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EXHIBIT 10.7
EMPLOYMENT AGREEMENT
BETWEEN
XXXXXX LODGING COMPANY
AND
XXXX X. XXXXXX
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EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT is entered into as of the ___ day of
___________, 1996, between Xxxxxx Lodging Company, an Ohio corporation (the
"Company"), and Xxxx X. Xxxxxx (the "Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ the Executive, and the
Executive desires to be employed by the Company, on the terms and subject to the
conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual promises herein
contained, the parties agree as follows:
1. EMPLOYMENT.
(a) The Company hereby employs the Executive as its
Senior Vice President - Development and Acquisitions and the Executive hereby
accepts such employment, on the terms and subject to the conditions hereinafter
set forth.
(b) During the term of this Employment Agreement and
any renewal hereof (all references herein to the term of this Employment
Agreement shall include references to the period of renewal hereof, if any), the
Executive shall be and have the title of Senior Vice President - Acquisitions
and Development and shall devote such business time and all reasonable efforts
to his employment as the Executive deems appropriate and perform diligently such
duties as are customarily performed by officers holding similar positions in
publicly-held real estate investment trusts, together with such other duties as
may be reasonably requested from time to time by the Board of Directors of the
Company (the "Board"), which duties shall be consistent with his positions as
set forth above and as provided in Paragraph 2.
2. TERM AND POSITIONS.
(a) Subject to the provisions for renewal and
termination hereinafter provided, the term of this Employment Agreement shall
begin on the date hereof and shall continue until December 31, 1997. As of June
1, 1997, and the June 1 of each succeeding calendar year thereafter such term
automatically shall be extended for one (1) additional calendar year, beginning
with the calendar year commencing January 1, 1998, unless: (i) this Employment
Agreement is terminated as provided in Paragraph 4(a)(i) or 4(a)(ii) or (ii)
either the Company or the Executive shall give at least 180 days written notice
of termination of this Employment Agreement to the other (for example, unless
such written notice of termination is given on or prior to June 1, 1997, the
term of this Employment Agreement automatically will be extended, effective
January 1, 1998, until December 31, 1998.
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(b) The Executive shall be entitled to serve as the
senior acquisitions officer of the Company. Without limiting the generality of
any of the foregoing, except as hereafter expressly agreed in writing by the
Executive: (i) the Executive shall be required to report only to the Chief
Executive Officer and the Board as an entire body, and (ii) no other individual
shall be elected or appointed as a more senior acquisitions officer of the
Company. For service as an officer and employee of the Company, the Executive
shall be entitled to the full protection of applicable indemnification
provisions of the articles of incorporation and code of regulations of the
Company, as the same may be amended from time to time.
(c) If:
(i) the Company materially changes the
Executive's duties and responsibilities as set forth in
Paragraph 1(b) or 2(b) without his consent (including, without
limitation, by violating any of the provisions of clause (i)
and (ii) of Paragraph 2 (b));
(ii) the Executive's place of employment or the
principal executive offices of the Company are moved to a
location more than fifty (50) miles from the geographical
center of Cleveland, Ohio;
(iii) there occurs a material breach by the
Company of any of its obligations under this Employment
Agreement (other than those specified in this Section 2(c)),
which breach has not been cured in all material respects
within ten (10) days after the Executive gives notice thereof
to the Company;
(iv) there occurs a "change in control" (as
hereinafter defined) of the Company,
then the Executive shall have the right to terminate his employment with the
Company, but such termination shall not be considered a voluntary resignation or
termination of such employment or of this Employment Agreement by the Executive
but rather a discharge of the Executive by the Company without "cause" (as
defined in Paragraph 4(a)(ii)).
(d) The Executive shall be considered not to have
consented to any written proposal calling for a material change in his duties
and responsibilities unless he shall give written notice of his consent thereto
to the Board within fifteen (15) days after receipt of such written proposal. If
the Executive shall not have given such consent, the Company shall have the
opportunity to withdraw such proposed material change by written notice to the
Executive given within ten (10) days after the end of said fifteen (15) day
period.
