Re: Amended and Restated Change in Control and Severance Agreement
Exhibit 10.8
FELCOR LODGING TRUST INCORPORATED
October 1, 2006
Re: Amended and Restated Change in Control and Severance Agreement
Dear :
FelCor Lodging Trust Incorporated, a Maryland corporation (“FelCor”), and FelCor Lodging
Limited Partnership, a Delaware limited partnership (“FelCor LP”), and their respective
subsidiaries (collectively, the “Company”), consider it essential and in the best interests of
FelCor’s shareholders and the partners of FelCor LP to ▇▇▇▇▇▇ the continued employment of key
management personnel. In this connection, the Board of Directors of FelCor (the “Board”) recognizes
that, as is the case with many publicly held corporations, the possibility of a change of control
may exist and that such possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel to the detriment of
the Company and its shareholders and/or partners.
The Board has determined that it is appropriate and in the best interests of the shareholders
of FelCor and the partners in FelCor LP that steps be taken to encourage the continued attention
and dedication of members of the Company’s senior management, including yourself, to their assigned
duties without distraction in the face of potentially disturbing circumstances arising from the
possibility of a change in control of the Company, although no such change is currently anticipated
or contemplated.
In order to induce you to remain in the employ of the Company and in consideration of your
agreements set forth in Section 3 hereof, the Company agrees that you shall receive the benefits
specified in this letter agreement (this “Agreement”) upon a “Change in Control of the Company” (as
defined in Section 2 hereof) and in the event of the termination of your employment with the
Company, under certain circumstances, subsequent to such a Change in Control of the Company. This
Agreement amends, restates and supercedes in its entirety the Change in Control and Severance
Agreement previously entered into between you and the Company.
1. Term of Agreement. This Agreement shall become effective as of the date hereof
(“Commencement Date”) and shall continue in effect through December 31, 2006; provided, however,
that commencing on January 1, 2007 and on each January 1 thereafter, the term of this Agreement
shall be automatically extended for one additional year unless, not later than
September 30 of the preceding year, the Company shall have given you written notice that it
will not extend this Agreement beyond the end of the calendar year during which such notice is
given; further provided, however, that if a Change in Control of the Company shall occur during the
original or any extended term of this Agreement, this Agreement shall automatically be extended
(regardless of any notice to the contrary from the Company) for a period of twenty-four (24) months
beyond the month in which such Change in Control of the Company shall occur.
2. Definitions. You shall not be entitled to any benefit under or by virtue of this
Agreement (except as expressly provided in Section 8 hereof) unless a Change in Control of the
Company (as defined below) shall occur during the original or any extended term of this Agreement.
(a) Change in Control of the Company. For all purposes of this Agreement, a
“Change in Control of the Company” shall be deemed to have occurred upon the occurrence of
any of the events described in subparagraphs (i), (ii), (iii) or (iv) below:
(i) Any “person” or “group” (as such terms are used in Section 13(d) and 14(d)
of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than
an employee benefit plan of the Company or a trustee holding securities under an
employee benefit plan of the Company, is or becomes the “beneficial owner “ (as
defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of 35% or
more of the Company’s outstanding securities then having the right to vote in
elections of persons to the Board, regardless of the comparative voting power of any
such securities and regardless of whether or not the Board shall have approved the
acquisition or ownership of any such securities by such person; or
(ii) A majority of the Board shall be comprised of persons (A) designated by
any person(s) who shall have entered into an agreement with the Company to effect a
transaction of the type described in subparagraphs (i) or (iii) hereof or (B) other
