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EXHIBIT 10(j)
CHANGE IN CONTROL AGREEMENT
This Agreement, dated this 14th day of May, 1998, is between Prime
Hospitality Corp., a Delaware corporation (the "Company"), and Xxxxxxx X.
Xxxxxxxxx ("Employee").
R E C I T A L S:
A. Employee is a key officer and employee of the Company.
B. The Board of Directors of the Company (the "Board") recognizes
that Employee is one of several key officer/employees whose high quality of job
performance is essential to promoting and protecting the best interests of the
Company and its shareholders.
C. The Board further recognizes (i) that it is possible that a
Change in Control of the Company could occur at some time in the future, (ii)
that the uncertainty associated with such a possibility could result in the
distraction of Employee from Employee's assigned duties and responsibilities,
(iii) that it is in the best interests of the Company and its shareholders to
assure the continued attention by Employee to such duties and responsibilities
without such distraction and (iv) that Employee must be able to participate in
the assessment and evaluation of any proposal which could effect a Change in
Control of the Company without Employee's judgment being influenced by
uncertainties regarding Employee's future financial security.
D. The Company wishes to provide Employee with certain benefits
in the event of a Change in Control of the Company as set forth herein.
TERMS AND CONDITIONS
For valuable consideration, the receipt of which is hereby
acknowledged, the parties agree as follows:
1. Definitions.
(a) For purposes of this Agreement, the Company shall have
"Cause" to terminate Employee's employment hereunder upon (A) the willful
engaging by Employee in misconduct
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which results in demonstrable and material economic injury to the Company, or
(B) the conviction of Employee of a felony involving moral turpitude. For
purposes of this paragraph, no act, or failure to act, on Employee's part shall
be considered "willful" unless done, or omitted to be done, by him not in good
faith and without reasonable belief that his action or omission was in or not
opposed to the best interests of the Company. Employee shall not be deemed to
have been terminated for Cause unless the Company shall have given or delivered
to Employee (i) reasonable notice setting forth the reasons for the Company's
intention to terminate for Cause, (ii) an opportunity for Employee to cure any
such breach within thirty (30) days after receipt of such notice, (iii) an
opportunity for Employee, together with his counsel, to be heard before the
Board, and (iv) a written notice of termination stating that, in the good faith
opinion of not less than a majority of the entire membership of the Board,
Employee was guilty of conduct set forth above in clauses (A) or (B) of the
second preceding sentence, and specifying the particulars thereof in detail.
Notwithstanding the foregoing, in the case of any Employee who has in effect an
employment agreement with the Company ("Employment Agreement"), no termination
following a Change in Control shall be treated as for Cause (x) for purposes of
this Agreement unless it would also be treated as for Cause under such
Employment Agreement, or (y) for purposes of such Employment Agreement unless it
would also be treated as for Cause under this Agreement.
(b) A "Change in Control" of the Company shall be considered
to occur if and when:
(i) more than 30% of the Company's outstanding
securities entitled to vote in elections of directors (the
"Voting Securities") are acquired by any person, entity or
group (as such terms are used in Sections 13(d) and 14(d)
of the Securities Exchange Act of 1934) (other than the
Company, any corporation, partnership, trust or other
entity controlled by the Company (a "Subsidiary") or any
trustee, fiduciary or other person or entity holding
securities under any employee benefit plan or trust of the
Company or any of its Subsidiaries) (such person, entity
or group, a "Person"); provided, however that,
notwithstanding the prior clause of this Section 1(b)(i),
unless
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the Board, within thirty (30) days of such event,
determines otherwise, a Change in Control shall be
considered to occur if and when more than 20% of the
Voting Securities are acquired by any Person; or
(ii) during any period of two consecutive years,
the individuals who, at the beginning of such period,
constitute the Board (the "Incumbent Board") cease for any
reason to constitute at least a majority thereof,
provided, however, that a director who is not otherwise a
member of the Incumbent Board shall be deemed to be a
member of the Incumbent Board if such director was elected
by, on the recommendation of, or with the approval of, at
least two-thirds of the Incumbent Board (taking into
account the proviso in this Section 1(b)(ii);
(iii) the sale, lease, exchange or other
disposition in one transaction or in a series of related
transactions of all or substantially all of the assets of
the Company, other than a sale, lease, exchange or other
disposition to an entity, following which (A) more than
