Exhibit 10.35
EXECUTION COPY
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this "Agreement"), by and between
ResortQuest International, Inc., a Delaware corporation formerly known as
Vacation Properties International, Inc. and J. Xxxxxxxx Xxxxxxx ("Employee"), is
dated as of this 13th day of March, 2000 (the "Effective Date"). If RQI and the
other party to a transaction constituting a Change in Control (as defined
herein) agree that such transaction shall be treated as a "pooling of interests"
for financial reporting purposes, and if the transaction is in fact so treated,
then the provisions of this Agreement shall not be valid to the extent that
RQI's independent public accountants determine in good faith that the provisions
of this Agreement would preclude "pooling of interests" accounting.
WITNESSETH:
WHEREAS, as of the date of this Agreement, RQI is engaged primarily in
the business of providing noncommercial property management, rental and sales
services and hotel management services;
WHEREAS, Employee is employed hereunder by RQI in a confidential
relationship wherein Employee, in the course of Employee's employment with RQI,
has and will continue to become familiar with and aware of information as to
RQI's customers, specific manner of doing business, including the processes,
techniques and trade secrets utilized by RQI, and future plans with respect
thereto, all of which has been and will be established and maintained at great
expense to RQI, which information is a trade secret and constitutes the valuable
goodwill of RQI;
NOW, THEREFORE, in consideration of the mutual promises, terms,
covenants and conditions set forth herein and the performance of each, the
parties hereto hereby agree as follows:
AGREEMENTS:
1. EMPLOYMENT AND DUTIES.
(a) RQI hereby employs Employee as Senior Vice President and Chief
Financial Officer of RQI. As such, Employee shall have responsibilities, duties
and authority reasonably accorded to and expected of a Senior Vice President and
Chief Financial Officer of RQI and will report to the Chief Executive Officer
("CEO") and the Board of Directors (the "Board") of RQI. Employee hereby accepts
this employment upon the terms and conditions herein contained and, subject to
SECTION L(C) hereof, agrees to devote Employee's full working time, attention
and efforts to promote and further the business of RQI.
(b) Employee shall faithfully adhere to, execute and fulfill all
policies established by RQI.
(c) Employee shall not, during the Term of his employment hereunder, be
engaged in any other business activity pursued for gain, profit or other
pecuniary advantage if such activity interferes with Employee's duties and
responsibilities hereunder. The foregoing limitations shall not be construed as
prohibiting Employee from making personal investments in such form or manner as
will neither require Employee's services in the operation or affairs of the
companies or enterprises in which such investments are made nor violate the
terms of SECTION 3 hereof.
2. COMPENSATION; OPTIONS.
For all services rendered by Employee, RQI shall compensate Employee as
follows:
(a) BASE SALARY. The base salary payable to Employee shall be $180,000
per year, payable on a regular basis in accordance with RQI's standard payroll
procedures but not less than monthly.
(b) INCENTIVE BONUS PLAN. It is RQI's intent to develop a written
Incentive Bonus Plan (which may be RQI's Incentive Bonus Plan) setting forth the
criteria under which Employee and other officers and key employees will be
eligible to receive year-end bonus awards. RQI contemplates that the maximum
bonus for which Employee may be eligible will be fifty percent (50%) of
Employee's base salary.
(c) EXECUTIVE PERQUISITES, BENEFITS AND OTHER COMPENSATION. Employee
shall be entitled to receive additional benefits and compensation from RQI in
such form and to such extent as specified below:
(i) Payment of all premiums for coverage for Employee under
health, hospitalization, disability, dental, life and other insurance
plans that RQI may have in effect from time to time, such benefits
provided to Employee under this clause (I) to be at least equal to such
benefits provided to RQI executives;
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(ii) Reimbursement for all business travel and other
out-of-pocket expenses reasonably incurred by Employee in the
performance of Employee's services pursuant to this Agreement. All
reimbursable expenses shall be appropriately documented in reasonable
detail by Employee upon submission of any request for reimbursement,
and in a format and manner consistent with RQI's expense reporting
policy; and
(iii) RQI shall provide Employee with other executive
perquisites as may be available to or deemed appropriate for Employee
by the Board and participation in all other RQI-wide employee benefits
as available from time to time.
At the Effective Date, RQI shall grant to Employee options to acquire
fifty thousand (50,000) shares of RQI common stock at a price per share equal to
the closing price on the Effective Date. Such options shall vest in installments
of sixteen thousand six hundred sixty-seven (16,667) shares on each of the first
(1st) and second (2nd) anniversaries of the Effective Date, and sixteen thousand
six hundred sixty-six (16,666) on the third (3rd) anniversary of the Effective
Date.
3. NON-COMPETITION.
(a) Employee shall not, during the period of Employee's employment with
RQI, and for a period of two (2) years immediately following the termination of
Employee's employment under this Agreement, for any reason whatsoever, directly
or indirectly, for himself or on behalf of or in conjunction with any other
person, company, partnership, corporation or business of whatever nature:
(i) engage, as an officer, director, shareholder, owner,
partner, joint venturer or in a managerial capacity whether as an
employee, independent contractor, consultant or advisor, or as a sales
representative, in any noncommercial property management, rental or
sales business or hotel management business in direct competition with
RQI or any subsidiary of RQI, within one hundred (100) miles of the
locations in which RQI or any of RQI's subsidiaries conducts any
noncommercial property management, rental or sales business or hotel
management business (the "TERRITORY");
(ii) call upon any person who is, at that time, within the
Territory, an employee of RQI (including the subsidiaries thereof) in a
sales representative or managerial capacity for the purpose or with the
intent of enticing such employee away from or out of the employ of RQI
(including
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the subsidiaries thereof), provided that Employee shall be permitted
to call upon and hire any member of his immediate family;
(iii) call upon any person or entity which is at that time, or
which has been, within one (1) year prior to that time, a customer of
RQI (including the subsidiaries thereof) within the Territory for the
purpose of providing noncommercial property management, rental or sales
services to property owners and/or renters in direct competition with
RQI or any subsidiary of RQI within the Territory; or
(iv) call upon any prospective acquisition candidate, on
Employee's own behalf or on behalf of any competitor in the
noncommercial property management, rental or sales business or hotel
management business, which candidate, to Employee's actual knowledge
after due inquiry, was called upon by RQI (including the subsidiaries
thereof) or for which, to Employee's actual knowledge after due
inquiry, RQI (or any subsidiary thereof) made an acquisition analysis,
for the purpose of acquiring such entity, unless RQI (or any subsidiary
thereof) has expressly declined to pursue such acquisition candidate or
at least one (1) year has elapsed since RQI (or any subsidiary thereof)
has taken any action with respect to pursuing such acquisition
candidate.
