1
EXHIBIT 10.22
SEVERANCE AGREEMENT
AGREEMENT between Gaylord Entertainment Company, a Delaware corporation
("GEC"), and David B. Jones (the "Key Employee").
W I T N E S E T H
WHEREAS, the Board of Directors of GEC (the "Board") believes that, in
the event of a threat or occurrence of a "Change of Control" (as defined
hereafter) of GEC, it is in the best interest of GEC and its present and future
shareholders that the business of GEC be continued with a minimum of disruption,
and that such objective will be achieved if GEC key management employees are
given reasonable assurances of employment security during the period of
uncertainty often associated with Change of Control; and
WHEREAS, GEC believes the giving of such assurances by GEC will enable
it (a) to secure the continued services of both its key operational and
management employees in the performance of both their regular duties and such
extra duties as may be required of them during such period of uncertainty, (b)
to be able to rely on such employees to manage and maintain their focus on the
affairs of GEC during any such period, and (c) to have the ability to attract
new key employees as needed; and
WHEREAS, the Board has approved entering into severance agreements with
certain key management employees of GEC in order to achieve the foregoing
objectives; and
WHEREAS, Key Employee is a key management employee of GEC or one of its
subsidiaries;
NOW, THEREFORE, GEC and Key Employee agree as follows:
1. CHANGE OF CONTROL. For the purposes of this Agreement, a
"Change of Control" shall be deemed to have taken place if: (i) any person or
entity, including a "group" as defined in Section 13(d)(3) of the Securities
Exchange Act of 1934, other than GEC, a wholly-owned subsidiary thereof or any
employee benefit plan of GEC or any of its subsidiaries, and other than E. L.
Gaylord or any member of his immediate family or any affiliate of Mr. Gaylord or
any member of his immediate family, hereafter becomes the beneficial owner of
GEC securities having 40% or more of the combined voting power of the then
outstanding securities of GEC that may be cast for the election of directors of
GEC (other than as a result of an issuance of securities initiated by GEC in the
ordinary course of business); or (ii) as the result of, or in connection with,
any cash tender or exchange offer, merger or other business combination, sale of
assets or contested election, or any combination of the foregoing transactions,
100% of the combined voting power of the outstanding securities of GEC entitled
to vote generally in the election of directors of GEC prior to any such
transaction is reduced to less than a majority of the combined voting power of
the outstanding securities of GEC or any successor corporation or entity
entitled to vote generally in the election of directors immediately after such
transaction; or (iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of Directors of GEC
cease
2
for any reason to constitute at least a majority thereof, unless the election,
or the nomination for election by GEC's shareholders, of each director of GEC
first elected during such period was approved by a vote of at least two-thirds
of the directors of GEC then still in office who were directors of GEC at the
beginning of any such period. Upon a Change of Control of GEC while the Key
Employee is still an employee of GEC, this Agreement and all of its provisions
shall become operative immediately.
2. EMPLOYMENT. GEC and Key Employee hereby agree that, if Key
Employee is in the employ of GEC on the date on which a Change of Control occurs
(the "Change of Control Date"), GEC will continue to employ Key Employee and Key
Employee will remain in the employ of GEC, for the period commencing on the
Change of Control Date and ending on the Second anniversary of such date (the
"Employment Period"), to exercise such authority and perform such duties as are
commensurate with the authority being exercised and duties being performed by
the Key Employee immediately prior to the Change of Control Date. Nothing
expressed or implied in this Agreement shall create any right or duty on the
part of GEC or the Key Employee to have the Key Employee remain in the
employment of GEC prior to any Change in Control, provided; however, that any
termination of employment of the Key Employee or the removal of the Key Employee
from the office or position in GEC following the commencement of any discussion
with a third person that ultimately results in a Change in Control with that or
another person shall be deemed to be a termination or removal of the Key
Employee after a Change in Control for purposes of this Agreement.
3. COMPENSATION AND BENEFITS. During the Employment Period, GEC
will (a) continue to pay the Key Employee a salary at not less than the amount
paid to Key Employee on the Change of Control Date, (b) pay the Key Employee
cash bonuses not less in amount than 60% of the average of cash bonuses paid
during the two 12-month periods preceding the Change of Control Date, (c)
continue employee benefit programs to or for the benefit of Key Employee and his
or her beneficiaries at levels in effect on the Change of Control Date as more
particularly described in Section 7, and (d) pay to Key Employee any Additional
Amount determined pursuant to Section 4.
