Exhibit 10.6
EXECUTIVE EMPLOYMENT AGREEMENT
EXECUTIVE EMPLOYMENT AGREEMENT, effective as of November 1, 2001 by
and between MERISTAR HOSPITALITY CORPORATION, a Maryland corporation (the
"Company"), MERISTAR HOSPITALITY OPERATING PARTNERSHIP, L.P., a Delaware limited
partnership (the "Partnership"), and XXXX X. XXXXXXXX (the "Executive"), an
individual residing at 00000 Xxxx Xxxx, Xxxxxxx, Xxxxxxxx 00000.
The Company and the Partnership desire to employ the Executive in the
capacities of Chairman of the Board and Chief Executive Officer, and the
Executive desires to be so employed, on the terms and subject to the conditions
set forth in this agreement (the "Agreement");
Now, Therefore, in consideration of the mutual covenants set forth
herein and other good and valuable consideration the parties hereto hereby agree
as follows:
1. Employment; Term. The Company and the Partnership each hereby
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employ the Executive, and the Executive agrees to be employed by the Company and
the Partnership, upon the terms and subject to the conditions set forth herein,
for an initial term of three and one-half (3-1/2) years, commencing on November
1, 2001 (the "Commencement Date"), unless terminated earlier in accordance with
Section 5 of this Agreement; provided that such term shall automatically be
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extended from time to time for additional periods of one calendar year from the
date on which it would otherwise expire unless the Executive, on one hand, or
the Company and the Partnership, on the other, gives notice to the other party
or parties prior to such date that it elects to permit the term of this
Agreement to expire without extension on such date. (The initial term of this
Agreement as the same may be extended in accordance with the terms of this
Agreement is hereinafter referred to as the "Term").
2. Positions; Conduct.
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(a) During the Term, the Executive will hold the titles and
offices of, and serve in the positions of, Chairman of the Board and Chief
Executive Officer of the Company and the Partnership. The Executive shall report
to the Board of Directors of the Company (the "Board") and shall perform such
specific duties and services (including service as an officer, director or
equivalent position of any direct or indirect subsidiary without additional
compensation) as they shall reasonably request consistent with the Executive's
positions.
(b) During the Term, the Executive agrees to devote his full
business time and attention to the business and affairs of the Company and the
Partnership and to faithfully and diligently perform, to the best of his
ability, all of his duties and responsibilities hereunder. The Company is aware
that Executive has an employment agreement, dated as of November 1, 2001 ("MHR
Agreement"), with MeriStar Hotels & Resorts, Inc. and MeriStar Management
Company, LLC (collectively,
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"MHR") and may perform duties as required under such agreement so long as those
duties are not in violation of this Agreement. Nothing in this Agreement shall
preclude the Executive from devoting reasonable time and attention to (i)
serving, with the approval of the Board, as a director, trustee or member of any
committee of any organization, (ii) engaging in charitable and community
activities and (iii) managing his personal investments and affairs; provided
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that such activities do not involve any material conflict of interest with the
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interests of the Company or, individually or collectively, interfere materially
with the performance by the Executive of his duties and responsibilities under
this Agreement. Notwithstanding the foregoing and except as expressly provided
herein, during the Term, the Executive may not accept employment with any other
individual or entity, or engage in any other venture which is directly or
indirectly in conflict or competition with the business of the Company or the
Partnership.
(c) The Executive's office and place of rendering his services
under this Agreement shall be in the principal executive offices of the Company
which shall be in the Washington, D.C. metropolitan area. Under no circumstances
shall the Executive be required to relocate from the Washington, D.C.
metropolitan area or provide services under this Agreement in any other location
other than in connection with reasonable and customary business travel. During
the Term, the Company shall provide the Executive with executive office space,
and administrative and secretarial assistance and other support services
consistent with his position as Chairman of the Board and Chief Executive
Officer and with his duties and responsibilities hereunder.
3. Board of Directors. While it is understood that the right to
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elect directors of the Company is by law vested in the stockholders and
directors of the Company, it is nevertheless mutually contemplated that, subject
to such rights, during the Term the Executive will serve as a member of the
Company's Board of Directors.
