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EXHIBIT 10(k)
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 Xxxxxx
("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 Xxxxxx
000 Xxxxxxx Xxxxxx
Xxxxxxx, 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:________________________________
EMPLOYEE:
___________________________________
Xxxxxxx Xxxxxx
00
