Document:

EX-10.1

 

EXHIBIT 10.1

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made and entered into by
Winston Hotels, Inc., a North Carolina corporation (hereinafter the
“Corporation”), and Brent V. West (hereinafter the “Employee”).

     The Corporation desires to employ Employee and Employee desires to accept
such employment on the terms set forth below.

     In consideration of the mutual promises set forth below and other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the Corporation and Employee agree as follows:

     1. Employment. The Corporation employs Employee and Employee accepts
employment on the terms and conditions set forth in this Agreement.

     2. Nature Of Employment.

          Employee shall serve as the Vice President and Chief Accounting Officer of
the Corporation and shall have such responsibilities and authority consistent
with such positions as may be reasonably assigned to him by the Board of
Directors of the Corporation. Employee shall devote his full time and attention
and best efforts to perform successfully his duties and advance the
Corporation’s interests. Employee shall abide by the Corporation’s policies,
procedures, and practices as they may exist from time to time.

     During this employment, Employee shall have no other employment of any
nature whatsoever without the prior consent of the Corporation;

 

 

provided, however, this Agreement shall not prohibit Employee from personally
owning and dealing in stocks, bonds, securities, real estate, commodities or
other investment properties for his own benefit.

     3. Compensation and Benefits.

          (a) Salary. Compensation for Employee’s services under this Agreement
initially shall be One Hundred Forty-Four Thousand Five Hundred Dollars
($144,500) per year, payable in accordance with the Corporation’s reasonable
policies, procedures, and practices as they may exist from time to time. The
Employee’s salary shall be reviewed annually by the Corporation’s Chief
Executive Officer or Board of Directors as of December 31 and by February 15 of
each year and may be changed in the CEO’s or Board’s reasonable discretion.

          (b) Bonus. Employee shall be entitled to earn an annual bonus of up to
fifty percent (50%) of his annual salary with the specific amount to be
reviewed and determined annually by the Corporation’s Board of Directors.

          (c) Benefits. Employee may participate in any medical insurance or other
employee benefit plans and programs which may be made available from time to
time to other Corporation employees at Employee’s level; provided, however,
that Employee’s participation in such benefit plans and programs is subject to
the applicable terms, conditions, and eligibility requirements of those plans
and programs, some of which are within the plan administrator’s discretion, as
they may exist from time to time.

          (d) Expenses. Employee shall be reimbursed by the Corporation for any
reasonable expenses incurred by Employee on behalf of the Corporation or in
connection with Employee’s performance of his

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duties hereunder. Such reimbursement shall be in accordance with the
Corporation’s practices or policies as they may exist from time to time.

          (e) Vacation. Employee shall be entitled to four (4) weeks of vacation
each year. Such vacation shall be taken in accordance with the Corporation’s
policies and practices as they may exist from time to time.

     4. Term Of Employment. Unless terminated earlier as provided herein, the
original term of employment under this Agreement shall be for three (3) years
commencing on the date hereof. Upon the expiration of the original term of
employment or any subsequent term, this Agreement shall be automatically
renewed for an additional one (1) year period unless either party gives the
other ninety (90) days prior written notice of intent not to renew.

     5. Termination of Employment.

          (a) With Notice. Either the Corporation or Employee may terminate this
Agreement during the original or any extension term of employment by giving
ninety (90) days prior written notice to the other party. If the Corporation
terminates this Agreement with such notice, or gives a notice of non-renewal
pursuant to Section 4 of this Agreement, then Employee shall be entitled to an
amount equal to the sum of (i) the Employee’s then current monthly salary
multiplied by 12 plus (ii) an accrued bonus amount equal to 50% of the
Employee’s then current annual salary pro rated from the first day of the
calendar year in which such notice is given through and including the day and
date that the Employee leaves the employment of the Company, with said amount
to be paid in a lump sum upon the date of termination of this Agreement.

