EXHIBIT 10.3
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, is executed for reference date purposes on March
1, 1998 by and between Cavanaughs Hospitality Corporation, a Washington
corporation (the "Company"), and Xxxxxxx X. Xxxxxxxx (the "Executive").
The Company desires to employ the Executive in the capacities of Senior Vice
President and General Counsel, 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 date of the initial public offering of the common
shares of the Company on the national stock exchange selected by the Company
(the "Commencement Date") and terminating on December 31, 1999 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, Senior Vice President and General Counsel of the
Company. The Executive shall report to the Executive Vice President 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.
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(c) The Executive's office and place of rendering his services under this
Agreement shall be in the principal executive offices of the Company which shall
be in the Spokane, Washington metropolitan area and in the branch office in the
Seattle, Washington metropolitan area, with time divided approximately equally
between the two locations. Under no circumstances shall the Executive be
required to relocate from the Spokane or Seattle, Washington metropolitan areas
or provide services under this Agreement in any other location other than in
connection with reasonable and customary business travel. 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 this Agreement is not conditioned on service on the Board of
Directors or any of its committees.
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 $96,000 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. The award and amount of such bonus shall be based upon the
Compensation Committee's determination of actual performance as measured against
goals and shall give the Executive the opportunity to earn a bonus of up to 100%
of his base salary.
(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 their employees, such as bonuses, 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 Executive shall be eligible for stock option grants from time to time
pursuant to the Company's 1998 Stock Incentive Plan in accordance with the terms
thereof. The Company shall recommend to the Committee designated in accordance
with such plan that the Company grant to the Executive, effective on the initial
public offering of Company shares, options to purchase 45,000 shares of the
common stock of the Company at an exercise price equal to the initial public
offering price of such stock (the "Option Price"). Subject to the terms of
Section 6(f) of this Agreement as to the acceleration of vesting of stock
options, such options shall vest on the earlier of the following calendar or
value-appreciation schedules:
i)Calendar Schedule:
Four Years after the grant date, options are fully vested as to 50% of
the applicable shares;
Five Years after the grant date, options are fully vested for the
remaining 50% of the shares.
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ii) Value Appreciation Schedule: Beginning one year after the option
grant date, if the stock price reaches the below described target
levels (as a percentage increase over the Option Price) for 20
consecutive trading days, the options will vest as follows:
Stock Price Increase: Percent of Option Shares Vested:
25% 25%
50% 50%
75% 75%
100% 100%
Such options shall be exercisable, subject to vesting, for ten years from the
date of grant and in all other respects shall be subject to the terms and
conditions of the 1998 Stock Incentive Plan.
(e) 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.
(f) 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.
(g) In the event that any accelerated vesting of the Executive's rights with
respect to stock options, restricted stock or any other benefit or compensation
results in the imposition of an excise tax payable by the Executive under
Section 4999 of the Internal Revenue Code, or any successor or other provision
with respect to "excess parachute payments" within the meaning of Section
280G(b) of the Internal Revenue Code, the Company shall make a cash payment to
the Executive in the amount of such taxes and shall also make a cash payment to
the Executive in an amount equal to the total of federal, state and local income
and excise taxes (the "Excise Tax") for which the Executive may be liable on
account of the cash payments made under this section, up to a maximum
reimbursement equal to two times the amount of such Excise Tax.
(h) The Company shall indemnify the Executive to the fullest extent permitted
under the law of the State of Washington and shall each enter into a separate
agreement with respect thereto with the Executive to the extent necessary to
implement this indemnification obligation.
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.
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(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 and 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, the Standard Termination Payments and all death or
disability payments or other employee benefits under their employee benefit
plans.
(c) Subject to Section 6(d), 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 twice the
Executive's total compensation for the previous fiscal year (but not less than
twice $96,000) and (iii) 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 in Control: the Executive terminates his employment
hereunder within 6 months following such Change in Control; the Company shall
(i) pay the Executive the Standard Termination Payments, (ii) pay the Executive
a lump sum payment equal to three times the Executive's total cash compensation
for the previous fiscal year (but in no event less than three times $96,000) and
(iii) continue in effect the Executive's benefits with respect to life, health
and insurance plans or their equivalent for three years.
(e) If the initial 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 twice the Executive's total compensation for the previous
fiscal year (but not less than twice $96,000) and (iii) 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 initial
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 the
Executive terminates his employment hereunder 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
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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) 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 position as
described in Section 2(a); (ii) the removal of the Executive from the positions
as described in Section 2(a); (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 in Control" means the occurrence of any
one of the following events: (i) any "person", as such term is used in Sections
3(a)(9) and 13(d) of the Securities Exchange Act of 1934, becomes a "beneficial
owner", as such term is used in Rule 13d-3 promulgated under such Act, of 35% or
more of the Voting Stock of the Company (other than a person holding such
percentage ownership as of the Commencement Date) or 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 Commencement Date;
provided that any person becoming a director subsequent to the Commencement Date
whose election or nomination for election was supported by 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 merges or combines with another company
and, immediately thereafter, the stockholders of the Company immediately prior
to such merger or combination hold, directly or indirectly, 50% or less of the
Voting Stock and other ownership interests of the surviving entity or entities;
(iv) the Company sells all or substantially all of its assets on a consolidated
basis in a single transaction or series of transactions; or (v) the Company
ceases to act as the general partner of Cavanaughs Hospitality Limited
Partnership. 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). As used
herein, "Voting Stock" means capital stock of any class or classes having
general voting power under ordinary circumstances, in the absence of
contingencies, to elect the directors or their equivalent.
(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 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 hereunder Confidential
Information will be disclosed to the Executive by the Company 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 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 business the confidentiality of which
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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 the ownership or operation of any hotel property and
the term "Territory" means the states of California, Oregon, Washington, Alaska,
Idaho, Montana and Utah and the provinces of Alberta and British Columbia.
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.
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(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.
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.
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:
Xxxxxxx X. Xxxxxxxx
000 Xxxxx Xxxxxxxxxx Xxxx. #X000
Xxxxxxx XX 00000
If to the Company, to:
Cavanaughs Hospitality 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, Wa. 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).
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(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 Commencement 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
DATE FIRST ABOVE WRITTEN.
EXECUTIVE: COMPANY:
CAVANAUGHS HOSPITALITY CORPORATION
by
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Xxxxxxx X. Xxxxxxxx Its President
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