than those persons constituting the Board on the Commencement Date and those other
persons whose election by the Board, or nomination for election by the shareholders
of the Company to the Board, was approved by a vote of at least two-thirds of the
directors constituting the Board on the Commencement Date or whose election by or
nomination for election to the Board was previously so approved; or
(iii) The holders of securities of the Company entitled to vote thereon shall
approve either:
(A) A merger or consolidation of the Company with any other
corporation, regardless of which entity is the surviving or resulting
entity, other than a merger or consolidation which:
(I) would result in those securities of the Company outstanding
immediately prior to such merger or consolidation and then having the
right to vote in elections of persons to the Board
-2-
continuing immediately after such merger or consolidation to
represent (either by remaining outstanding or by being changed or
converted into securities of the surviving or resulting entity) at
least 65% of the surviving or resulting entity’s outstanding
securities then having the right to vote in elections of persons to
the Board; or
(II) in purpose and effect is the functional equivalent of an
asset acquisition by the Company and in which the senior executive
officers of the Company (specifically including, without limitation,
the President and each Executive Vice President and Senior Vice
President and each person designated as the Chief Executive Officer,
Chief Operating Officer or Chief Financial Officer) immediately prior
to such merger or consolidation will continue, upon the effectiveness
thereof, to serve in the same capacities with the surviving or
resulting entity, without change in their respective positions,
responsibilities, powers, compensation and benefits; or
(B) A plan or agreement under which all or substantially all of the
Company’s assets would be liquidated, distributed, sold or otherwise
disposed of (otherwise than by leases entered into in the ordinary and
normal course of business); or
(iv) The Compensation Committee of the Board shall adopt a resolution to the
effect that, in the judgment of such committee, as a consequence of any one or more
transactions or events or series of transactions or events, that a change in control
of the Company has effectively occurred. The Compensation Committee of the Board
shall be entitled to exercise its sole and absolute discretion in exercising its
judgment and in the adoption of such resolution, whether or not any such
transaction(s) or event(s) might be deemed, individually or collectively, to satisfy
any of the criteria set forth in subparagraphs(i) through (iii) above.
(b) Potential Change in Control of the Company. For all purposes of this
Agreement, a “Potential Change in Control of the Company” shall be deemed to have occurred
upon the occurrence of any of the events described in subparagraphs (i), (ii), (iii) or (iv)
below:
(i) The Company enters into an agreement or letter of intent with respect to
any transaction which, if consummated, would result in the occurrence of a Change in
Control of the Company; or
(ii) Any person (including the Company) publicly announces that it intends to
take, or is considering taking, any action which, if consummated, would result in
the occurrence of a Change in Control of the Company; or
-3-
(iii) Any person or group, other than an employee benefit plan of the Company
or a trustee holding securities under an employee benefit plan of the Company, that
is or becomes the beneficial owner, directly or indirectly, of 9.9% or more of the
Company’s outstanding securities then having the right to vote in elections of
persons to the Board increases its beneficial ownership of such securities by 5% or
more over the percentage so owned by such person or group on the Commencement Date;
or
(iv) The Compensation Committee of the Board shall adopt a resolution to the
effect that, for purposes of this Agreement, a potential change in control of the
Company has effectively occurred. The Compensation Committee of the Board shall be
entitled to exercise its sole and absolute discretion in the adoption of such
resolution, whether or not any transaction(s) or event(s) have occurred that might
be deemed, individually or collectively, to satisfy any of the criteria set forth in
subparagraphs (i) through (iii) above.