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(e) The term "change in control" means the first
to occur of the following events:
(i) any person or group of commonly
controlled persons owns or controls, directly or indirectly,
fifty percent (50%) or more of the voting control or value of
the equity interests in the Company following consummation of
the initial public offering of the Company's Common Shares,
without par value (the "IPO"); or
(ii) any person or group of commonly controlled
persons who own less than five percent (5%) of the voting
control or value of the equity interests in the Company during
the first 30 days following the consummation of the IPO
acquire ownership or control, directly or indirectly, of more
than twenty percent (20%) of the voting control or value of
the equity interests in the Company;
(iii) the shareholders of the Company approve an
agreement to merge or consolidate with another corporation or
other entity resulting (whether separately or in connection
with a series of transactions) in a change in ownership of
twenty percent (20%) or more of the voting control or value of
the equity interests in the Company, or an agreement to sell
or otherwise dispose of all or substantially all of the
Company's assets (including, without limitation, a plan of
liquidation or dissolution), or otherwise approve of a
fundamental alteration in the nature of the Company's
business.
Notwithstanding the foregoing provisions of this Paragraph
2, the ownership of equity interests in the Company by Xxxxxx X. Xxxxxx, Xxxx X.
Xxxxxx, Xxxxxxx X. Xxxxxx and their respective affiliates shall not be
considered to result in a "change in control" of the Company.
3. COMPENSATION.
During the term of this Employment Agreement the
Company shall pay or provide, as the case may be, to the Executive the
compensation and other benefits and rights set forth in this Paragraph 3.
(a) The Company shall pay to the Executive a base
salary payable in accordance with the Company's usual pay practices (and in any
event no less frequently than monthly) at the rate of One Hundred Forty Thousand
Dollars ($140,000) per annum, to be increased (but not decreased) from time to
time (based upon the performance of the Company and the Executive) in
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a manner consistent with the compensation of Financial Officers of
publicly-held real estate investment trusts.
(b) The Company shall pay to the Executive bonus
compensation for each calendar year of the Company, not later than sixty (60)
days following the end of each calendar year or the termination of his
employment, as the case may be, prorated on a per diem basis for partial
calendar years, and determined and calculated in a manner set forth on Exhibit A
attached hereto.
(c) The Company shall provide to the Executive and
his family all the medical, dental, and all other group insurance benefits which
the Company provides generally to employees of the Company during active
employment. In the event of disability or death of the Executive, these benefits
shall be continued by the Company for life for the Executive and his spouse.
(d) The Company shall provide to the Executive a
suitable new, air-conditioned, full-sized automobile, or other automobile of
equal or lesser value of the Executive's choice, for the exclusive use of the
Executive, together with automobile theft, casualty, and liability insurance,
and payment or reimbursement of the Executive for all maintenance, repair and
gasoline or, in lieu of the foregoing automobile, an automobile allowance as
exists from time to time under Company policy, the dollar amount of which shall
be substantially commensurate with the cost for such automobile, together with
insurance costs, maintenance, repairs and gasoline for the Executive's personal
vehicle used in lieu thereof.
(e) The Executive shall participate in all
retirement and other benefit plans of the Company generally available from time
to time to employees of the Company and for which the Executive qualifies under
their terms (and nothing in this Agreement shall or shall be considered to in
any way affect the Executive's rights and benefits thereunder except as
expressly provided herein).
(f) The Executive shall be entitled to such periods
of vacation and sick leave allowance each year as are determined by the
Executive in his reasonable and good faith discretion, which in any event shall
be not less than as provided generally under the Company's vacation and sick
leave policy for executive officers.
(g) The Executive shall be entitled to participate
in any option or other employee benefit compensation plan that is generally
available to senior executive officers, as distinguished from general
management, of the Company. The Executive's participation in and benefits under
any such plan
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shall be on the terms and subject to the conditions specified in the governing
document of that plan.
(h) The Company shall reimburse the Executive or
provide him with an expense allowance during the term of this Employment
Agreement for travel, entertainment and other expenses reasonably and
necessarily incurred by the Executive in connection with the Company's business.
The Executive shall furnish such documentation with respect to reimbursement to
be paid hereunder as the Company shall reasonably request.
4. TERMINATION.
(a) The employment of the Executive under this
Employment Agreement, and the terms hereof, may be terminated by the Company:
(i) on the death or permanent disability (as defined below)
of the Executive;
(ii) for cause at any time by action of the Board. For
purposes hereof, the term "cause" shall mean:
(A) The Executive's fraud, commission of a felony or of
an act or series of acts which result in material injury to
the business reputation of the Company, commission of an act
or series of repeated acts of dishonesty which are
materially inimical to the best interests of the Company, or
the Executive's willful and repeated failure to perform his
duties under this Employment Agreement, which failure has
not been cured within fifteen (15) days after the Company
gives notice thereof to the Executive; or
(B) The Executive's material breach of any material
provision of this Employment Agreement, which breach has not
been cured in all substantial respects within ten (10) days
after the Company gives notice thereof to the Executive; or
(iii) other than for cause at any time by action of the
Board, subject to the operation of Paragraph 4(c).