          (b) Cause, Disability, or Death. The Corporation may terminate Employee’s
employment immediately for “Disability,” “Cause,”

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or in the event of Employee’s death. For purposes of this Agreement,
Disability shall mean a mental or physical condition, or both, that
substantially interferes with Employee’s ability to perform satisfactorily his
usual duties for the Corporation for a period of more than six (6) consecutive
months upon the certificate of a qualified physician approved by the
Corporation. For purposes of this Agreement, Cause shall mean: (i) any act of
Employee’s in connection with his employment and relating to the Corporation’s
business, including but not limited to, gross negligence, which is materially
detrimental to the Corporation’s interests; (ii) any act of willful misconduct,
unlawfulness or dishonesty by Employee in connection with his employment, which
is materially detrimental to the Corporation’s interests; (iii) the Employee’s
failure to (a) perform his job in a reasonably satisfactory manner following
two consecutive notice and cure periods as set forth below; or, (b) comply with
the Corporation’s reasonable directions; or (iv) Employee’s material breach of
this Agreement. Employee shall be given written notice and a thirty (30) day
opportunity to cure any deficiencies arising under Sections 5(b) (i), (iii) and
(iv) above.

     In the event of termination for Cause, the Corporation’s obligation to
compensate Employee ceases on the date of termination except as to the amounts
of salary due at that time. In the event of termination for Disability, the
Corporation shall pay Employee’s then current annual salary (reduced by any
payments Employee receives from disability insurance) and any bonus to which he
may be entitled equal to 50% of the Employee’s then current annual salary for
a period of one year from the date of termination. In the event of termination
for death, the Corporation shall pay Employee’s estate any salary and prorated
bonuses to which he may be entitled as of the date of termination.

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     6. Non-Competition and Non-Solicitation.

          (a) During the Executive’s employment with the Company and for a period
of eighteen (18) months following the Executive’s Date of Termination, the
Executive shall not, for himself or on behalf of or in conjunction with any
other person, persons, company, firm, partnership, corporation, business, group
or other entity (each, a “Person”), work in the principal line of business
engaged in, or planned to be engaged in, by the Company at the Date of
Termination within any state where the Company is doing business or has plans
for commencing business as of the Date of Termination. The Executive’s passive
ownership of less than five percent (5%) of the securities of a company shall
not be treated as an action in competition with the Company.

          (b) Executive hereby acknowledges and agrees that his employment with the
Company places him in a position of trust and confidence with respect to the
business operations, customers, prospects and personnel of the Company. He
agrees that, due to his position and knowledge, his engaging in any business
that directly competes in the principal line of business as the Company will
cause the Company significant and irreparable harm.

          (c) In consideration of the compensation and benefits extended to him
under this Agreement, Executive agrees that, during the term of Executive’s
employment by the Company and for eighteen (18) months following the Date of
Termination, the Executive shall not, for any reason whatsoever, directly or
indirectly, for himself or herself or on behalf of or in conjunction with any
other Person:

(i) solicit and/or hire any Person who is on the Date of
Termination, or has been within six (6) months prior to the Date of
Termination, an Executive of the Company or its affiliates;

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(ii) solicit, induce or attempt to induce any Person who is, at the
Date of Termination, or has been within six (6) months prior to the
Date of Termination, an actual customer, client, business partner,
or a prospective customer, client, business partner (i.e., a
customer, client or business partner who is party to a written
proposal or letter of intent with Company, in each case written
less than six (6) months prior to the Date of Termination) of the
Company, for the purpose or with the intent of (A) inducing or
attempting to induce such Person to cease doing business with
Company or its affiliates, (B) enticing or attempting to entice
such Person to do business with Executive or any affiliate of
Executive, or (C) in any way interfering with the relationship
between such Person and Company or its affiliates; or

(iii) solicit, induce or attempt to induce any Person who is or
that is, at the time of the Date of Termination, or has been within
six (6) months prior to the Date of Termination, a supplier,
licensee or consultant of, or provider of goods or services to
Company or its affiliates, for the purpose or with the intent of
(A) inducing or attempting to induce such Person to cease doing
business with Company or its affiliates or (B) in any way
interfering with the relationship between such Person and Company
or its affiliates.

          (d) Because of the difficulty of measuring economic losses to Company as a
result of a breach of the foregoing covenants, and because of the immediate and
irreparable damage that could be caused to Company for which it would have no
other adequate remedy, Executive agrees that the foregoing covenants in this
Section 6, in addition to and not in limitation of any other rights, remedies
or damages available to Company at law, in equity or under this Agreement,
shall be enforced

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by Company in the event of the breach or threatened breach by Executive, by
injunctions and/or restraining orders.

          (e) It is agreed by the parties that the covenants contained in this
Section 6 impose a fair and reasonable restraint on Executive in light of the
activities and business of Company on the date of the execution of this
Agreement and the current plans of Company; but it is also the intent of
Company and Executive that such covenants be construed and enforced in
accordance with the changing activities, business and locations of Company and
its affiliates throughout the term of these covenants. Executive also
acknowledges that this restraint will not prevent him from earning a living in
his chosen field of work.

