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EXECUTION VERSION
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February 20, 1998,
between Xxxxx X. Xxxxx ("Executive") and Prime Hospitality Corp., a Delaware
corporation ("Employer").
In consideration of the premises and the mutual covenants hereinafter
set forth and other good and valuable consideration, the receipt and sufficiency
of which is hereby acknowledged, the parties hereto hereby agree as follows:
1. EMPLOYMENT OF EXECUTIVE
Employer hereby agrees to employ Executive, and Executive hereby agrees
to be and remain in the employ of Employer, upon the terms and conditions
hereinafter set forth.
2. EMPLOYMENT PERIOD
Subject to earlier termination as provided in section 5, the term of
Executive's employment under this Agreement (the "Employment Period") shall
commence as of the date hereof and shall continue for a period of three (3)
years. Either party may terminate this Agreement at the end of three (3) years
or this Agreement may be renewed on a day to day basis pending the negotiation
of a new agreement.
3. DUTIES AND RESPONSIBILITIES
3.1 General. During the Employment Period, Executive (i) shall have the
titles of President and Chief Executive Officer of Employer and (ii) shall
devote substantially all of his business time and expend his best efforts,
energies and skills to the business of Employer.
Executive shall perform such duties, consistent with his status as
President and Chief Executive Officer of Employer, as he may be assigned from
time to time by Employer's Board.
4. COMPENSATION AND RELATED MATTERS
4.1 Base Salary. For each twelve-month period of the Employment Period,
commencing with the twelve-month period beginning on the date of this Agreement
(each such period, an "Employment Year"), Employer shall pay to Executive a base
salary ("Base Salary") equal to $400,000. The Base Salary for each Employment
Year shall be payable in equal weekly installments.
4.2 Annual Bonus. For each calendar year (the "Bonus Year"), at the
discretion of the Employer's Board of Directors (the "Board"), Executive may
receive a cash bonus ("Bonus") based upon attainment of annual performance
objectives to be reasonably established by the Board for the Bonus Year in
consultation with Executive, such performance objectives to be established as
soon as possible following the beginning of the Bonus Year. Bonus earned for the
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Bonus Year shall be payable promptly following the determination thereof, on the
earlier of (i) fifteen (15) days after the members of the Board have received
the audited financial statements for the Bonus Year, or (ii) the next meeting of
the Board. The Bonus Year 1998 will be deemed to commence on January 1. To the
extent specifically provided in Section 6 hereof, the Bonus payable for the
Bonus Year in which the Employment Period terminates shall equal the Bonus that
would have been paid had the Employment Period not so terminated, multiplied by
a fraction, the numerator of which shall be the number of days of the Employment
Period within the Bonus Year and the denominator of which shall be 365.
4.3 Life Insurance. Employer shall maintain in effect at all times
during the Employment Period, at Employer's expense, a policy of term insurance
on the life of Executive in the amount equal to $1,000,000, naming such person
as Executive shall designate from time to time as the owner and beneficiary
thereof. Executive agrees that Employer shall have the right to obtain other
life insurance on Executive's life, at Employer's sole expense and with Employer
or an affiliate thereof as the sole beneficiary thereof. Executive shall (i)
cooperate fully with Employer in obtaining all such insurance, (ii) sign any
necessary consents, applications and other related forms or documents, and (iii)
take any required medical examinations.
4.4 Automobile. Employer shall provide Executive with the use of a
vehicle at Employer's expense. Executive will be entitled to continue to use
that automobile for the term of this Agreement. Employer shall be responsible
for all expenses of use, maintenance and operation of that vehicle, except if
Executive's operation of the vehicle causes penalty insurance rates, in which
case Executive will bear such costs.