The exercise by the Company of its rights of termination under
this Paragraph 4 shall be the Company's sole remedy in the event
of the occurrence of the event as a result of which such right to
terminate arises. Upon any termination of this Employment
Agreement, the Executive shall be deemed to have resigned from
all offices and any directorships held by the Executive in the
Company.
(b) For purposes of this Employment Agreement, the
Executive's "permanent disability" shall be deemed to have
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occurred after one hundred twenty (120) days in the aggregate during any
consecutive twelve (12) month period, or after ninety (90) consecutive days,
during which one hundred and twenty (120) or ninety (90) days, as the case
may be, the Executive, by reason of his physical or mental disability or
illness, shall have been unable to discharge his duties under this Employment
Agreement. The date of permanent disability shall be such one hundred twentieth
(120th) or ninetieth (90th) day, as the case may be. In the event either the
Company or the Executive, after receipt of notice of the Executive's permanent
disability from the other, dispute that the Executive's permanent disability
shall have occurred, the Executive shall promptly submit to a physical
examination by the chief of medicine of any major accredited hospital in
the Cleveland, Ohio, area and, unless such physician shall issue his written
statement to the effect that in his opinion, based on his diagnosis, the
Executive is capable of resuming his employment and devoting his full time and
energy to discharging his duties within thirty (30) days after the date of such
statement, such permanent disability shall be deemed to have occurred.
(c) In the event of termination for any of the
reasons set forth in subparagraph (a)(i) or (a)(ii) of this Paragraph 4, except
as otherwise provided in Paragraph 3(e), the Executive shall be entitled to no
further compensation or other benefits under this Employment Agreement, except
as to that portion of any unpaid salary and other benefits accrued and earned by
him hereunder up to and including the effective date of such termination. If the
Company terminates the Executive's employment other than pursuant to
subparagraph 4(a)(i) or 4(a)(ii) or the Executive terminates his employment
pursuant to subparagraph 2(c), all of the compensation and benefits payable to
the Executive pursuant to this Employment Agreement shall be paid to the
Executive for the remainder of the term of this Employment Agreement (as that
term is defined in subparagraph 2(a)).
5. COVENANTS AND CONFIDENTIAL INFORMATION.
(a) The Executive acknowledges the Company's
reliance and expectation of the Executive's continued commitment to performance
of his duties and responsibilities during the term of this Employment Agreement.
In light of such reliance and expectation on the part of the Company, during the
term of this Employment Agreement, and for a period of 180 days thereafter if
the Company terminates this Employment Agreement under subparagraph 4(a) (ii) or
the Executive terminates this Employment Agreement other than under subparagraph
2(c) and with less than 180 days notice (and, as to clause (ii) of this
subparagraph (a), at any time during and after the term of this Employment
Agreement), the Executive shall not, directly or indirectly, do or suffer either
of the following:
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(i) Own, manage, control or participate in the ownership,
management, or control of, or be employed or engaged by or
otherwise affiliated or associated as a consultant, independent
contractor or otherwise with, any other corporation, partnership,
proprietorship, limited liability company, firm, association or
other business entity engaged in the business of, or otherwise
engage in the business of, acquiring, owning or developing hotel
properties, except that the Executive may (A) own not more than
one percent (1%) of any class of publicly traded securities of
any entity, and own interests in the Company and in Xxxxxx Hotel
Properties, L.P. (the "Partnership"), subject only to any
restriction imposed by any agreement or instrument other than
this Agreement, (B) have such an interest in, or participation,
employment, engagement, affiliation, association or relationship
with, any entity that manages hotel properties, so long as that
entity is not engaged in the business of acquiring, owning or
developing hotel properties, (C) after the term of this
Employment Agreement, develop, own or manage any hotel property
so long as that property does not compete with any hotel property
owned by or leased to the Company or the Partnership, and (D)
after the term of this Employment Agreement, conduct business as
a broker of hotel properties; or
(ii) Disclose, divulge, discuss, copy or otherwise use or
suffer to be used in any manner, in competition with, or contrary
to the interests of, the Company, any confidential information
relating to the Company's operations, properties or otherwise to
its particular business or other trade secrets of the Company, it
being acknowledged by the Executive that all such information
regarding the business of the Company compiled or obtained by, or
furnished to, the Executive while the Executive shall have been
employed by or associated with the Company is confidential
information and the Company's exclusive property; provided,
however, that the foregoing restrictions shall not apply to the
extent that such information: (A) is clearly obtainable in the
public domain, (B) becomes obtainable in the public domain,
except by reason of the breach by the Executive of the terms
hereof, (C) was not acquired by the Executive in connection with
his employment or affiliation with the Company, (D) was not
acquired by the Executive from the Company or its
representatives, or (E) is required to be disclosed by rule of
law or by order of a court or governmental body or agency.