          (f) The covenants in this Section 6 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent that such court deems
reasonable, and the Agreement shall thereby be reformed to reflect the same.

          (g) All of the covenants in this Section 6 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against Company whether
predicated on this Agreement or otherwise shall not constitute a defense to the
enforcement by Company of such covenants. It is specifically agreed that the
duration of the period during which the agreements and covenants of Executive
made in this Section 6 shall be effective shall be computed by excluding from
such computation any time during which Executive is in violation of any
provision of this Section 6.

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          (h) Notwithstanding any of the foregoing, if any applicable law, judicial
ruling or order shall reduce the time period during which Executive shall be
prohibited from engaging in any competitive activity described in Section 6
hereof, the period of time for which Executive shall be prohibited pursuant to
Section 6 hereof shall be the maximum time permitted by law.

     7. Proprietary Information And Property. Employee shall not, at any time
during or following employment with the Corporation, disclose or use, except in
the course of his employment with the Corporation or as may be required by law,
any confidential or proprietary information of the Corporation received by
Employee while employed hereunder, whether such information is in Employee’s
memory or embodied in writing or other physical form.

     Confidential or proprietary information is information which is not
generally available to the general public, or Corporation’s competitors, or
ascertainable through common sense or general business knowledge; including,
but not limited to data, compilations, methods, financial data, financial
plans, business plans, product plans, lists of actual or potential customers,
and marketing information regarding executives and employees.

     All records, files or other objects maintained by or under the control,
custody or possession of the Corporation or its agents in their capacity as
agents shall be and remain the Corporation’s property. Upon termination of his
employment, Employee shall return to the Corporation all property (including,
but not limited to, equipment, records, files, documents, credit cards, and
keys) which he received in connection with his employment. At the
Corporation’s request, Employee shall bring current all such records, files or
documents before returning them.

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     Upon notice of cessation of his employment with the Corporation, Employee
shall fully cooperate with the Corporation in winding up his pending work and
transferring his work to those individuals designated by the Corporation.

     The terms and conditions of this Section 7 shall survive expiration or
termination of this Agreement or Employee’s employment and shall not be
affected by any change or modification of this Agreement unless specific
reference is made to this Section 7.

     8. Change in Control.

(a) For purposes of this Agreement, “Change in Control” shall mean:

     (i) The acquisition by any entity or person, which theretofore
beneficially owned less than 50% of the Corporation’s common stock
in a transaction or series of transactions which results in such
entity or person beneficially owning 50% or more of the
Corporation’s common stock or voting power, where beneficial
ownership and the percentages of shares outstanding are determined
pursuant to Sections 13(d) and (g) of the Securities Exchange Act
of 1934 and the rules and regulations promulgated thereunder; or

     (ii) The merger, share exchange, or consolidation of the
Corporation with one or more corporations in a transaction or
series of transactions where the common stock of the Corporation is
exchanged for less than 50% of the voting stock of the resulting or
surviving corporation, including, without limitation, an exchange
of the common stock of the Corporation for cash; or

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     (iii) The sale, assignment, transfer, pledge, hypothecation or
other disposition of assets (except a pledge, hypothecation or
other similar disposition made at the time the Corporation enters
into a bona fide financing transaction with a party which at the
time of such transaction is not an affiliate of the Corporation) of
the Corporation having a value in excess of 50% of the consolidated
total assets of the Corporation.

     (iv) The individuals who, as of the date of this Agreement,
are members of the Board of Directors (the “Incumbent Board”),
cease for any reason to constitute at least two-thirds of the
members of the Board; provided, however, that if the election, or
nomination for election by the Corporation’s common stockholders of
any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board.

A Change in Control shall not include a transaction, or series of transactions,
whereby the Corporation becomes a subsidiary of a holding company if the
shareholders of the holding company are substantially the same as the
shareholders of the Corporation prior to such transaction or series of series
of transactions.

                     (b) After the occurrence of a Change in Control, Employee shall be
entitled to receive payments and benefits pursuant to Section 8 of this
Agreement in the following circumstances:

     (i) If within one year after the occurrence of a Change in
Control, the Corporation (or any successor in interest)

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terminates Employee’s employment for reasons other than Cause,
Disability, or Death.

