EXHIBIT 10.1
EXECUTIVE EMPLOYMENT AGREEMENT
This EXECUTIVE EMPLOYMENT AGREEMENT ("Agreement") is made as of the 9th day
of March, 1998, by and among Patriot American Hospitality, Inc., a Delaware
corporation (the "Company"), Wyndham International, Inc., a Delaware corporation
(the "Affiliated Company") and Xxxxxxxx X. Xxxxx ("Executive"). The Company and
the Affiliated Company may hereinafter be referred to jointly as the
"Companies."
WHEREAS, as an additional inducement to Executive to enter into this
Agreement, the Companies shall, on the Commencement Date (as hereinafter
defined), enter into a separate Indemnification Agreement with Executive of even
date in the form attached hereto as Exhibit A (the "Indemnification Agreement");
and
WHEREAS, Executive is desirous of committing to serve the Companies on the
terms herein provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties agree as follows:
1. EMPLOYMENT. The term of this Agreement shall extend from the date hereof
(the "Commencement Date") until the third anniversary of the Commencement Date.
On the third anniversary of the Commencement Date (and each subsequent
anniversary thereof), the term of this Agreement shall be automatically extended
for an additional year unless either the Company or Executive provides written
notice of its or his intent not to extend the Agreement at least forty-five (45)
days prior to such anniversary date, in which event the Agreement shall expire
in accordance with its terms. The term of this Agreement shall be subject to
termination as provided in Paragraph 6 and may be referred to herein as the
"Period of Employment."
2. POSITION AND DUTIES. During the Period of Employment, Executive shall
serve as the Executive Vice President and Treasurer of the Company and the
Executive Vice President and Treasurer of the Affiliated Company, shall report
to the President and Chief Operating Officer of the Company and the President
and Chief Operating Officer of the Affiliated Company, shall be the senior most
financial executive at the Affiliated Company other than the President, shall
have primary supervision and control over and responsibility for the day-to-day
business and affairs of those functions and operations of the Companies
described on Schedule I attached hereto and made a part hereof by this reference
and shall have such other powers and duties as may from time to time be
prescribed by either President, provided that such duties are consistent with
Executive's position or other positions that he may hold from time to time,
subject to outside investments customary for executives of Executive's seniority
that are not prohibited by Paragraph 5. Executive shall devote his full
working time and efforts to the business and affairs of the Companies.
Notwithstanding the foregoing, Executive may serve on other boards of directors
or engage in religious, charitable or other community activities as
long as such services and activities are disclosed to the Presidents and do not
materially interfere with Executive's performance of his duties to the Companies
as provided in this Agreement.
3. COMPENSATION AND RELATED MATTERS.
(a) BASE SALARY. Initially, Executive shall receive an annual base salary
("Base Salary") equal to $300,000. Executive's Base Salary shall be
redetermined at least thirty (30) days before each annual compensation
determination date established by the Companies during the Period of Employment
in an amount to be fixed by the Boards of Directors of the Companies (the
"Boards"), but may never be decreased except in connection with across-the-board
salary reductions similarly affecting all executives of the Companies; provided,
however, in such event, Executive's reduction shall in no event be greater than
any other executive measured against any criteria. The Base Salary, as
redetermined, may be referred to herein as "Adjusted Base Salary." The Base
Salary or Adjusted Base Salary shall be payable in substantially equal bi-weekly
installments and shall in no way limit or reduce the obligations of the
Companies hereunder.
(b) INCENTIVE COMPENSATION. In addition to Base Salary or Adjusted Base
Salary, Executive shall be eligible to receive, on or about the annual
compensation determination date established by the Companies of each year,
during the Period of Employment, cash incentive compensation in an amount
determined by the Compensation Committees of the Boards based on individual
performance, performance by the Companies and total return to shareholders. The
incentive compensation potential shall be up to eighty percent (80%) of Base
Salary or Adjusted Base Salary, as applicable, with a minimum incentive
compensation of fifty percent (50%) of Base Salary or Adjusted Base Salary, as
applicable, which shall be payable at not less than that level in all events.
Executive will also participate in such incentive compensation plans as the
Boards or the Compensation Committees thereof shall determine from time to time
for employees of the same status within the hierarchy of the Companies.
(c) EXPENSES. Executive shall be entitled to receive prompt reimbursement
for all reasonable expenses incurred by him (in accordance with the policies and
procedures then in effect and established by the Companies for their senior
executive officers) in performing services hereunder during the Period of
Employment, provided that Executive properly accounts therefor in accordance
with the Companies' policy.
(d) RESTRICTED PAIRED UNIT AWARD. On the Commencement Date, the Companies
shall issue to Executive a Restricted Paired Unit Award covering the right to
receive 30,000 shares of common stock of the Company and common stock of the
Affiliated Company which trade as a pair ("Paired Shares"). Such Award shall
vest and become nonforfeitable on a ratable basis over four (4) years, on each
anniversary of the date of grant.
(e) OPTION GRANT. On the Commencement Date, the Companies shall issue to
Executive a non-qualified stock option (the "Option") to acquire 80,000 Paired
Shares. The
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Option shall vest and become exercisable with respect to 6.25% of the number of
Paired Shares underlying the Option quarterly on the first day of each calendar
quarter thereafter, such that all the Paired Shares underlying the Option have
vested and are exercisable on or before the fourth anniversary of the
Commencement Date. Unless otherwise provided in Paragraph 7, the Option shall
expire on the earlier of the tenth anniversary of the date of grant or the 91st
day following Executive's termination of employment. The exercise price per
share for the Option shall be $26.00. The Companies further agree to issue to
Executive in 1999 an option to acquire 10,000 Paired Shares. The exercise price
per share for such option shall be the quoted closing price of the Paired Shares
on the New York Stock Exchange on the date of grant. If the date of grant is not
a business day, the price shall be determined as of the immediately preceding
business day.