4. Salary; Additional Compensation; Perquisites and Benefits.
(a) During the Term, the Company and the Partnership will pay the
Executive a base salary at an aggregate annual rate of not less than $285,000
per annum, subject to annual review by the Compensation Committee of the Board
(the "Compensation Committee"), and in the discretion of such Committee,
increased from time to time. Once increased, such base salary may not be
decreased. Such salary shall be paid in periodic installments in accordance with
the Company's standard practice, but not less frequently than semi-monthly.
(b) For each fiscal year during the Term, the Executive will be
eligible to receive a bonus from the Company. The award and amount of such bonus
shall be based upon the achievement of predefined operating or performance goals
and other criteria established by the Compensation Committee, which goals shall
give the Executive the opportunity to earn a bonus in the following amounts:
threshold target - 25% of base salary; target - 165% of base salary; and maximum
bonus amount - 200% of base salary.
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(c) During the Term, the Executive will participate in all plans
now existing or hereafter adopted by the Company or the Partnership for their
management employees or the general benefit of their employees, such as any
pension, profit-sharing, bonuses, stock option or other incentive compensation
plans, life and health insurance plans, or other insurance plans and benefits on
the same basis and subject to the same qualifications as other senior executive
officers.
(d) (i) Annual stock option grants shall be at the discretion of
the Board.
(ii) Executive shall be granted annually, on May 1 of 2002,
2003 and 2004, pursuant to the Company's Profits-Only
Operating Partnership Units ("POPs") Plan, a minimum of
125,000 POPs and a maximum of 200,000 POPs as determined by
the Board. The POPs shall vest equally on the first, second
and third anniversary of the date of grant. Annual POPs grants
thereafter shall be at the discretion of the Board. The
Company or the Partnership will pay the executive a
distribution on each POP, while such POPs are outstanding,
equal to, and at the same time as, distributions made to
common operating partnership units of the Partnership.
(e) The Company and the Partnership will reimburse the Executive,
in accordance with their standard policies from time to time in effect, for all
out-of-pocket business expenses as may be incurred by the Executive in the
performance of his duties under this Agreement.
(f) The Executive shall be entitled to vacation time to be
credited and taken in accordance with the Company's policy from time to time in
effect for senior executives, which in any event shall not be less than a total
of four weeks per calendar year. Such vacation time shall not be carried over
year to year, and shall not be paid out upon termination of employment, or upon
expiration of this Agreement.
(g) The Company (or MHR), at its sole cost, shall pay (i) up to
$20,000 annually (to be increased annually by the prior year's consumer price
index, "CPI") toward the premium of a life insurance policy with a death benefit
of at least $2,000,000 payable to a beneficiary designated by the Executive and
(ii) up to $20,000 annually (to be increased annually by the prior year's CPI)
toward the premium of a disability policy which, upon a determination of the
Executive's Disability (as hereinafter defined), pays at least $2,000,000 to the
Executive. The premiums for such insurance policies are to be split equally
between the Company and MHR for so long as the Executive remains employed by
MHR. While the Executive is employed by both the Company and MHR, both the
Company and MHR, in the aggregate, shall not pay in excess of $20,000 annually
(as increased by CPI) toward each premium.
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(h) The Executive shall be granted a car allowance of up to
$1,000 per month toward the lease of an automobile to be leased by the Company
(or MHR) for the use of the Executive. The monthly lease payment for such car is
to be split equally between the Company and MHR for so long as the Executive is
employed by MHR. While the Executive is employed by both the Company and MHR,
the Company and MHR, in the aggregate, shall not pay in excess of $1,000 monthly
toward such car lease.
(i) To the fullest extent permitted by applicable law, the
Executive shall be indemnified and held harmless by the Company and the
Partnership against any and all judgments, penalties, fines, amounts paid in
settlement, and other reasonable expenses (including, without limitation,
reasonable attorneys' fees and disbursements) actually incurred by the Executive
in connection with any threatened, pending or completed action, suit or
proceeding (whether civil, criminal, administrative, investigative or other) for
any action or omission in his capacity as a director, officer or employee of the
Company or the Partnership.