Notwithstanding the above, the foregoing covenant shall not be deemed
to prohibit Employee from (A) acquiring as an investment not more than two
percent (2%) of the capital stock of a competing business whose stock is traded
on a national securities exchange or over-the-counter, or (B) engaging in the
hotel management business if the Employee's employment hereunder is terminated
after the initial Term of this Agreement.
(b) Because of the difficulty of measuring economic losses to RQI as a
result of a breach of the foregoing covenant, and because of the immediate and
irreparable damage that could be caused to RQI for which RQI would have no other
adequate remedy, Employee agrees that the foregoing covenant may be enforced by
RQI in the event of breach by him, by injunctions and restraining orders.
(c) It is agreed by the parties hereto that the foregoing covenants in
this SECTION 3 impose a reasonable restraint on Employee in light of the
activities and business of RQI (including RQI's subsidiaries) on the date of the
execution of this Agreement and the current plans of RQI (including RQI's
subsidiaries); but it is also the intent of RQI and Employee that such covenants
be construed and enforced in accordance with the changing locations of RQI
(including RQI's subsidiaries) throughout the Term of this Agreement. For
example, if, during the
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Term of this Agreement, RQI (including RQI's subsidiaries) establishes new
locations for its current activities or business, then Employee will be
precluded from soliciting the customers or employees from such new location and
from directly competing within one hundred (100) miles of such locations through
the Term of this Agreement.
It is further agreed by the parties hereto that, in the event that
Employee shall cease to be employed hereunder, and shall enter into a business
or pursue other activities not in competition with RQI (including RQI's
subsidiaries), or similar activities, or business in locations the operation of
which, under such circumstances, does not violate clause (A) of this SECTION 3,
and in any event such new business, activities or location are not in violation
of this SECTION 3 or of Employee's obligations under this SECTION 3, if any,
Employee shall not be chargeable with a violation of this SECTION 3 if RQI
(including RQI's subsidiaries) shall thereafter enter the same, similar or a
competitive (i) business, (ii) course of activities or (iii) location, as
applicable.
(d) The covenants in this SECTION 3 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of any
other covenant. Moreover, in the event any court of competent jurisdiction shall
determine that the scope, time or territorial restrictions set forth are
unreasonable, then it is the intention of the parties that such restrictions be
enforced to the fullest extent which the court deems reasonable, and the
Agreement shall thereby be reformed.
(e) All of the covenants in this SECTION 3 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Employee against RQI (including the
subsidiaries thereof), whether predicated on this Agreement or otherwise, shall
not constitute a defense to the enforcement by RQI of such covenants. It is
specifically agreed that the period of two (2) years following termination of
employment stated at the beginning of this Section 3, during which the
agreements and covenants of Employee made in this Section 3 shall be effective,
shall be computed by excluding from such computation any time during which
Employee is in violation of any provision of this SECTION 3.
4. PLACE OF PERFORMANCE.
(a) Employee understands that he may be requested by RQI to relocate
from Employee's present residence to another geographic location in order
to more efficiently carry out Employee's duties and responsibilities under
this Agreement or as part of a promotion or other increase in duties and
responsibilities. In such event if Employee agrees to relocate, RQI will
pay all
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reasonable relocation costs to move Employee, Employee's immediate family
and their personal property and effects. Such costs may include, by way of
example, but are not limited to: reasonable expenses related to pre-move
visits to search for a new residence, to investigate schools or for other
purposes; reasonable temporary lodging and living costs prior to moving
into a new permanent residence; duplicate home carrying costs; all closing
costs on the sale of Employee's present residence and on the purchase of a
comparable residence in the new location; and added income taxes that
Employee may incur if any unreimbursed relocation costs are not deductible
for tax purposes. The general intent of the foregoing is that Employee
shall not personally bear any out-of-pocket costs as a result of the
relocation, with an understanding that Employee will use Employee's best
efforts to incur only those costs which are reasonable and necessary to
effect a smooth, efficient and orderly relocation with minimal disruption
to the business affairs of RQI, and the personal life of Employee and
Employee's family.
(b) Notwithstanding the above, if Employee is requested by the Board to
relocate and Employee refuses, such refusal shall constitute "good cause" for
termination of this Agreement under the terms of SECTION 5(c) hereof.
5. TERM; TERMINATION; RIGHTS ON TERMINATION.
The term of this Agreement shall begin on the Effective Date and
continue until October 1, 2002, and, unless terminated sooner as herein
provided, shall continue thereafter on a year-to-year basis on the same terms
and conditions contained herein in effect as of the time of renewal (such
initial period and any extensions thereof being referred to herein as the
"Term"). This Agreement and Employee's employment may be terminated in any one
of the following ways:
(a) DEATH. The death of Employee shall immediately terminate this
Agreement with no severance compensation due to Employee's estate.