4. TAX REIMBURSEMENT PAYMENT.
(a) Notwithstanding anything to the contrary contained in this
Agreement, in any plan of GEC or its affiliates, or in any other agreement or
understanding, GEC will pay to Key Employee, at the times hereinafter specified,
an amount (the "Additional Amount") equal to the excise tax under Section 4999
of the Internal Revenue Code of 1986, as amended (the "Code"), if any, incurred
or to be incurred by Key Employee by reason of the payments under this
Agreement, payments under the supplemental executive retirement plan,
acceleration of vesting of stock options or restricted stock granted under the
1997 Stock Option and Incentive Plan, or any other payments under any plan,
agreement or understanding between Key Employee and GEC or its affiliates,
constituting Excess Parachute Payments (as defined below), plus all excise taxes
and federal, state and local income taxes incurred or to be incurred by the Key
Employee with respect to receipt of the Additional Amount. For purposes of this
Agreement, the term "Excess Parachute Payment" shall mean any payment or any
portion thereof which would be an "excess parachute payment" within the meaning
of Section 280G(b) of the Code, and which would result in the imposition of an
excise tax on the
2
3
Key Employee under Section 4999 of the Code. Attached hereto as Exhibit A is an
example illustrating the computation of the Additional Amount.
(b) All determinations required to be made regarding the
Additional Amount, including whether payment of any Additional Amount is
required and the amount of any Additional Amount, shall be made by the
independent accounting firm which is advising GEC (the "Accounting Firm"), and
the Accounting Firm shall provide detailed support calculations to GEC and Key
Employee within sixty (60) days following the "Termination Event," as such term
is defined in Section 5, below. In computing taxes, the Accounting Firm shall
use the highest marginal federal, state and local income tax rates applicable to
the Key Employee for the year in which the Additional Amount is to be paid (or
if those tax rates are unknown, for the year in which the calculation is made)
and shall assume the full deductibility of state and local income taxes for
purposes of computing federal income tax liability. The portion of the
Additional Amount based on the excise tax as determined by the Accounting Firm
to be due shall be paid to Key Employee no later than March 1 immediately
following the calendar year in which a Termination Event occurs. The portion of
the Additional Amount based on the excise tax as determined by the Accounting
Firm to be due for each calendar year following the calendar year in which a
Termination Event occurs during the Employment Period shall be paid to the Key
Employee on or before March 1 immediately following the end of each such
calendar year. If GEC determines that the excise tax for any year will be
different from the amount originally calculated in the report of the Accounting
Firm delivered within sixty (60) days following the Termination Event, then GEC
shall provide to Key Employee detailed support calculations by the Accounting
Firm specifying the basis for the change in the Additional Amount.
5. TERMINATION OF EMPLOYMENT.
(a) If, during the Employment Period, Key Employee's
employment is terminated by GEC (or a subsidiary of GEC) or a successor thereto
for other than gross misconduct;
(b) or if
(i) there is a reduction in Key Employee's
salary under Section 3(a), a reduction in Key Employee's bonus
below the level set forth in Section 3(b), a reduction in Key
Employee's benefits, or a material change in Key Employee's
status, working conditions or management responsibilities, or
(ii) Key Employee is required to relocate his or
her residence more than 100 miles from his or her city of
employment,
and Key Employee voluntarily terminates his or her employment within 60 days of
any such event, or the last in a series of events, then Key Employee shall be
entitled to continue to receive those benefits described in Section 5(e) and to
receive a lump sum payment ("Severance Compensation") equal to the sum of
(1) For purposes of this Agreement, the term "gross misconduct" shall mean an
intentional act of fraud or embezzlement, intentional wrongful damage to
property of GEC, or intentional wrongful disclosure of material confidential
information of GEC. No act or failure to act on the part of the Key Employee
shall be deemed intentional unless determined by a final judicial decision to be
done, or omitted to be done, by Key Employee not in good faith and without
reasonable belief that his or her action or omission was in the best interest of
GEC.
3
4
(x) 150% of Key Employee's "Base Amount" as
determined under paragraph (c) below, and
(y) any portion of the Additional Amount not
theretofore paid, as described in paragraph (d) below.
The lump sum payment shall be subject to and reduced by all applicable federal
and state withholding taxes and shall be paid to the Key Employee within 30
business days after his or her termination of employment. The termination of
employment pursuant to Section 5(a) or 5(b) shall be referred to herein as a
"Termination Event."