(c) Good Reason. For purposes of this Agreement, “Good Reason” shall mean the
occurrence, following a Change in Control of the Company, of any of the following
circumstances, unless (A) you have expressly consented thereto in writing or (B) in the case
of subparagraphs (i), (v), (vi) or (vii) below, all such circumstances shall have been fully
corrected prior to the “Date of Termination” specified in the “Notice of Termination” (as
defined in Subsections 5(e) and 5(d), respectively) given in connection with such
circumstances:
(i) The assignment to you of any duties inconsistent with your status as a
senior executive officer of the Company or any substantial reduction in or
restriction upon the nature, status or extent of your responsibilities or authority,
as compared to the nature, status and extent of your responsibilities and authority
in effect immediately prior to such Change in Control of the Company;
(ii) A reduction by the Company in your annual base salary, as in effect
immediately prior to such Change in Control of the Company, except for
across-the-board salary reductions similarly affecting all executives of the Company
and all executives of any person(s) then in control of the Company;
(iii) The relocation of the Company’s principal executive offices, or the
office where you are required to perform your duties, to a location more than 25
miles from the location of such offices immediately prior to such Change in Control
of the Company, or the imposition upon you of other travel requirements inconsistent
with your normal business travel practices immediately prior to such Change in
Control of the Company;
(iv) The failure of the Company, without your prior written consent, to pay to
you any portion of your then current compensation, or any portion or installment of
deferred compensation under any deferred compensation program of the Company, in
each case within five days of the date such payment is due;
-4-
(v) The failure of the Company to continue in effect any compensation or
benefit plan (including but not limited to any stock option, stock grant, bonus,
income deferral, insurance, paid vacation plan or policy or other fringe benefit or
benefit plan) in which you were a participant immediately prior to the Change in
Control of the Company, unless an equitable arrangement (embodied in an ongoing
substitute or alternative plan) has been made with respect to such plan, or the
failure of the Company to continue your participation in any such plan (or in any
such substitute or alternative plan) on a basis no less favorable to you, both in
terms of the actual amount of benefits provided to you and in your level of
participation therein relative to other participants, than in effect immediately
prior to such Change in Control of the Company;
(vi) The failure of the Company to obtain a satisfactory agreement from any
successor entity to assume and agree to pay and perform all of the obligations of
the Company under this Agreement, as contemplated by Section 8 hereof; or
(vii) Any purported termination of your employment by the Company which is not
for “Cause” (as defined in Subsection 5(b) hereof) or which is not effected pursuant
to a Notice of Termination satisfying the requirements of Subsection 5(d) hereof;
for purposes of this Agreement, no such purported termination shall be effective.
(d) Severance Payment Date. For purposes of the Agreement, the “Severance
Payment Date” shall mean with respect to a particular payment a date not more than five days
following your Date of Termination; provided, however, that if you are a “specified
employee” within the meaning of Section 409A of the Internal Revenue Code of 1986, as
amended (the “Code”), the Severance Payment Date with respect to such payment shall be the
date that is the six-month anniversary of your Date of Termination to the extent such delay
is necessary to avoid penalties and interest under Section 409A.
Your right to terminate your employment pursuant to this Agreement for Good Reason shall not
be affected by your incapacity due to physical or mental illness. Your continued employment shall
not be deemed or construed to constitute your consent to, or waiver of rights with respect to, any
circumstance constituting Good Reason hereunder.
3. Agreement to Continue Employment. You agree that, in the absence of Good Reason and
subject to the terms and conditions of this Agreement, in the event of a Potential Change in
Control of the Company, you agree to remain in the employ of the Company (or of the subsidiary
thereof by which you are employed at the date such Potential Change in Control of the Company
occurs) at least until the earliest to occur of (a) the first anniversary of the Potential Change
in Control of the Company, (b) the date which is six months following a Change in Control of the
Company and (c) the termination by you of your employment for reasons of “Disability” or
“Retirement” (at your normal retirement age), each as defined in Section 5 hereof.
-5-
4. Acceleration of Vesting Upon a Change in Control. Upon the occurrence of a Change
in Control of the Company:
(a) All outstanding shares of common stock of the Company (“Company Shares”)
theretofore issued to you, under any one or more of the restricted stock and/or stock option
plans at any time maintained by the Company (“Option Plans”), as restricted stock (or
otherwise subject to forfeiture upon certain conditions) shall become fully and irrevocably
vested, and all possibility of forfeiture thereof shall terminate, and the certificates
evidencing all of such Company Shares shall be delivered to you on the day next following a
Change in Control of the Company;
(b) All outstanding options or other rights to purchase Company Shares theretofore
issued to you under any one or more of the Option Plans, whether or not then currently
vested or exercisable, shall become fully and irrevocably vested and exercisable, and may
thereafter be exercised in accordance with the Option Plans under which they were issued and
any and all agreements with you in connection therewith; and
(c) All other compensation and benefits to which you are then entitled, subject to the
satisfaction of certain vesting or similar requirements, under any other employee benefit,
deferred compensation or other similar plan shall become fully and irrevocably vested under
the terms of such plans and all possibility of forfeiture thereof shall terminate.