(b) DISABILITY. If, as a result of incapacity due to physical or mental
illness or injury, Employee shall have been absent from Employee's full-time
duties hereunder for one hundred twenty (120) consecutive days, then thirty (30)
days after receiving written notice (which notice may occur before or after the
end of such four (4) month period, but which shall not be effective earlier than
the last day of such four (4) month period), RQI may terminate Employee's
employment hereunder, provided Employee is unable to resume Employee's full-time
duties at the conclusion of such notice period. Also, Employee may terminate
Employee's employment hereunder if his health should become impaired to an
extent that makes the continued performance of Employee's duties hereunder
hazardous to Employee's physical or mental health or life, provide that Employee
shall have
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furnished RQI with a written statement from a qualified doctor to such effect
and provided, further that, at RQI's request made within thirty (30) days of the
date of such written statement, Employee shall submit to an examination by a
doctor selected by RQI who is reasonably acceptable to Employee or Employee's
doctor and such doctor shall have concurred in the conclusion of Employee's
doctor. In the event this Agreement is terminated as a result of Employee's
disability, Employee shall have no right to any severance compensation.
(c) GOOD CAUSE. RQI may terminate this Agreement ten (10) days after
delivery of written notice to Employee for "good cause", which shall be: (1)
Employee's willful, material and irreparable breach of the Agreement; (2)
Employee's continual and material failure to adequately perform, continuing for
ten (10) days after receipt of written notice of need to cure, any of Employee's
material duties and responsibilities, provided that a termination pursuant to
this clause (2) is approved by a vote of at least two-thirds (2/3) of the Board;
(3) Employee's willful dishonesty, fraud or misconduct which has a material
adverse affect on the operations or reputation of RQI (other than good faith
expense account disputes); (4) Employee's conviction in a court of competent
jurisdiction of a felony (other than a traffic violation); (5) Employee's
chronic alcohol abuse or illegal drug use; or (6) Employee's refusal to relocate
as set forth in Section 4(b) above. In the event of a termination for good
cause, as enumerated above, Employee shall have no right to any severance
compensation.
(d) WITHOUT GOOD CAUSE. Should Employee be terminated by RQI without
good cause during the Term, Employee shall be entitled to continue to receive
from RQI the base salary at the rate then in effect for whatever time period is
remaining under the Term of this Agreement or for one (1) year, whichever amount
is greater. Should Employee be terminated by RQI without good cause at any time
during or after the Term, Employee shall be entitled to waive Employee's right
to receive severance compensation (by a written waiver delivered to RQI on the
effective date of termination), and, in such case, the noncompetition provisions
of SECTION 3 hereof shall not apply.
(e) BY EMPLOYEE. At any time after the commencement of employment,
Employee may, without "good reason" (as defined in Exhibit A hereto), terminate
this Agreement and Employee's employment, effective thirty (30) days after
written notice is provided to RQI. If Employee resigns or otherwise terminates
Employee's employment without good reason, Employee shall receive no severance
compensation. If Employee's resignation or other termination by Employee is for
good reason, RQI shall pay all amounts and damages to which Employee may be
entitled as a result of such resignation or other termination, including
interest thereon and all reasonable legal fees and expenses and other costs
incurred by Employee to enforce Employee's rights hereunder. Further, none
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of the provisions of SECTION 3 hereof shall apply in the event this Agreement is
terminated by Employee for good reason.
(f) CHANGE IN CONTROL OF RQI. In the event of a "Change in Control" of
RQI (as defined below) during the Term, refer to SECTION 12 below.
Upon termination of this Agreement for any reason provided above,
Employee shall be entitled to receive all compensation earned and all benefits
and reimbursements due through the effective date of termination. Additional
compensation subsequent to termination, if any, will be due and payable to
Employee only to the extent and in the manner expressly provided above or in
SECTION 12 hereof. All other rights and obligations of RQI and Employee under
this Agreement shall cease as of the effective date of termination, except that
RQI's obligations under SECTION 9 hereof and Employee's obligations under
SECTIONS 3, 6, 7, 8 and 10 hereof shall survive such termination in accordance
with their terms. Notwithstanding anything herein to the contrary, if a Change
in Control occurs during the Term and there is less than one (1) year remaining
on the Term, the Term shall be extended for one (1) year following the date of
the Change in Control, provided that the payment and other obligations hereunder
shall survive the termination of this Agreement to the extent a Change in
Control has occurred at any time during the Term.
6. RETURN OF COMPANY PROPERTY.
All records, designs, patents, business plans, financial statements,
manuals, memoranda, lists and other property delivered to or compiled by
Employee by or on behalf of RQI or its representatives, vendors or customers
which pertain to the business of RQI shall be and remain the property of RQI and
be subject at all times to its discretion and control. Likewise, all
correspondence, reports, records, charts, advertising materials and other
similar data pertaining to the business, activities or future plans of RQI which
is collected by Employee shall be delivered promptly to RQI without request by
it upon termination of Employee's employment.
7. INVENTIONS.
Employee shall disclose promptly to RQI any and all significant
conceptions and ideas for inventions, improvements and valuable discoveries,
whether patentable or not, which are conceived or made by Employee, solely or
jointly with another, during the period of employment or within one (1) year
thereafter, and which are directly related to the business or activities of RQI
and which Employee conceives as a result of Employee's employment by RQI.
Employee hereby assigns and agrees to assign all of Employee's interests therein
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to RQI or its nominee. Whenever requested to do so by RQI, Employee shall
execute any and all applications, assignments or other instruments that RQI
shall deem necessary to apply for and obtain Letters Patent of the United States
or any foreign country or to otherwise protect RQI's interest therein.