50%, respectively, of the then outstanding shares of
common stock or other securities, (measured by value) of
such entity and the combined voting power of the then
outstanding voting securities of such entity entitled to
vote generally in the election of directors (collectively,
"Equity Securities") is then beneficially owned, directly
or indirectly, by individuals and entities who were the
beneficial owners of the outstanding Voting Securities
immediately prior to such sale, lease, exchange or other
disposition, in substantially the same proportions among
such beneficial owners, (B) no Person (excluding any
Person beneficially owning, immediately prior to such
sale, lease, exchange or other disposition, directly or
indirectly, 30% or more of the outstanding Voting
Securities), beneficially owns, directly or indirectly,
30% or more, respectively, of the then outstanding Equity
Securities, and (C) at least a majority of the members of
the board of directors of the entity were members of the
Incumbent Board at
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the time of the execution of the initial agreement or
action of the Board providing for such sale, lease,
exchange or other disposition of assets of the Company;
(iv) approval by the Company's shareholders of a
reorganization, merger or consolidation of the Company,
unless, following such reorganization, merger or
consolidation, (A) more than 50%, respectively, of the
then outstanding Equity Securities of the entity resulting
from such reorganization, merger or consolidation is then
beneficially owned, directly or indirectly, by individuals
and entities who were the beneficial owners, respectively,
of the outstanding Voting Securities immediately prior to
such reorganization, merger or consolidation, in
substantially the same proportions among such beneficial
owners, (B) no Person (excluding any Person beneficially
owning, immediately prior to such reorganization, merger
or consolidation, directly or indirectly, 30% or more of
the outstanding Voting Securities), beneficially owns,
directly or indirectly, 30% or more of the outstanding
Voting Securities), beneficially owns, directly or
indirectly, 30% or more, respectively, of the then
outstanding Equity Securities of the entity resulting from
such reorganization, merger or consolidation, and (C) at
least a majority of the members of the board of directors
of the entity resulting from such reorganization, merger
or consolidation were members of the Incumbent Board at
the time of the execution of the initial agreement
providing for such reorganization, merger or
consolidation;
(v) approval by the Company's shareholders of a
complete liquidation or dissolution of the Company; or
(vi) such other events as the Board may designate.
(c) "Good Reason" shall mean the occurrence of any of the
following, without Employee's consent, after a Change in Control:
(i) a material reduction or adverse alteration in
the titles, duties,
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authorities or responsibilities of Employee's position;
(ii) a reduction in Employee's annual base salary,
bonus or other compensation arrangements provided by the
Company;
(iii) the relocation of Employee's place of
employment by more than twenty miles; or
(iv) a material reduction in or the discontinuance
of the perquisites or benefits provided by the Company to
Employee.
In addition, and without limiting the foregoing, in the case
of an Employee with an Employment Agreement "Good Reason"
shall include any act or failure to act which would constitute
"good reason" as such term is defined in the Employee's
Employment Agreement.
(d) The term "Cash Compensation" shall mean, during
any fiscal year of the Company, Employee's aggregate cash
compensation earned as an Employee of the Company during the
immediately preceding fiscal year (including any bonus earned
but not paid by fiscal year-end and without regard to any
election deferring the receipt of compensation so earned). If
Employee was employed by the Company for only a portion of the
preceding fiscal year, "Cash Compensation" shall mean his
annualized aggregate cash compensation for such year, which
shall be determined based on the aggregate cash compensation
earned during the portion of such year that Employee was
employed.
2. Change in Control.
(a) Options. In the event of a Change in Control of the
Company, all stock options granted to Employee by the Company
under any compensatory plan or arrangement shall become
immediately vested and exercisable, notwithstanding any
vesting schedule previously applicable to such stock options.
(b) Cash Payment. If, within twenty-four (24) months following
a Change in Control of the Company, the Company terminates
Employee's employment without Cause, or Employee terminates
his or her employment with the Company for
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Good Reason, then the Company shall, within ten (10) days of
such termination of employment, pay to Employee, in one lump
sum, in immediately available funds by wire transfer in
accordance with Employee's instructions, an amount equal to
two and one-half (2-1/2) times Employee's "Cash Compensation"
as defined above.
