EXHIBIT 10.12
EMPLOYMENT AGREEMENT
I, W. Xxxxxx Xxxxxxxxxx, and Lodgian, Inc. (Company) agree to the terms
and conditions of employment set forth in this Employment Agreement (Agreement).
1. TERM OF EMPLOYMENT. My employment under this Agreement shall
commence on July 1, 2003 and shall end on July 15, 2006 (Expiration Date), or
such earlier date on which my employment is terminated under Section 5 of this
Agreement ( "Employment Term"). Unless one party notifies the other in writing
that it intends to permit this Agreement to expire at least 60 days prior to the
Expiration Date, the Expiration Date shall automatically be extended for one
year. In the event that the Agreement is extended, I shall continue to be
eligible to receive the performance based incentive awards in Section 4(d) and
4(e). The Company and I shall enter into a side letter with respect to such
awards, which shall specify the Target EBITDA and how awards shall vest (or in
the case of the options, become exercisable), which shall be in a manner
consistent with the vesting schedules, as applicable, in Section 4(d) or 4(e).
2. NATURE OF DUTIES. I shall be the Company's President and Chief
Executive Officer reporting solely to the Board of Directors (Board). Except as
noted herein, I shall work exclusively for the Company and shall have all of the
customary powers and duties associated with these positions. I shall devote my
full business time and effort to the performance of my duties for the Company,
which I shall perform faithfully and to the best of my ability. I shall be
subject to the Company's policies, procedures, and approval practices, as
generally in effect from time-to-time and applied to Senior Executives.
Notwithstanding the foregoing, I shall be able to serve on up to two Boards for
for-profit entities. With Board approval, which shall not be unreasonably
withheld, I shall be permitted to exceed this limit of two. Nothing herein shall
be construed as limiting my ability to serve on the Board for non-profit
entities or otherwise engage in activities for charities. However, I shall not
serve on such Boards to the extent that doing so would interfere with my duties
to the Company.
3. PLACE OF PERFORMANCE. My primary office location shall be at
0000 Xxxxxxxxx Xxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx, except for required travel on
the Company's business.
4. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. The Company shall pay me base salary at
an annual rate of $650,000, or such higher rate as it elects to pay me. My base
salary shall be paid in conformity with the Company's salary payment practices
generally applicable to other similarly situated Company senior executives, but
no less often than once monthly.
(b) SIGNING BONUS - STOCK.
(i) The Company shall pay me a signing bonus in
the form of: (1) 200,000 restricted shares of the Company's common stock (Common
Stock) which were issued on July 15, 2003 and (2) a non-qualified option
(Option) to purchase 100,000 shares of Common Stock at a strike price of $3.00
per share, which was granted on July 15, 2003.
(ii) The Option and restricted stock in Section
4(b) shall be subject to the terms of the incentive plan and incentive agreement
under which they were issued.
(iii) If I remain employed by the Company through
the vesting date in question, subject to Section 5(a), one-third of the Option
and one-third of the restricted stock award in Section 4(b) shall vest (i.e.,
with respect to the Option, become exercisable) on each of July 15, 2004, 2005,
and 2006. However, subject to Section 5(a), vesting shall be postponed during
any Health-Related Leave of Absence until I return to work, unless such
postponement is prohibited by law.
(c) Signing Bonus - Cash Payment. The Company shall pay
me a signing bonus of $100,000 payable in two payments of $50,000 each on April
1, 2004 and April 1, 2005.
(d) ANNUAL PERFORMANCE BONUS.
(i) Subject to Section 5(a), I shall be eligible
to receive an annual performance bonus in the amount shown in the applicable row
on the following table for each calendar year 2003-2006 as indicated if I remain
employed through December 31 of the year in question. If I take a Health-Related
Leave of Absence, my annual performance bonus shall be prorated by multiplying
the applicable bonus by a percentage equal to a fraction, the numerator of which
is the total number of days that I was employed during the applicable calendar
year, minus the total number of days that I was absent, the denominator of which
is 365, but the prorated bonus shall be payable only if I am employed through
December 31 of the year in question or, if my employment terminated before then,
if the bonus is to be paid pursuant to Section 5(a). Prior to payment of the
bonus, the Company's Board shall review and approve the bonus, which is subject
to Board approval. The Board shall review actual operating EBITDA performance,
and determine the percentage of Target EBITDA (as defined in the chart below)
that the Company achieved for the applicable calendar year. The Board shall not
unreasonably withhold approval upon determination of the actual operating EBITDA
performance (as defined herein) and the corresponding bonus due for that level
of performance. If the Board has not approved or disapproved the bonus by April
15, its approval shall not be required and the bonus for the calendar year in
question shall be paid if otherwise due.