8. TRADE SECRETS.
Employee agrees that he will not, during or after the Term of this
Agreement with RQI, disclose the specific terms of RQI's relationships or
agreements with its significant vendors or customers or any other significant
and material trade secret of RQI, whether in existence or proposed, to any
person, firm, partnership, corporation or business for any reason or purpose
whatsoever.
9. INDEMNIFICATION.
In the event Employee is made a party to any threatened, pending, or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by RQI against Employee), by reason of the
fact that Employee is or was performing services under this Agreement, then RQI
shall indemnify Employee against all expenses (including attorneys' fees),
judgments, fines and amounts paid in settlement, as actually and reasonably
incurred by Employee in connection therewith. In the event that both Employee
and RQI are made a party to the same third-party action, complaint, suit or
proceeding, RQI agrees to engage competent legal representation, and Employee
agrees to use the same representation, provided that if counsel selected by RQI
shall have a conflict of interest that prevents such counsel from representing
Employee, Employee may engage separate counsel and RQI shall pay all reasonable
attorneys' fees of such separate counsel.
10. NO PRIOR AGREEMENTS.
Employee hereby represents and warrants to RQI that the execution of
this Agreement by Employee and his employment by RQI and the performance of
Employee's duties hereunder will not violate or constitute a breach of any
agreement with a former employer, client or any other person or entity. Further,
Employee agrees to indemnify RQI for any claim, including but not limited to
attorneys' fees and expenses of investigation, by any such third party that such
third party may now have or may hereafter come to have against RQI based upon or
arising out of any noncompetition agreement, invention or secrecy agreement
between Employee and such third party which was in existence as of the date of
this Agreement.
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11. ASSIGNMENT; BINDING EFFECT.
Employee understands that he has been selected for employment by RQI on
the basis of Employee's personal qualifications, experience and skills.
Employee, therefore, shall not assign all or any portion of Employee's
performance under this Agreement. Subject to the preceding two (2) sentences and
the express provisions of SECTION 12 below, this Agreement shall be binding
upon, inure to the benefit of and be enforceable by the parties hereto and their
respective heirs, legal representatives, successors and assigns.
12. CHANGE IN CONTROL.
(a) Unless Employee elects to terminate this Agreement pursuant to
subsection (C) below, Employee understands and acknowledges that RQI may be
merged or consolidated with or into another entity and that such entity shall
automatically succeed to the rights and obligations of RQI hereunder or that RQI
may undergo another type of Change in Control. In the event such a merger or
consolidation or other Change in Control is initiated prior to the end of the
Term, then the provisions of this SECTION 12 shall be applicable.
(b) In the event of a pending Change in Control wherein RQI and
Employee have not received written notice at least five (5) business days prior
to the anticipated closing date of the transaction giving rise to the Change in
Control from the successor to all or a substantial portion of RQI's business
and/or assets that such successor is willing as of the closing to assume and
agree to perform RQI's obligations under this Agreement in the same manner and
to the same extent that RQI is hereby required to perform, then such Change in
Control shall be deemed to be a termination of this Agreement by RQI without
cause during the Term and the applicable portions of SECTION 5(d) hereof shall
apply; however, under such circumstances, the amount of the severance payment
due to Employee shall be triple the amount calculated under the terms of SECTION
5(D) and shall payable in a lump sum payment and the noncompetition provisions
of SECTION 3 hereof shall not apply. In addition, RQI shall provide Employee
with the benefits set forth in subsections 12(h)(ii) through (iv) hereof.
(c) In any Change in Control situation, Employee may elect to terminate
this Agreement by providing written notice to RQI at least five (5) business
days prior to the anticipated closing of the transaction giving rise to the
Change in Control. In such case, the applicable provisions of SECTION 5(d)
hereof shall apply as though the Company had terminated the Agreement without
cause during the Term; provided, however under such circumstances, the amount of
the severance payment due to Employee shall be double the amount calculated
under the terms of SECTION 5(d) and shall be payable in a lump sum payment and
the
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noncompetition provisions of SECTION 3 hereof shall all apply for a period of
two (2) years from the effective date of termination. Employee shall have the
right to waive Employee's right to receive the severance compensation payable
under this SECTION 12(c) (by a written waiver delivered to RQI on the effective
date of the termination), in which case the noncompetition provisions of SECTION
3 hereof shall not apply.
(d) For purposes of applying SECTION 5 hereof under the circumstances
described in subsections (b) and (c) above, the effective date of termination
shall be the closing date of the transaction giving rise to the Change in
Control, and all compensation, reimbursements and lump-sum payments due Employee
must be paid in full by RQI at or prior to such closing. Further, Employee shall
be given sufficient time and opportunity to elect whether to exercise all or any
of Employee's vested options to purchase RQI Common Stock, including any options
with accelerated vesting under the provisions of RQI's 2000 Long-Term Incentive
Plan, such that Employee may convert the options to shares of RQI Common Stock
at or prior to the closing of the transaction giving rise to the Change in
Control, if Employee so desires.