5. Termination Following Change in Control. If any Change in Control of the Company
shall have occurred, you shall thereafter be entitled to the Benefits provided in Subsection 6(c)
hereof upon the termination of your employment by the Company during the term of this Agreement,
provided that such termination is (i) effected by the Company otherwise than for Cause or by reason
of Retirement or Disability, or (ii) effected by you for Good Reason.
(a) Disability; Retirement. If, as a result of your incapacity due to physical
or mental illness, you shall have been absent from the full-time performance of your duties
with the Company for six consecutive months, your employment may be terminated for
“Disability.” Termination of your employment, whether by the Company or you, shall be
deemed to be “Retirement” if the same occurs after you have reached the age of sixty-five
and have completed at least five years of service with the Company, or is otherwise in
accordance with any other written agreement between the Company and you regarding your
retirement.
(b) Cause. The Company shall be entitled to terminate your employment for
“Cause” if you engage in willful and continued misconduct or in the willful and continued
failure to substantially perform your duties with the Company (other than due to physical or
mental illness); provided, however, that prior to any such termination you shall have been
given written notice by the Company setting forth in reasonable detail the nature of such
misconduct or failure and you shall have continued to engage in such misconduct or failure
for at least thirty days following the giving of such notice by the Company. For purposes of
this Subsection, no act, omission, or failure to act, on your part shall be deemed “willful”
unless done, omitted, or refused to be done, by you not in
-6-
good faith and without reasonable belief that your action, omission or refusal to act,
was in the best interest of the Company.
(c) Voluntary Resignation. After a Change in Control of the Company, upon the
occurrence of any circumstance constituting Good Reason, you shall be entitled to terminate
your employment by voluntary resignation given at any time during the two years immediately
following the occurrence of such Change in Control of the Company hereunder, in which event
you shall be entitled to all of the Benefits provided in Subsection 6(c) hereof from and
after the Date of Termination. No such resignation shall be deemed or construed to
constitute a breach of any contract or agreement of employment between you and the Company.
(d) Notice of Termination. Any purported termination of your employment by the
Company or by you shall be communicated by a written Notice of Termination from the party
seeking termination to the other party hereto given in accordance with Section 9 hereof. For
purposes of this Agreement, a “Notice of Termination” shall mean a notice which shall
indicate (i) the specific termination provision(s) of this Agreement being relied upon in
respect of such termination, (ii) shall set forth, in reasonable detail, the facts and
circumstances claimed to provide a basis for termination of your employment under the
termination provision(s) so indicated and (iii) shall set forth the Date of Termination in
accordance with Subsection (e) below.
(e) Date of Termination, Etc. “Date of Termination” shall mean:
(i) If your employment is terminated for Disability, the later of (i) thirty
days after Notice of Termination is given (provided that you shall not have returned
to the substantially full-time performance of your duties during such thirty day
period) and (ii) the date that you cease to be included on the Company’s payroll,
and
(ii) If your employment is terminated pursuant to Subsection (b) or (c) above,
or for any reason other than Disability, the later of (i) the date specified in the
Notice of Termination (which, in the case of a termination pursuant to Subsection
(b) above, shall not be less than thirty days following the date such Notice of
Termination is given and, in the case of a termination pursuant to Subsection (c)
above, shall not be less than fifteen nor more than sixty days following the date
such Notice of Termination is given) and (ii) the date that you cease to be included
on the Company’s payroll;
provided, however, that if within fifteen days after any Notice of
Termination is given, or (if later) prior to the Date of Termination set forth in such
Notice of Termination, the party receiving such Notice of Termination notifies the other
party that a dispute exists concerning the termination, the Date of Termination shall be the
later of (i) the date on which the dispute is finally resolved, either by mutual written
agreement of the parties, by a binding arbitration award, or by a final judgment, order or
decree of a court of competent jurisdiction (which is not appealable or with respect to
which the time for appeal therefrom has expired and no appeal has been perfected) and (ii)
the date that you
-7-
cease to be included on the Company’s payroll; further provided, however, that the Date of
Termination shall be extended by a notice of dispute hereunder only if such notice is given
in good faith and the party giving such notice pursues the resolution of such dispute in
good faith and with reasonable diligence. Notwithstanding the pendency of any such dispute,
the Company will continue to pay you your full compensation in effect when the Notice of
Termination giving rise to such dispute was given (including, but not limited to, your base
salary) and will continue you as a participant in all other compensation, bonus, benefit and
insurance plans in which you were participating when the Notice of Termination was given,
until the dispute is finally resolved in accordance with this Subsection. Amounts paid under
this Subsection are in addition to all other amounts due under this Agreement and shall not
be offset against, or reduce, any other amount or benefit due under this Agreement.