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IF THE COMPANY'S EBITDA
FOR THE CALENDAR YEAR THE COMPANY SHALL PAY ME
IN QUESTION IS AN ANNUAL PERFORMANCE BONUS OF
-------------------------------- --------------------------------------
125% or more of the Company's For 2003: $325,000
target EBITDA for the calendar year
in question as set forth in
Section 4(d)(iii) (Target EBITDA) For 2004, 2005 & 2006: $650,000
(Maximum Bonus)
124.99% - 115% of Target EBITDA For 2003: $276,250
For 2004, 2005 & 2006: 85% of Maximum
Bonus ($552,500)
114.99% - 107.5% of Target EBITDA For 2003: $211,250
For 2004, 2005 & 2006: 65% of Maximum
Bonus ($422,500)
107.49% - 100% of Target EBITDA For 2003: $167,500
For 2004, 2005 & 2006: 50% of Maximum
Bonus ($325,000)
99.99% - 90% of the Target EBITDA For 2003, $100,000
For 2004, $200,000
For 2005, 20% of Maximum Bonus ($130,000)
For 2006, 20% of Maximum Bonus ($130,000)
Less than 90% of the Target EBITDA For 2003, $100,000
For 2004, $200,000
For 2005, $0
For 2006, $0
(ii) For calendar year 2003, my partial year of
employment is reflected by the bonus amount in the chart, but the minimum bonus
for year 2003 shall be no less than $100,000, regardless of the Company's
EBITDA. For
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calendar year 2006, my bonus shall be prorated to reflect, if still applicable,
a partial year of employment. My prorated bonus in 2006, as applicable, shall be
calculated by multiplying the bonus by a percentage equal to the total number of
days in 2006 that I am employed pursuant this Agreement, divided by total number
of days in 2006.
(iii) Subject to section (iv) below, the Company's
"Target EBITDA" as used herein for calendar years 2003, 2004, 2005, and 2006
are, respectively, $65 million, $76.5 million, $84.1 million, and $92.6 million.
(iv) EBITDA means the Company's earnings before
interest, taxes, depreciation, and amortization of the Company's current
portfolio of assets, but shall exclude restructuring charges, asset sales, and
other nonrecurring income and expense items. EBITDA shall be calculated in a
manner consistent with the Company's presentation of financial statements to the
Board for the period commencing January 1, 2003 and ending June 30, 2003. If
changes to the portfolio are made, the Company will adjust its EBITDA targets as
follows:
(1) If a property is sold, the Target
EBITDA for the Year in which the sale occurs shall be reduced by the sold
property's EBITDA for the trailing 12 full months through the date of the sale,
and actual results for the Year will exclude the sold property's EBITDA. For
each subsequent Year, Target EBITDA shall be reduced by the sum of the reduction
for the Year of sale plus 10 percent of that reduction for each Year since the
Year of sale.
(2) If a property is acquired, the
Target EBITDA for the Year in which the purchase occurs shall be increased by
the acquired property's EBITDA for the trailing 12 full months through the date
of purchase, and actual results for the Year of purchase shall include the
acquired property's EBITDA as if it had been acquired on the first day of the
year. For each subsequent Year, Target EBITDA shall be increased by the sum of
the increase for the Year of purchase plus 10 percent of that increase for each
Year since the Year of purchase.
(3) For purposes of clauses (1) and
(2), "Year" shall mean the annual performance bonus calendar year in question
or, with respect to Section 4(e), the long-term compensation fiscal year in
question.
(v) My bonus shall be paid within 30 days after
the Company has finalized its financial statement for the period in question,
but in no event later than April 15 (Bonus Payment Date). The Company shall pay
each bonus 75% in cash and 25% in restricted shares of Common Stock. The
restricted stock grant shall vest on the first anniversary of the Bonus Payment
Date if I remain employed through such date, except as provided in Sections
4(c)(vi) and 5(a). My restricted stock awards shall be subject to the terms of
the incentive plan and agreement under which they are issued. The restricted
stock in Section 4(d) is intended to qualify as "qualified performance based
compensation" for purposes of Section 162(m) of the Code.
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(vi) Notwithstanding Section 4(d)(v) but subject
to Section 5(a), vesting shall be postponed during any Health-Related Leave of
Absence until I return to work, unless prohibited by law.
(e) LONG-TERM COMPENSATION.
(i) Subject to the approval of the Board, the
Company shall grant me Options to purchase: (i) 50,000 shares of Common Stock
(2004 Options), (ii) 50,000 shares of Common Stock (2005 Options), and (iii)
50,000 shares of Common Stock (2006 Options). The strike price of these Option
shall be equal to the fair market value per share (Strike Price).
(ii) Subject to Section 4(e)(iii) and 5(a), the
Options in Section 4(e) shall vest as follows:
(1) One-third of the 2004 Options shall
become exercisable on each of June 30, 2005, 2006, and 2007 if the Company's
EBITDA for the year ending June 30, 2004 is $70.8 million and I remain employed
through the vesting date in question.