4.5 Other Benefits. During the Employment Period, subject to, and to
the extent Executive is eligible under their respective terms, Executive shall
be entitled to receive such fringe benefits as are, or are from time to time
hereafter generally provided by Employer to Employer's senior management
employees or other employees (other than those provided under or pursuant to
separately negotiated individual employment agreements or arrangements) under
any pension or retirement plan, disability plan or insurance, group life
insurance, medical and dental insurance, travel accident insurance, phantom
stock or other similar plan or program of Employer. Executive's Base Salary
shall (where applicable) constitute the compensation on the basis of which the
amount of Executive's benefits under any such plan or program shall be fixed and
determined.
4.6 Expense Reimbursement. Employer shall reimburse Executive for all
business expenses reasonably incurred by him in the performance of his duties
under this Agreement upon his presentation of signed, itemized accounts of such
expenditures, all in accordance with Employer's procedures and policies as
adopted and in effect from time to time and applicable to its senior management
employees.
4.7 Vacations. Executive shall be entitled to 20 days vacation for each
calendar year during the Employment Period with reasonable one year carry-over
allowances, which vacations shall be taken at such time or times as shall not
unreasonably interfere with Executive's performance of his duties under this
Agreement.
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4.8 Stock Options. On February 20, 1998, the Compensation Committee of
the Board granted to Executive, subject to stockholder approval of an amendment
to the Employer's 1995 Employee Stock Option Plan (the "Plan") at the 1998
Annual Meeting of Stockholders, increasing the maximum number of options that
can be granted to one person during a single year, a stock option (the "Option")
to purchase 300,000 shares of Common Stock of the Employer (the "Common Stock"),
having a term of ten years. The Option shall vest and become exercisable as to
one-third of the shares of common stock covered by the Option on and after
February 20, 1999, as to an additional one-third of the shares of common stock
on and after February 20, 2000 and as to an additional one-third of the shares
of common stock on and after February 20, 2001. The exercise price shall be the
Fair Market Value of the Employer's shares as defined in the Plan on February
20, 1998. Except as otherwise set forth herein, the terms of the Option shall be
as set forth in the Plan and the Option Agreement.
4.9 Tax Gross-Up. To the extent that payments made by Employer to or on
behalf of Executive pursuant to the provisions of Sections 4.3 and 4.4 hereof
are subject to federal, state or local income or payroll taxes, Employer shall
pay to Executive, not later than forty-five (45) days after the end of the
calendar year for which such payments are includable in Executive's gross
income, the amount of such additional taxes, calculated by assuming application
of the highest applicable tax rates, plus such additional amount as shall be
necessary to hold harmless Executive, as nearly as practicable, from the
obligation to pay such taxes in respect of amounts payable pursuant to this
Section 4.9.
5. TERMINATION OF EMPLOYMENT PERIOD
5.1 Termination Without Cause; Voluntary Termination by Executive.
Employer may, by notice to Executive at any time during the Employment Period,
terminate the Employment Period without cause. The effective date of such
termination of the Executive from the Employer shall be the date that is thirty
(30) days following the date on which such notice is given. Executive may, by
notice to Employer at any time during the Employment Period, voluntarily resign
from the Employer and terminate the Employment Period. The effective date of
such termination of the Executive from the Employer shall be the date that is
thirty (30) days following the date on which such notice is given.
5.2 By Employer for Cause. Employer may, at any time during the
Employment Period by notice to Executive (but only after compliance with the
procedure hereinafter set forth in this Section 5.2 in the event of the cause
specified in clause (ii) below), terminate the Employment Period "for cause"
effective on the later of the giving of such notice or upon the determination by
the Board following notice, if applicable. Such notice shall specify the conduct
which is the basis for termination for cause in reasonable detail. For the
purposes hereof, "for cause" means:
(i) the conviction of Executive in a court of competent
jurisdiction of a crime constituting a felony in such jurisdiction involving
money or other property of the Employer or any of its affiliates or any other
felony (whether or not involving money or other property of the Employer)
involving moral turpitude; or
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(ii) the willful engaging in misconduct that is materially
injurious to Employer, monetarily or otherwise. For the purposes hereof, (a) no
act, or failure to act, on Executive's part shall be considered "willful" unless
done, or omitted to be done, by Executive not in good faith and without
reasonable belief that such action or omission was in or not opposed to the best
interests of Employer and (b) no failure to achieve performance targets shall be
considered a willful act of misconduct.