Indemnification under this Section 4(i) shall be in addition to,
and not in substitution of, any other indemnification by the Company or the
Partnership of its officers and directors. Expenses incurred by the Executive in
defending an action, suit or proceeding for which he claims the right to be
indemnified pursuant to this Section 4(i) shall be paid by the Company or the
Partnership, as the case may be, in advance of the final disposition of such
action, suit or proceeding upon the Company's or the Partnership's receipt of
(x) a written affirmation by the Executive of his good faith belief that the
standard of conduct necessary for his indemnification hereunder and under the
provisions of applicable law has been met and (y) a written undertaking by or on
behalf of the Executive to repay the amount advanced if it shall ultimately be
determined by a court that the Executive engaged in conduct which precludes
indemnification under the provisions of such applicable law. Such written
undertaking in clause (y) shall be accepted by the Company or the Partnership,
as the case may be, without security therefor and without reference to the
financial ability of the Executive to make repayment thereunder. The Company and
the Partnership shall use commercially reasonable efforts to maintain in effect
for the Term of this Agreement a directors' and officers' liability insurance
policy, with a policy limit of at least $5,000,000, subject to customary
exclusions, with respect to claims made against officers and directors of the
Company or the Partnership; provided, however, the Company or the Partnership,
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as the case may be, shall be relieved of this obligation to maintain directors'
and officers' liability insurance if, in the good faith judgment of the Company
or the Partnership, it cannot be obtained at a reasonable cost.
5. Termination.
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(a) The Term will terminate immediately upon the Executive's
death or, upon thirty (30) days' prior written notice by the Company, in the
case of a determination of the Executive's Disability. As used herein the term
"Disability" means the Executive's inability to perform his duties and
responsibilities under this Agreement for a period of more than 120 consecutive
days, or for more than 180 days, whether or
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not continuous, during any 365-day period, due to physical or mental incapacity
or impairment. A determination of Disability will be made by a physician
reasonably satisfactory to both the Executive and the Company and paid for by
the Company or the Partnership whose decision shall be final and binding on the
Executive and the Company; provided that if they cannot agree as to a physician,
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then each shall select and pay for a physician and these two together shall
select a third physician whose fee shall be borne equally by the Executive and
either the Company or the Partnership and whose determination of Disability
shall be binding on the Executive and the Company. Should the Executive become
incapacitated, his employment shall continue and all base and other compensation
due the Executive hereunder shall continue to be paid through the date upon
which the Executive's employment is terminated for Disability in accordance with
this section.
(b) The Term may be terminated by the Company upon notice to the
Executive upon the occurrence of any event constituting "Cause" as defined
herein.
(c) The Term may be terminated by the Executive upon notice to
the Company of any event constituting "Good Reason" as defined herein.
6. Severance.
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(a) If the Term is terminated by the Company for Cause,
(i) the Company and the Partnership will pay to the
Executive an aggregate amount equal to the Executive's
accrued and unpaid base salary through the date of
such termination;
(ii) all unvested options, restricted shares, and POPs will
terminate immediately; and
(iii) any vested options issued pursuant to the Company's
Incentive Plan and held by the Executive at
termination, will expire ninety (90) days after the
termination date.
(b) If the Term is terminated by the Executive other than
because of death, Disability or for Good Reason,
(i) the Company and the Partnership will pay to the
Executive an aggregate amount equal to the Executive's
accrued and unpaid base salary through the date of
such termination;
(ii) all unvested options and restricted shares terminate
immediately;
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(iii) any vested options issued pursuant to the Company's
Incentive Plan and held by the Executive at termination,
will expire ninety (90) days after the termination date;
and
(iv) all POPs granted through the date of such termination
shall immediately vest and convert, on a one-for-one
basis, into common operating partnership units ("Common
OP Units") of the Partnership and become free and clear
of all contractual restrictions.
(c) If the Term is terminated upon the Executive's death or
Disability,
(i) the Company and the Partnership will pay to the
Executive's estate or the Executive, as the case may be,
a lump sum payment equal to the Executive's base salary
through the termination date, plus a pro rata portion of
the Executive's bonus for the fiscal year in which the
termination occurred;
(ii) the Company will make payments for one (1) year of all
compensation otherwise payable to the Executive pursuant
to this Agreement, including, but not limited to, base
salary, bonus and welfare benefits;
(iii) all of the Executive's unvested stock options will
immediately vest and such options, along with those
previously vested and unexercised, will become
exercisable for a period of one (1) year thereafter;
(iv) all of the Executive's unvested restricted stock will
immediately vest and all of the restricted stock of the
Company held by the Executive shall become free from all
contractual restrictions; and
(v) all POPs to be granted to Executive on May 1 of 2002,
2003 or 2004 (assuming 165,000 POPs were granted on each
date that is subsequent to the date of termination)
which have not yet been granted by the date of
termination shall be immediately granted and vested, all
of the Executive's unvested POPs will immediately vest,
and all of the Executive's POPs held at termination
(including POPs granted and/or vested pursuant to this
Paragraph 6(c)(v))
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will be converted, on a one-for-one basis, to Common OP
Units of the Partnership and shall become free from all
contractual restrictions.