     (ii) If within one year after the occurrence of a Change in
Control, the Employee terminates his employment with the
Corporation (or any successor in interest) for “Good Reason.” For
purposes of this Agreement “Good Reason” shall mean the occurrence
after a Change in Control of any of the following events or
conditions:

         (1) a change in the Employee’s status, titles,
positions, or responsibilities (including reporting
responsibilities) which, in the Employee’s reasonable
judgment represents an adverse change from his status,
titles, positions, or responsibilities in effect immediately
prior thereto; the assignment to Employee of any duties or
responsibilities which, in the Employee’s reasonable
judgment, are inconsistent with his status, titles, positions
or responsibilities; or any removal of Employee from or
failure to reappoint or re-elect him to any of such
positions, status, or titles, except in connection with the
termination of his employment for Disability, Cause, or
death, or by the Employee other than for Good Reason;

         (2) a reduction in the Employee’s base salary and/or any
material adverse change in the bonus program applicable to
the Employee;

         (3) the Corporation’s requiring the Employee to be based
at any place outside a thirty (30) mile radius from Raleigh,
North Carolina, except for reasonably required travel on the
Corporation’s business which is

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not substantially greater than such travel requirements
prior to the Change in Control;

         (4) the failure by the Corporation to continue in effect
any compensation, welfare, or benefit plan in which Employee
is participating at the time of a Change in Control without
substituting plans providing Employee with substantially
similar or greater benefits, or the taking of any action by
the Corporation which would adversely affect Employee’s
participation in or materially reduce Employee’s benefits
under, any of such plans or deprive Employee of any material
fringe benefit enjoyed by Employee at the time of the Change
in Control;

         (5) any purported termination of Employee’s employment
for Cause or Disability without grounds therefor;

         (6) any breach by the Corporation of any provision of
this Agreement; or

         (7) the failure of the Corporation to obtain an
agreement, satisfactory to the Employee, from any successor
or assign of the Corporation to assume and agree to perform
all of the provisions of this Agreement; or,

         (8) the principal executive offices of the Corporation
being located outside of a thirty (30) mile radius of
Raleigh, North Carolina.

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                          (c) In the event that Employee’s employment with the Corporation
terminates under any of the circumstances described above in this Section 8,
Employee shall be entitled to receive all of the following:

         (i) all accrued compensation and any pro rata bonuses to which
he may be entitled and which Employee may have earned up to the
date of termination;

         (ii) a severance payment equal to one and one-half (1.5) times
the amount of the Employee’s current annual compensation plus a
bonus equal to 50% of the Employee’s then current annual salary;
provided, however, that in no case shall the amount used for such
annual compensation or bonus be less than those amounts immediately
prior to the Change in Control. The severance payment shall be
paid in a lump sum upon the date of termination;

         (iii) a continuation of benefits. The Corporation shall
maintain in full force and effect, for one (1) year after the date
of termination, all life insurance, health, accidental death and
dismemberment, and disability plans and other benefit programs in
which Employee is entitled to participate immediately prior to the
termination, provided that Employee’s continued participation is
possible under the general terms and provisions of such plans and
programs. Employee’s continued participation in such plans and
programs shall be at no greater cost to Employee than the cost he
bore for such participation immediately prior to termination. If
Employee’s participation in any such plan or program is barred, the
Corporation shall arrange upon comparable terms, and at no greater
cost to Employee than the cost he bore for such plans and programs
prior to termination, to provide Employee with benefits
substantially similar to, or

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greater than, those which he is entitled to receive under any
such plan or program; and,

(iv) a lump sum payment (or otherwise as specified by Employee to the extent
permitted by the applicable plan) of any and all amounts contributed to a
Corporation pension or retirement plan which Employee is entitled to under the
terms of any such plan.

     9. Remedies. Employee agrees that his breach or violation of Section 6
will result in immediate and irreparable harm to the Corporation for which
legal remedies would be inadequate. Therefore, in addition to any legal or
other relief to which the Corporation may be entitled, the Corporation may seek
legal and equitable relief, including but not limited to, preliminary and
permanent injunctive relief.

     10. Employee Representation. Employee represents and warrants that his
employment and obligations under this Agreement will not breach any duty or
obligation he owes to another person or entity.

     11. Waiver Of Breach. The Corporation’s or Employee’s waiver of any
breach of a provision of this Agreement shall not waive any subsequent breach
by the other party.

