EXHIBIT 10.20
XXXX SUPPLEMENTAL RETENTION
AND PERFORMANCE AGREEMENT
This Supplemental Retention and Performance Agreement ("Agreement") is
made as of this 1st day of December, 2002 by and between ARLINGTON HOSPITALITY,
INC., a Delaware corporation ("Company"), whose address is 0000 Xxxxx Xxxxxxxxx
Xxxxxxx Xxxx, Xxxxxxxxx Xxxxxxx, Xxxxxxxx 00000, and XXXXX X. XXXX ("Employee"),
whose address is 0000 Xxxxx Xxx Xxxxx, Xx. Xxxxxxx, Xxxxxxxx 00000. Also party
hereto for the purposes of Section 4 is Arlington Lodging Group, Inc.
RECITALS:
A. Employee is an executive officer of the Company. The Company is
desirous of entering into this Agreement in order to provide Employee: (i) an
incentive to continue his employment with the Company; and (ii) an incentive
compensation program to reward Employee for attaining certain desirable mutually
agreed objectives.
B. Employee is willing to continue his employment with the Company,
subject to the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the promises and covenants contained
herein and other good and valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties agree as follows:
1. Recitals. The Recitals set forth above are incorporated by
reference herein and made a part hereof as if fully rewritten.
2. Severance Bonus. In the event that between the date hereof and
December 31, 2003, Employee's employment with the Company is terminated other
than due to death, "Disability," "Voluntary Termination" or "Cause," Employee
shall be entitled to a Severance Bonus of $50,000, payable at the rate of
$10,000 per month on or before the 10th day of each month following the month in
which Employee's employment is terminated. In the event Employee's employment is
not terminated by the Company on or before December 31, 2003, or Employee's
employment is terminated prior to such date due to death, Disability, Voluntary
Termination or Cause, then Employee shall not be entitled to a Severance Bonus.
For purposes of this Section 2, the following definitions shall apply:
(a) "Disability" shall mean termination of Employee's employment
following absence from the Company pursuant to circumstances which qualify
Employee to receive disability payments pursuant to the disability
insurance policy presently maintained by the Company for the benefit of
Employee.
(b) "Cause" shall mean termination of Employee's employment by the
Company due to any of the following circumstances:
(i) conduct amounting to fraud, embezzlement, illegal misconduct
in connection with Employee's performance of services for the Company
or any of its subsidiaries;
(ii) the conviction of Employee by a court of proper jurisdiction
of (or his written, voluntary and freely given confession to) a crime
which constitutes a felony (other than a traffic violation) or an
indictment that results in material injury to the Company's property,
operation or reputation;
(iii) the willful failure of Employee to comply with reasonable
directions of the Board after:
(1) written notice delivered to the Employee describing such
willful failure; and
(2) Employee has failed to cure or take substantial steps to
cure such willful failure after a reasonable time period as
determined by the Board in its reasonable discretion (not to be
less than thirty (30) days) unless counsel for the Company, in
good faith believes, that the directions of the Board (or its
actions or inactions in response to the Employee's written
notice) are illegal; or
(iv) willful misconduct or a material default by the Employee in
the performance or observance of any promise or undertaking of
Employee or commission of an act of dishonesty in connection with
Employee performing services to or for the benefit of the Company or
any of its subsidiaries, which willful misconduct, default or
dishonest act has a material adverse effect on the Company and has
continued for a period of ten (10) business days after written notice
thereof from the Company to the Employee; provided, that if such
willful misconduct or default is of a nature that it or the injury
therefrom cannot be reasonably cured within such ten (10) day period
(but is curable -- for purposes hereof an act of dishonesty with
material adverse consequences will not be deemed susceptible of cure)
then, if Employee shall have commenced an attempt to cure such default
within such ten (10) day period, the period to cure the default shall
be extended until the earlier of:
(1) the date which is forty-five (45) days after receipt of
notice;
or
(2) the date that Employee has failed to diligently continue
his efforts in a reasonable manner to cure his default.