Termination "for cause" pursuant to clause (ii) of the
preceding sentence shall be effected only if (i) Employer has delivered to
Executive a copy of a notice of termination that complies with the foregoing
paragraph and that gives Executive, on at least fifteen (15) business days'
prior notice, the opportunity, together with Executive's counsel, to be heard
before Employer's Board, and (ii) the Board (after such notice and opportunity
to be heard), adopts a resolution that in the good faith opinion of the Board
Executive was guilty of conduct set forth in clause (ii) of the preceding
sentence, and specifying the particulars thereof in reasonable detail.
5.3 By Executive for Good Reason. Executive may, at any time during the
Employment Period by notice to Employer, terminate the Employment Period under
this Agreement "for good reason" effective immediately. For the purposes hereof,
"good reason" means any material breach by Employer of any provision of this
Agreement. Without limiting the generality of the foregoing, each of the
following shall be deemed to be "good reason": (i) a failure by the Employer to
comply with any provision of this Agreement which has not been cured within ten
(10) days after notice of such noncompliance has been given by Executive to the
Employer, (ii) the assignment to Executive by Employer of duties inconsistent
with Executive's position, responsibilities or status with Employer as in effect
on the date of this Agreement including, but not limited to, any reduction
whatsoever in such position, duties, responsibilities or status, any change in
Executive's titles, offices or perquisites, as then in effect, or any removal of
Executive from, or any failure to re-elect Executive to, any of such positions
(except for Executive's election to the Board), except in connection with the
termination of his employment on account of his death, disability, or for cause,
(iii) any failure to pay (or any reduction in) compensation (including benefits)
paid or payable to Executive pursuant to the provisions of Section 4 hereof,
(iv) any purported termination of Executive's employment for cause which is not
effected in accordance with the requirements of Section 5.2 hereof (and for
purposes of this Agreement no such purported termination shall be effective) or
(v) the failure of the Employer to obtain the assumption of its obligation to
perform this Agreement by any successor to all or substantially all of the
assets of the Employer as set forth in Section 9 herein.
5.4 Disability. During the Employment Period, if, as a result of
physical or mental incapacity or infirmity, Executive shall be unable to perform
his duties under this Agreement for (i) a continuous period of at least 180
days, or (ii) periods aggregating at least 270 days during any period of 12
consecutive months (each a "Disability Period"), and at the end of the
Disability Period there is no reasonable probability that Executive can promptly
resume his duties hereunder, Executive shall be deemed disabled (the
"Disability") and Employer, by notice to Executive, shall have the right to
terminate the Employment Period for Disability at, as of or after the end of the
Disability Period. The existence of the Disability shall be determined by a
reputable, licensed physician mutually selected by Employer and Executive, whose
determination
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shall be final and binding on the parties. Executive shall cooperate in all
reasonable respects to enable an examination to be made by such physician.
Notwithstanding the foregoing, Employer may conclusively determine Executive to
be disabled at any time after the end of the Disability Period if Executive has
then commenced receiving benefits under the long-term disability insurance
policy obtained pursuant to Section 4.5 hereof.
5.5 Death. The Employment Period shall end on the date of
Executive's death.
6. TERMINATION COMPENSATION
6.1 Termination Without Cause by Employer or for Good Reason by
Executive. If the Employment Period is terminated by Employer pursuant to the
provisions of Section 5.1 hereof or by Executive pursuant to the provisions of
Section 5.3 hereof, Employer will pay to Executive (i) Executive's Base Salary
through the date of termination, (ii) within five (5) days following the date of
termination in one lump sum an amount equal to the greater of the (a) Base
Salary multiplied by the number of full and partial years then remaining in the
Employment Period (assuming no termination) and (b) one year's Base Salary
(calculated in each case at the Base Salary rate then in effect); and (iii) on
the date due pursuant to the provisions of Section 4.2 hereof, the bonus for the
then current Bonus Year, without proration. All other benefits provided for in
Sections 4.3, 4.4, 4.5 and Section 4.9 shall be continued at the expense of
Employer for the longer of the balance of the unexpired portion of the
Employment Period (assuming no termination) and twelve months from date of
termination.