(e) A "Change in Control" shall be deemed to have occurred if any of
the following shall have occurred:
(i) any person or entity, other than RQI or an employee
benefit plan of RQI, acquires directly or indirectly the Beneficial
Ownership (as defined in Section 13(d) of the Securities Exchange Act
of 1934, as amended) of any voting security of RQI and immediately
after such acquisition such person or entity is, directly or
indirectly, the Beneficial Owner of voting securities representing
fifty percent (50%) or more of the total voting power of all of the
then outstanding voting securities of RQI;
(ii) the following individuals no longer constitute a majority
of the members of the Board of Directors of RQI: (A) those individuals
who, as of the closing date of RQI's initial public offering,
constitute the Board of Directors of RQI (the "ORIGINAL DIRECTORS");
(B) those individuals who thereafter are elected to the Board of
Directors of RQI and whose election, or nomination for election, to the
Board of Directors of RQI was approved by a vote of at least two-thirds
(2/3) of the Original Directors then still in office (such directors
becoming "Additional Original Directors" immediately following their
election); and (C) those individuals who are elected to the Board of
Directors of RQI and whose election, or nomination for election, to the
Board of Directors of RQI was approved by a vote of at least two-thirds
(2/3) of the Original Directors and Additional Original
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Directors then still in office (such directors also becoming
"Additional Original Directors" immediately following their
election);
(iii) the stockholders of RQI shall approve a merger,
consolidation, recapitalization or reorganization of RQI, a reverse
stock split of outstanding voting securities, or consummation of any
such transaction if stockholder approval is not obtained, other than
any such transaction which would result in at least seventy-five
percent (75%) of the total voting power represented by the voting
securities of the surviving entity outstanding immediately after such
transaction being Beneficially Owned by at least seventy-five percent
(75%) of the holders of outstanding voting securities of RQI
immediately prior to the transaction, with the voting power of each
such continuing holder relative to other such continuing holders not
substantially altered in the transaction; or
(iv) the stockholders of RQI shall approve a plan of complete
liquidation of RQI or an agreement for the sale or disposition by RQI
of all or a substantial portion of RQI's assets (i.e., fifty percent
(50%) or more of the total assets of RQI).
(f) Employee must be notified in writing by RQI at any time that RQI
anticipates that a Change in Control may take place.
(g) (i) In the event any payment that is either received by Employee or
paid by RQI on his behalf or any property or any other benefit provided
to him under this Agreement or under any other plan, arrangement or
agreement with RQI or any other person whose payments or benefits are
treated as contingent on a change of ownership or control of RQI (or in
the ownership of a substantial portion of the assets of RQI) or any
person affiliated with RQI or such person (but only if such payment or
other benefit is in connection with Employee's employment by RQI
(collectively the "RQI PAYMENTS")), shall be subject to the tax (the
"EXERCISE TAX") imposed by Section 4999 of the Internal Revenue Code of
1986, as amended (the "CODE") (and any similar tax that may hereafter
be imposed by any taxing authority), RQI shall pay to Employee at the
time specified in clause (iv) below an additional amount (the "GROSS-UP
PAYMENT") such that the net amount retained by Employee, after
deduction of any Excise Tax on the RQI Payments and any U.S. federal,
state, or local income or payroll tax upon the Gross-up Payment
provided for by this clause (i), but before deduction for any U.S.
federal, state, and local income or payroll tax on the RQI Payments,
shall be equal to the RQI Payments.
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(ii) For purposes of determining whether any of the RQI
Payments and Gross-up Payments (collectively the "TOTAL PAYMENTS") will
be subject to the Excise Tax and the amount of such Excise Tax, (A) the
Total Payments shall be treated as "parachute payments" within the
meaning of Section 280G(b)(2) of the Code, and all "parachute payments"
in excess of the "base amount" (as defined under Code Section
280G(b)(3) of the Code) shall be treated as subject to the Exercise
Tax, unless and except to the extent that, in the opinion of RQI's
independent certified public accountants appointed prior to any Change
in Control or tax counsel selected by such accountants or RQI (the
"ACCOUNTANTS"), such Total Payments (in whole or in part) either do not
constitute "parachute payments," represent reasonable compensation for
services actually rendered within the meaning of Section 280G(b)(4) of
the Code in excess of the "base amount," or are otherwise not subject
to the Excise Tax, and (B) the value of any noncash benefits or any
deferred payment or benefit shall be determined by the Accountants in
accordance with the principles of Section 280G of the Code. In the
event that the Accountants are serving as accountant or auditor for the
individual, entity or group effecting the Change in Control, Employee
may appoint another nationally recognized accounting firm to make the
determinations hereunder (which accounting firm shall then be referred
to as the "Accountants" hereunder). All determinations hereunder shall
be made by the Accountants which shall provide detailed supporting
calculations both to RQI and Employee at such time as it is requested
by RQI or Employee. If the Accountants determine that payments under
this Agreement must be reduced pursuant to this SECTION 12, they shall
furnish Employee with a written opinion to such effect. The
determination of the Accountants shall be binding upon RQI and
Employee.
(iii) For purposes of determining the amount of the Gross-up
Payment, Employee shall be deemed to pay U.S. federal income taxes at
the highest marginal rate of U.S. 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 Employee's residence for the calendar year in
which the RQI Payments are to be made, net of the maximum reduction in
U.S. federal income taxes which could be obtained from deduction of
such state and local taxes if paid in such year. In the event that the
Excise Tax is subsequently determined by the Accountants to be less
than the amount taken into account hereunder at the time the Gross-up
Payment is made, Employee shall repay to RQI, at the time that the
amount of such reduction in Excise Tax is finally determined, the
portion of the prior Gross-up Payment attributable to such reduction
(plus the portion of the Gross-up
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Payment attributable to the Excise Tax and U.S. federal, state and local
income tax imposed on the portion of the Gross-up Payment being repaid
by Employee if such repayment results in a reduction in Excise Tax or a
U.S. federal, state and 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. Notwithstanding the foregoing, in the event
any portion of the Gross-up Payment to be refunded to RQI has been paid
to any U.S. federal, state or local tax authority, repayment thereof
(and related amounts) shall not be required until actual refund or
credit of such portion has been made to Employee, and interest payable
to RQI shall not exceed the interest received or credited to Employee by
such tax authority for the period it held such portion. Employee and RQI
shall mutually agree upon the course of action to be pursued (and the
method of allocating the expense thereof) if Employee's claim for refund
or credit is denied.