(f) RELOCATION EXPENSES. Executive shall relocate to the Dallas area as
soon as reasonably practicable. The Companies shall reimburse Executive for
relocation expenses in accordance with the Companies' standard relocation policy
for executive vice presidents.
(g) LOAN. The Companies will loan Executive $750,000 on a non-recourse
basis, due on the third anniversary of the Commencement Date, except as
otherwise provided in this Agreement. The loan will be made within five (5)
days after the Commencement Date. The unpaid principal amount will bear
interest at 7 percent compounded annually, payable annually. If Executive
remains employed until the third anniversary of the Commencement Date and the
sum of the value of the compensation earned by Executive during the Period of
Employment, including the value of Paired Shares granted (whether vested or
not), dividends on Paired Shares received and earned, stock option exercise
value (whether vested or not), incentive compensation paid or earned, Base
Salary and Adjusted Base Salary paid or earned ("Total Compensation"), is less
than $3,000,000, a portion of the loan amount will be forgiven such that when
such forgiven amount (which shall in no event exceed $750,000) is added to the
Total Compensation, the total amount shall equal $3,000,000. In the event
Executive's employment is terminated without Cause under Subparagraph 6(e), or
for Good Reason under Subparagraph 6(f), or pursuant to Subparagraph 8(b) in
connection with a Change in Control prior to the third anniversary of the
Commencement Date, if the sum of Total Compensation and Severance Payments is
less than $3,000,000, a portion of the loan amount will be forgiven such that
when such forgiven amount (which shall in no event exceed $750,000) is added to
the sum of Total Compensation and Severance Payments, the total amount shall
equal $3,000,000. For purposes of this Subparagraph 3(g), the value of the
Paired Shares and stock option exercise value shall be determined using the
average quoted closing price per Paired Share on the New York Stock Exchange for
the twenty (20) business days ending on the third anniversary of the
Commencement Date, or the Date of Termination, as the case may be; provided,
however, should Executive sell his Paired Shares or exercise his options during
the Period of Employment, the quoted closing price per Paired Share on the New
York Stock Exchange for the date of sale or option exercise shall be used.
(h) OTHER BENEFITS. During the Period of Employment, Executive shall be
entitled to continue to participate in or receive benefits under all of the
Companies' Employee Benefit
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Plans in effect on the Commencement Date, or under plans or arrangements that
provide Executive with at least substantially equivalent benefits to those
provided under such Employee Benefit Plans. As used herein, "Employee Benefit
Plans" include, without limitation, each pension and retirement plan;
supplemental pension, retirement and deferred compensation plan; savings and
profit-sharing plan; stock ownership plan; stock purchase plan; stock option
plan; life insurance plan; medical insurance plan; disability plan; and health
and accident plan or arrangement established and maintained by the Companies on
the date hereof for employees of the same status within the hierarchy of the
Companies. During the Period of Employment, Executive shall be entitled to
participate in or receive benefits under any employee benefit plan or
arrangement which may, in the future, be made available by the Companies to
their executives and key management employees, subject to and on a basis
consistent with the terms, conditions and overall administration of such plan or
arrangement. Any payments or benefits payable to Executive under a plan or
arrangement referred to in this Subparagraph 3(h) in respect of any calendar
year during which Executive is employed by the Companies for less than the whole
of such year shall, unless otherwise provided in the applicable plan or
arrangement, be prorated in accordance with the number of days in such calendar
year during which he is so employed. Should any such payments or benefits accrue
on a fiscal (rather than calendar) year, then the proration in the preceding
sentence shall be on the basis of a fiscal year rather than calendar year.
(i) LIFE INSURANCE. The Companies shall pay the premiums on, and maintain
in effect throughout the Period of Employment, a life insurance policy on the
life of Executive in an amount not less than the sum of the amount of
Executive's then current Base Salary or Adjusted Base Salary plus the mid-point
of the bonus range. Executive shall have the right to designate the beneficiary
under such policy.
(j) VACATIONS. Executive shall be entitled to the number of paid vacation
days in each calendar year determined by the Companies from time to time for
executives at the same level as Executive, which number for calendar year 1998
is currently set at twenty (20) days. Executive shall also be entitled to all
paid holidays given by the Companies to their executives.
(k) DISABILITY INSURANCE. The Companies shall pay the premiums on, and
maintain in effect through the Period of Employment, long-term disability
insurance providing for payment of benefits at rates not less than sixty percent
(60%) of Executive's current Base Salary or Adjusted Base Salary.