6. Compensation Upon Termination or During Disability Following a Change in Control of the
Company. Following a Change in Control of the Company, as defined in Subsection 2(a) hereof,
upon termination of your employment or during a period of Disability, you shall be entitled to the
following benefits:
(a) During any period that you fail to perform your full-time duties with the Company
as a result of incapacity due to physical or mental illness, you shall continue to receive
your base salary at the rate in effect at the commencement of any such period, together with
all compensation payable to you under all bonus plans, restricted stock and/or stock option
plans, and other incentive and/or deferred compensation plans during such period, until this
Agreement is terminated pursuant to Subsection 5(a) hereof. Thereafter, or in the event your
employment shall be terminated by reason of your Retirement or death, your benefits shall be
determined under the Company’s retirement, insurance and other compensation programs then in
effect in accordance with the terms of such programs, subject to Subsection 6(f) hereof.
(b) If your employment shall be rightfully terminated by the Company for Cause, the
Company shall pay you your full base salary through the Date of Termination, at the rate in
effect at the time Notice of Termination is given, plus all other amounts in which you are
then irrevocably vested and to which you are then entitled under any compensation plan of
the Company, at the time such payments are due, and the Company shall have no other or
further obligations to you under this Agreement.
(c) If your employment by the Company shall be terminated (y) by the Company other than
for Cause, Retirement or Disability or (z) by you for Good Reason, then you shall be
entitled to all of the benefits provided below:
(i) The Company shall pay you your full base salary through the Date of
Termination at the rate in effect at the time Notice of Termination is given, plus
all other amounts to which you are then irrevocably vested and to which you are then
entitled under any compensation plan of the Company, at the time such payments are
due;
-8-
(ii) In lieu of any other or further salary payments to you for periods
subsequent to the Date of Termination, the Company shall pay to you, as severance
pay, a lump sum severance payment (the “Severance Payment”) equal to 2.99 times the
average of the Annual Compensation (as defined below) which was payable to you by
the Company or any corporation affiliated with the Company within the meaning of
Section 1504 of the Code, for the three calendar years immediately preceding the
calendar year in which the Change in Control of the Company occurred. Such average
shall be determined in accordance with proposed, temporary or final regulations
promulgated under Section 280G(d) of the Code, or, in the absence of such
regulations, if you were not employed by the Company or its affiliates during the
entire three calendar years preceding the calendar year in which the Change in
Control of the Company occurred, then such average shall be an average of your
Annual Compensation for the complete calendar years (if any) and partial calendar
year (if any) during which you were so employed by the Company or any of its
affiliates; provided, however, that the amount for any such partial calendar year
shall be an annualized amount based on the amount of Annual Compensation paid or
payable to you during such partial calendar year. If you were not employed by the
Company or any of its affiliates during such period, then such average shall be an
annualized amount based on the amount of Annual Compensation paid or payable to you
during the calendar year in which the Change in Control of the Company occurred.