(c) The Base Amount for purposes of this Section 5 shall
be Key Employee's base salary and bonuses paid to him or her during the 12-month
period preceding the date of his or her termination of employment pursuant to
paragraph (a). If Key Employee has not been employed for a 12-month period, his
or her Base Amount shall be his or her annualized base salary at the rate then
in effect and bonuses paid to Key Employee prior to the date of his or her
termination of employment.
(d) The Additional Amount shall be determined in the same
manner described in section 4, as illustrated in Exhibit A. At or prior to the
time of payment of the Additional Amount (or the remainder thereof), GEC shall
provide to Key Employee a report of the Accounting Firm, including detailed
support calculations, describing its determination of the Additional Amount (or
an updated report of the Accounting Firm to its report for the year in which the
Termination Event occurs, if that report has already been provided to Key
Employee). If GEC determines that no Additional Amount is due under this
paragraph (c), it shall provide to Key Employee an opinion of the Accounting
Firm that Key Employee will not incur an excise tax on any or all of the
Severance Compensation, vesting of stock options, or other payments under any
plan, agreement or understanding between Key Employee and GEC. Any such opinion
shall be based upon the proposed regulations under Code Sections 280G and 4999
or substantial authority within the meaning of Code Section 6662.
(e) After termination of employment for which Key
Employee is entitled to Severance Compensation, and continuing until the end of
the Employment Period (i.e., the second anniversary of the Change of Control
Date, or if later, during the extended term of this Agreement pursuant to
Section 16), GEC shall maintain at its expense for the continued benefit of Key
Employee and his or her dependents all medical, dental, basic life insurance,
and basic accident insurance plans of GEC in which Key Employee or his or her
dependents are entitled to participate pursuant to Section 7, provided that such
continued participation is possible under the terms and provisions of such
plans. In the event that the participation by Key Employee or his or her
dependents in any such plan is barred, or if the benefits in any of the plans
are reduced to a level below what they were on the Change of Control Date, GEC
shall arrange to provide Key Employee and his or her dependents with benefits
equivalent to those which they were receiving under such plans immediately prior
to the Change of Control Date, such benefits to be provided at GEC's
4
5
expense by means of individual insurance policies, or if such policies cannot be
obtained, from GEC's assets. If Key Employee should accept employment with
another employer and if Key Employee and/or his or her dependents should become
covered under that employer's medical, dental, life insurance and accident
insurance plans, or any of them, or if Key Employee and/or his or her dependents
should obtain comparable coverage from any other source (e.g. spousal coverage),
then effective on the date that such coverage commences, the obligation of GEC
to provide any benefits under this Section 5(e) to Key Employee or his or her
dependents shall terminate to the extent that equivalent coverage is provided
under the plans of the subsequent employer or otherwise obtained coverage.
The medical and dental benefits required to be provided
pursuant to this Section 5(d) are not intended to be a substitute for any
extended coverage benefits ("COBRA rights") described in Section 4980B of the
Code, and such COBRA rights shall not commence until after the period of
coverage specified in the first sentence of this Section 5(d) comes to an end.
(f) In the event of a dispute concerning the amount of
Severance Compensation, including a dispute as to the calculation of the
Additional Amount or the employee benefits to which Key Employee is entitled
pursuant to the terms of this Agreement, which is not resolved within 60 days
after the date of termination of employment, Key Employee may submit the
resolution of the dispute to arbitration. Any arbitration pursuant to this
Agreement shall be determined in accordance with the rules of the American
Arbitration Association then in effect, by a single arbitrator if the parties
shall agree upon one, or otherwise by three arbitrators, one appointed by each
party, and a third arbitrator appointed by the two arbitrators selected by the
parties, all arbitrators to come from a panel proposed by the American
Arbitration Association. If any party shall fail to appoint an arbitrator within
30 days after it is notified to do so, then the arbitration shall be
accomplished by a single arbitrator. Unless otherwise agreed by the parties
hereto, all arbitration proceedings shall be held in Nashville, Tennessee. Each
party agrees to comply with any award made in any such proceeding, which shall
be final, and to the entry of judgment in accordance with applicable law in any
jurisdiction upon any such award. The decision of the arbitrators shall be
tendered within 60 days of final submission of the parties in writing or any
hearing before the arbitrators and shall include their individual votes. If the
Key Employee is entitled to any award pursuant to the determination reached in
the arbitration proceeding that is greater than that proposed by GEC, he or she
shall be entitled to payment by GEC of all attorneys' fees, costs (including
expenses of arbitration), and other out-of-pocket expenses incurred in
connection with the arbitration.