(d) Subject to Section 6(e) hereof, if the Term is terminated by
the Company without Cause or other than by reason of Executive's death or
Disability, in addition to any other remedies available, or if the Executive
terminates the Term for Good Reason,
(i) the Company and the Partnership shall pay the Executive
a lump sum equal to the product of (x) the sum of (A)
the Executive's then annual base salary and (B) the
amount of the Executive's bonus for the preceding year,
multiplied by (y) the greater of (A) two and one-half (2
1/2) and (B) a fraction, the numerator of which is the
number of days remaining in the Term (without further
extension) and the denominator of which is 365;
(ii) all of the Executive's unvested stock options will
immediately vest and such options, along with those
previously vested and unexercised, will become
exercisable for a period of one (1) year thereafter;
(iii) all of the Executive's unvested restricted stock will
immediately vest and all of the restricted stock of the
Company held by the Executive shall become free from all
contractual restrictions;
(iv) all POPs to be granted to Executive on May 1 of 2002,
2003 or 2004 (assuming 165,000 POPs were granted on each
date that is subsequent to the date of termination)
which have not yet been granted by the date of
termination shall be immediately granted and vested, all
of the Executive's unvested POPs will immediately vest,
and all of the Executive's POPs held at termination
(including POPs granted and/or vested pursuant to this
Paragraph 6(c)(iv)) will be converted, on a one-for-one
basis, to Common OP Units of the Partnership and shall
become free from all contractual restrictions; and
(v) the Company shall also continue in effect the
Executive's health benefits noted in Section 4(c) hereof
or their equivalent for a period equal to the greater of
(X) two and one-half (2 1/2) years or the remaining
Term, without further extension or (Y)
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the date on which the Executive obtains health
insurance coverage from a subsequent employer;
provided, however, that in the event the Executive
remains in the employ of MHR following such
termination, his health insurance benefits shall be
provided by MHR pursuant to the MHR Agreement rather
than pursuant to this Section (6)(d)(v).
(e) If, within twenty-four (24) months following a Change in
Control, the Term is terminated by the Executive for Good Reason or by the
Company without Cause, in addition to any other rights which the Executive may
have under law or otherwise, the Executive shall receive the same payments and
benefits provided for under Section 6(d) hereof; provided, that the amount of
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the multiplier described in clause (d)(i)(y)(A) of Section 6 hereof shall be
increased from two and one-half (2 1/2) times to three and one-half (3 1/2)
times.
(f) If at any time the Term is not extended pursuant to the
proviso to Section 1 hereof as a result of the Company giving notice thereunder
that it elects to permit the term of this Agreement to expire without extension,
the Company shall be deemed to have terminated the Executive's employment
without Cause.
(g) As used herein, the term "Cause" means:
(i) the Executive's willful and intentional failure or
refusal to perform or observe any of his material duties,
responsibilities or obligations set forth in this Agreement; provided,
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however, that the Company shall not be deemed to have Cause pursuant
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to this clause (i) unless the Company gives the Executive written
notice that the specified conduct has occurred and making specific
reference to this Section 6(g)(i) and the Executive fails to cure the
conduct within thirty (30) days after receipt of such notice;
(ii) any willful and intentional act of the Executive
involving malfeasance, fraud, theft, misappropriation of funds,
embezzlement or dishonesty affecting the Company or the Partnership;
(iii) the Executive's conviction of, or a plea of guilty or
nolo contendere to, an offense which is a felony in the jurisdiction
involved; or
(iv) the Executive is terminated by MHR for Cause (as
defined in the MHR Agreement).