(c) "Voluntary Termination" shall mean Employee's voluntary
resignation from employment by the Company.
Company may maintain an employee leasing agreement under which Employee
is employed by a separate corporation and then "leased" to the Company whereby
the Company agrees to pay all costs of employment of Employee pursuant to an
employee leasing contract ("ELC"). Notwithstanding anything to the contrary
contained in the ELC, Employee shall be deemed to constitute an employee of, and
employed by the Company, for purposes of this Agreement, whether Employee is a
direct employee of the Company or leased to the Company pursuant to the ELC.
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All determinations of Employee's entitlement to Severance Bonus shall
be made in the sole discretion of the Company and shall be binding on Employee
absent a showing of bad faith or manifest error.
3. Continued Employment Performance Bonus. If and only if Employee remains
in the employ of the Company through December 31, 2003, then Employee shall be
paid the "Retention Bonus Amount" on or before ten (10) days following the
Company's completion of its audit for calendar year 2003, with such sum to be
paid in cash ("Cash Retention Bonus Amount") plus common stock of the Company
("Stock Retention Bonus Amount") based upon that number of shares of common
stock of the Company ("Shares") set forth below, subject to adjustment in the
event of any stock split, reverse stock split, stock dividend, recapitalization,
merger, consolidation, or other similar event occurs between the date hereof and
January 10, 2004. By setting the Stock Retention Bonus Amount as a finite number
of Shares, the Company is providing Employee the opportunity to share in the
subsequent appreciation of such shares. Employee shall not be entitled to any
Retention Bonus if Employee is not employed by the Company at January 1, 2004
for any reason.
The Retention Bonus Amount shall be the sum of each of the "Targets"
set forth below that are achieved by Employee during Employee's employment by
the Company. All determinations of Target achievement shall be made in the sole
discretion of the Company and shall be binding upon Employee absent a showing of
bad faith or manifest error. The Company shall compute the aggregate Retention
Bonus Amount as soon as practicable following completion of its financial
statements for calendar year 2003 and shall total up the Cash Retention Bonus
Amount plus the number of Shares comprising the Stock Retention Bonus Amount
(any fractional Share shall be rounded up to the nearest whole Share amount).
The Targets are as follows:
(a) $150 per month plus 45.45 Shares per month for each month from
December, 2002 through November, 2003 that Employee delivers to the CEO and
the Board of Directors of the Company ("Board"), unaudited financial
statements (income statement balance sheet and statement of cash flow) of
the Company, by the 25th of the following month (maximum of $1,800 plus
545.45 Shares).
(b) $250 per quarter plus 75.76 Shares per quarter for each quarter
that a Form 10-Q is filed during 2003 within the SEC specified deadline (no
extension) without requiring an amendment during the period of this
Agreement (maximum of $750 plus 227.27 Shares).
(c) $500 plus 151.52 Shares if Form 10-K required in 2003 is filed
within SEC specified deadline (no extension).
(d) $250 per quarter plus 75.76 Shares per quarter for every quarter
in 2003 that involved a Form 3, 4 or 5 filing and the filing was filed
within the SEC filing time frame and in a manner where no supplemental
disclosure (proxy or otherwise) is required or any amendment (e.g., done
right, done on time and Company does not look bad) (maximum of $1,000 plus
303.03 Shares in the event filings are made every quarter; no bonus
allocable for any quarter in which a filing is not required).
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(e) $1,250 plus 378.79 Shares for identification and hiring/naming of
controller/successor acceptable to Board by April 1, 2003 (Target met if
offer is accepted prior to such date but employment starts later).
(f) $250 plus 75.76 Shares for every hotel sale by the Company or any
of its subsidiaries under contract after November 7, 2002 and closed by
December 31, 2003 not including Vicksburg or Freeport properties owned by
Company subsidiaries.