(2) One-third of the 2005 Options shall
become exercisable on each of June 30, 2006, 2007, and 2008 if the Company's
EBITDA for the year ending June 30, 2005 is $80.3 million and I remain employed
through the vesting date in question.
(3) One-third of the 2006 Options shall
become exercisable on each of June 30, 2007, 2008, and 2009 if the Company's
EBITDA for the year ending June 30, 2006 is $88.4 million and I remain employed
through the vesting date in question.
(4) If the EBITDA targets in Section
4(e) are not met, the Options shall become exercisable on the seventh
anniversary of the grant date if I remain employed through this date.
(iii) Notwithstanding Section 4(e)(ii), if the
EBITDA target is met for the option year in question, I remain employed through
the applicable Vesting Commencement Date, and the Strike Price of any Option
granted in this section is greater than the Target Price, the Company shall
grant me a number of restricted shares of Common Stock determined by the
Conversion Formula in Section 4(e)(iv), rounded up to the nearest whole share,
and an equal number of shares covered by the Option shall lapse. The Target
Price of the 2004, 2005, and 2006 Options, respectively, are $3, $4, and $5 per
share. The restricted stock granted in this section shall vest according to the
same three-year schedule as the options for the year in question. For example,
restricted stock granted in connection with the 2004 Options shall vest
according to analogous vesting provisions.
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(iv) "Conversion Formula" shall mean a fraction,
the numerator of which is the excess, if any, of the Strike Price over the
Target Price of the Option in question, multiplied by 50,000, and the
denominator of which is the fair market value of the Common Stock on the June
30, 2004 with respect to the 2004 Options, June 30, 2005 with respect to the
2005 Options, and June 30, 2006 with respect to the 2006 Options (Vesting
Commencement Date). Therefore, for example, if the Strike Price of the 2004
Options is $5 per share and the applicable fair market value is $5 per share,
then the I will receive (5-3)*50,000=100,000/5=20,000 shares of restricted stock
and 30,000 Options for 2004.
(v) The Options in Section 4(e) are intended to
qualify as "qualified performance based compensation" for purposes of Section
162(m) of the Code. The Options and restricted stock in Section 4(e) will be
subject to the terms of the incentive plan under which they are issued and the
award agreement between me and the Company. Notwithstanding Section 4(e)(ii) but
subject to Section 5(a), vesting shall be postponed during any Health-Related
Leave of Absence until I return to work, unless such postponement is prohibited
by law.
(f) STANDARD BENEFITS. During my employment, I shall be
entitled to participate in all employee benefit plans and programs, including
paid vacations, to the same extent generally available to other similarly
situated Company senior executives, in accordance with the terms of those plans
and programs. The Company agrees that I and my spouse shall be immediately
eligible to participate in the Company's medical/health/prescription coverage
plan without any waiting period or any pre-existing condition(s), limitations,
or exclusions whatsoever. To the extent that I or my spouse is/are not fully
covered by the medical/health/prescription plan for any reason, then the Company
shall pay or otherwise provide full coverage such that I and my spouse do not
incur any expense beyond the standard plan deductible and co-payment, if any.
Notwithstanding anything to the contrary herein, I shall not be eligible to
participate in the Company's 401(k) plan. The Company shall have the right to
terminate or change any such plan or program at any time in accordance with plan
terms.
(g) INTEGRATION WITH DISABILITY BENEFITS. While I am
absent due to a health-related disability, the Company compensation otherwise
payable to me for that period shall be reduced by payments for that period from
Company-provided short or long term disability coverage and Workers'
Compensation wage replacement benefits.
(h) INDEMNIFICATION. The Company shall extend to me the
same indemnification arrangements as are generally provided to other similarly
situated Company senior executives, which shall survive termination of my
employment.
(i) EXPENSES. I shall be entitled to receive prompt
reimbursement for all reasonable and customary travel and business expenses I
incur in connection with my employment, but I must incur and account for those
expenses in
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accordance with the policies and procedures established by the Company and as
applied to Senior Executives.
(j) XXXXXXXX-XXXXX ACT LOAN PROHIBITION. Notwithstanding
this Agreement or any other Company policy or program, the Company shall not
make a loan to me that would violate the Xxxxxxxx-Xxxxx Act, and this Agreement
does not contemplate any such loans.
(k) OTHER BENEFITS. I shall be entitled to the following
non-recurring benefits: (1) reimbursement of my relocation expenses, to be paid
within 30 days of presentment by me, (2) reimbursement of temporary housing
costs incurred by me to reside in Atlanta through October 7, 2003 and (3)
reimbursement of reasonable fees and expenses for legal and tax advice arising
in connection with the negotiation and documentation of this Agreement.