4. UNAUTHORIZED DISCLOSURE.
(a) CONFIDENTIAL INFORMATION. Executive acknowledges that in the course
of his employment with the Companies, he will be allowed to become acquainted
with the Companies' business affairs, information, trade secrets, and other
matters which are of a proprietary or confidential nature, including, but not
limited to, the Companies' and their respective predecessors' operations,
business opportunities, price and cost information, finance, customer
information, business plans, various sales techniques, manuals, letters,
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notebooks, procedures, reports, products, processes, services, and other
confidential information and knowledge (collectively the "Confidential
Information") concerning the Companies. The Companies agree to provide on an
ongoing basis such Confidential Information as the Companies deem necessary or
desirable to aid Executive in the performance of his duties. Executive
understands and acknowledges that such Confidential Information is confidential,
and he agrees not to disclose such Confidential Information to anyone outside
the Companies except to the extent that (i) Executive deems such disclosure or
use reasonably necessary or appropriate in connection with performing his duties
on behalf of the Companies, (ii) Executive is required by order of a court of
competent jurisdiction (by subpoena or similar process) to disclose or discuss
any Confidential Information, provided that in such case, Executive shall
promptly inform the Companies of such event, shall cooperate with the Companies
in attempting to obtain a protective order or to otherwise restrict such
disclosure, and shall only disclose Confidential Information to the minimum
extent necessary to comply with any such court order; (iii) such Confidential
Information becomes generally known to and available for use by the hotel and
hospitality industry (the "Hotel Industry"), other than as a result of any
prohibited action or inaction by Executive; or (iv) such information has been
rightfully received by a member of the Hotel Industry or has been published in a
form generally available to the Hotel Industry prior to the date Executive
proposes to disclose or use such Confidential Information. Executive further
agrees that he will not during employment and/or at any time thereafter use such
Confidential Information in competing, directly or indirectly, with the
Companies. At such time as Executive shall cease to be employed by the
Companies, he will immediately turn over to the Companies all Confidential
Information, including papers, documents, writings, electronically stored
information, other property, and all copies of them provided to or created by
him during the course of his employment with the Companies.
(b) HEIRS, SUCCESSORS, AND LEGAL REPRESENTATIVES. The foregoing
provisions of this Paragraph 4 shall be binding upon Executive's heirs and legal
representatives. The provisions of this Paragraph 4 shall survive the
termination of this Agreement for any reason.
5. COVENANT NOT TO COMPETE. In consideration for Executive's employment by
the Companies under the terms provided in this Agreement and as a means to aid
in the performance and enforcement of the terms of the Unauthorized Disclosure
provisions of Paragraph 4, Executive agrees that
(a) during the term of Executive's employment with the Companies and for a
period of six (6) months after any termination other than termination without
Cause under Subparagraph 6(e), termination for Good Reason under Subparagraph
6(f), and termination upon a Change in Control under Subparagraph 8(b),
Executive will not, directly or indirectly, as an owner, director, principal,
agent, officer, employee, partner, consultant, servant, or otherwise, carry on,
operate, manage, control, or become involved in any manner with any business,
operation, corporation, partnership, association, agency, or other person or
entity which is in the business of owning, operating, managing or granting
franchise rights with respect to hotels, motels or other lodging facilities in
any area or territory in which the
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Companies conduct operations; provided, however, that the foregoing shall not
prohibit Executive from (i) owning up to one percent (1%) of the outstanding
stock of a publicly held company engaged in the hospitality business, or (ii)
returning to the accounting profession after his termination of employment.
Notwithstanding the foregoing, Executive shall be permitted to engage in such
activities with respect to any other hotel, motel or lodging facility that would
be immaterial to the operations of the Companies in the area or territory in
question. Immateriality, for purposes of the foregoing sentence, shall be
determined in the sole discretion of the Boards in good faith.
(b) during the term of Executive's employment with the Companies and for a
period of two (2) years thereafter, Executive will not, directly or indirectly,
either for himself or for any other business, operation, corporation,
partnership, association, agency, or other person or entity, call upon, compete
for, solicit, divert, or take away, or attempt to divert or take away any of the
customers (including, without limitation, any hotel owner, lessor or lessee,
asset manager, trustee, consumer with whom the Companies from time to time (i)
have an existing agreement or business relationship; or (ii) have included as a
prospect in their applicable pipelines) or vendors of the Companies in any of
the areas or territories in which the Companies conduct operations if such
action has the intent or effect of interfering with the Companies' relationship
with the vendor or customer.
(c) during the term of Executive's employment with the Companies and for a
period of two (2) years thereafter, Executive will not directly or indirectly
solicit or induce any present or future employee of the Companies to accept
employment with Executive or with any business, operation, corporation,
partnership, association, agency, or other person or entity with which Executive
may be associated, and Executive will not employ or cause any business,
operation, corporation, partnership, association, agency, or other person or
entity with which Executive may be associated to employ any present or future
employee of the Companies without providing the Companies with ten (10) days'
prior written notice of such proposed employment.
Should Executive violate the provisions of this Paragraph, then in addition
to all other rights and remedies available to the Companies at law or in equity,
the duration of this covenant shall automatically be extended for the period of
time from which Executive began such violation until he permanently ceases such
violation.
6. TERMINATION. Executive's employment hereunder may be terminated without
any breach of this Agreement under the following circumstances:
(a) DEATH. Executive's employment hereunder shall terminate upon his
death.
(b) DISABILITY. If, as a result of Executive's incapacity due to physical
or mental illness, Executive shall have been absent from his duties hereunder on
a full-time basis for one hundred eighty (180) calendar days in the aggregate in
any twelve (12) month period, the Companies may terminate Executive's employment
hereunder.
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(c) TERMINATION BY COMPANIES FOR CAUSE. At any time during the Period of
Employment, the Companies may terminate Executive's employment hereunder for
Cause if such termination is approved by not less than a majority of each Board
at a meeting of each Board called and held for such purpose. For purposes of
this Agreement "Cause" shall mean: (A) conduct by Executive constituting a
material act of willful misconduct in connection with the performance of his
duties, including, without limitation, misappropriation of funds or property of
the Companies or the affiliates of either of them other than the occasional,
customary and de minimis use of the Companies' property for personal purposes;
(B) criminal or civil conviction or conduct by Executive that would reasonably
be expected to result in material injury to the reputation of the Companies if
he were retained in his position with the Companies, including, without
limitation, conviction of a felony involving moral turpitude; (C) continued,
willful and deliberate non-performance by Executive of his duties hereunder
(other than by reason of Executive's physical or mental illness, incapacity or
disability) and such non-performance has continued for more than thirty (30)
days following written notice of such non-performance from the Boards; or (D) a
nonaccidental breach by Executive of any of the provisions contained in
Paragraphs 4 and 5 of this Agreement.