3. Excise Tax Gross-Up.
(a) Anything in this Agreement to the contrary
notwithstanding, if it shall be determined that any payment or
distribution by the Company to or for Employee's benefit
(whether paid or payable or distributed or distributable
pursuant to the terms of this Agreement or pursuant to an
Employment Agreement or any other compensatory Company plan or
arrangement, without taking into account the Gross-Up Payment,
as hereinafter defined) (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Internal Revenue
Code of 1986, as amended (the "Code"), or any interest or
penalties are incurred by Employee with respect to such excise
tax (such excise tax, together with any such interest and
penalties, are hereinafter collectively referred to as the
"Excise Tax"), then Employee shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such
that after payment by Employee of all Federal, state and local
taxes (including any interest or penalties imposed with
respect to such taxes), including, without limitation, any
income taxes, withholding taxes and payroll taxes (and any
interest and penalties imposed with respect thereto) and
Excise Tax imposed upon the Gross-Up Payment, Employee retains
an amount of the Gross-Up Payment equal to the Excise Tax
imposed upon the Payments.
All determinations required to be made under this
Section 11, including whether and when a Gross-Up Payment is
required and the amount of such Gross-Up Payment and the
assumptions to be utilized in arriving at such determination,
shall be made by a nationally recognized accounting firm as
may be designated by Employee (the "Accounting Firm") which
shall provide detailed supporting calculations both to the
Company and Employee within fifteen (15) business days of
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the receipt of notice from Employee that there has been a
Payment, or such earlier time as is requested by the Company.
In the event that the Accounting Firm is serving as accountant
or auditor for the individual, entity or group effecting the
Change in Control, Employee shall appoint another nationally
recognized accounting firm to make the determinations required
hereunder (which accounting firm shall then be referred to as
the Accounting Firm hereunder). All fees and expenses of the
Accounting Firm shall be borne by the Company. Any Gross-Up
Payment, as determined pursuant to this Section 11, shall be
paid by the Company to Employee within five days of the
receipt of the Accounting Firm's determination. Any
determination by the Accounting Firm shall be binding upon the
Company and Employee. As a result of the uncertainty in the
application of Section 4999 of the Code at the time of the
initial determination by the Accounting Firm hereunder, it is
possible that Gross-Up Payments which will not have been made
by the Company should have been made ("Underpayment"),
consistent with the calculations required to be made
hereunder. In the event that the Company exhausts its remedies
pursuant to Section 3(b) and Employee thereafter is required
to make a payment of any Excise Tax, the Accounting Firm shall
determine the amount of the Underpayment that has occurred and
any such Underpayment shall be promptly paid by the Company to
or for Employee's benefit.
(b) Employee shall notify the Company in writing of
any claim by the Internal Revenue Service that, if successful,
would require the payment by the Company of the Gross-Up
Payment. Such notification shall be given as soon as
practicable but no later than fifteen business days after
Employee is informed in writing of such claim and shall
apprise the Company of the nature of such claim and the date
on which such claim is requested to be paid. Employee shall
not pay such claim prior to the expiration of the 30-day
period following the date on which it gives such notice to the
Company (or such shorter period ending on the date that any
payment of taxes with respect to such claim is due). If the
Company notifies
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Employee in writing prior to the expiration of such period
that it desires to contest such claim, Employee shall:
(i) give the Company any information reasonably
requested by the Company to such claim,
(ii) take such action in connection with contesting
such claim as the Company shall reasonably request in
writing from time to time, including, without limitation,
accepting legal representation with respect to such claim
by an attorney reasonably selected by the Company,
(iii) cooperate with the Company in good faith in
order effectively to contest such claim, and (iv) permit
the Company to participate in any proceeding relating to
such claim,
provided, however, that the Company shall bear and pay
directly all costs and expenses (including additional interest
and penalties) incurred in connection with such contest and
shall indemnify and hold Employee harmless, on an after-tax
basis, from any Excise Tax or income tax (including interest
and penalties with respect thereto) imposed as a result of
such representation and payment of costs and expense. Without
limitation on the foregoing provisions of this Section 3, the
Company shall control all proceedings taken in connection with
such contest and, at its sole option, may pursue or forego any
and all administrative appeals, proceedings, hearings and
conferences with the taxing authority in respect of such claim
and may, at its sole option, either direct Employee to pay the
tax claimed and xxx for a refund or contest the claim in any
permissible manner, and Employee agrees to prosecute such
contest to a determination before any administrative tribunal,
in a court of initial jurisdiction and in one or more
appellate courts, as the Company shall determine; provided,
however, that if the Company directs Employee to pay such
claim and xxx for a refund, the Company shall advance the
amount of such payment to Employee, on an interest-free basis,
and shall indemnify and hold Employee harmless, on an
after-tax
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basis, from any Excise Tax or income tax (including interest
or penalties with respect thereto) imposed with respect to
such advance or with respect to any imputed income with
respect to such advance; and further provided that any
extension of the statute of limitations relating to payment of
taxes for Employee's taxable year with respect to which such
contested amount is claimed to be due is limited solely to
such contested amount. Furthermore, the Company's control of
the contest shall be limited to issues with respect to which a
Gross-Up Payment would be payable hereunder and Employee shall
be entitled to settle or contest, as the case may be, any
other issue raised by the Internal Revenue Service or any
other taxing authority.