Termination of the Executive for Cause shall be communicated by a Notice of
Termination. For purposes of this Agreement, a "Notice of Termination" shall
mean delivery to the Executive of a copy of a resolution duly adopted by the
affirmative vote of not less than a majority of the entire membership of the
Company's Board at a meeting of the Board called and held for the purpose (after
reasonable notice to the Executive and reasonable opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board prior to
such vote) of finding that in the good faith opinion of the
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Board, the Executive was guilty of conduct constituting Cause and specifying the
particulars thereof in detail, including, with respect to any termination based
upon conduct described in clause (i) above that the Executive failed to cure
such conduct during the thirty-day period following the date on which the
Company gave written notice of the conduct referred to in such clause (i). For
purposes of this Agreement, no such purported termination of the Executive's
employment shall be effective without such Notice of Termination;
(h) As used herein, the term "Good Reason" means the occurrence
of any of the following, without the prior written consent of the Executive:
(i) assignment of the Executive of duties materially
inconsistent with the Executive's positions as described in Section 2(a)
hereof, or any significant diminution in the Executive's duties or
responsibilities, other than in connection with the termination of the
Executive's employment for Cause, Disability or as a result of the
Executive's death or by the Executive other than for Good Reason;
(ii) the failure of the Company to nominate the Executive to
the Board or the failure of the Executive to be elected to the Board;
(iii) the change in the location of the Company's principal
executive offices or of the Executive's principal place of employment to a
location outside the Washington, D.C. metropolitan area;
(iv) any material breach of this Agreement by the Company or
the Partnership which is continuing; or
(v) a Change in Control; provided that a Change of Control
shall only constitute Good Reason if (i) the Executive terminates this
Agreement within the six month period following a Change of Control, (ii)
the Company terminates the Executive within two years following a Change of
Control or (iii) the Company changes the Executive's job title,
responsibilities or decreases Executive's compensation within two years
following a Change of Control and Executive within six months after such
change (but not later than two years following the Change of Control)
terminates the Term of this Agreement; or
(vi) termination of the MHR Agreement by MHR without Cause
(as such term is defined in the MHR Agreement) or termination of the MHR
Agreement by Executive for Good Reason (as such term is defined in the MHR
Agreement); provided that such terminations of the MHR Agreement shall only
constitute Good Reason (for purposes of this Agreement) if the Company does
not, effective immediately upon the termination of the Executive's
employment with MHR, increase the Executive's total annual compensation
under this Agreement by the amount of total annual compensation (including,
base salary, bonus, restricted stock, POPs, and other similar types of
annual compensation) the Executive was receiving from MHR.
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provided, however, that the Executive shall not be deemed to have
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Good Reason pursuant to clauses (h)(i), (ii) or (iv) above unless the
Executive gives the Company or the Partnership, as the case may be,
written notice that the specified conduct or event has occurred and
the Company or the Partnership fails to cure such conduct or event
within thirty (30) days of the receipt of such notice.
(i) As used herein, the term "Change in Control" shall have the
following meaning:
"Change in Control" means the occurrence of any one of the
following events:
(i) the acquisition (other than from the Company) by any
"Person" (as the term is used for purposes of Sections 13(d) or 14(d)
of the Exchange Act) of beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange Act) of thirty (30%) percent
or more of the combined voting power of the Company's then outstanding
voting securities;
(ii) the individuals who were members of the Board (the
"Incumbent Board") during the previous twelve (12) month period, cease
for any reason to constitute at least a majority of the Board;
provided, however, that if the election, or nomination for election by
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the Company's stockholders, of any new director was approved by a vote
of at least two-thirds of the Incumbent Board, such new director
shall, for purposes of this Agreement, be considered as a member of
the Incumbent Board;
(iii) approval by the stockholders of the Company of (a)
merger or consolidation involving the Company if the stockholders of
the Company, immediately before such merger or consolidation do not,
as a result of such merger or consolidation, own, directly or
indirectly, more than fifty (50%) percent of the combined voting power
of the then outstanding voting securities of the corporation resulting
from such merger or consolidation in substantially the same proportion
as their ownership of the combined voting power of the voting
securities of the Company outstanding immediately before such merger
or consolidation or (b) a complete liquidation or dissolution of the
Company or an agreement for the sale or other disposition of all or
substantially all of the assets of the Company; or
(iv) approval by the stockholders of the Company of any
transaction (including without limitation a "going private
transaction") involving the Company if the stockholders of the
Company, immediately before such transaction, do not as a result of
such transaction, own directly or indirectly, more than fifty (50%)
percent of the combined voting power of the then outstanding voting
securities of the corporation resulting from such transaction in
substantially the same proportion as their ownership of the combined
voting power of the
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voting securities of the Company outstanding immediately before such
transaction.