In the event that the Excise Tax is later determined by the
Accountants to exceed the amount taken into account hereunder at the
time the Gross-up Payment is made (including by reason of any payment
the existence or amount of which cannot be determined at the time of
the Gross-up Payment), RQI shall make an additional Gross-up Payment in
respect of such excess (plus any interest or penalties payable with
respect to such excess) at the time that the amount of such excess is
finally determined.
(iv) Not later than the date on which Employee's Excise Tax is
due (which shall include the date that any withholding obligation for
such Excise Tax is required to be satisfied), RQI shall pay to Employee
or, in the case of any withholding obligation, the Internal Revenue
Service on behalf of such Employee, an amount equal to the Excise Tax.
The Gross-up Payment or portion thereof provided for in clause (iii)
above (less any amounts paid pursuant to the preceding sentence) shall
be paid within ten (10) days after Employee delivers a written request
for reimbursement accompanied by a copy of Employee's tax return(s)
showing the Excise Tax actually incurred by Employee.
(v) Employee shall notify the Chief Executive Officer of RQI
in writing of any claim by the Internal Revenue Service that, if
successful, would require the payment by RQI of a Gross-up Payment.
Such notification shall be given as soon as practicable but no later
than ten (10) business days after Employee is informed in writing of
such claim and shall apprise RQI of the nature of such claim and the
date on which such claim is requested to be paid. Employee shall not
pay such claim prior to the expiration of the thirty (30) day period
following the date on which it gives
14
such notice to RQI (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If RQI notifies
Employee in writing prior to the expiration of such period that it
desires to contest such claim, Employee shall:
(A) give RQI any information reasonably requested by RQI
relating to such claim;
(B) take such action in connection with contesting such
claim as RQI shall reasonably request in writing from time to
time, including, without limitation, accepting legal
representation with respect to such claim by an attorney
reasonably selected by RQI;
(C) cooperate with RQI in good faith in order to effectively
contest such claim; and
(D) permit RQI to participate in any proceedings relating to
such claim;
PROVIDED, HOWEVER, that RQI shall bear and pay directly all costs and expenses
(including, without limitation, additional interest and penalties) incurred in
connection with such contest and shall indemnify and hold Employee harmless, on
an after-tax basis, for any Excise Tax or income tax (including any interest and
penalties with respect thereto) imposed as a result of such representation and
payment of cost and expenses.
Without limitation on the foregoing provisions of this clause (v), RQI
shall control all proceedings taken in connection with such contest 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
such claim and may, at its sole option, either direct Employee to pay the tax
claimed and xxx for a refund or contest the claim in any contest to a
determination before any administrative tribunal, in a court of initial
jurisdiction and in one or more appellate courts, as RQI shall determine;
PROVIDED, HOWEVER, that if RQI directs Employee to pay such claim and xxx for a
refund, RQI shall advance the amount of such payment to Employee, on an
interest-free basis, and shall indemnify and hold Employee harmless, on an
after-tax 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; and FURTHER PROVIDED
that any extension of the statute of limitations relating to payment of taxes
for the taxable year of Employee with respect to which such contested amount is
claimed to be due is limited solely to such contested amount. Furthermore, RQI's
control of the contest shall be limited to issues with respect to
15
which a Gross-up Payment would be payable hereunder and Employee shall be
entitled to settle or contest, as the case may be, any other issue raised by the
Internal Revenue Service or any other taxing authority.
(vi) If, after receipt by Employee of an amount advanced by
RQI pursuant to clause (v) above, Employee becomes entitled to receive
any refund with respect to such claim, Employee shall (subject to RQI's
complying with the requirements of clause (v) promptly pay to RQI the
amount of such refund (together with any interest paid or credited
thereon after taxes applicable thereto). If, after the receipt by
Employee of an amount advanced by RQI pursuant to clause (v), a
determination is made that Employee shall not be entitled to any refund
with respect to such claim and RQI does not notify Employee in writing
of its intent to contest such denial of refund prior to the expiration
of thirty (30) days after such determination, then such advance shall
offset, to the extent thereof, the amount of Gross-up Payment required
to be paid.
(vii) RQI shall be responsible for all charges of the
Accountants.
(viii) RQI and Employee shall promptly deliver to each other
copies of any written communications, and summaries of any verbal
communications, with any taxing authority regarding the Excise Tax
covered by this SECTION 12.
(h) If Employee's employment by RQI is terminated within one (1) year
after a Change in Control by Employee for good reason or by RQI without good
cause, then RQI shall pay or provide Employee with all of the following
severance benefits:
(i) a lump-sum cash payment within fifteen (15) days of
Employee's date of termination (or, if applicable, such later date as
is necessary for Employee to execute the release described under
SECTION 20(b) herein) equal to three (3) times Employee's annual base
salary in effect immediately prior to the Change in Control;
(ii) any base salary, bonus, vacation pay, deferred
compensation accrued or earned under law or in accordance with RQI's
policies applicable to Employee but not yet paid and any incurred, but
unreimbursed business expenses for the period prior to termination
shall be payable in accordance with RQI's policies and the terms of the
applicable plan ("ACCRUED OBLIGATIONS");
16
(iii) continued participation (at RQI's cost and without any
required employee or dependent contributions) in all health or welfare
plans which cover Employee (and eligible dependents), including,
without limitation, medical, dental, life insurance and disability
coverage upon the same terms and conditions (except for the
requirements of Employee's continued employment) in effect on the
Employee's date of termination (which shall be substantially comparable
to the health or welfare plans in which Employee participated in
immediately prior to the Change in Control) until three (3) years after
the date of termination; provided, however that in the event Employee
obtains other employment that offers substantially similar or improved
benefits, as to any particular health or welfare plan, such
continuation of coverage by RQI for such similar or improved benefit
under such plan shall immediately cease. To the extent such coverage
cannot be provided under RQI's health plans without jeopardizing the
tax status of such plans, for underwriting reasons or because of the
tax impact on Employee, RQI shall pay Employee an amount such that
Employee can purchase such benefits separately at no greater after tax
cost to him than he would have had if such benefits were provided to
him as an employee. The continuation of health benefits for the
thirty-six (36) month period shall reduce and count against Employee's
rights under the Consolidated Omnibus Budget Reconciliation Act of
1985, as amended; and
(iv) Outplacement services at a level commensurate with
Employee's position, including use of an Employee office and secretary
available through such outplacement services, for a period of one (1)
year commencing on the Employee's date of termination but in no event
extending beyond the date on which Employee commences other full time
employment.