“Annual Compensation” shall mean, for any calendar year, the sum of (i) your annual
base salary for that calendar year (annualized for any partial year, and pro-rated
to reflect intra-year adjustments to base salary), plus (ii) any cash bonus
that you were actually paid in respect of that calendar year (annualized if such
payment was made with respect to a partial year), plus (iii) to the extent
that the amount of the cash bonus for any calendar year has not been determined as
of the date of a Change in Control, any cash bonus that would have been paid to you
in respect of that calendar year, based on the performance criteria established for
determining such cash bonuses for executives of the Company for that calendar year
as of the date of a Change in Control (annualizing any calendar year performance
targets based on year-to-date performance) or, if greater, your “Target” bonus for
that calendar year. In all cases, Annual Compensation shall be determined without
any reduction for any deferrals of such salary or such bonus under any deferred
compensation plan (whether qualified or unqualified) and without any reduction for
any salary reductions used to make contributions to any 401(k) plan or other group
plan maintained by the Company or any of its affiliates;
(iii) The Company shall also pay to you all amounts of compensation or other
awards payable or due to you in respect of any period preceding the Date of
Termination under any incentive compensation plan of the Company (including, without
limitation, any and all Option Plans) at any time maintained by the Company and
under any and all agreements with you in connection therewith, and shall make any
other payments and take any other actions provided for in such plans and agreements;
-9-
(iv) The Company shall also pay to you all legal fees and expenses incurred by
you as a result of such termination (including all such fees and expenses, if any,
incurred in contesting or disputing any such termination or in seeking to obtain or
enforce any right or benefit provided under this Agreement or in connection with any
tax audit or proceeding to the extent attributable to the application of Section
4999 of the Code to any payment or benefit provided hereunder); and
(v) The payments provided for in paragraphs (ii), (iii) and (iv) above shall be
made on your Severance Payment Date.
(d) If your employment shall be terminated (y) by the Company other than for Cause or
(z) by you for Good Reason, then the Company shall, for a period of twenty-four months
following the Date of Termination, continue to provide life, disability, accident and health
insurance benefits that are substantially identical to those you (and your dependents) were
receiving immediately prior to the giving of the Notice of Termination. Benefits otherwise
receivable by you pursuant to this Subsection 6(d) shall be reduced to the extent of
comparable benefits actually received by you from another employer, and you shall promptly
report any such comparable benefits so received by you from another employer;
(e) You shall not be required to mitigate the amount of any payment or benefit provided
for in this Section 6 by seeking or accepting other employment, or otherwise, nor shall the
amount of any payment or benefit provided for in this Section 6 be reduced by any
compensation earned by you as the result of employment by another employer, by retirement
benefits, by offset against any amount claimed to be owed by you to the Company, or
otherwise (except as expressly otherwise provided in this Section 6);
(f) In addition to all other amounts payable to you under this Section 6,
notwithstanding any provision of any plan or agreement to the contrary (which plans and
agreements are deemed amended by this provision), on your Severance Payment Date, you shall
be entitled to receive all amounts theretofore credited to you or to your account (whether
or not then fully vested or payable under the terms of such plan or agreement) under any
deferred compensation or similar plan or agreement with the Company (other than the
Company’s 401(k) Plan); and
(g) In addition to all other amounts payable to you under this Section 6, on your
Severance Payment Date, you shall be entitled to receive all benefits payable to you or
credited to your account (whether or not then fully vested) under and in accordance with the
terms of any other benefit plan or compensation plan of the Company in which you are or have
been a participant, to the extent such benefits have not been previously paid or are not
paid or expressly provided for under this Agreement.
If a Potential Change in Control of the Company shall have occurred, within five business days
following your written request that the Company do so, the Company shall deposit with an escrow
agent acceptable to you, pursuant to an escrow agreement between the Company
-10-
and such escrow agent in form and substance acceptable to you, a sum of money or other
property permitted by such escrow agreement sufficient, in the reasonable good faith estimate of
the Company, to fund the payment to you of the amounts specified in Subsection 6(c) and Section 7
of this Agreement. It is intended that any amounts so deposited in escrow pursuant to the preceding
sentence be subject to the claims of the Company’s creditors, as set forth in the form of such
escrow agreement.
7. Excise Tax; Gross-Up Payments. In the event that you become entitled to any of the
payments or benefits (collectively, the “Benefits”) provided for under Sections 4 and 6 above, and
if any of the Benefits will be subject to the tax (the “Excise Tax”) imposed by Section 4999 of the
Code, the Company shall pay to you, an additional amount (the “Gross-Up Payment”) such that the net
amount retained by you, after deduction of any Excise Tax upon such Benefits, shall be equal to the
amount of the Benefits before the deduction or payment of any Excise Tax attributable thereto. Such
Gross-Up Payment shall be payable concurrently with the Benefits to which it relates (or, if the
amount of such Gross-Up Payment cannot be finally determined on or before such date, the Company
shall pay to you on such date the estimated amount, determined in good faith by the Company, of
such Gross-Up Payment and shall pay the remainder thereof, without interest, as soon as the amount
thereof can be determined, but in no event later than the thirtieth day after the date upon which
the payment of such Benefits are due). For purposes of determining whether any of the Benefits will
be subject to the Excise Tax, and the amount of such Excise Tax, the following shall apply:
(a) Any other payments or benefits received or to be received by you in connection with
a Change in Control of the Company or the termination of your employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with the Company,
any person whose actions result in a Change in Control of the Company or any person
affiliated with the Company or any such person) shall be treated as “parachute payments”
within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments”
within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the
Excise Tax, unless in the written opinion of tax counsel selected by the Company’s
independent auditors and acceptable to you such other payments or benefits (in whole or in
part) do not constitute “parachute payments,” or such “excess parachute payments” (in whole
or in part) represent reasonable compensation for services actually rendered within the
meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of
Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;
(b) The amount of the Benefits which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (y) the total amount of the Benefits and (z) the amount of
“excess parachute payments” within the meaning of Section 280G(b)(1) of the Code (after
applying clause (a) above); and
(c) The value of any non-cash benefits or any deferred payment or benefit shall be
determined by the Company’s independent auditors in accordance with proposed, temporary or
final regulations under Sections 280G(d)(3) and (4) of the Code or, in the absence of any
such regulations, in accordance with the principles of Section 280G(d)(3) and (4) of the
Code. For purposes of determining the amount of the Gross-Up Payment,
-11-
you shall be deemed to pay Federal income taxes at the highest marginal rate of
taxation applicable to individuals in the calendar year in which the Gross-Up Payment is to
be made and state and local income taxes at the highest marginal rate of taxation in the
state and locality of your residence on the Date of Termination, net of the maximum
reduction in Federal income taxes which would be obtained from deduction of such state and
local taxes. In the event that the amount of Excise Tax attributable to Benefits is
subsequently determined to be less than the amount taken into account hereunder at the time
of termination of your employment, you shall repay to the Company, without interest, within
thirty days following the date that the amount of such reduction in Excise Tax is finally
determined, that portion of the Gross-Up Payment attributable to such reduction (including
appropriate adjustments to reflect the net effect on Federal, state and local income taxes
applicable to the repayment of such portion of the Gross-Up Payment). In the event that the
Excise Tax attributable to Benefits is determined to exceed the amount taken into account
hereunder at the time of the termination of your employment (including by reason of any
payment the existence or amount of which was not be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest or penalty payable by you in respect thereof) at the time that the amount
of such excess is finally determined;
8. Successors; Binding Agreement.
(a) The Company will require that any successor (whether direct or indirect, by
purchase, merger, consolidation or otherwise) to all or substantially all of the business
and/or assets of the Company to expressly assume and agree to perform this Agreement in the
same manner and to the same extent that the Company would be required to perform it if no
such succession had taken place. Failure of the Company to obtain such assumption and
agreement prior to the effectiveness of any such succession shall constitute a breach of
this Agreement, which breach shall entitle you to receive compensation from the Company in
the same amount and on the same terms as you would be entitled to hereunder if you
terminated your employment for Good Reason following a Change in Control of the Company,
except that for purposes of implementing the foregoing, the date on which any such
succession becomes effective shall be deemed the Date of Termination. As used in this
Agreement “Company” shall mean the Company as hereinabove defined and any successor to all
or substantially all of its business and/or assets which assumes and agrees to perform this
Agreement in writing, by operation of law, or otherwise.
(b) This Agreement shall inure to the benefit of and be enforceable by you, your
personal or legal representatives, executors, administrators, successors, heirs,
distributees, devisees and legatees. If you should die while any amount would still be
payable to you hereunder if you had continued to live, all such amounts, unless otherwise
expressly provided herein, shall be paid in accordance with the terms of this Agreement to
your devisees, legatees or other designees or, if there is no such devisee, legatee or
designee, to your estate.
9. Notice. For the purpose of this Agreement, notices and all other communications
provided for in this Agreement shall be in writing and shall be deemed to have been duly given
-12-
when delivered or mailed by United States registered or certified mail, return receipt
requested, postage prepaid, addressed to the respective addresses set forth on the signature page
of this Agreement, provided that all notices to the Company shall be directed to the Secretary of
the Company, or to such other address as either party shall have designated to the other in writing
in accordance herewith, except that any such notice of change of address shall be effective only
upon receipt.
10. Miscellaneous. No provision of this Agreement may be amended, modified, waived or
discharged unless such amendment, modification, waiver or discharge is agreed to in writing and
signed by you and a duly authorized officer of the Company, other than yourself. No waiver by
either party hereto at any time of any breach of, or noncompliance with, any particular provision
of this Agreement by the other party hereto, or the existence of any particular condition or the
occurrence of any particular event hereunder, shall be deemed or construed as a waiver of any other
or further breach, noncompliance, condition or occurrence, whether similar or dissimilar and
whether occurring or existing at the same or any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the subject matter hereof
have been made by either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed by the substantive
laws of the State of Texas, without regard for any provision of such law which might require the
application of the laws of any other jurisdiction. All references herein to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor provisions to such
sections. Except as otherwise expressly provided herein, any payments provided for hereunder shall
be paid net of applicable withholding taxes required under Federal, state or local law. The accrued
obligations of the Company under Section 4 hereof, if any, shall survive your subsequent death,
Disability or Retirement and shall survive the expiration of the term of this Agreement.
11. Validity. The invalidity or unenforceability of any provision of this Agreement
shall not affect the validity or enforceability of any other provision of this Agreement, all of
which shall remain in full force and effect.
12. Execution in Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original and all of which together shall
constitute one and the same instrument.
13. Arbitration. Any dispute or controversy arising under or in connection with this
Agreement shall be settled exclusively by expedited arbitration in Dallas, Texas in accordance with
the Commercial Arbitration rules of the American Arbitration Association then in effect. Judgment
may be entered on the arbitrator’s award in any court of competent jurisdiction; provided, however,
that you shall be entitled to seek specific performance, in any court of competent jurisdiction, of
your right to be paid your full base salary hereunder for all periods prior to the Date of
Termination, and during the pendency of any dispute or controversy arising under or in connection
with this Agreement.
14. Similar Provisions in Other Agreements. The Benefits provided for under this
Agreement shall supercede and replace any other benefits to which you may be entitled under any
previous agreement between you and the Company or its affiliates.
-13-
If this letter sets forth fully and accurately our agreement with respect to the subject
matter hereof, please sign and date the enclosed copy of this letter and return the same to the
Secretary of the Company, whereupon this letter shall constitute our mutually binding agreement
with respect to the subject matter hereof.
[Signatures on following page.]
-14-
| Very truly yours, | ||||||
| Company Address: | ||||||
| ▇▇▇ ▇. ▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇ Attention: Corporate Secretary |
FELCOR LODGING TRUST INCORPORATED, acting individually and as the sole general partner of FelCor Lodging Limited Partnership | |||||
| By: | ||||||
| Name: | ||||||
| Title: | ||||||
| Accepted and Agreed to this ___ day of | ||||||
| October, 2006: | ||||||
Name: |
||||||
Address: |
||||||
-15-