6. INDEMNIFICATION.
(a) If Key Employee shall have to institute litigation
brought in good faith to enforce any of his or her rights under the Agreement,
GEC shall indemnify Key Employee for his or her reasonable attorney's fees and
disbursements incurred in any such litigation.
(b) In the event that an excise tax is ever assessed by
the Internal Revenue Service against Key Employee (or if GEC and Key Employee
mutually agree that an excise tax is payable) by reason of the payments under
this Agreement, payments under the supplemental executive retirement plan,
acceleration of vesting of stock options or restricted stock granted under the
GEC 1997 Stock Option and Incentive Plan, or any other payments under any plan,
agreement or
5
6
understanding between Key Employee and GEC or its affiliates, constituting
Excess Parachute Payments, and if such excise tax was not included in the
determination by the Accounting Firm of the Additional Amount that has been
actually paid to Key Employee, GEC agrees to indemnify Key Employee by paying to
Key Employee the amount of such excise tax, together with any interest and
penalties, including reasonable legal and accounting fees and other
out-of-pocket expenses incurred by Key Employee, attributable to the failure to
pay such excise tax by the date it was originally due, plus all federal, state
and local income taxes incurred with respect to payment of the excise tax,
calculated in a manner analogous to Exhibit A. This indemnification obligation
shall survive the termination of the Employment Period and shall apply to all
such excise taxes on Excess Parachute Payments, whether due before or after
termination of employment, except that no such right of indemnification shall
exist after termination of employment for gross misconduct (as defined pursuant
to paragraph (a) of Section 5).
(c) If the excise tax for any year which is actually
imposed on Key Employee is finally determined to be less than the amount taken
into account in the calculation of the Additional Amount that was paid to Key
Employee pursuant to Section 4 or Section 5, then Key Employee shall repay to
GEC, at the time that the amount of such reduction in excise tax is finally
determined, the portion of the Additional Amount attributable to such reduction
(including the portion of the Additional Amount attributable to the excise tax
and federal and state income taxes imposed on the Additional Amount being repaid
by Key Employee, to the extent that such repayment results in a reduction in
such excise tax, federal or state income tax), plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code.
7. NORMAL EMPLOYEE BENEFITS. During the Employment Period, Key
Employee and his or her dependents shall be entitled to participate in any and
all employee benefit plans maintained by GEC (or a subsidiary of GEC), or a
successor thereto, which provide benefits for its executives and for its
salaried employees generally, including, without limitation, its tax-qualified
retirement plans, supplemental executive retirement plan, stock option and other
stock award plans, and welfare benefit plans providing medical and dental
benefits, group life insurance, disability benefits and accidental death and
dismemberment insurance. Any future increases in benefits in any of such plans
available to executives or salaried employees of GEC generally shall also be
provided to Key Employee.
Nothing in this Agreement shall preclude GEC from amending or
terminating any employee benefit plan, but it is the intent of the parties that
Key Employee and his or her dependents shall be entitled during the Employment
Period to the same level of benefits in all employee benefit plans as the level
in effect in the respective plans of GEC on the Change of Control Date. In the
case of the stock option and other stock award plans, the requirement that the
same level of benefits be provided shall be satisfied if Key Employee enjoys at
least the same reward opportunities as provided by GEC prior to the Change of
Control Date. If any of the employee benefit plans are amended to reduce
benefits to Key Employee or his or her dependents, or if Key Employee or his or
her dependents become ineligible to participate in any such plans, GEC shall
arrange to provide Key Employee and his or her dependents with benefits
equivalent to those which they were receiving under such plans immediately prior
to the Change of Control Date, such benefits to be provided at GEC's expense by
means of individual insurance policies, or if such policies cannot be obtained,
from GEC's assets.
6
7
8. CONFIDENTIALITY. Key Employee recognizes that he or she has or
will have access to and may participate in the origination of non-public
confidential information and will owe a fiduciary duty with respect to such
information to GEC. Confidential information includes, but is not limited to,
trade secrets, supplier information, pricing information, internal corporate
planning, GEC secrets, methods of marketing, methods of showroom selection and
operation, ideas and plans for development, historical financial data and
forecasts, long range plans and strategies, and any other data or information of
or concerning GEC that is not generally known to the public or in the industry
in which GEC is engaged. Key Employee agrees that from the date of this
Agreement and throughout the Employment Period he or she will, except as
specifically authorized by GEC in writing, maintain in strict confidence and
will not use or disclose, other than disclosure made in the ordinary course of
business of GEC or to other employees of GEC, any confidential information
belonging to GEC. If Key Employee shall breach the terms of this Section 8, all
of his or her rights under this Agreement shall terminate.