(i) If Employee's employment by RQI is terminated by RQI without
good cause during the one hundred eighty (180) days prior to the effective
date of a Change in Control, then RQI shall pay or provide Employee with all
of the following severance benefits:
(i) a lump sum cash payment within fifteen (15) days of the
Change in Control (or, if applicable, such later date as is necessary
for Employee to execute the release described under SECTION 20(b)
hereof) equal to Employee's base salary at the rate in effect at the
time of Employee's termination for whatever time period is remaining
under the Term of this Agreement at the time of Employee's termination,
less any amounts paid pursuant to SECTION 5(d) hereof between the
effective date of Employee's termination and the effective date of a
Change in Control, plus
17
one (1) times Employee's annual base salary at the rate in effect at
the time of Employee's termination; and
(ii) the benefits set forth in subsections 12(h)(ii) through
(iv) hereof, provided, however, that benefits under subsection
12(h)(iii) shall continue for the same period used to calculate the
lump sum cash payment under clause (i) above.
13. COMPLETE AGREEMENT.
This Agreement is not a promise of future employment. This Agreement
supersedes any other agreements or understandings, written or oral, between RQI
and Employee, and Employee has no oral representations, understandings or
agreements with RQI or any of its officers, directors or representatives
covering the same subject matter as this Agreement.
This written Agreement is the final, complete and exclusive statement
and expression of the agreement between RQI and Employee and of all the terms of
this Agreement, and it cannot be varied, contradicted or supplemented by
evidence of any prior or contemporaneous oral or written agreements. This
written Agreement may not be later modified except by a written instrument
signed by a duly authorized officer of RQI and Employee, and no term of this
Agreement may be waived except by a written instrument signed by the party
waiving the benefit of such term.
14. NOTICE.
Whenever any notice is required hereunder, it shall be given in writing
addressed as follows:
To the Company: ResortQuest International, Inc.
000 Xxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Attention: General Counsel
To Employee: J. Xxxxxxxx Xxxxxxx
000 Xxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxxxxxx 00000
Notice shall be deemed given and effective three (3) days after the deposit in
the U.S. mail of a writing addressed as above and sent first class mail,
certified, return receipt-requested, or when actually received. Either party may
change the address
18
for notice by notifying the other party of such change in accordance with this
SECTION 14.
15. SEVERABILITY; HEADINGS.
If any portion of this Agreement is held invalid or inoperative
(including a determination by RQI's independent public accountants in good faith
that any provision of this Agreement would preclude "pooling of interests"
accounting), the other portions of this Agreement shall be deemed valid and
operative and so far as is reasonable and possible, effect shall be given to the
intent manifested by the portion held invalid or inoperative. The section
headings herein are for reference purposes only and are not intended in any way
to describe, interpret, define or limit the extent or intent of the Agreement or
of any part hereof.
16. ARBITRATION.
Any unresolved dispute or controversy arising under or in connection
with this Agreement shall be settled exclusively by arbitration, conducted
before a panel of three (3) arbitrators in Memphis, Tennessee in accordance with
the rules of the American Arbitration Association then in effect. The
arbitrators shall not have the authority to add to, detract from or modify any
provision hereof nor to award punitive damages to any injured party. The
arbitrators shall have the authority to order back-pay, severance compensation,
vesting of options (or cash compensation in lieu of vesting of options),
reimbursement of costs, including those incurred to enforce this Agreement, and
interest thereon in the event the arbitrators determine that Employee was
terminated without disability or good cause, as defined in SECTIONS 5(b) and
5(c) hereof, respectively, or that RQI has otherwise materially breached this
Agreement. A decision by a majority of the arbitration panel shall be final and
binding. Judgment may be entered on the arbitrators' award in any court having
jurisdiction. The direct expense of any arbitration proceeding shall be borne by
RQI. To the fullest extent permitted by law, RQI shall promptly pay upon
submission of statements all legal and other professional fees, costs of
litigation, prejudgment interest, and other expenses incurred in connection with
any dispute concerning payments, benefits or any other entitlements under
SECTION 12 hereof; provided, however that RQI shall be reimbursed by Employee
for (a) the fees and expenses advanced in the event Employee's claim is, in a
material manner, in bad faith or frivolous and the arbitrator or court, as
applicable, determines that the reimbursement of such fees and expenses is
appropriate, or (b) to the extent that the arbitrator or court, as appropriate,
determines that such legal and other professional fees are clearly and
demonstrably unreasonable.
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17. GOVERNING LAW.
This Agreement shall in all respects be interpreted, construed and
enforced according to the internal laws of the State of Tennessee, without
giving effect to choice of law principles thereof.
18. COUNTERPARTS.
This Agreement may be executed simultaneously in two (2) or more
counterparts, each of which shall be deemed an original and all of which
together shall constitute but one and the same instrument.