6.2 Certain Other Terminations. If the Employment Period is terminated
by Employer pursuant to the provisions of Section 5.2, or by death, pursuant to
the provisions of Section 5.5, Employer shall pay to Executive, within thirty
(30) days of the date of termination, Executive's Base Salary through the date
of termination. Provided the date of termination is after the end of a calendar
year for which a Bonus is payable, but prior to the date of payment, Employer
shall also pay to Executive, when due pursuant to provisions of Section 4.2
hereof, the Bonus for the Bonus Year in which the date of termination occurred.
Employer shall have no obligation to continue any other benefits provided for in
Section 4 past the date of termination.
6.3 Termination for Disability. If the Employment Period is terminated
by Employer pursuant to the provisions of Section 5.4, Employer shall make all
payments and continue all benefits for the period specified in Section 6.1;
provided, however, that such payment shall be reduced by any amounts actually
paid to Executive pursuant to any disability insurance or other such similar
program maintained by Employer, including amounts paid pursuant to any long-term
disability policy purchased pursuant to Section 4.5 hereof.
6.4 No Other Termination Compensation. Executive shall not, except as
set forth in this Section 6, be entitled to any compensation following
termination of the Employment Period.
6.5 Mitigation; Offset. Executive shall not be required to mitigate the
amount of any payments or benefits provided for hereunder upon termination of
the Employment Period by seeking employment with any other person, or otherwise,
nor shall the amount of any such payments or benefits be reduced by any
compensation, benefit or other amount earned by,
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accrued for or paid to Executive as the result of Executive's employment by or
consultancy or other association with any other person or entity, provided, that
any medical, dental or hospitalization insurance or benefits provided to
Executive in connection with his employment by or consultancy with any person or
entity unaffiliated with the Employer during such period shall be primary to the
benefits to be provided to Executive pursuant to this Agreement for the purposes
of coordination of benefits. Notwithstanding the foregoing, if Executive elects
to be covered by the insurance or benefits provided by an entity or person
unaffiliated with the Employer, Executive agrees that Employer may terminate any
insurance or benefits provided to the Executive. The Employer's obligation to
pay termination compensation pursuant to this Section 6 shall not be reduced by
any amount owed by Executive to the Employer.
7. INDEMNIFICATION
7.1 General. The Employer shall indemnify the Executive to the fullest
extent permitted by law in effect as of the date hereof against all costs,
expenses, liabilities and losses (including, without limitation, attorneys'
fees, judgments, fines, penalties, ERISA excise taxes, penalties and amounts
paid in settlement) reasonably incurred by the Executive in connection with a
Proceeding. For the purposes of this Section, a "Proceeding" shall mean any
action, suit or proceeding, whether civil, criminal, administrative or
investigative, in which the Executive is made, or is threatened to be made, a
party to, or a witness in, such action, suit or proceeding by reason of the fact
that he is or was an officer, director or employee of the Employer or is or was
serving as an officer, director, member, employee, trustee or agent of any other
entity at the request of the Employer.
7.2 Costs and Expenses. The Employer shall advance to the Executive all
reasonable costs and expenses incurred by him in connection with a Proceeding
within 20 days after receipt by the Employer of a written request for such
advance. Such request shall include an itemized list of the costs and expenses
and an undertaking by the Executive to repay the amount of such advance if it
shall ultimately be determined that he is not entitled to be indemnified against
such costs and expenses. Notwithstanding anything herein to the contrary, to the
extent that Executive has served on behalf of the Employer as a witness or other
participant in any Proceeding, or has been successful, on the merits or
otherwise, in defense of any Proceeding, including but not limited to, the
dismissal of any Proceeding without prejudice, Executive shall be indemnified
against all costs, charges and expenses (including attorney's fees) actually
incurred by Executive in connection therewith.