(d) TERMINATION BY COMPANIES FOR PERFORMANCE REASONS. At any time during
the Period of Employment, the Companies may terminate Executive's employment if
(i) such termination is approved by not less than a majority of each Board at a
meeting of each Board called and held for such purpose; and (ii) Executive has
materially failed to perform his duties hereunder or has violated, in material
respects, the policies and procedures of the Companies and such failure or
violation has continued for more than ninety (90) days following written notice
of such violation from the Boards.
(e) TERMINATION WITHOUT CAUSE. At any time during the Period of
Employment, the Companies may terminate Executive's employment hereunder without
Cause if such termination is approved by a majority of each Board at a meeting
of each Board called and held for such purpose. Any termination by the
Companies of Executive's employment under this Agreement which does not
constitute a termination for Cause under Subparagraph 6(c), or termination for
performance under Subparagraph 6(d), or result from the death or disability of
the Executive under Subparagraph 6(a) or (b) or result from the expiration of
the Period of Employment without extension, shall be deemed a termination
without Cause.
(f) TERMINATION BY EXECUTIVE. At any time during the Period of
Employment, Executive may terminate his employment hereunder for any reason,
including, but not limited to, Good Reason. For purposes of this Agreement,
"Good Reason" shall mean that Executive has complied with the "Good Reason
Process" (hereinafter defined) following the occurrence of any of the following
events: (A) a substantial diminution or other substantive adverse change, not
consented to by Executive in advance and in writing, in the nature or scope of
Executive's responsibilities, authorities, powers, functions, duties or
reporting relationship from the responsibilities, authorities, powers, functions
or duties described on Schedule I or reporting relationship set forth in
Paragraph 2; (B) except in connection with a termination of Executive's
employment, any removal, during the Period of Employment, of Executive from
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or, any failure by management to nominate, or, if nominated, any failure by the
Boards to re-elect, Executive to any of the positions indicated in Paragraph 2;
(C) a reduction in Executive's Base Salary or Adjusted Base Salary or
involuntary reduction in cash incentive compensation plan (but not reduction in
incentive compensation appropriate for level of performance) except for across-
the-board salary reductions similarly affecting all or substantially all
management employees; (D) a breach by the Companies of any of their other
material obligations under this Agreement and the failure of the Companies to
cure such breach within thirty (30) days after written notice thereof by
Executive; (E) the involuntary relocation of the Companies' offices at which
Executive is principally employed or the involuntary relocation of the offices
of Executive's primary workgroup to a location more than thirty (30) miles from
such offices, or the requirement by the Companies for Executive to be based
anywhere other than the Companies' offices at such location on an extended
basis, except for required travel on the Companies' business to an extent
substantially consistent with Executive's business travel obligations; or (F)
Executive is not the senior most financial officer of the Affiliated Company
with the exception of the President. "Good Reason Process" shall mean that (i)
the Executive reasonably determines in good faith that a "Good Reason" event has
occurred; (ii) Executive notifies the Companies in writing of the occurrence of
the Good Reason event; (iii) Executive cooperates in good faith with the
Companies' efforts, for a period not less than ninety (90) days following such
notice, to modify Executive's employment situation in a manner acceptable to
Executive and the Companies; and (iv) notwithstanding such efforts, one or more
of the Good Reason events continues to exist and has not been modified in a
manner acceptable to Executive.
(g) NOTICE OF TERMINATION. Except for termination as specified in
Subparagraph 6(a), any termination of Executive's employment by the Companies or
any such termination by Executive shall be communicated by written Notice of
Termination to the other party hereto. For purposes of this Agreement, a "Notice
of Termination" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon.
(h) DATE OF TERMINATION. "Date of Termination" shall mean: (A) if
Executive's employment is terminated by his death, the date of his death; (B) if
Executive's employment is terminated on account of disability under Subparagraph
6(b) thirty (30) days after the date on which a Notice of Termination is given;
(C) if Executive's employment is terminated by the Companies for Cause under
Subparagraph 6(c), the date on which Notice of Termination is given; (D) if
Executive's employment is terminated by the Companies under Subparagraph 6(d),
fourteen (14) days after the date on which a Notice of Termination is given; (E)
if Executive's employment is terminated by the Companies under Subparagraph
6(e), sixty (60) days after the date on which a Notice of Termination is given;
and (F) if Executive's employment is terminated by Executive under Subparagraph
6(f), thirty (30) days after the date on which a Notice of Termination is given.
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7. COMPENSATION UPON TERMINATION OR DURING DISABILITY.
(a) If Executive's employment terminates by reason of his death, the
Companies shall, within ninety (90) days of death, pay in a lump sum amount to
such person as Executive shall designate in a notice filed with the Companies
or, if no such person is designated, to Executive's estate, Executive's accrued
and unpaid Base Salary or, if applicable, his Adjusted Base Salary, to the date
of his death, plus his accrued and unpaid incentive compensation under
Subparagraph 3(b). All unvested stock options and stock-based grants shall
immediately vest in Executive's estate or other legal representatives and become
exercisable, and Executive's estate or other legal representatives shall have
one (1) year from the Date of Termination, or remaining option term, if earlier,
to exercise the stock options. For a period of one (1) year following the Date
of Termination, the Companies shall pay such health insurance premiums as may be
necessary to allow Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. In addition to the foregoing, any payments to which Executive's
spouse, beneficiaries, or estate may be entitled under any employee benefit plan
shall also be paid in accordance with the terms of such plan or arrangement.