5. TERMINATION.
(a) RIGHTS AND DUTIES. If my employment is terminated, I
shall be entitled to the amounts and/or benefits shown on the applicable row of
the following table, subject to the balance of this Section 5. The Company and I
shall have no further obligations to each other, except the Company's ongoing
indemnification obligation under Section 4, my confidentiality, etc. obligations
under Section 6, and our mutual arbitration obligations under Section 8, or as
set forth in any written agreement I subsequently enter into with the Company.
DISCHARGE Payment of (1) any unpaid base salary, reimbursement
FOR CAUSE of expenses incurred, and unused vacation days
OR accrued prior to the date of termination, (2) other
RESIGNATION unpaid REASON vested amounts or benefits under
WITHOUT GOOD Company compensation, incentive, and benefit plans,
(3) COBRA benefits.
DISABILITY Payment of (1) any unpaid base salary, reimbursement
of expenses incurred, and unused vacation days
accrued prior to the date of termination, (2) other
unpaid vested amounts or benefits under Company
compensation, incentive, and benefit plans, (3) COBRA
benefits, (4) a prorated bonus, calculated by
multiplying the applicable bonus by a percentage
equal to the total number of days that I was employed
for the bonus year in question, divided by 365, (5)
accelerated vesting and right to exercise all options
in Section 4(b), (6) accelerated vesting and right to
exercise all Options and restricted stock in Section
4(e) if the EBITDA target is met for the option year
in question and I remain employed through the
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applicable Vesting Commencement Date (all other
awards granted under Section 4(e) shall terminate),
(7) any unpaid portion of the cash signing bonus in
Section 4(c), and (8) a lump sum payment equal to the
difference, if any, between my monthly base salary
and my monthly Company-provided short term disability
benefits and Workers' Compensation wage replacement
benefits for up to 6 months or the date that my
Company-provided long-term disability benefits
commence if I am eligible to receive such benefits,
whichever is shorter. I shall be eligible to receive
the benefits in clauses (4) through (8) only if I am
terminated by the Company due to Disability, but not
if I resign.
DISCHARGE Payment of (1) any unpaid base salary, reimbursement
WITHOUT of expenses incurred, and unused vacation days
CAUSE OR accrued prior to the date of termination, (2) other
RESIGNATION unpaid vested amounts or benefits under Company
FOR GOOD compensation, incentive, and benefit plans, (3) COBRA
REASON benefits. In exchange for my execution of a release
in accordance with this section, I shall also receive
(4) my base salary in section 4(a), any unpaid
portion of the cash signing bonus in Section 4(c),
and medical benefits all shall continue through the
Expiration Date or two years, whichever is shorter,
(5) the vesting of the stock options awarded in
Section 4(b) and the vesting of restricted stock
awarded in Section 4(d) shall accelerate and become
immediately exercisable, (6) I shall continue to be
eligible to receive the annual performance bonus in
section 4(d) through the Expiration Date or two
years, whichever is shorter, and (7) accelerated
vesting and right to exercise all Options and
restricted stock in Section 4(e) if the EBITDA target
is met for the option year in question and I remain
employed through the applicable Vesting Commencement
Date (all other awards granted under Section 4(e)
shall terminate). The annual performance bonus (if
any) shall be determined and paid as set forth in
Section 4(d) as if my employment had continued
through the Expiration Date, or for two years,
whichever is shorter.
DEATH Payment of (1) any unpaid base salary, reimbursement
of expenses incurred, and unused vacation days
accrued prior to the date of termination, (2) other
unpaid vested amounts or benefits under Company
compensation, incentive, and benefit plans, (3) COBRA
benefits, (4) accelerated vesting and right of
designee to exercise all options in Section 4(b) and
all granted but unvested restricted stock, (5)
prorated annual performance bonus, calculated by
multiplying
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the applicable bonus by a percentage equal to the
total number of days that I was employed for the year
in question, divided by 365, (6) accelerated vesting
and right to exercise all Options and restricted
stock in Section 4(e) if the EBITDA target is met for
the option year in question and I remain employed
through the applicable Vesting Commencement Date (all
other awards granted under Section 4(e) shall
terminate), and (4) any unpaid portion of the cash
signing bonus in Section 4(c).
TERMINATION
OF PAYMENT Payment of (1) any unpaid base salary, reimbursement
EMPLOYMENT of expenses incurred, and unused vacation days
AT accrued prior to the date of termination, (2) other
EXPIRATION unpaid vested amounts or benefits under Company
OF compensation, incentive, and benefit plans, (3) COBRA
AGREEMENT benefits.