(b) The Executive agrees and understands that the
remedy at law for any breach by him of this Paragraph 5 will be
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inadequate and that the damages flowing from such breach are not readily
susceptible to being measured in monetary terms. Accordingly, it is acknowledged
that, upon adequate proof of the Executive's violation of any legally
enforceable provision of this Paragraph 5, the Company shall be entitled to
immediate injunctive relief and may obtain a temporary order restraining any
threatened or further breach. Nothing in this Paragraph 5 shall be deemed to
limit the Company's remedies at law or in equity for any breach by the Executive
of any of the provisions of this Paragraph 5 which may be pursued or availed of
by the Company.
(c) The Executive has carefully considered the
nature and extent of the restrictions upon him and the rights and remedies
conferred upon the Company under this Paragraph 5, and hereby acknowledges and
agrees that the same are reasonable in time and territory, are designed to
eliminate competition which otherwise would be unfair to the Company, do not
stifle the inherent skill and experience of the Executive, would not operate as
a bar to the Executive's sole means of support, are fully required to protect
the legitimate interests of the Company and do not confer a benefit upon the
Company disproportionate to the detriment to the Executive.
6. TAX ADJUSTMENT PAYMENTS. If all or any portion of the
amounts payable to the Executive under this Employment Agreement (together with
all other payments of cash or property, whether pursuant to this Employment
Agreement or otherwise, including, without limitation, the issuance of common
stock of the Company, or the granting, exercise or termination of options
therefor) constitutes "excess parachute payments" within the meaning of Section
280G of the Code that are subject to the excise tax imposed by Section 4999 of
the Code (or any similar tax or assessment), the amounts payable hereunder
shall be increased to the extent necessary to place the Executive in the same
after-tax position as he would have been in had no such tax assessment been
imposed on any such payment paid or payable to the Executive under this
Employment Agreement or any other payment that the Executive may receive in
connection therewith. The determination of the amount of any such tax or
assessment and the incremental payment required hereby in connection therewith
shall be made by the accounting firm employed by the Executive within thirty
(30) calendar days after such payment and said incremental payment shall be
made within five (5) calendar days after determination has been made. If, after
the date upon which the payment required by this Paragraph 6 has been made, it
is determined (pursuant to final regulations or published rulings of the
Internal Revenue Service, final judgment of a court of competent jurisdiction,
Internal Revenue Service audit assessment, or otherwise) that the amount of
excise or other similar taxes or assessments payable by the Executive is
greater than the amount initially so determined, then the Company shall pay the
Executive an amount equal to the sum of: (i) such
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additional excise or other taxes, PLUS (ii) any interest, fines and penalties
resulting from such underpayment, PLUS (iii) an amount necessary to reimburse
the Executive for any income, excise or other tax assessment payable by the
Executive with respect to the amounts specified in (i) and (ii) above, and the
reimbursement provided by this clause (iii), in the manner described above in
this Paragraph 6. Payment thereof shall be made within five (5) calendar days
after the date upon which such subsequent determination is made.
7. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Ohio, and
has all requisite corporate power and authority to enter into, execute and
deliver this Employment Agreement, fulfill its obligations hereunder and
consummate the transactions contemplated hereby.
(b) The execution and delivery of, performance of
obligations under, and consummation of the transactions contemplated by, this
Employment Agreement have been duly authorized and approved by all requisite
corporate action by or in respect of the Company, and this Employment Agreement
constitutes the legally valid and binding obligation of the Company, enforceable
by the Executive in accordance with its terms.