Notwithstanding the foregoing, a Change in Control shall not be
deemed to occur pursuant to clause (i)(A)(i) above solely because thirty
(30%) percent or more of the combined voting power of the Company's then
outstanding securities is acquired by (a) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by
the Company or any of its subsidiaries or (b) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by
the stockholders of the Company in the same proportion as their ownership
of stock in the Company immediately prior to such acquisition.
(j) The amounts required to be paid and the benefits
required to be made available to the Executive under this Section 6 are
absolute. Under no circumstances shall the Executive, upon the termination
of his employment hereunder, be required to seek alternative employment
and, in the event that the Executive does secure other employment, no
compensation or other benefits received in respect of such employment shall
be set-off or in any other way limit or reduce the obligations of the
Company under this Section 6.
(k) Intentionally omitted.
(l) Excise Tax Payments.
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(i) Gross-Up Payment. If it shall be determined
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that any payment or distribution of any type to or in respect of the
Executive, by the Company, the Partnership, or any other person,
whether paid or payable or distributed or distributable pursuant to
the terms of the Agreement or otherwise (the "Total Payments"), is or
will be subject to the excise tax imposed by Section 4999 of the
Internal Code of 1986, as amended (the "Code") or any interest or
penalties with respect to such excise tax (such excise tax, together
with any such interest and penalties, are collectively referred to as
the "Excise Tax"), then the Executive shall be entitled to receive an
additional payment (a "Gross-Up Payment") in an amount such that after
payment by the Executive of all taxes (including any interest or
penalties imposed with respect to such taxes) imposed upon the
Gross-Up Payment, the Executive retains an amount of the Gross-Up
Payment equal to the Excise Tax imposed upon the Total Payments.
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(ii) Determination by Accountant.
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(A) All computations and determinations
relevant to this Section 6(l) shall be made by a national accounting
firm selected by the Company from among the five (5) largest
accounting firms in the United States (the "Accounting Firm") which
firm may be the Company's accountants. Such determinations shall
include whether any of the Total Payments are "parachute payments"
(within the meaning of Section 280G of the Code). In making the
initial determination hereunder as to whether a Gross-Up Payment is
required the Accounting Firm shall determine that no Gross-Up Payment
is required, if the Accounting Firm is able to conclude that no
"Change of Control" has occurred (within the meaning of Section 280G
of the Code) on the basis of "substantial authority" (within the
meaning of Section 6230 of the Code) and shall provide opinions to
that effect to both the Company and the Executive. If the Accounting
Firm determines that a Gross-Up Payment is required, the Accounting
Firm shall provide its determination (the "Determination"), together
with detailed supporting calculations regarding the amount of any
Gross-Up Payment and any other relevant matter both to the Company and
the Executive by no later than ten (10) days following the Termination
Date, if applicable, or such earlier time as is requested by the
Company or the Executive (if the Executive reasonably believes that
any of the Total Payments may be subject to the Excise Tax). If the
Accounting Firm determines that no Excise Tax is payable by the
Executive, it shall furnish the Executive and the Company with a
written statement that such Accounting Firm has concluded that no
Excise Tax is payable (including the reasons therefor) and that the
Executive has substantial authority not to report any Excise Tax on
his federal income tax return.
(B) If a Gross-Up Payment is determined to
be payable, it shall be paid to the Executive within twenty (20) days
after the later of (i) the Determination (and all accompanying
calculations and other material supporting the Determination) is
delivered to the Company by the Accounting Firm or (ii) the date of
the event which leads to the Gross-up Payment. Any determination by
the Accounting Firm shall be binding upon the Company and the
Executive, absent manifest error.
(C) As a result of 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 not made by the Company should have been made
("Underpayment"), or that Gross-Up Payments will have been made by the
Company which should not have been made ("Overpayments"). In either
such event, the Accounting Firm shall determine the amount of the
Underpayment or Overpayment that has occurred. In the case of an
Underpayment, the amount of such Underpayment (together with any
interest and penalties payable by the Executive as a result of such
Underpayment) shall be promptly paid by the Company to or for the
benefit of the Executive.