(b) DISCHARGE FOR CAUSE. The Company may terminate my
employment at any time if it believes in good faith that it has Cause to
terminate me. However, my termination shall not be deemed for Cause unless the
Company sends me a written notice detailing the reasons it believes it had Cause
to terminate me on or before the date it did so. "Cause" shall mean:
(i) my willful refusal to follow the Board's
lawful directions or my material failure to perform my duties (other than by
reason of physical or mental illness, injury, or condition), in either case,
only after I have been given written notice by the Board detailing the
directives I have refused to follow or the duties I have failed to perform and
at least 30 days to cure;
(ii) my material and willful failure to comply
with Company policies as applied to senior executives, only after I have been
given written notice by the Board detailing the policies with which I have
failed to comply and at least 30 days to cure;
(iii) my having actively sought a position with
another business, applied for such a position, and am likely to accept such a
position without the Company's written consent at any time more than 90 days
before the Expiration Date.
(iv) my engaging in any of the following conduct:
(1) an act of fraud or dishonesty that
materially xxxxx the Company or its affiliates.
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(2) a felony or any violation of any
federal or state securities law or my being enjoined from violating any federal
or state securities law or being determined to have violated any such law.
(3) willful or reckless misconduct or
gross negligence in connection with any property or activity of the Company and
its subsidiaries and affiliates, and successors (Group).
(4) repeated and intemperate use of
alcohol or illegal drugs after written notice from the Board.
(5) material breach of any of my
obligations under this Agreement (other than by reason of physical or mental
illness, injury, or condition), but only after I have been given written notice
by the Board of the breach and at least 30 days to cure.
(6) becoming barred or prohibited by
the SEC from holding my position with the Company.
In the event I have tendered my resignation, the Company may not then or
thereafter terminate me for Cause.
(c) TERMINATION FOR DISABILITY. Except as prohibited by
applicable law, the Company may terminate this Agreement on account of
Disability, or may transfer me to inactive employment status, which shall have
the same effect under this Agreement as a termination for Disability.
"Disability" means a physical or mental illness, injury, or condition that
prevents me from performing substantially all of my duties under this Agreement
for at least 90 consecutive calendar days or for at least 120 calendar days,
whether or not consecutive, in any 365 calendar day period.
(d) DISCHARGE WITHOUT CAUSE. The Board may terminate my
employment at any time without cause by providing me with 30 days advance
written notice for any reason. If I am terminated by the Company other than for
Cause under Section 5(b) or for Disability under Section 5(c), I will only
receive the special benefits provided under the applicable provisions of Section
5(a) if I sign a mutual release form, subject to negotiation as provided below,
within 30 days after I receive the release from the Company and before asserting
any claims covered by the release against the Company other than claims
pertaining to (i) my right to severance benefits, (ii) the Company's continuing
indemnification obligations to me under Section 4, and (iii) claims for
defamation, slander and/or libel. The Company shall furnish the release to me at
my termination. Subject to the exceptions in clauses (i) through (iii) of the
second preceding sentence, the parties shall in good faith negotiate the final
form of such release, but it shall include any provision customary in formal
settlement agreements and general releases, including such things as the
Company's release of all claims against me other than my continuing obligations
under Section 5(i) and the claims that the Company has
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asserted no later than 30 days after my termination of employment, my release of
the Company and all conceivably related persons or entities (affiliates) from
all known and unknown claims, my covenant never in the future to pursue any
released claim, my promise never seek employment with the Company or any
affiliate in the future, but not including any provision that expands my
obligations to the Company under Section 5(i). The Company and I acknowledge
that the severance benefits for which the release is required are intended to
effect my peaceful transition from the Company. If I choose not to sign the
release, I shall have the right to pursue any claims I may have, but I shall not
be eligible to receive the severance benefits that I would have otherwise
received had I signed this release.
(e) RESIGNATION FOR GOOD REASON. I may resign my
employment for Good Reason, which shall mean the occurrence of any of the
following without my express written consent:
(i) Relocation of my primary office location
more than 50 miles from the current location, as set forth in section 3;
(ii) Any change in my reporting relationship as
set forth in section 2;
(iii) Any diminution in title, or material
diminution in overall compensation or duties;
(iv) Material failure by the Company to keep any
promise or make any payment provided herein;
(v) Change in Control as defined in Section 7
below;
(vi) Any transfer to any subsidiary or affiliate
or other change that removes me from the position of Chief Executive and
President of the parent company;
(vii) Failure by the Company to continue, or
continue my participation in, any compensation or benefit plan in which I
participate or am entitled to participate that materially affects my total
compensation, unless an equivalent substitute is adopted or made available on a
basis not less favorable to me and my spouse;
However, an event that is or would constitute Good Reason
shall cease to be Good Reason if: (i) I do not provide the Company with written
notice of my intent to terminate my employment due to an event that would
constitute Good Reason within the earlier of 30 days after the occurrence of
such event or 30 days after I am officially notified or it is officially
announced that the Company will take any actions that would constitute Good
Reason to resign, (ii) the Company reverses the action or cures the default that
constitutes Good Reason within 30 days after receiving such written notice,
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(iii) I do not terminate employment within 60 days after the event occurs, (iv)
I am a primary instigator of the Good Reason event other than a Change in
Control and the circumstances make it inappropriate for me to receive benefits
under this Agreement (e.g., I initiate a relocation of the Company's
headquarters); or (v) if the company in good faith temporarily suspends me for
no more than 30 days (with full pay) to investigate any suspected wrongdoing
that, if substantiated, would give the Company reason to terminate me for Cause.