(c) If, after Employee's receipt of an amount
advanced by the Company pursuant to Section 3(b), Employee
becomes entitled to receive any refund with respect to such
claim, Employee shall (subject to the Company's complying with
the requirements of this Section 3(b)) promptly pay to the
Company the amount of such refund (together with any interest
paid or credited thereon after taxes applicable thereto). If,
after Employee's receipt of an amount advanced by the Company
pursuant to Section 3(b), a determination is made that
Employee shall not be entitled to any refund with respect to
such claim and the Company does not notify Employee in writing
of its intent to contest such denial of refund prior to the
expiration of 30 days after such determination, then such
advance shall be forgiven and shall not be required to be
repaid and the amount of such advance shall offset, to the
extent thereof, the amount of Gross-Up Payment required to be
paid.
4. Waiver of Invalidity. Inasmuch as the injury caused to
Employee in the event Employee's employment is terminated within
twenty-four (24) months of a Change in Control is difficult or
incapable of accurate estimation at the date of this Agreement, the
amounts to be paid pursuant to Sections 2 and 3 are intended to be
liquidated damages and not a penalty, and therefore constitute a good
faith forecast of the harm which might be expected to be caused to
Employee. Accordingly, the Company waives any right to assert against
Employee the invalidity of any payment provided in Sections 2 and 3 by
reason of
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Employee's failure to seek other employment or otherwise, nor shall the
amount of any payment provided in Sections 2 and 3 be reduced by reason
of any compensation earned or not earned by Employee as a result of
employment by another employer after the date of termination or
otherwise.
5. Arbitration of Disputes. All disputes governing the
interpretation or enforcement of this Agreement shall be resolved
exclusively by arbitration in the manner set forth in this Section 5.
Employee or the Company may submit to arbitration any claim under this
Agreement as follows: At any time following the termination of
Employee's employment with the Company, the claim may be filed in
writing with an arbitrator of Employee's choice or, if the claim is
filed by the Company, reasonably acceptable to Employee, and thereafter
the Company, or Employee, as applicable, shall be notified in writing
of the claim and furnished with a true copy as so filed. The arbitrator
must be a member of the National Academy of Arbitrators or one who
currently appears on arbitration panels issued by the American
Arbitration Association. To the extent not inconsistent with the rules
set forth in this Section 5, the arbitration proceeding shall insofar
as practicable be conducted in accordance with the National Rules of
the American Arbitration Association for the Resolution of Employment
Disputes effective June 1, 1996. The arbitration hearing shall be held
within ten (10) business days after the receipt of notice of the claim
by the Company. No continuance of the hearing shall be allowed without
the mutual consent of Employee and the Company. Absence from or
non-participation at the hearing by either party shall not prevent the
issuance of an award. Hearing procedures which will expedite the
hearing may be ordered at the arbitrator's discretion. The arbitrator's
award shall be rendered as expeditiously as possible. In the event the
arbitrator finds that the Company has breached this Agreement, the
arbitrator shall order the Company to pay to Employee, within
twenty-four hours after the decision is rendered, the amount due
hereunder. The award of the arbitrator shall be final and binding upon
the parties. Judgment may be entered on the arbitrator's award in any
appropriate court as soon as possible after its rendition without
further notice to the Company. The Company shall promptly reimburse
Employee for the reasonable legal
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fees and expenses incurred by Employee in connection with enforcement
of Employee's rights hereunder or the determination of Employee's
rights in any arbitration proceeding.