Such payments, in the aggregate, shall fully discharge the Companies'
obligations hereunder.
(b) During any period that Executive fails to perform his duties hereunder
as a result of incapacity due to physical or mental illness, Executive shall
continue to receive his accrued and unpaid Base Salary or, if applicable, his
Adjusted Base Salary and accrued and unpaid incentive compensation payments
under Subparagraph 3(b), until Executive's employment is terminated due to
disability in accordance with Subparagraph 6(b) or until Executive terminates
his employment in accordance with Subparagraph 6(f), whichever first occurs.
All unvested stock options and stock-based grants shall immediately vest and
become exercisable, and Executive shall have one (1) year from the Date of
Termination, or remaining option term, if earlier, to exercise the stock
options. For a period of one (1) year following the Date of Termination, the
Companies shall pay such health insurance premiums as may be necessary to allow
Executive, Executive's spouse and dependents to receive health insurance
coverage substantially similar to coverage they received prior to the Date of
Termination. Upon termination due to death prior to the termination first to
occur as specified in the preceding sentence, Subparagraph 7(a) shall apply.
(c) If Executive's employment is terminated by Executive other than for
Good Reason as provided in Subparagraph 6(f), then the Companies shall, through
the Date of Termination, pay Executive his accrued and unpaid Base Salary or, if
applicable, his Adjusted Base Salary at the rate in effect at the time Notice of
Termination is given. Thereafter, the Companies shall have no further
obligations to Executive except as otherwise expressly provided under this
Agreement, provided any such termination shall not adversely affect or alter
Executive's rights under any employee benefit plan of the Companies in which
Executive, at the Date of Termination, has a vested interest, unless otherwise
provided in such employee benefit plan or any agreement or other instrument
attendant thereto.
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(d) If Executive terminates his employment for Good Reason as provided in
Subparagraph 6(f) or if Executive's employment is terminated by the Companies
without Cause as provided in Subparagraph 6(e), then the Companies shall,
through the Date of Termination, pay Executive his accrued and unpaid Base
Salary or, if applicable, his Adjusted Base Salary at the rate in effect at the
time Notice of Termination is given and his accrued and unpaid incentive
compensation under Subparagraph 3(b). In addition, subject to signing by
Executive of a general release of claims in a form and manner satisfactory to
the Companies,
(i) the Companies shall provide payments to Executive in an amount
equal to the sum of Executive's Average Base Salary and his Average
Incentive Compensation for a year and one-half or if termination of
employment occurs within the first eighteen (18) months of the Commencement
Date, the sum of Executive's Average Base Salary and Average Incentive
Compensation payable for the remaining length of the original three-year
term after the Date of Termination (the "Severance Amount"). The Severance
Amount shall be paid out in substantially equal quarterly installments, in
advance. For purposes of this Agreement, "Average Base Salary" shall mean
the average of the annual Base Salary or, if applicable, Adjusted Base
Salary received by Executive for each of the three (3) immediately
preceding fiscal years or such fewer number of complete fiscal years as
Executive may have been employed by the Companies. For purposes of this
Agreement, "Average Incentive Compensation" shall mean the average of the
annual incentive compensation under Subparagraph 3(b) received by Executive
for the three (3) immediately preceding fiscal years or such fewer number
of complete fiscal years as Executive may have been employed by the
Companies. Notwithstanding the foregoing, if the Executive nonaccidentally
breaches any of the provisions contained in Paragraphs 4 and 5 of this
Agreement, all payments of the Severance Amount shall immediately cease.
Notwithstanding the foregoing, in the event Executive terminates his
employment for Good Reason as provided in Subparagraph 6(f), he shall be
entitled to the Severance Amount only if he provides the Notice of
Termination provided for in Subparagraph 6(g) within thirty (30) days after
the occurrence of the event or events which constitute such Good Reason as
specified in clauses (A), (B), (C), (D), (E) and (F) of Subparagraph 6(f);
(ii) in addition to any other benefits to which Executive may be
entitled in accordance with the Companies' then existing severance
policies, the Companies shall,
(a) for a period of six (6) months commencing on the Date of
Termination or through the date Executive secures new employment, if
earlier, pay for the cost of executive outplacement services selected
by Executive for use in connection with obtaining alternate
employment; and
(b) for a period of one (1) year commencing on the Date of
Termination, pay such health insurance premiums as may be necessary to
allow Executive, Executive's spouse and dependents to continue to
receive health
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insurance coverage substantially similar to the coverage they received
prior to his termination of employment; and
(iii) Executive shall receive all the rights and benefits granted or
in effect with respect to Executive under the Companies' employee stock
option or incentive plans and agreements with Executive pursuant thereto.
In addition to the foregoing, all unvested stock options and other stock-
based awards shall immediately accelerate and become exercisable or
nonforfeitable as of the Date of Termination.
(e) If Executive's employment is terminated by the Companies for Cause as
provided in Subparagraph 6(c) or for performance as provided in Subparagraph
6(d), then the Companies shall, through the Date of Termination, pay Executive
his accrued and unpaid Base Salary or, if applicable, his Adjusted Base Salary
at the rate in effect at the time Notice of Termination is given and in case of
termination for performance as provided by Subparagraph 6(d), his accrued and
unpaid incentive compensation under Subparagraph 3(b) and any severance pay
provided under the Companies' then current severance policy. Thereafter, the
Companies shall have no further obligations to Executive except as otherwise
expressly provided under this Agreement, provided any such termination shall not
adversely affect or alter Executive's rights under any employee benefit plan of
the Companies in which Executive, at the Date of Termination, has a vested
interest, unless otherwise provided in such employee benefit plan or any
agreement or other instrument attendant thereto. Notwithstanding the foregoing
and in addition to whatever other rights or remedies the Companies may have at
law or in equity, all stock options held by Executive shall immediately expire
on the Date of Termination if Executive's employment is terminated by the
Companies for Cause as provided by Subparagraph 6(c).
(f) If upon the expiration of the Period of Employment, Executive shall
cease to be employed for any reason other than Cause, then the Companies shall,
through the date of termination, pay Executive his accrued and unpaid Base
Salary or, if applicable, his Adjusted Base Salary at the rate in effect at such
time, his accrued and unpaid incentive compensation under Subparagraph 3(b) and
the amount provided under the Companies' then current severance policy.
Executive shall receive all the rights and benefits granted or in effect with
respect to Executive under the Companies' employee stock option or incentive
plans and agreements with Executive pursuant thereto. In addition to the
foregoing, subject to compliance with the provisions of Paragraphs 4 and 5,
Executive shall continue to vest in all options and other stock-based awards for
an additional twelve months and Executive shall be given an additional 90-day
period after the expiration of the twelve-month period to exercise his options.
Thereafter, the Companies shall have no further obligations to Executive except
as otherwise expressly provided under this Agreement, provided any such
termination shall not adversely affect or alter Executive's rights under any
employee benefit plan of the Companies in which Executive, at the date of
termination, has a vested interest, unless otherwise provided in such employee
benefit plan or any agreement or other instrument attendant thereto.
11
(g) Regardless of the reason for termination, for a period of five (5)
years beginning on the Date of Termination, the Companies will provide such
reasonable assistance and support to Executive as he shall reasonably require in
connection with the preparation and filing of tax returns, statements and forms
insofar as such returns, statements or forms relate to Executive's association
with the Companies or any of their respective predecessors or affiliates. At
the Companies' election, such assistance and support shall be provided by either
tax personnel from the Companies or certified public accountants selected and
compensated by the Companies.
(h) Nothing contained in the foregoing Subparagraphs 7(a) through 7(g)
shall be construed so as to affect Executive's rights or the Companies'
obligations relating to agreements or benefits which are unrelated to
termination of employment.
8. PARACHUTE PAYMENT. The provisions of this Paragraph 8 set forth certain
terms of an agreement reached between Executive and the Companies regarding
Executive's rights and obligations upon the occurrence of a Change in Control of
the Companies. These provisions are intended to assure and encourage in advance
Executive's continued attention and dedication to his assigned duties and his
objectivity during the pendency and after the occurrence of any such event.
These provisions shall apply in lieu of, and expressly supersede, the provisions
of Subparagraph 7(d)(i) regarding severance pay upon a termination of
employment, if such termination of employment occurs within eighteen (18) months
after the occurrence of the first event constituting a Change of Control;
provided that such first event occurs during the Period of Employment. These
provisions shall terminate and be of no further force or effect beginning
eighteen (18) months after the occurrence of a Change of Control.
(a) ESCROW. Within fifteen (15) days after the occurrence of the first
event constituting a Change of Control, the Companies shall place funds in an
amount equal to the estimated Parachute Amount in escrow, pursuant to
arrangements that are mutually acceptable to the Companies and Executive
providing for the payment of the Parachute Amount in the event Executive becomes
entitled thereto pursuant to Subparagraph 8(b)(i) (the "Escrow Arrangement").
The Escrow Arrangement shall be maintained until the earlier of (A) eighteen
(18) months after the occurrence of the first event constituting a Change of
Control or (B) the payment to Executive of the Parachute Amount pursuant to the
provisions of Subparagraph 8(b)(i).
(b) CHANGE IN CONTROL.
(i) If within eighteen (18) months after the occurrence of the first
event constituting a Change in Control, Executive's employment terminates
for any reason other than (A) death, (B) his inability, due to illness,
accident, or other physical or mental incapacity, to perform his duties for
more than one hundred eighty (180) days during any twelve-month period, (C)
for Cause or (D) his Voluntary Resignation ("Termination"), then the
Companies shall pay Executive in a lump sum an amount
12
equal to the applicable Parachute Amount on the tenth (10th) day following
Executive's Termination; and
(ii) Notwithstanding anything to the contrary in any applicable
option agreement or stock-based award agreement, upon the effective date of
the Change in Control, all stock options and other stock-based awards
granted to Executive by the Companies shall immediately accelerate and
become exercisable or non-forfeitable as of the date of Change in Control,
and Executive shall be entitled to any other rights and benefits with
respect to stock-related awards, to the extent and upon the terms provided
in the employee stock option or incentive plan or any agreement or other
instrument attendant thereto pursuant to which such options or awards were
granted.
(c) GROSS UP PAYMENT.
(i) Excess Parachute Payment. If Executive incurs the tax (the
"Excise Tax") imposed by Section 4999 of the Internal Revenue Code of 1986
(the "Code") on "excess parachute payments" within the meaning of Section
280G(b)(1) of the Code, the Companies will pay to Executive an amount (the
"Gross Up Payment") such that the net amount retained by Executive, after
deduction of any Excise Tax on the excess parachute payment and any
federal, state and local income taxes and employment taxes (together with
penalties and interest) and Excise Tax upon the payment provided for by
this Subparagraph 8(c)(i), will be equal to the Parachute Amount.
(ii) Applicable Rates. For purposes of determining the amount of
the Gross Up Payment, Executive will be deemed to pay federal income taxes
at the highest marginal rate of federal income taxation in the calendar
year in which the Gross Up Payment is to be made and state and local income
taxes at the highest marginal rates of taxation in the state and locality
of Executive's residence on the date of Executive's Termination, net of the
maximum reduction in federal income taxes that could be obtained from
deduction of such state and local taxes.
(iii) Determination of Gross Up Payment Amount. The determination of
whether the Excise Tax is payable and the amount thereof will be based upon
the opinion of tax counsel selected by Executive and approved by the
Companies, which approval will not be unreasonably withheld. If such
opinion is not finally accepted by the Internal Revenue Service (or state
and local taxing authorities), then appropriate adjustments to the Excise
Tax will be computed and additional Gross Up Payments will be made in the
manner provided by this Subparagraph (c).
(iv) Time For Payment. The Companies will pay the estimated amount
of the Gross Up Payment in cash to Executive concurrent with Employee's
Termination. Executive, and the Companies agree to reasonably cooperate in
the determination of the actual amount of the Gross Up Payment. Further,
Executive and the Companies agree to make such adjustments to the estimated
amount of the Gross Up Payment as may be
13
necessary to equal the actual amount of the Gross Up Payment, which in the
case of Executive will refer to refunds of prior overpayments and in the
case of the Companies will refer to makeup of prior underpayments.
(d) DEFINITIONS. For purposes of this Paragraph 8, the following terms
shall have the following meanings:
"AFFILIATED COMPANY" shall mean not only Wyndham International, Inc.,
but also its successors by merger or otherwise.
"CHANGE IN CONTROL" shall mean an event which shall be deemed to have
occurred if (i) any "person" or "group" (as such terms are used in Sections
13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), other than a trustee or other fiduciary holding securities
under an employee benefit plan of the Companies, is or becomes the
"beneficial owner" (as defined in Rule 13d-3 promulgated under the Exchange
Act), directly or indirectly, of securities of the Companies representing
twenty-five percent (25%) or more of the combined voting power of the
Companies' then outstanding securities; or (ii) individuals who at the
Commencement Date constitute the Board of either the Company or the
Affiliated Company and any new director (other than a director designated
by a person who has entered into an agreement with the Company or the
Affiliated Company to effect a transaction described in clauses (i) or
(iii) of this paragraph) whose election by the Board of either the Company
or the Affiliated Company or nomination for election by the Companies'
stockholders was approved by a vote of at least eighty percent (80%) of the
directors then still in office who either were directors at the
Commencement Date or whose election or nomination for election was
previously so approved, cease for any reason to constitute a majority of
the Board of either the Company or the Affiliated Company; or (iii) the
stockholders of the Companies approve a merger or consolidation of the
Companies with or into any other corporation, other than a merger or
consolidation which would result in the voting securities of the Companies
outstanding immediately prior thereto continuing to represent (either by
remaining outstanding or by being converted into voting securities of the
surviving entity) at least sixty percent (60%) of the combined voting power
of the voting securities of the Companies or such surviving entity
outstanding immediately after such merger or consolidation, or the
stockholders of the Companies approve a plan of complete liquidation of the
Company or the Affiliated Company or an agreement for the sale or
disposition by the Company or the Affiliated Company of all or
substantially all the Company's or Affiliated Company's assets.
"COMPANY" shall mean not only Patriot American Hospitality, Inc., but
also its successors by merger or otherwise.
"PARACHUTE AMOUNT" shall mean an amount equal to the Severance Amount
provided for in Subparagraph 7(d)(i).
14
"VOLUNTARY RESIGNATION" shall mean any termination of Executive's
employment by his own act, unless such termination is for Good Reason.
9. NOTICE. For purposes of this Agreement, notices and all other
communications provided for in the Agreement shall be in writing and shall be
deemed to have been duly given when delivered or mailed by United States
certified mail, return receipt requested, postage prepaid, addressed as follows:
if to the Executive:
At his home address as shown
in the Companies' personnel records;
if to the Company:
Patriot American Hospitality, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: President
if to the Affiliated Company:
Wyndham International, Inc.
0000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxx, XX 00000
Attention: President and Chief Operating Officer
or to such other address as either party may have furnished to the other in
writing in accordance herewith, except that notices of change of address shall
be effective only upon receipt.
10. MISCELLANEOUS. No provisions of this Agreement may be modified, waived, or
discharged unless such waiver, modification, or discharge is agreed to in
writing and signed by Executive and such officer of the Companies as may be
specifically designated by the Boards. No waiver by either party hereto of, or
compliance with, any condition or provision of this Agreement to be performed by
such other party shall be deemed a waiver of similar or dissimilar provisions or
conditions at the same or at any prior or subsequent time. No agreements or
representations, oral or otherwise, express or implied, unless specifically
referred to herein, with respect to the subject matter hereof have been made by
either party which are not set forth expressly in this Agreement. The validity,
interpretation, construction, and performance of this Agreement shall be
governed by the laws of the State of Texas (without regard to principles of
conflicts of laws).
15
11. VALIDITY. The invalidity or unenforceability of any provision or
provisions of this Agreement shall not affect the validity or enforceability of
any other provision of this Agreement, which shall remain in full force and
effect. The invalid portion of this Agreement, if any, shall be modified by any
court having jurisdiction to the extent necessary to render such portion
enforceable.
12. COUNTERPARTS. This Agreement may be executed in several counterparts, each
of which shall be deemed to be an original but all of which together will
constitute one and the same instrument.
13. ARBITRATION; OTHER DISPUTES. In the event of any dispute or controversy
arising under or in connection with this Agreement, the parties shall first
promptly try in good faith to settle such dispute or controversy by mediation
under the Commercial Mediation Rules of the American Arbitration Association
before resorting to arbitration. In the event such dispute or controversy
remains unresolved in whole or in part for a period of thirty (30) days after it
arises, the parties will settle any remaining dispute or controversy exclusively
by arbitration in Dallas, Texas, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction. Notwithstanding the above,
the Companies shall be entitled to seek a restraining order or injunction in any
court of competent jurisdiction to prevent any continuation of any violation of
Paragraph 4 or 5 hereof. Furthermore, should a dispute occur concerning
Executive's mental or physical capacity as described in Subparagraph 6(b), 6(c)
or 7(b), a doctor selected by Executive and a doctor selected by the Companies
shall be entitled to examine Executive. If the opinion of the Companies' doctor
and Executive's doctor conflict, the Companies' doctor and Executive's doctor
shall together agree upon a third doctor, whose opinion shall be binding. Any
amount to which Executive is entitled under this Agreement (including any
disputed amount), which is not paid when due, shall bear interest at a rate
equal to the lesser of eighteen percent (18%) per annum or the maximum lawful
rate.
14. THIRD-PARTY AGREEMENTS AND RIGHTS. Executive represents to the Companies
that Executive's execution of this Agreement, Executive's employment with the
Companies and the performance of Executive's proposed duties for the Companies
will not violate any obligations Executive may have to any employer or other
party, and Executive will not bring to the premises of the Companies any copies
or other tangible embodiments of non-public information belonging to or obtained
from any such previous employment or other party.
15. LITIGATION AND REGULATORY COOPERATION. During and after Executive's
employment, Executive shall reasonably cooperate with the Companies in the
defense or prosecution of any claims or actions now in existence or which may be
brought in the future against or on behalf of the Companies which relate to
events or occurrences that transpired while Executive was employed by the
Companies; provided, however, that such cooperation shall not materially and
adversely affect Executive or expose Executive to an increased probability of
civil or criminal litigation. Executive's cooperation in connection with such
claims or actions shall include, but not be limited to, being available to meet
with counsel to prepare for discovery or trial and to
16
act as a witness on behalf of the Companies at mutually convenient times. During
and after Executive's employment, Executive also shall cooperate fully with the
Companies in connection with any investigation or review of any federal, state
or local regulatory authority as any such investigation or review relates to
events or occurrences that transpired while Executive was employed by the
Companies. The Companies shall also provide Executive with compensation on an
hourly basis calculated at his final base compensation rate for requested
litigation and regulatory cooperation that occurs after his termination of
employment, and reimburse Executive for all costs and expenses incurred in
connection with his performance under this Paragraph 15, including, but not
limited to, reasonable attorneys' fees and costs.
16. ALLOCATION OF OBLIGATIONS. The Company and the Affiliated Company shall
allocate among themselves which party shall be responsible for paying the salary
and other benefits required to be paid by this Agreement. The payment by either
party of such salary and other benefits shall satisfy the obligations of the
non-paying party under this Agreement. Both the Company and the Affiliated
Company shall be jointly and severally liable in the event of a failure by both
parties to pay compensation and other benefits hereunder.
IN WITNESS WHEREOF, the parties have executed this Agreement effective on
the date and year first above written.
PATRIOT AMERICAN HOSPITALITY, INC.
By: /s/ XXXXXXX X. XXXXX, III
----------------------------------------
Its: President and Chief Operating Officer
---------------------------------------
WYNDHAM INTERNATIONAL, INC.
By: /s/ XXXXXXX X. XXXXX, III
----------------------------------------
Its: Executive Vice President
---------------------------------------
/s/ XXXXXXXX X. XXXXX
----------------------------------------
Xxxxxxxx X. Xxxxx
17
SCHEDULE I
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Duties and Responsibilities: 1. To supervise the Companies' financial
reporting, financial control and accounting
functions as well as direct forecasting,
budgeting, cash management, operations
management and executive management reporting
activities (other than management information
systems).
2. To act as the senior-most financial officer
at the Affiliated Company with the exception of
the President.
3. To evaluate and restructure financial
functions of the Companies as needed.
4. To oversee the Companies' cash management
policies.
5. To oversee the Companies' treasury
function, with the assistance of appropriate
personnel.
6. To participate, as appropriate, in investor
and analyst meetings and conferences.
7. To have access to the Companies' senior-
most executive officers to (a) understand and
participate in the Companies' strategic
initiatives, (b) maintain a current
understanding of the Companies' progress in
achieving stated financial goals and objectives
(i.e., internal and Wall Street estimates)
relative to applicable projections and budgets
of the Companies.
The Companies recognize that to accomplish
these responsibilities, the Executive will
require full cooperation and extensive
interaction with each of the Presidents of
Patriot American Hospitality, Inc. (Xxxxxxx X.
Xxxxx, III) and Wyndham International, Inc.
(Xxxxx Xxxxxxx) and the other senior executive
officers of the Companies, as well as the use
of reasonably necessary staff resources
dedicated exclusively to assisting the
Executive in discharging his duties.