(g) $100 plus 30.30 Shares for initial draft minutes of Board of
Directors meeting held after November 6, 2002 completed and circulated to
board for comment/amendment within ten (10) business days following a board
meeting.
(h) $100 plus 30.30 Shares for management of the minutes amendment
iteration process such that each set of minutes referred in subparagraph
(g) above to be voted on at the next board meeting are not amended.
(i) Financing Bonus. Financing terms of the following must be
acceptable to the Board and closed by dates below:
(i) $5,000 plus 1,515.15 Shares for a minimum $70,000,000
(Omnibus) if closed before February 1, 2003 and if LaSalle line
extended; $2,500 plus 757.58 Shares if after February 1, 2003 and
before May 31, 2003.
(ii) Mutually exclusive with (i) above, (i.e., this test is not
earned if the test in (i) above is earned) $3,750 plus 1,136.36 Shares
for a minimum $8,500,000 holding company financing of at least two and
one-half (2 1/2) years ("asset sale bridge note") if closed before
December 31, 2002 or $2,500 plus 757.58 Shares if after December 31,
2002 and before February 1, 2003 or the extended LaSalle line
termination but not later than May 31, 2003.
(iii) Mutually exclusive with (i) and (ii) above (i.e., this test
is not earned if the test in (i) or (ii) above is earned), $1,000 plus
303.03 Shares for a minimum $8,500,000 holding company financing of at
least one (1) year but less than two and one-half (2 1/2) years
("LaSalle or replacement") if closed before December 31, 2002 or $500
plus 151.52 Shares if after December 31, 2002 and before February 1,
2003 or extended LaSalle line termination date.
(iv) $500 plus 151.52 Shares if by November 3, 2002 and $250 plus
75.76 Shares if by December 31, 2002, LaSalle grants extension of line
of credit in place as of November 6, 2002 past April 29, 2003. But not
paid if renewed full line of LaSalle achieves Test (iii) above -
Mutually exclusive (no double dip).
(v) If no $70,000,000 refinancing (Omnibus) then $1,250 plus
378.79 Shares for executing during 2003, a 1 year or more extension of
the $20,000,000 GECC development line for another year.
The parties agree to take such actions and execute and deliver, promptly upon
request, such additional documents as may be necessary or appropriate to
implement the terms of this Agreement and effectuate its intent.
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4. Employment Contract. The term of Employee's existing employment
agreement ("Employment Agreement") is hereby extended to a termination date of
January 12, 2005 and is hereby amended by substituting the Company for Arlington
Lodging Group, Inc. as Employee's employer. Notwithstanding anything to the
contrary contained in the Employment Agreement, the bonus amounts, if any,
payable to Employee pursuant to Section 2 and Section 3 of this Agreement are
specifically excluded from any severance compensation payable to Employee
pursuant to the Employment Agreement.
Notwithstanding anything to the contrary contained in Employee's Employment
Agreement dated January 12, 2001 or in this Agreement, Company reserves the
right on an annual basis, beginning for calendar year 2004, to modify the
criteria for Employee's earning compensation under his Bonus Program in the
Employment Agreement, pursuant to any business plan or new bonus program
criteria approved by Company's Chief Executive Officer and/or Board of
Directors, provided such revised criteria provide Employee the opportunity to
earn potential bonus income at least substantially similar to that set forth in
the Employment Agreement, as determined in good faith discretion of the Board of
Directors. The terms of this Section 4 will supersede any inconsistencies with
the remainder of this Agreement or the Employment Agreement.