7.3 Standard of Conduct. The Executive shall not be entitled to
indemnification under this Section unless he meets the standard of conduct
specified in the Delaware General Corporation Law. Notwithstanding the
foregoing, to the extent permitted by law, neither Section 145(d) of the
Delaware General Corporation Law nor any similar provision shall apply to
indemnification under this Section, so that if the Executive in fact meets the
applicable standard of conduct, he shall be entitled to such indemnification
whether or not the Employer (whether by the Board of Directors, the
shareholders, independent legal counsel or other party) determines that
indemnification is proper because he has met such applicable standard of
conduct. Neither the failure of the Employer to have made such a determination
prior to the
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commencement by the Executive of any suit or arbitration proceeding seeking
indemnification, nor a determination by the Employer that he has not met such
applicable standard of conduct, shall create a presumption that he has not met
the applicable standard of conduct.
7.4 Settlement. The Employer shall not settle any Proceeding or claim
in any manner which would impose on the Executive any penalty or limitation
without his prior written consent. Neither the Employer nor the Executive will
unreasonably withhold its or his consent to any proposed settlement. The
Employer shall not be liable to indemnify the Executive under this Agreement for
any amounts paid in settlement of any action or claim effected without its
written consent.
7.5 Notification and Defense of Claim. Promptly after receipt by the
Executive of notice of the commencement of any Proceeding, the Executive will,
if a claim in respect thereof is to be made against the Employer under this
Agreement, notify the Employer in writing of the commencement thereof; but the
omission to so notify the Employer will not relieve the Employer from any
liability that it may have to the Executive otherwise than under this Agreement.
Notwithstanding any other provision of this Agreement, with respect to any such
Proceeding as to which the Executive gives notice to the Employer of the
commencement thereof:
(i) The Employer will be entitled to participate therein at
its own expense; and
(ii) Except as otherwise provided in this Section 7.5(ii) to
the extent that it may wish, the Employer, jointly with any other indemnifying
party similarly notified, shall be entitled to assume the defense thereof, with
counsel satisfactory to the Executive. After notice from the Employer to the
Executive of its election to so assume the defense thereof, the Employer shall
not be liable to the Executive under this Agreement for any legal or other
expenses subsequently incurred by the Executive in connection with the defense
thereof other than reasonable costs of investigation or as otherwise provided
below. The Executive shall have the right to employ the Executive's own counsel
in such Proceeding, but the fees and expenses of such counsel incurred after
notice from the Employer of its assumption of the defense thereof shall be at
the expense of the Executive unless (a) the employment of counsel by the
Executive has been authorized by the Employer, (b) the Executive shall have
reasonably concluded that there may be a conflict of interest between the
Employer and the Executive in the conduct of the defense of such Proceeding
(which conclusion shall be deemed reasonable if, without limitation, such action
shall seek any remedy other than money damages and the Executive would be
personally affected by such remedy or the carrying out thereof), or (c) the
Employer shall not in fact have employed counsel to assume the defense of the
Proceeding, in each of which cases the fees and expenses of counsel shall be at
the expense of the Employer. The Employer shall not be entitled to assume the
defense of any Proceeding brought against the Executive by or on behalf of the
Employer or as to which the Executive shall have reached the conclusion provided
for in clause (b) above.
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8. CONFIDENTIALITY
Unless otherwise required by law or judicial process, Executive shall
retain in confidence after termination of Executive's employment with Employer
pursuant to this Agreement all confidential information known to the Executive
concerning the Employer and its businesses for the shorter of one (1) year
following such termination or until such information is publicly disclosed by
the Employer or otherwise becomes publicly disclosed other than through
Executive's actions.