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(D) In the case of an Overpayment, the
Executive shall, at the direction and expense of the Company, take
such steps as are reasonably necessary (including the filing of
returns and claims for refund), follow reasonable instructions from,
and procedures established by, the Company, and otherwise reasonably
cooperate with the Company to correct such Overpayment, provided,
however, that (i) the Executive shall not in any event be obligated to
return to the Company an amount greater than the net after-tax portion
of the Overpayment that he has retained or has recovered as a refund
from the applicable taxing authorities and (ii) this provision shall
be interpreted in a manner consistent with the intent of Section
6(l)(i), which is to make the Executive whole, on an after-tax basis,
from the application of the Excise Taxes, it being acknowledged and
understood that the correction of an Overpayment may result in the
Executive repaying to the Company an amount which is less than the
Overpayment.
(E) The Executive shall notify the Company
in writing of any claim by the Internal Revenue Service relating to
the possible application of the Excise Tax under Section 4999 of the
Code to any of the payments and amounts referred to herein and shall
afford the Company, at its expense, the opportunity to control the
defense of such claim.
7. Confidential Information.
(a) The Executive acknowledges that the Company and its
subsidiaries or affiliated ventures ("Company Affiliates") own and have
developed and compile, and will in the future own, develop and compile,
certain Confidential Information and that during the course of his
rendering services hereunder Confidential Information will be disclosed to
the Executive by the Company Affiliates. The Executive hereby agrees that,
during the Term and for a period of three years thereafter, he will not use
or disclose, furnish or make accessible to anyone, directly or indirectly,
any Confidential Information of the Company Affiliates.
(b) As used herein, the term "Confidential Information"
means any trade secrets, confidential or proprietary information, or other
knowledge, know-how, information, documents or materials, owned, developed
or possessed by a Company Affiliate pertaining to its businesses the
confidentiality of which such company takes reasonable measures to protect,
including, but not limited to, trade secrets, techniques, know-how
(including designs, plans, procedures, processes and research records),
software, computer programs, innovations, discoveries, improvements,
research, developments, test results, reports, specifications, data,
formats, marketing data and business plans and strategies, customer lists,
client lists and client contact lists, agreements and other forms of
documents, expansion plans, budgets, projections, and salary, staffing and
employment information. Notwithstanding the foregoing, Confidential
Information shall not in any event include information which (i) was
generally known or generally available to the public prior to its
disclosure to the Executive, (ii) becomes generally known or generally
available to the public subsequent
14
to its disclosure to the Executive through no wrongful act of the Executive,
(iii) is or becomes available to the Executive from sources other than the
Company Affiliates which sources are not known to the Executive to be under any
duty of confidentiality with respect thereto or (iv) the Executive is required
to disclose by applicable law or regulation or by order of any court or federal,
state or local regulatory or administrative body (provided that the Executive
provides the Company with prior notice of the contemplated disclosure and
reasonably cooperates with the Company, at the Company's sole expense, in
seeking a protective order or other appropriate protection of such information).
(c) The Executive agrees that during his employment hereunder and
for a period of twenty-four months thereafter he will not solicit, raid, entice
or induce any person that then is or at any time during the twelve-month period
prior to the end of the Term was an employee of a Company Affiliate (other than
a person whose employment with such Company Affiliate has been terminated by
such Company Affiliate), to become employed by any person, firm or corporation.
8. Specific Performance.
(a) The Executive acknowledges that the services to be rendered
by him hereunder are of a special, unique, extraordinary and personal character
and that the Company Affiliates would sustain irreparable harm in the event of a
violation by the Executive of Section 7 hereof. Therefore, in addition to any
other remedies available, the Company shall be entitled to specific enforcement
and/or an injunction from any court of competent jurisdiction restraining the
Executive from committing or continuing any such violation of this Agreement
without proving actual damages or posting a bond or other security. Nothing
herein shall be construed as prohibiting the Company from pursuing any other
remedies available to it for such breach or threatened breach, including the
recovery of damages.
(b) If any of the restrictions on activities of the Executive
contained in Section 7 hereof shall for any reason be held by a court of
competent jurisdiction to be excessively broad, such restrictions shall be
construed so as thereafter to be limited or reduced to be enforceable to the
maximum extent compatible with the applicable law as it shall then appear; it
being understood that by the execution of this Agreement the parties hereto
regard such restrictions as reasonable and compatible with their respective
rights.