(f) RESIGNATION OTHER THAN FOR GOOD REASON. I may
terminate my employment hereunder at any time without good reason upon providing
the Company with 30 days written notice of my intention to do so, but the
Company shall be entitled to accept my resignation as of any earlier date and my
termination, in such event, I shall only be eligible to receive the benefits in
Section 5(a) under the subsection "Resignation Without Good Reason."
Notwithstanding anything to the contrary in this Agreement or any other
document, restricted stock, options and all other incentive compensation shall
cease vesting when I give such notice.
(g) DEATH. If I die while employed under this Agreement,
the payments required by Section 5(a) in the event of my death shall be made.
(h) AMOUNTS OWED TO THE COMPANY. Any amounts payable to
me under this section shall first be applied to repay any liquidated amounts I
owe the Company (i.e., personal expenses on my credit card).
(i) NO FURTHER OBLIGATIONS. The Company and I shall have
no further obligations to each other, except the Company's ongoing
indemnification obligation under Section 4, my confidentiality, etc. obligations
under Section 6, and our mutual arbitration obligations under Section 8, or as
set forth in any written agreement I subsequently enter into with the Company.
6. CONFIDENTIALITY. I acknowledge that I currently possess or
will acquire secret, confidential, or proprietary information or trade secrets
concerning the operations, future plans, customers or business methods of the
Group (Confidential Information).
(a) PROMISE NOT TO DISCLOSE. I promise never to use or
disclose any Confidential Information before it has become generally known
within the relevant industry through no fault of my own. I agree that this
promise shall never expire.
(b) PROMISE NOT TO SOLICIT. I further agree that, while
this Agreement is in effect and for 6 months after termination, I will not
solicit or attempt to solicit (or assist others to solicit) for employment any
person who is, or within the preceding 6 months was, an officer, manager, or
employee of the Group.
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(c) PROMISE NOT TO ENGAGE IN CERTAIN EMPLOYMENT. I agree
that, while this Agreement is in effect and for 6 months after termination, I
will not accept any employment or engage in any activity, without the written
consent of the Chairman of the Board if the loyal and complete fulfillment of my
duties would inevitably require me to reveal or utilize Confidential
Information, as reasonably determined by the Chairman of the Board.
(d) RETURN OF INFORMATION. When my employment with the
Company ends, I will promptly deliver to the Company, or, at its written
instruction, destroy, all documents, data, drawings, manuals, letters, notes,
reports, electronic mail, recordings, and copies thereof, of or pertaining to it
or any other Group member in my possession or control. In addition, during my
employment with the Company or the Group and thereafter, I agree to meet with
Company personnel and, based on knowledge or insights I gained during my
employment with the Company and the Group, answer any question they may have
related to the Company or the Group. The Company shall pay me for attending such
meetings at a rate not less than the hourly equivalent of my base salary, plus
reimbursement of reasonable expenses in accordance with the Company's
reimbursement policy for senior executives.
(e) PROMISE TO DISCUSS PROPOSED ACTIONS IN ADVANCE. I
promise that, before I disclose or use Confidential Information and before I
commence employment, solicitations, or any other activity that could possibly
violate the promises I have just made, I will discuss my proposed actions with
the Chairman of the Board, who will advise me in writing whether my proposed
actions would violate these promises.
(f) INTELLECTUAL PROPERTY. Intellectual property
(including such things as all inventions, plans, developments, software, data,
configurations, materials (whether written or machine-readable), designs,
drawings, illustrations, and photographs, that may be protectable, in whole or
in part, under any patent, copyright, trademark, trade secret, or other
intellectual property law), developed, created, conceived, made, or reduced to
practice during my Company employment (except intellectual property that has no
relation to the Group or any Group customer that I developed, purely on my own
time and at my own expense), shall be the sole and exclusive property of the
Company, and I hereby assign all my rights, title, and interest in any such
intellectual property to the Company.