9. WITHHOLDING OF TAXES. GEC may withhold from any amounts
payable under this Agreement all federal, state, city or other taxes as shall be
required pursuant to any law or government regulations or ruling.
10. GOVERNING LAW. This Agreement shall be construed according to
the laws of Tennessee, without giving effect to the principles of conflicts of
laws of such State.
11. AMENDMENT; MODIFICATION; WAIVER. This Agreement may not be
amended except by the written agreement of the parties hereto. No provisions of
this Agreement may be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing signed by Key Employee and
GEC. No waiver by either party hereto at any time of any breach by the other
party hereto 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.
12. BINDING EFFECT.
(a) This Agreement shall be binding on GEC, its
successors and assigns. Should there be a consolidation or merger of GEC with or
into another corporation, or a purchase of all or substantially all of the
assets of GEC by another entity, the surviving or acquiring corporation will
succeed to the rights and obligations of GEC under this Agreement.
(b) This Agreement shall inure to the benefit of and be
enforceable by Key Employee's personal or legal representatives, executors,
administrators, successors, heirs, distributees and/or legatees.
(c) This Agreement is personal in nature and neither of
the parties hereto shall, without the consent of the other, assign, transfer or
delegate this Agreement or any rights or obligations hereunder except as
expressly provided in paragraphs (a) or (b) hereof. Without limiting the
generality of the foregoing, Key Employee's right to receive payments hereunder
shall not be assignable, transferable or delegable, whether by pledge, creation
of a security interest or otherwise, other than by a transfer by will or by the
laws of descent and distribution and, in the event of any
7
8
attempted assignment or transfer contrary to this Section 13 (c), GEC shall have
no liability to pay any amount so attempted to be assigned, transferred or
delegated.
(d) GEC and Key Employee recognize that each party will
have no adequate remedy at law for breach by the other of any of the agreements
contained herein and, in the event of any such breach, GEC and Key Employee
hereby agree and consent that the other shall be entitled to a decree of
specific performance, mandamus or other appropriate remedy to enforce
performance of this Agreement.
(e) Notwithstanding anything to the contrary contained in
this Agreement, in any plan of GEC or its affiliates, or in any other agreement
or understanding, GEC shall pay to Key Employee all amounts required to be paid
hereunder (including the Additional Amount and Severance Compensation), as well
as amounts required by the terms of any other plan, agreement or understanding
(including the accelerated vesting of stock options and restricted stock upon a
Change of Control), regardless of whether any such amounts or accelerated
vesting constitute Excess Parachute Payments.
13. ENTIRE CONTRACT. This Agreement constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, express or implied with respect to the subject matter of this
Agreement.
14. NOTICE. For all purposes of this Agreement, all communications
provided for herein shall be in writing and shall be deemed to have been duly
given when delivered or after three business days after having been mailed
registered or certified mail, return receipt requested, addressed to the
addresses set forth at the end of this Agreement or to such other address as any
party furnishes in writing to the other party.
15. TERM. This Agreement shall be effective from the date of its
execution by GEC and for the twenty-four (24) months next succeeding any Change
of Control, and shall continue in effect from year to year after such
twenty-four (24) month period, unless GEC shall notify Key Employee in writing
90 days in advance of an anniversary of its execution that the Agreement shall
terminate or unless, prior to a Change of Control or the commencement of any
discussion with a third person that ultimately results in a Change of Control,
the Key Employee ceases for any reason to be an employee of GEC in which event
this Agreement shall immediately terminate and be of no further effect.
Notwithstanding the foregoing, the indemnification provisions of this Agreement
contained in Section 6 shall survive until the expiration of the statute of
limitations for assessment of any excise tax with regard to an Excess Parachute
Payment on account of the Change of Control.
(Remainder of Page Intentionally Left Blank)
8
9
IN WITNESS WHEREOF the parties hereto have executed this Severance
Agreement as of the ____ day of February, 1999.
GAYLORD ENTERTAINMENT COMPANY KEY EMPLOYEE
DAVID B. JONES
By:
--------------------------------- -----------------------------------
Terry E. London, President and Address:
Chief Executive Officer ---------------------------
One Gaylord Drive -----------------------------------
Nashville, TN 37214 -----------------------------------
9