19. CONFIDENTIALITY.
(a) Employee agrees and understands that during the Employee's position
with RQI, Employee has been and will be exposed to and receive information
relating to the affairs of RQI considered by RQI to be confidential and in the
nature of trade secrets (including but not limited to procedures, memoranda,
notes, records and customer lists, whether such information has been or is made,
developed or compiled by Employee or otherwise has been or is made available to
him) (any and all such information, the "Confidential information"). Employee
agrees that, during the Term and thereafter for a period of two (2) years,
Employee shall keep such Confidential Information confidential and will not
disclose such Confidential Information, either directly or indirectly, to any
third person or entity without the prior written consent of RQI; provided,
however that (i) Employee shall have no such obligation to the extent such
Confidential Information is or becomes publicly known other than as a result of
Employee's breach of his obligations hereunder or is received by Employee
following the date of termination and (ii) Employee may, after giving prior
notice to RQI to the extent practicable under the circumstances, disclose such
Confidential Information to the extent required by applicable laws or
governmental regulations or judicial or regulatory process.
(b) Employee agrees that all Confidential Information is and shall
remain the property of RQI. Employee further agrees that, during the Term and
thereafter, he shall hold in the strictest confidence all Confidential
Information, and shall not, directly or indirectly, duplicate, sell, use, lease,
commercialize, disclose or otherwise divulge to any person or entity any portion
of the Confidential Information or use any Confidential Information for his own
benefit or profit or allow any person or entity, other than RQI and its
authorized employees, to use or otherwise gain access to any Confidential
Information.
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20. NO MITIGATION/NO OFFSET/RELEASE.
(a) In the event of any termination of employment hereunder, Employee
shall be under no obligation to seek other employment and there shall be no
offset against any amounts due Employee under this Agreement on account of any
remuneration attributable to any subsequent employment that Employee may obtain.
The amounts payable hereunder shall not be subject to setoff, counterclaim,
recoupment, defense or other right which RQI may have against Employee or
others, except as specifically set forth in SECTION 3 hereof or upon obtaining
by RQI of a final unappealable judgment against Employee.
(b) Any amounts payable and benefits or additional rights provided
pursuant to SECTIONS 5(d), 5(e) or 12 beyond Accrued Obligations shall only be
payable if Employee delivers to RQI a release (substantially in the form of the
release set forth in RQI's standard form severance agreement) of all claims that
Employee has or may have against RQI and its affiliates (other than claims to
payments, benefits or entitlements specifically payable or provided hereunder,
claims under COBRA, claims to vested accrued benefits under RQI's employee
benefit plans or any rights of indemnification under RQI's organizational
documents) occurring up to the release date in such form as reasonably requested
by RQI; provided, however, that such release shall also release Employee of all
claims that RQI and its affiliates have or may have against the Employee. In the
event that RQI fails to deliver such release to Employee within ten (10) days
from the later of (i) the Employee's date of termination or (ii) the date of the
Change in Control, such release shall not be required and shall not prohibit or
otherwise delay payment of any amounts due Employee hereunder.
(c) Upon any termination of employment, upon the request of RQI,
Employee shall deliver to RQI a resignation from all offices and directorships
and fiduciary positions of Employee in which Employee is serving with, or at the
request of, RQI or its subsidiaries, affiliates or benefit plans.
21. LIABILITY INSURANCE.
RQI shall cover Employee under directors and officers liability
insurance both during and, while potential liability exists, after the Term in
the same amount and to the same extent, if any, as RQI covers its other officers
and directors.
22. LITIGATION SUPPORT.
Subject to Employee's other commitments, following the Term, Employee
shall be reasonably available to cooperate (but only truthfully) with RQI and
21
provide information as to matters which Employee was personally involved, or has
information on, during the Term and which are or become the subject of
litigation or other dispute.
23. MULTIPLE TRIGGERING EVENTS; CANCELLATION AND RECOVERY.
If Employee first becomes eligible to receive payments pursuant to
SECTIONS 5(d) or (e) or SECTIONS 12(b), (c), (h) or (i) hereof, Employee shall
not thereafter be entitled to any additional payments or benefits pursuant to
such provisions (other than pursuant to SECTION 12(i) hereof) which would have
become payable as a result of subsequent events had Employee's employment by RQI
not previously terminated. Notwithstanding anything herein to the contrary, RQI
reserves the right to terminate all payments and benefits hereunder and to
recover from Employee amounts previously paid to Employee if Employee's
employment by RQI is terminated by Employee for good reason or by RQI without
good cause within thirty (30) days after an event which would be grounds for a
termination by RQI for good cause.
[Remainder of Page Intentionally Left Blank - Signature Page Follows]
22
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
RESORTQUEST INTERNATIONAL, INC.,
a Delaware corporation
By: /s/ Xxxxx X. Xxxxxx
------------------------------
Name: Xxxxx X. Xxxxxx
Title: CEO
EMPLOYEE: /S/ X. X. Xxxxxxx
------------------------
J. XXXXXXXX XXXXXXX, INDIVIDUALLY
23
EXHIBIT A
TO EMPLOYMENT AGREEMENT
The term "good reason" shall mean, without the express written consent
of Employee, the occurrence of any of the following events:
(i) any material diminution or change in (except temporarily during any
period of Disability) Employee's positions, duties, responsibilities, authority
or titles not commensurate with Employee's position or the assignment of duties
or responsibilities not commensurate with Employee's position;
(ii) a reduction by RQI in Employee's base salary provided in SECTION
2(a) hereof;
(iii) a failure to continue bonus, incentive or other equity plans,
programs or arrangements, or Employee's participation therein, on the same basis
as to potential or targeted amounts; or
(iv) a material breach by RQI of any agreement with Employee.
24