7. CHANGE IN CONTROL.
(i) EVENTS TRIGGERING CHANGE IN CONTROL. Change
in Control shall mean the first of the following to occur after the date of this
Agreement, excluding any event that is Management Action, and, if I have not yet
become entitled to severance benefits under Section 7, excluding any event that
is subsequently rescinded, revoked, abandoned, or enjoined:
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(1) Acquisition of Controlling
Interest. Any Person becomes the Beneficial Owner, directly or indirectly, of
securities of the Company representing 51 percent or more of the combined voting
power of the Company's then outstanding securities, except that a voting
agreement or other voting activity shall not make the Person a Beneficial Owner
unless the voting activity in question is intended to accomplish a Change in
Control under Sections 7(d)(i)(2), (3), or (4). In applying the preceding
sentence, securities acquired directly from the Company or its affiliates by or
for the Person shall not be taken into account.
(2) Change in Board Control. During a
consecutive 2-year period commencing after the date of this Agreement,
individuals who constituted the Board at the beginning of the period cease for
any reason to constitute a majority of the Board. A new director shall be
considered an "approved replacement" director if his or her election (or
nomination for election) was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning of the
period or were themselves approved replacement directors.
(3) Merger Approved. The shareholders
of the Company approve a merger or consolidation of the Company with any other
corporation unless: (a) the voting securities of the Company outstanding
immediately before the merger or consolidation would continue to represent
(either by remaining outstanding or by being converted into voting securities of
the surviving entity) at least 51 percent of the combined voting power of the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation.
(4) Sale of Assets. The shareholders of
the Company approve an agreement for the sale or disposition by the Company of
all or substantially all of the Company's assets in a transaction or series of
transactions to an entity that is not owned, directly or indirectly, by the
Company's Common Stock shareholders in substantially the same proportions as the
owners of the Company's Common Stock before such transaction or series of
transactions.
Notwithstanding the foregoing, a Change in Control shall not
be deemed to have occurred by virtue of the consummation of any transaction or
series of integrated transactions immediately following which the record holders
of Common Stock immediately prior to such transaction or series of transactions
continue to have substantially the same proportionate ownership in an entity
which owns all or substantially all of the assets of the Company immediately
following such transaction or series of transactions.
(b) CERTAIN DEFINITIONS.
(i) "Beneficial Owner" has the meaning
set forth in Rule 13d-3 under the Securities Exchange Act of 1934, as amended."
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(ii) Management Action" means any event,
circumstance, or transaction that results from the action of the Management
Group.
(iii) "Management Group" means any entity
or group that includes, is affiliated with, or is wholly or partly controlled by
one or more executive officers of the Company.
(iv) "Person" has the meaning given in
Section 3(a)(9) of the Securities Exchange Act of 1934, as amended, and as
modified and used in Section 13(d) of that Act, and shall include a "group," as
defined in Rule 13d-5 promulgated thereunder. However, a Person shall not
include: (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company or
any of its subsidiaries, (iii) an underwriter temporarily holding securities
pursuant to an offering of such securities, (iv) Oaktree Capital Management,
LLC, (v) the Blackstone Group, or (vi) a corporation owned, directly or
indirectly, by the stockholders of the Company in substantially the same
proportions as their ownership of stock of the Company.
8. NOTICE.
(a) TO THE COMPANY. I will send all communications
required by this Agreement to the Company in writing by hand delivery or
overnight, both requiring signature acknowledging receipt, addressed as follows:
If Mailed or Faxed Lodgian Inc.
Attention: Xxxxxx Xxxxx, Senior Vice President and
General Counsel
0000 Xxxxxxxxx Xxxx XX, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
With a copy to Lodgian Inc.
Attention: Chairman of the Board
0000 Xxxxxxxxx Xxxx XX, Xxxxx 000
Xxxxxxx, Xxxxxxx 00000
(b) TO ME. All communications required by this Agreement
from the Company to me relating to this Agreement must be sent to me in writing
by hand delivery or overnight, both requiring my signature acknowledging receipt
at 0000 Xxxxxxxxx Xxxxxxx, Xxxxxxxxx 000, Xxxxxxx, Xxxxxxx, 00000; with a copy
to Xxxxx X. Xxxxxx at Xxxx & Xxxxxx, LLP, 0000 Xxxxxxxxx Xxxxxx, Xxxxx 000,
Xxxxxxx, Xxxxxxx 00000, also by hand delivery or overnight, requiring signature
acknowledging receipt by her or her representative.
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(c) TIME NOTICE DEEMED GIVEN. Written notice as required
by this Agreement shall be deemed to have been given to either party when signed
by such party or its representative acknowledging receipt.
9. ARBITRATION OF DISPUTES. All disputes between the Company and
me are to be resolved by final and binding arbitration in accordance with the
separate Arbitration Agreement attached as Schedule 1 to this Agreement. This
section shall remain in effect after the termination of this Agreement.