(c) No provision of the Company's governing
documents or any agreement to which it is a party or by which it is bound or of
any material law or regulation of the kind usually applicable and binding upon
the Company prohibits or limits its ability to enter into, execute and deliver
this Employment Agreement, fulfill its respective obligations hereunder and
consummate the transactions contemplated hereby.
8. MISCELLANEOUS.
(a) The Executive represents and warrants that he is
not a party to any agreement, contract or understanding, whether employment or
otherwise, which would restrict or prohibit him from undertaking or performing
employment in accordance with the terms and conditions of this Employment
Agreement.
(b) The provisions of this Employment Agreement are
severable and if any one or more provisions may be determined to be illegal or
otherwise unenforceable, in whole or in part, the remaining provisions and any
partially unenforceable provision, to the extent enforceable in any
jurisdiction, nevertheless shall be binding and enforceable.
(c) The rights and obligations of the Company under
this Employment Agreement shall inure to the benefit of, and shall be binding
on, the Company and its successors and
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assigns, and the rights and obligations (other than obligations to perform
services) of the Executive under this Employment Agreement shall inure to the
benefit of, and shall be binding upon, the Executive and his heirs, personal
representatives and assigns.
(d) Any controversy or claim arising out of or
relating to this Employment Agreement, or the breach thereof, shall be settled
by arbitration in accordance with the Rules of the American Arbitration
Association then pertaining in the City of Cleveland, Ohio, and judgment upon
the award rendered by the arbitrator or arbitrators may be entered in any court
having jurisdiction thereof. The arbitrator or arbitrators shall be deemed to
possess the powers to issue mandatory orders and restraining orders in
connection with such arbitration; provided, however, that nothing in this
Paragraph 8(d) shall be construed so as to deny the Company the right and power
to seek and obtain injunctive relief in a court of equity for any breach or
threatened breach by the Executive of any of his covenants contained in
Paragraph 5 hereof.
(e) Any notice to be given under this Employment
Agreement shall be personally delivered in writing or shall have been deemed
duly given when received after it is posted in the United States mail, postage
prepaid, registered or certified, return receipt requested, and if mailed to the
Company, shall be addressed to its principal place of business, attention:
General Counsel, and if mailed to the Executive, shall be addressed to him at
his home address last known on the records of the Company, or at such other
address or addresses as either the Company or the Executive may hereafter
designate in writing to the other.
(f) The failure of either party to enforce any
provision or provisions of this Employment Agreement shall not in any way be
construed as a waiver of any such provision or provisions as to any future
violations thereof, or prevent that party thereafter from enforcing each and
every other provision of this Employment Agreement. The rights granted the
parties herein are cumulative and the waiver of any single remedy shall not
constitute a waiver of such party's right to assert all other legal remedies
available to it under the circumstances.
(g) This Employment Agreement supersedes all prior
agreements and understandings between the parties and may not be modified or
terminated orally. No modification, termination or attempted waiver shall be
valid unless in writing and signed by the party against whom the same is sought
to be enforced.
(h) This Employment Agreement shall be governed by
and construed according to the laws of the State of Ohio.
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(i) Where necessary or appropriate to the meaning
hereof, the singular and plural shall be deemed to include each other, and the
masculine, feminine and neuter shall be deemed to include each other.
XXXXXX LODGING COMPANY
By:___________________________
Title:________________________
And By:_______________________
Title:________________________
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XXXX X. XXXXXX
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Exhibit A
BONUS CALCULATION
The amount of the bonus to be paid by the Company to the Executive
under Paragraph 3(b) of the Employment Agreement shall be based on the increase
in the "funds from operations per share" of the Company from year to year. The
bonus for the first year under this Agreement shall be based on the increase in
the "funds from operations per share" of the Company from the Company's year
ended immediately before the effective date of the Employment Agreement to the
year of the Company in which the Employment Agreement becomes effective. Each
year thereafter, the "funds from operations per share" at the end of the current
year shall be compared to the "funds from operations per share" for the
immediately preceding year. The amount of the "funds from operations per share"
shall be appropriately adjusted in connection with share dividends, share splits
and other changes in the Company's capitalization and shall be determined each
year by the Company's Compensation Committee in conjunction with such
accountants or other experts as may be appropriate. The amount of the bonus each
year shall be calculated as follows:
Growth in
"Funds From Operations per share" Amount of Bonus
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Zero to less than 5% 5%
5% to less than 10% 10%
10% to less than 15% 20%
15% to less than 20% 30%
20% or higher 45%
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