a breach of any of
the provisions of Section 12(a) or 12(b), the Company shall have the right and
remedy to have such provision specifically enforced by any Court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that monetary
damages will not provide an adequate remedy to the Company. In the event that,
notwithstanding the foregoing, a restriction or any portion thereof, contained
in Section 12(a) or 12(b) is deemed to be unreasonable by a court of competent
jurisdiction, Executive and the Company agree that such restriction, or portion
thereof, shall be modified in order to make it reasonable and shall be
enforceable accordingly.
(d) Consideration. The parties acknowledge the requirement that
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the currently employed Executive be provided good and valuable consideration for
providing the restrictions set forth in Section 12(a) and 12(b). Therefore, in
consideration of the foregoing restrictions, the Company shall allow the
Executive to participate in the Company's long-term incentive program, the terms
of which shall be separately specified and incorporated by reference herein.
13. NOTICES. All notices or deliveries authorized or required pursuant
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to this Agreement shall be deemed to have been given when in writing and
personally delivered or when deposited in the U.S. mail, certified, return
receipt requested, postage prepaid, addressed to the parties at the following
addresses or to such other addresses as either may designate in writing to the
other party:
To the Company: Hersha Hospitality Trust, Inc.
000 Xxxxxxxx Xxxxx
Xxx Xxxxxxxxxx, XX 00000
To the Executive: Xxx X. Xxxx
000 Xxxxx Xxxx
Xxxx Xxxxxx, XX 00000
14. ENTIRE AGREEMENT. This Agreement contains the entire understanding
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between the parties hereto with respect to the subject matter hereof and shall
not be modified in any manner except by instrument in writing signed, by or on
behalf of the parties hereto; provided, however, that any amendment or
termination of the covenant of noncompetition in Section 12 must be approved by
a majority of the directors of the Company other than the Executive, if the
Executive is then a director of the Company. This Agreement shall be binding
upon and inure to the benefit of the heirs, successors and assigns of the
parties hereto.
15. ARBITRATION.
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(a) All disputes (except for those arising pursuant to Section 12)
arising out of, relating to or concerning this Agreement, the breach of this
Agreement, the employment of Executive, or the termination of Executive's
employment shall be resolved pursuant to this Section 15. This includes all
claims or disputes whether arising in tort or contract and whether arising under
statute or common law, including Title VII, the ADA, the ADEA, and all other
federal and state employment statutes. Any such dispute will be resolved by
arbitration held in Harrisburg, Pennsylvania under the Employment Dispute rules
of the American Arbitration Association. This agreement to arbitrate will be
specifically enforceable.
(b) Executive and Company agree that he or it must file any
arbitration with the AAA and serve on the other party within sixty (60) days
after the date on which the dispute arose.
(c) Subject to Section 15(e) below, each party shall bear its own
expenses for arbitration, including attorney and witness fees and expenses,
except that the fee of the arbitrator shall be borne solely by the Company.
(d) Upon a request for arbitration under this Agreement, the
parties shall confer with each other for the purpose of attempting to select a
single independent arbitrator. In the event that the parties cannot agree to
the selection of an arbitrator within thirty days of notice of arbitration,
three (3) individuals shall serve as arbitrators in accordance with the
Expedited Procedures of the Commercial Arbitration Rules of the American
Arbitration Association. One of the arbitrators shall be selected by Executive
and another by Company. The two arbitrators so selected shall select a third
arbitrator. The finding of a majority of the arbitrators shall be final and
binding on the parties. The agreement to arbitrate shall be specifically
enforceable under applicable law in any court having jurisdiction.
(e) The prevailing party in connection with such arbitration shall
be entitled to recover from the other party reasonable sums as attorney fees and
expenses in connection with such
action, except that the fee of the arbitrator shall be borne solely by the
Company regardless of outcome.
(f) The arbitrators will have no authority to extend, modify, or
suspend any of the terms of this Agreement. The arbitrators will make the award
in writing and shall accompany it with an opinion discussing the evidence and
setting forth the reasons for the award. The decision of the arbitrators within
the scope of the submission will be final and binding on both parties, and any
right to judicial action on any matter subject to arbitration hereunder is
waived (unless otherwise required by applicable law), except suit to enforce
this arbitration award and any rights to vacate or modify the arbitration award
in accordance with the Uniform Arbitration Act as enacted in Pennsylvania. The
arbitrators shall have authority to award all relief provided for by such
relevant laws at issue. If the rules of the AAA differ from those of this
Section, the provisions of this Agreement will control.
16. APPLICABLE LAW. Except to the extent pre-empted by federal law,
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this Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania without regard to internal conflict of law
principles and any litigation or legal action concerning this Agreement, not
otherwise waived or subject to arbitration, shall be brought before a state or
federal court of competent jurisdiction in Harrisburg, Pennsylvania.
17. ASSIGNMENT. The Executive acknowledges that his services are
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unique and personal. Accordingly, the Executive may not assign his rights or
delegate his duties or obligations under this Agreement. The Company's rights
and obligations under this Agreement shall inure to the benefit of and shall be
binding upon the Company's successors and assigns.
18. HEADINGS. Headings in this Agreement are for convenience only and
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shall not be used to interpret or construe its provisions.
IN WITNESS WHEREOF, the Parties hereto have executed this Employment
Agreement as of the date first set forth above.
HERSHA HOSPITALITY TRUST
BY:____________________________________
Xxxxxxx Xxxx, Xx., Lead Trustee,
Board of Trustees
EXECUTIVE
_______________________________________
Xxx X. Xxxx