6. Miscellaneous.
(a) Waiver. The failure of any party to exercise any rights
hereunder or to enforce any of the terms or conditions of this
Agreement on any occasion shall not constitute or be deemed a
waiver of that party's rights thereafter to exercise any
rights hereunder or to enforce each and every term and
condition of this Agreement.
(b) Binding Effect; Successors.
(i) The Company will require any successor (whether
direct or indirect, by purchase, merger, consolidation or
otherwise) to all or substantially all of the business or
assets of the Company, by agreement, in form and substance
satisfactory to Employee, expressly to assume and agree to
perform this Agreement in the same manner and to the same
extent that the Company would be required to perform if no
such succession had taken place. Failure of the Company to
obtain such assumption and agreement prior to the
effectiveness of any such succession will entitle Employee
to compensation from the Company in the same amount and on
the same terms as Employee would be entitled to under
Section 2(b) hereunder had the Company terminated Employee
without Cause on the succession date (assuming a Change in
Control of the Company had occurred prior to such
succession date). As used in this Agreement, "the Company"
means Employer as defined in the preamble to this
Agreement and any successor to its business or assets
which executes and delivers the agreement provided for in
this Section 6(b) or which otherwise becomes bound by all
the terms and provisions of this Agreement by operation of
law or otherwise.
(ii) This Agreement and all rights of the Employee
hereunder shall inure to the benefit of and be enforceable
by Employee and Employee's personal or legal
representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If Employee
should die while any amounts would still be payable to him
hereunder if he had continued to live, all such amounts,
unless otherwise
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provided herein, shall be paid in accordance with
the terms of this Agreement to Employee's devisee,
legatee, or other beneficiary or, if there be no such
beneficiary, to Employee's estate.
(c) Governing Law. This Agreement shall be construed and
enforced in accordance with the laws of the State of Delaware.
(d) Authorization and Modification. This Agreement is executed
for and on behalf of the Company by an officer thereof duly
authorized to do so by resolution of the Board of Directors
approving this Agreement and authorizing such execution. This
Agreement shall not be varied, altered, modified, changed or
in any way amended except by an instruction in writing
executed by the parties hereto.
(e) Assignment by Employee. Except as otherwise expressly
provided for in this Agreement, no right, benefit or interest
of Employee arising hereunder shall be subject to
anticipation, alienation, sale, assignment, encumbrance,
charge, pledge, hypothecation or set-off in respect of any
claim, debt or obligation or to execution, attachment, levy or
similar process, or assignment by operation of law. Any
attempt, voluntary or involuntary, to effect any action
specified in the immediately preceding sentence shall, to the
full extent permitted by law, be null, void and of no effect.
(f) Notice. For the purposes of this Agreement, notices,
demands and all other communications provided for in the
Agreement shall be in writing and shall be deemed to have been
given when hand delivered or (unless otherwise specified)
mailed by United States registered mail, return receipt
requested, postage prepaid, addressed as follows:
If to the Employee: Xxxxxxx X. Xxxxxxxxx
000 Xxxxx Xxxx Xxxxx
Xxxxxx, Xxx Xxxxxx 00000
If to the Company: Prime Hospitality Corp.
000 Xxxxx 00 Xxxx
Xxxxxxxxx, Xxx Xxxxxx 00000
Attention: General Counsel
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or to such other address as any party may have furnished to
the others in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
(g) Validity. The invalidity or unenforceability of any
provision or provisions of this Agreement shall not affect the
validity or enforceability of any other provisions of this
Agreement, which shall remain in full force and effect.
(h) Taxes. The Company shall deduct from all amounts payable
under this Agreement all federal, state, local and other taxes
required by law to be withheld with respect to such payments.
7. Other Arrangements. The rights of Employee under this
Agreement are in addition to Employee's rights under any Employment
Agreement or any successor agreement to an Employment Agreement
covering Employee. Nothing contained in this Agreement shall adversely
affect any of Employee's rights under an Employment Agreement or as a
participant or beneficiary under the Company's pension and welfare
benefit plans, incentive compensation arrangements and perquisite
programs, or Employee's obligations arising under any confidentiality,
non-competition or no solicitation agreement with the Company. This
Agreement supersedes any and all prior Change in Control Agreements
entered into between Employee and the Company.
PRIME HOSPITALITY CORP.
By:
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EMPLOYEE:
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Xxxxxxx X. Xxxxxxxxx
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