5. Representations Regarding Stock Retention Bonus Amount. Employee
acknowledges and represents the following to Company with respect to the shares
of common stock of the Company, if any, that will be issued to Employee pursuant
to the Stock Retention Bonus Amount (the "Shares"):
(a) Employee will be subject to income tax based upon the fair market
value of the Shares issued to Employee on the date of issuance. Employee
acknowledges that in the event that the Shares appreciate over the per
share price used in computing the Stock Retention Bonus Amount, Employee
will be liable for taxes for such issuance, which taxes may exceed the Cash
Bonus Retention Amount. Employee hereby grants to the Company the right to
apply such amount of the Cash Bonus Retention Amount as it deems necessary
to satisfy applicable withholding tax obligations with respect to the
Retention Bonus Amount (cash and Shares amounts), and further agrees that
should more than the full Cash Bonus Retention Amount be necessary to
satisfy Company's applicable withholding tax obligations regarding
Employee, then Employee shall immediately fund such shortfall on notice
from the Company and further authorizes the Company to withhold from
Employee's paycheck such additional sums as are necessary to fund the
shortfall.
(b) The Shares issuable to Employee will be acquired solely for the
account of Employee for investment and not for subdivision, resale or
redistribution. Employee has no direct or indirect agreements or
understandings to sell or resell the Shares.
(c) The Shares will not be registered under the Securities Act of
1933, as amended ("Act"), and accordingly, their resale will only be
permitted pursuant to an exemption from registration under the Act or a
registration statement under the Act. The Company has no obligation to
register the Shares and has no obligation to file those reports under the
Securities Exchange Act of 1934 necessary to qualify the Shares for resale
pursuant to Rule 144 under the Act. The certificate for the Shares will
contain a corresponding restrictive legend.
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(d) Employee has:
(i) sufficient knowledge regarding the Company to evaluate an
investment in the Shares;
(ii) sufficient net worth and liquidity to bear the entire risk
of loss with respect to the Shares; and
(iii) has been advised that he should consult with his tax
advisors to evaluate the tax impact of issuance and ownership of the
Shares, and has access to competent tax advisors for advice as to the
foregoing.
6. Miscellaneous.
(a) Survival. All representations, warranties and covenants of the parties
contained in this Agreement or made pursuant hereto, shall survive the date of
execution of this Agreement and remain in full force and effect, and shall
survive the termination or expiration of this Agreement.
(b) Counsel. All parties hereto have independent counsel, and no inference
shall be drawn in favor of or against any party by virtue of the fact that such
party's counsel was or was not the principal draftsman of this Agreement.
(c) Notices. All notices or other communications required or permitted
under this Agreement shall be in writing and shall be deemed to have been duly
given if delivered personally or sent by registered or certified mail, postage
prepaid or via national courier, addressed as to the party entitled to notice at
the address set forth above, or such other address as is subsequently provided
by written notice from such party to the other party.
(d) No Assignment. Except as expressly noted below, this Agreement and the
rights of the parties under this Agreement may not be sold, assigned or
otherwise transferred without the prior written consent of the other party.
(e) Entire Agreement. This Agreement, sets forth the entire agreement and
understanding of the parties hereto in respect of the subject matter
contemplated hereby, and supersedes all prior agreements, arrangements and
understandings relating to the subject matter hereof.
(f) Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Illinois. Should any dispute arise
under this Agreement, it shall be litigated in the state or federal courts
situated in Xxxx County, Illinois, to which jurisdiction and venue all parties
consent.
(g) Counterparts. This Agreement may be executed in two or more
counterparts, each of which, whether photocopy, facsimile or ink, shall be
deemed an original, but all of which together shall constitute one instrument.
(h) Approval. This Agreement shall be binding upon the parties, their
respective heirs, successors and assigns, and each entity party represents and
warrants that this Agreement has been duly approved by proper action.
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IN WITNESS WHEREOF, the undersigned have executed this Agreement as of
the date first set forth above.
ARLINGTON HOSPITALITY, INC. EMPLOYEE
/s/ Xxxxx X. Xxxx
----------------------------------
XXXXX X. XXXX
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Its:
--------------------------------
Date of Execution: 05-06-03
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ARLINGTON LODGING GROUP, INC.(1)
By: /s/ Xxxxxxx X. Xxxx
--------------------------------
Its: --------------------------------
Date of Execution: 05-06-03
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(1) For purposes of Section 4.
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