     12. Entire Agreement. This Agreement including any exhibit or attachment
hereto: (i) supersedes all other understandings and agreements, oral or
written, between the parties with respect to the subject matter of this
Agreement including any exhibit or attachment hereto; and (ii) constitutes the
sole agreement between the parties with respect to this subject matter. Each
party acknowledges that: (i) no representations, inducements, promises or
agreements, oral or written, have been made by any party or by anyone acting on
behalf of any party, which are not embodied in this Agreement including any
exhibit or attachment hereto; and (ii) no agreement, statement or promise not
contained in this

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Agreement shall be valid. No change or modification of this Agreement shall be
valid or binding upon the parties unless such change or modification is in
writing and is signed by the parties.

     13. Severability. If a court of competent jurisdiction holds that any
provision or sub-part thereof contained in this Agreement is invalid, illegal
or unenforceable, that invalidity, illegality or unenforceability shall not
affect any other provision in this Agreement.

     14. Parties Bound. The terms, provisions, covenants and agreements
contained in this Agreement shall apply to, be binding upon and inure to the
benefit of the Corporation’s successors and assigns. Employee may not assign
this Agreement without the Corporation’s prior written consent.

     15. Governing Law. This Agreement and the employment relationship created
by it shall be governed by North Carolina law. The parties hereby consent to
exclusive jurisdiction in North Carolina for the purpose of any litigation
relating to this Agreement and agree that any litigation by or involving them
relating to this Agreement shall be conducted in the court of Wake County or
the federal court of the United States for the Eastern District of North
Carolina.

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     IN WITNESS WHEREOF, the parties have entered into this Agreement on the
day and year written below.

	 	 	 
	

	 	EMPLOYEE
	 
	 	 
	3/30/04

	 	/s/ Brent V. West
	
 

	 	
 
	Date

	 	Brent V. West
	 
	 	 
	

	 	WINSTON HOTELS, INC.
	 
	 	 
	3/30/04

	 	/s/ Robert W. Winston
	
 

	 	
 
	Date

	 	Robert W. Winston
	

	 	Chief Executive Officer

16EX-10.2

 

EXHIBIT 10.2

EMPLOYMENT AGREEMENT

     This Employment Agreement (“Agreement”) is made and entered into by
Winston Hotels, Inc., a North Carolina corporation (hereinafter the
“Corporation”), and James P. Frey (hereinafter the “Employee”).

     The Corporation desires to employ Employee and Employee desires to accept
such employment on the terms set forth below.

     In consideration of the mutual promises set forth below and other good and
valuable consideration, the receipt and sufficiency of which the parties
acknowledge, the Corporation and Employee agree as follows:

     1. Employment. The Corporation employs Employee and Employee accepts
employment on the terms and conditions set forth in this Agreement.

     2. Nature Of Employment.

          Employee shall serve as the Vice President–Barclay Design of the
Corporation and shall have such responsibilities and authority consistent with
such positions as may be reasonably assigned to him by the Board of Directors
of the Corporation. Employee shall devote his full time and attention and best
efforts to perform successfully his duties and advance the Corporation’s
interests. Employee shall abide by the Corporation’s policies, procedures, and
practices as they may exist from time to time.

     During this employment, Employee shall have no other employment of any
nature whatsoever without the prior consent of the Corporation;

 

 

provided, however, this Agreement shall not prohibit Employee from personally
owning and dealing in stocks, bonds, securities, real estate, commodities or
other investment properties for his own benefit.

     3. Compensation and Benefits.

          (a) Salary. Compensation for Employee’s services under this Agreement
initially shall be One Hundred Forty-Three Thousand Five Hundred Dollars
($143,500) per year, payable in accordance with the Corporation’s reasonable
policies, procedures, and practices as they may exist from time to time. The
Employee’s salary shall be reviewed annually by the Corporation’s Chief
Executive Officer or Board of Directors as of December 31 and by February 15 of
each year and may be changed in the CEO’s or Board’s reasonable discretion.

          (b) Bonus. Employee shall be entitled to earn an annual bonus of up to
fifty percent (50%) of his annual salary with the specific amount to be
reviewed and determined annually by the Corporation’s Board of Directors.

          (c) Benefits. Employee may participate in any medical insurance or other
employee benefit plans and programs which may be made available from time to
time to other Corporation employees at Employee’s level; provided, however,
that Employee’s participation in such benefit plans and programs is subject to
the applicable terms, conditions, and eligibility requirements of those plans
and programs, some of which are within the plan administrator’s discretion, as
they may exist from time to time.