9. SUCCESSORS; BINDING AGREEMENT
(a) The Employer 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 Employer, by agreement, in
form and substance satisfactory to the Executive, expressly to assume and agree
to perform this Agreement in the same manner and to the same extent that the
Employer would be required to perform if no such succession had taken place.
Failure of the Employer to obtain such assumption and agreement prior to the
effectiveness of any such succession will be a breach of this Agreement and
entitle the Executive to compensation from the Employer in the same amount and
on the same terms as the Executive would be entitled to hereunder had the
Employer terminated the Executive without Cause pursuant to the provisions of
Section 5.1 hereof on the succession date (and assuming a Change in Control of
the Employer had occurred prior to such succession date). As used in this
Agreement, "the Employer" means the 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 9 or which otherwise becomes
bound by all the terms and provisions of this Agreement by operation of law or
otherwise.
(b) This Agreement and all rights of the Executive hereunder shall
inure to the benefit of and be enforceable by Executive and Executive's personal
or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If Executive should die while any amounts
would still be payable to him hereunder if he had continued to live, all such
amounts, unless otherwise provided herein, shall be paid in accordance with the
terms of this Agreement to Executive's devisee, legatee, or other beneficiary
or, if there be no such beneficiary, to Executive's estate.
10. SURVIVORSHIP
The respective rights and obligations of the parties hereunder shall
survive any termination of this Agreement to the extent necessary to the
intended preservation of such rights and obligations.
11. MISCELLANEOUS
11.1 Notices. Any notice, consent or authorization required or
permitted to be given pursuant to this Agreement shall be in writing and sent to
the party for or to whom intended, at the address of such party set forth below,
by registered or certified mail, postage paid (deemed given five days after
deposit in the U.S. mails) or personally or by facsimile transmission (deemed
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given upon receipt), or at such other address as either party shall designate by
notice given to the other in the manner provided herein.
If to Employer: Prime Hospitality Corp.
000 Xxxxx 00 Xxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
Attn.: Secretary
If to Executive: Xx. Xxxxx X. Xxxxx
Prime Hospitality Corp.
000 Xxxxx 00 Xxxx
X.X. Xxx 0000
Xxxxxxxxx, XX 00000-0000
11.2 Legal Fees. Employer shall promptly reimburse the Executive for
the reasonable legal fees and expenses incurred by Executive in connection with
enforcement of Executive's rights hereunder.
11.3 Taxes. Employer is authorized to withhold (from any compensation
or benefits payable hereunder to Executive) such amounts for income tax, social
security, unemployment compensation and other taxes as shall be necessary or
appropriate in the reasonable judgment of Employer to comply with applicable
laws and regulations.
11.4 Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New Jersey applicable
to agreements made and to be performed therein.
11.5 Arbitration. Any dispute or controversy arising under or in
connection with this Agreement shall be settled exclusively by arbitration in
Fairfield, New Jersey in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitration award in
any court having jurisdiction; provided, however, that Executive shall be
entitled to seek specific performance of his right to be paid until expiration
of the Employment Period during the pendency of any arbitration.
11.6 Headings. All descriptive headings in this Agreement are inserted
for convenience only and shall be disregarded in construing or applying any
provision of this Agreement.
11.7 Counterparts. This Agreement may be executed in counterparts, each
of which shall be deemed to be an original, but all of which together shall
constitute one and the same instrument.
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11.8 Severability. If any provision of this Agreement, or any part
thereof, is held to be unenforceable, the remainder of such provision and this
Agreement, as the case may be, shall nevertheless remain in full force and
effect.
11.9 Entire Agreement and Representation. This Agreement contains the
entire agreement and understanding between Employer and Executive with respect
to the subject matter hereof. No representations or warranties of any kind or
nature relating to Employer or its several businesses, or relating to Employer's
assets, liabilities, operations, future plans or prospects have been made by or
on behalf of Employer to Executive. This Agreement supersedes any prior
agreement between the parties relating to the subject matter hereof.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
PRIME HOSPITALITY CORP.
By: /s/ Xxxxx X. Xxxxx
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Xxxxx X. Xxxxx
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