10. GOLDEN PARACHUTE LIMITATION. I agree that my payments and
benefits under this Agreement and all other contracts, arrangements, or programs
shall not, in the aggregate, exceed the maximum amount that may be paid to me
without triggering golden parachute penalties under Section 280G and related
provisions of the Internal Revenue Code, as determined in good faith by the
Company's independent auditors. If any benefits must be cut back to avoid
triggering such penalties, my benefits shall be cut back in the priority order
designated by the Company but in no event may the payment in Section 4(a) be
reduced. Any payment cut back must still be paid, but may be paid over the
shortest period of time or in a method so as not to trigger golden parachute
penalties. The Company and I agree to cooperate with each other in connection
with any administrative or judicial proceedings concerning the existence or
amount of golden parachute penalties with respect to payments or benefits I
receive.
11. AMENDMENT. No provisions of this Agreement may be modified,
waived, or discharged except by a written document signed by the Chairman of the
Board and me. Thus, for example, promotions, commendations, and/or bonuses shall
not, by themselves, modify, amend, or extend this Agreement. A waiver of any
conditions or provisions of this Agreement in a given instance shall not be
deemed a waiver of such conditions or provisions at any other time.
12. INTERPRETATION; EXCLUSIVE FORUM. The validity, interpretation,
construction, and performance of this Agreement shall be governed by the laws of
the state of Georgia (excluding any that mandate the use of another
jurisdiction's laws). Any litigation, arbitration, or similar proceeding with
respect to such matters only may be brought within that state, and all parties
to this Agreement consent to that state's jurisdiction and agree that venue
anywhere in that state would be proper.
13. SUCCESSORS. This Agreement shall be binding upon, and shall
inure to the benefit of, me and my estate, but I may not assign or pledge this
Agreement or any rights arising under it, except to the extent permitted under
the terms of the benefit plans in which I participate. Without my consent, the
Company may not assign this Agreement to a successor that agrees in writing to
be bound by this Agreement, after which any reference to the "Company" in this
Agreement shall be deemed to be a reference to the successor. Thereafter, the
Company shall have no further primary, secondary or other responsibilities or
liabilities under this Agreement of any kind.
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14. TAXES. The Company shall withhold taxes from payments it makes
pursuant to this Agreement as it determines to be required by applicable law.
15. VALIDITY. The invalidity or unenforceability of any provision
of this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
16. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original but all of which
together shall constitute the same instrument.
17. ENTIRE AGREEMENT. All oral or written agreements or
representations, express or implied, with respect to the subject matter of this
Agreement are set forth in this Agreement. However, this Agreement does not
override other written agreements I have executed relating to specific aspects
of my employment, such as conflicts of interest.
18. FORMER EMPLOYERS. I am not subject to any employment,
confidentiality, or other agreement or restriction that would prevent me from
fully satisfying my duties under this Agreement or that would be violated if I
did so. Without the Company's prior written approval, I promise I will not
disclose proprietary information belonging to a former employer or other entity
without its written permission.
I will indemnify and hold the Company harmless from any liabilities, including
defense costs, it may incur because I am alleged to have broken the promises in
this section 18 or improperly revealed or used proprietary information of a
former employer without its permission, or if a former employer challenges my
entering into this Agreement or rendering services pursuant to it.
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I ACKNOWLEDGE THAT ALL UNDERSTANDINGS AND AGREEMENTS BETWEEN THE COMPANY AND ME
RELATING TO THE SUBJECTS COVERED IN THIS AGREEMENT ARE CONTAINED IN IT AND THAT
I HAVE ENTERED INTO THIS AGREEMENT VOLUNTARILY AND NOT IN RELIANCE ON ANY
PROMISES OR REPRESENTATIONS BY THE COMPANY OTHER THAN THOSE CONTAINED IN THIS
AGREEMENT ITSELF.
I FURTHER ACKNOWLEDGE THAT I HAVE CAREFULLY READ THIS AGREEMENT, THAT I
UNDERSTAND ALL OF IT, AND THAT I HAVE BEEN GIVEN THE OPPORTUNITY TO DISCUSS THIS
AGREEMENT WITH MY PRIVATE LEGAL COUNSEL AND HAVE AVAILED MYSELF OF THAT
OPPORTUNITY TO THE EXTENT I WISHED TO DO SO. I UNDERSTAND THAT BY SIGNING THIS
AGREEMENT I AM GIVING UP MY RIGHT TO A JURY TRIAL.
Date: December 18, 2003 Lodgian, Inc.
By: /s/ Xxxxxx X. Xxxxx
-------------------------------
Name: Xxxxxx X. Xxxxx
--------------------------
Title: Senior Vice President and
--------------------------
General Counsel
--------------------------
Date: December 18, 2003
/s/ W. Xxxxxx Xxxxxxxxxx
-----------------------------------
W. Xxxxxx Xxxxxxxxxx
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