          (d) Expenses. Employee shall be reimbursed by the Corporation for any
reasonable expenses incurred by Employee on behalf of the Corporation or in
connection with Employee’s performance of his

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duties hereunder. Such reimbursement shall be in accordance with the
Corporation’s practices or policies as they may exist from time to time.

          (e) Vacation. Employee shall be entitled to four (4) weeks of vacation
each year. Such vacation shall be taken in accordance with the Corporation’s
policies and practices as they may exist from time to time.

     4. Term Of Employment. Unless terminated earlier as provided herein, the
original term of employment under this Agreement shall be for three (3) years
commencing on the date hereof. Upon the expiration of the original term of
employment or any subsequent term, this Agreement shall be automatically
renewed for an additional one (1) year period unless either party gives the
other ninety (90) days prior written notice of intent not to renew.

     5. Termination of Employment.

          (a) With Notice. Either the Corporation or Employee may terminate this
Agreement during the original or any extension term of employment by giving
ninety (90) days prior written notice to the other party. If the Corporation
terminates this Agreement with such notice, or gives a notice of non-renewal
pursuant to Section 4 of this Agreement, then Employee shall be entitled to an
amount equal to the sum of (i) the Employee’s then current monthly salary
multiplied by 12 plus (ii) an accrued bonus amount equal to 50% of the
Employee’s then current annual salary pro rated from the first day of the
calendar year in which such notice is given through and including the day and
date that the Employee leaves the employment of the Company, with said amount
to be paid in a lump sum upon the date of termination of this Agreement.

          (b) Cause, Disability, or Death. The Corporation may terminate Employee’s
employment immediately for “Disability,” “Cause,”

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or in the event of Employee’s death. For purposes of this Agreement,
Disability shall mean a mental or physical condition, or both, that
substantially interferes with Employee’s ability to perform satisfactorily his
usual duties for the Corporation for a period of more than six (6) consecutive
months upon the certificate of a qualified physician approved by the
Corporation. For purposes of this Agreement, Cause shall mean: (i) any act of
Employee’s in connection with his employment and relating to the Corporation’s
business, including but not limited to, gross negligence, which is materially
detrimental to the Corporation’s interests; (ii) any act of willful misconduct,
unlawfulness or dishonesty by Employee in connection with his employment, which
is materially detrimental to the Corporation’s interests; (iii) the Employee’s
failure to (a) perform his job in a reasonably satisfactory manner following
two consecutive notice and cure periods as set forth below; or, (b) comply with
the Corporation’s reasonable directions; or (iv) Employee’s material breach of
this Agreement. Employee shall be given written notice and a thirty (30) day
opportunity to cure any deficiencies arising under Sections 5(b) (i), (iii) and
(iv) above.

     In the event of termination for Cause, the Corporation’s obligation to
compensate Employee ceases on the date of termination except as to the amounts
of salary due at that time. In the event of termination for Disability, the
Corporation shall pay Employee’s then current annual salary (reduced by any
payments Employee receives from disability insurance) and any bonus to which he
may be entitled equal to 50% of the Employee’s then current annual salary for
a period of one year from the date of termination. In the event of termination
for death, the Corporation shall pay Employee’s estate any salary and prorated
bonuses to which he may be entitled as of the date of termination.

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     6. Non-Competition and Non-Solicitation.

     (a) During the Executive’s employment with the Company and for a period
of eighteen (18) months following the Executive’s Date of Termination, the
Executive shall not, for himself or on behalf of or in conjunction with any
other person, persons, company, firm, partnership, corporation, business, group
or other entity (each, a “Person”), work in the principal line of business
engaged in, or planned to be engaged in, by the Company at the Date of
Termination within any state where the Company is doing business or has plans
for commencing business as of the Date of Termination. The Executive’s passive
ownership of less than five percent (5%) of the securities of a company shall
not be treated as an action in competition with the Company.

     (b) Executive hereby acknowledges and agrees that his employment with the
Company places him in a position of trust and confidence with respect to the
business operations, customers, prospects and personnel of the Company. He
agrees that, due to his position and knowledge, his engaging in any business
that directly competes in the principal line of business as the Company will
cause the Company significant and irreparable harm.

     (c) In consideration of the compensation and benefits extended to him
under this Agreement, Executive agrees that, during the term of Executive’s
employment by the Company and for eighteen (18) months following the Date of
Termination, the Executive shall not, for any reason whatsoever, directly or
indirectly, for himself or herself or on behalf of or in conjunction with any
other Person:

(i) solicit and/or hire any Person who is on the Date of
Termination, or has been within six (6) months prior to the Date of
Termination, an Executive of the Company or its affiliates;

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(ii) solicit, induce or attempt to induce any Person who is, at the
Date of Termination, or has been within six (6) months prior to the
Date of Termination, an actual customer, client, business partner,
or a prospective customer, client, business partner (i.e., a
customer, client or business partner who is party to a written
proposal or letter of intent with Company, in each case written
less than six (6) months prior to the Date of Termination) of the
Company, for the purpose or with the intent of (A) inducing or
attempting to induce such Person to cease doing business with
Company or its affiliates, (B) enticing or attempting to entice
such Person to do business with Executive or any affiliate of
Executive, or (C) in any way interfering with the relationship
between such Person and Company or its affiliates; or

(iii) solicit, induce or attempt to induce any Person who is or
that is, at the time of the Date of Termination, or has been within
six (6) months prior to the Date of Termination, a supplier,
licensee or consultant of, or provider of goods or services to
Company or its affiliates, for the purpose or with the intent of
(A) inducing or attempting to induce such Person to cease doing
business with Company or its affiliates or (B) in any way
interfering with the relationship between such Person and Company
or its affiliates.

          (d) Because of the difficulty of measuring economic losses to Company as a
result of a breach of the foregoing covenants, and because of the immediate and
irreparable damage that could be caused to Company for which it would have no
other adequate remedy, Executive agrees that the foregoing covenants in this
Section 6, in addition to and not in limitation of any other rights, remedies
or damages available to Company at law, in equity or under this Agreement,
shall be enforced

6

 

by Company in the event of the breach or threatened breach by Executive, by
injunctions and/or restraining orders.

          (e) It is agreed by the parties that the covenants contained in this
Section 6 impose a fair and reasonable restraint on Executive in light of the
activities and business of Company on the date of the execution of this
Agreement and the current plans of Company; but it is also the intent of
Company and Executive that such covenants be construed and enforced in
accordance with the changing activities, business and locations of Company and
its affiliates throughout the term of these covenants. Executive also
acknowledges that this restraint will not prevent him from earning a living in
his chosen field of work.

          (f) The covenants in this Section 6 are severable and separate, and the
unenforceability of any specific covenant shall not affect the provisions of
any other covenant. Moreover, in the event any court of competent jurisdiction
shall determine that the scope, time or territorial restrictions set forth
herein are unreasonable, then it is the intention of the parties that such
restrictions be enforced to the fullest extent that such court deems
reasonable, and the Agreement shall thereby be reformed to reflect the same.

          (g) All of the covenants in this Section 6 shall be construed as an
agreement independent of any other provision in this Agreement, and the
existence of any claim or cause of action of Executive against Company whether
predicated on this Agreement or otherwise shall not constitute a defense to the
enforcement by Company of such covenants. It is specifically agreed that the
duration of the period during which the agreements and covenants of Executive
made in this Section 6 shall be effective shall be computed by excluding from
such computation any time during which Executive is in violation of any
provision of this Section 6.

7

 

          (h) Notwithstanding any of the foregoing, if any applicable law, judicial
ruling or order shall reduce the time period during which Executive shall be
prohibited from engaging in any competitive activity described in Section 6
hereof, the period of time for which Executive shall be prohibited pursuant to
Section 6 hereof shall be the maximum time permitted by law.

     7. Proprietary Information And Property. Employee shall not, at any time
during or following employment with the Corporation, disclose or use, except in
the course of his employment with the Corporation or as may be required by law,
any confidential or proprietary information of the Corporation received by
Employee while employed hereunder, whether such information is in Employee’s
memory or embodied in writing or other physical form.

     Confidential or proprietary information is information which is not
generally available to the general public, or Corporation’s competitors, or
ascertainable through common sense or general business knowledge; including,
but not limited to data, compilations, methods, financial data, financial
plans, business plans, product plans, lists of actual or potential customers,
and marketing information regarding executives and employees.