(c) Notwithstanding anything in this Agreement to the contrary,
in the event that the Company fails to make any payment of any amounts or
provide any of the benefits to the Executive when due as called for under
Section 6 of this Agreement and such failure shall continue for twenty (20) days
after notice thereof from the Executive, in addition to any other remedies
available to the Executive, all restrictions on the activities of the Executive
under Section 7 hereof shall be immediately and permanently terminated.
15
9. Withholding. The parties agree that all payments to
-----------
be made to the Executive by the Company pursuant to the Agreement shall be
subject to all applicable withholding obligations of such company.
10. Notices. All notices required or permitted hereunder
-------
shall be in writing and shall be deemed given and received when delivered
personally, four (4) days after being mailed if sent by registered or certified
mail, postage pre-paid, or by one (1) day after delivery if sent by air courier
(for next-day delivery) with evidence of receipt thereof or by facsimile with
receipt confirmed by the addressee. Such notices shall be addressed
respectively:
If to the Executive, to:
00000 Xxxx Xxxx
Xxxxxxx, Xxxxxxxx 00000
If to the Company or to the Partnership, to:
MeriStar Hospitality Corporation
0000 Xxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, X.X. 00000
Attention: Legal Department
or to any other address of which such party may have given notice to the other
parties in the manner specified above.
11. Miscellaneous.
-------------
(a) This Agreement is a personal contract calling
for the provision of unique services by the Executive, and the Executive's
rights and obligations hereunder may not be sold, transferred, assigned, pledged
or hypothecated by the Executive. The rights and obligations of the Company and
the Partnership hereunder will be binding upon and run in favor of their
respective successors and assigns. Neither the Company nor the Partnership will
be deemed to have breached this Agreement if any obligations of such party to
make payments to the Executive are satisfied by the other party.
(b) This Agreement shall be governed by and
construed and enforced in accordance with the internal laws of the State of
Delaware, without regard to conflict of laws principles.
(c) Any controversy arising out of or relating to
this Agreement or any breach hereof shall be settled by arbitration in
Washington, D.C. by a single neutral arbitrator in accordance with the
Commercial Arbitration Rules of the American Arbitration Association. Judgment
upon any award rendered may be entered in any court having jurisdiction thereof,
except in the event of a controversy relating to any alleged violation by the
Executive of Section 7 hereof, in which case the Company
16
shall be entitled to seek injunctive relief from a court of competent
jurisdiction without the requirement to seek arbitration.
(d) The headings of the various sections of this Agreement are
for convenience of reference only and shall not define or limit any of the terms
or provisions hereof.
(e) The provisions of this Agreement which by their terms call
for performance subsequent to the expiration or termination of the Term shall
survive such expiration or termination.
(f) The Company and the Partnership shall reimburse the Executive
for all costs incurred by the Executive in any proceeding for the successful
enforcement of the terms of this Agreement, including without limitation all
costs of investigation and reasonable attorneys fees and expenses.
(g) This Agreement constitutes the entire agreement of the
parties hereto with respect to the subject matter hereof and supersedes all
other prior agreements and undertakings, both written and oral, among the
parties with respect to the subject matter hereof (other than previously
executed option agreements, restricted stock agreements and POPs agreements
executed by the Executive and the Company and/or the Partnership, the "Grant
Agreements"), all of which shall be terminated on the Commencement Date. In
addition, the parties hereto hereby waive all rights such party may have under
all other prior agreements (other then the Grant Agreements), including without
limitation, the Executive Employment Agreement entered into as of August 3, 1998
and the Executive Employment Agreement entered into as of April 1, 2000, between
the Executive and the Company, all of which shall be terminated on the
Commencement Date. In addition, the parties hereto hereby waive all rights such
party may have under all other prior agreements and undertakings, both written
and oral, among the parties hereto (other than the Grant Agreements).
[SIGNATURE PAGE FOLLOWS]
17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
effective as of the date first above written.
EXECUTIVE:
____________________________________
Xxxx X. Xxxxxxxx
COMPANY:
MERISTAR HOSPITALITY CORPORATION
By:
_________________________________
Name:
Title:
PARTNERSHIP:
MERISTAR HOSPITALITY OPERATING
PARTNERSHIP, L.P.
By: MeriStar Hospitality Corporation,
its general partner
By:
_________________________________
Name:
Title:
