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EXECUTION VERSION
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (this "Agreement"), dated as of February 20,
1998, between John M. Elwood ("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 Executive Vice President and Chief Financial 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
Executive Vice President and Chief Financial Officer of Employer, as he may be
assigned from time to time by Employer's Chief Executive Officer.
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 (the "Base Salary") equal to $310,000. The Base Salary
for each Employment Year shall be payable in equal weekly installments.
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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 Chief Executive Officer and
approved 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. The Bonus earned for the 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.
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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.
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 240,000 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.
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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
(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.
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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 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 of the Employment
Period (assuming no termination) and twelve months from the date of
termination.
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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, 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.
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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 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.
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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.
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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 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.
700 Route 46 East
P.O. Box 2700
Fairfield, NJ 07007-2700
Attn.: Secretary
If to Executive: Mr. John M. Elwood
Prime Hospitality Corp.
700 Route 46 East
P.O. Box 2700
Fairfield, NJ 07007-2700
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.
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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.
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/ John M. Elwood
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John M. Elwood