     All records, files or other objects maintained by or under the control,
custody or possession of the Corporation or its agents in their capacity as
agents shall be and remain the Corporation’s property. Upon termination of his
employment, Employee shall return to the Corporation all property (including,
but not limited to, equipment, records, files, documents, credit cards, and
keys) which he received in connection with his employment. At the
Corporation’s request, Employee shall bring current all such records, files or
documents before returning them.

8

 

     Upon notice of cessation of his employment with the Corporation, Employee
shall fully cooperate with the Corporation in winding up his pending work and
transferring his work to those individuals designated by the Corporation.

     The terms and conditions of this Section 7 shall survive expiration or
termination of this Agreement or Employee’s employment and shall not be
affected by any change or modification of this Agreement unless specific
reference is made to this Section 7.

     8. Change in Control.

(a) For purposes of this Agreement, “Change in Control” shall mean:

     (i) The acquisition by any entity or person, which theretofore
beneficially owned less than 50% of the Corporation’s common stock
in a transaction or series of transactions which results in such
entity or person beneficially owning 50% or more of the
Corporation’s common stock or voting power, where beneficial
ownership and the percentages of shares outstanding are determined
pursuant to Sections 13(d) and (g) of the Securities Exchange Act
of 1934 and the rules and regulations promulgated thereunder; or

     (ii) The merger, share exchange, or consolidation of the
Corporation with one or more corporations in a transaction or
series of transactions where the common stock of the Corporation is
exchanged for less than 50% of the voting stock of the resulting or
surviving corporation, including, without limitation, an exchange
of the common stock of the Corporation for cash; or

9

 

     (iii) The sale, assignment, transfer, pledge, hypothecation or
other disposition of assets (except a pledge, hypothecation or
other similar disposition made at the time the Corporation enters
into a bona fide financing transaction with a party which at the
time of such transaction is not an affiliate of the Corporation) of
the Corporation having a value in excess of 50% of the consolidated
total assets of the Corporation.

     (iv) The individuals who, as of the date of this Agreement,
are members of the Board of Directors (the “Incumbent Board”),
cease for any reason to constitute at least two-thirds of the
members of the Board; provided, however, that if the election, or
nomination for election by the Corporation’s common stockholders of
any new director was approved by a vote of at least two-thirds of
the Incumbent Board, such new director shall, for purposes of this
Agreement, be considered as a member of the Incumbent Board.

A Change in Control shall not include a transaction, or series of transactions,
whereby the Corporation becomes a subsidiary of a holding company if the
shareholders of the holding company are substantially the same as the
shareholders of the Corporation prior to such transaction or series of series
of transactions.

                    (b) After the occurrence of a Change in Control, Employee shall be
entitled to receive payments and benefits pursuant to Section 8 of this
Agreement in the following circumstances:

     (i) If within one year after the occurrence of a Change in
Control, the Corporation (or any successor in interest)

10

 

terminates Employee’s employment for reasons other than Cause,
Disability, or Death.

     (ii) If within one year after the occurrence of a Change in
Control, the Employee terminates his employment with the
Corporation (or any successor in interest) for “Good Reason.” For
purposes of this Agreement “Good Reason” shall mean the occurrence
after a Change in Control of any of the following events or
conditions:

         (1) a change in the Employee’s status, titles,
positions, or responsibilities (including reporting
responsibilities) which, in the Employee’s reasonable
judgment represents an adverse change from his status,
titles, positions, or responsibilities in effect immediately
prior thereto; the assignment to Employee of any duties or
responsibilities which, in the Employee’s reasonable
judgment, are inconsistent with his status, titles, positions
or responsibilities; or any removal of Employee from or
failure to reappoint or re-elect him to any of such
positions, status, or titles, except in connection with the
termination of his employment for Disability, Cause, or
death, or by the Employee other than for Good Reason;

         (2) a reduction in the Employee’s base salary and/or any
material adverse change in the bonus program applicable to
the Employee;

         (3) the Corporation’s requiring the Employee to be based
at any place outside a thirty (30) mile radius from Raleigh,
North Carolina, except for reasonably required travel on the
Corporation’s business which is

11

 

not substantially greater than such travel requirements
prior to the Change in Control;

         (4) the failure by the Corporation to continue in effect
any compensation, welfare, or benefit plan in which Employee
is participating at the time of a Change in Control without
substituting plans providing Employee with substantially
similar or greater benefits, or the taking of any action by
the Corporation which would adversely affect Employee’s
participation in or materially reduce Employee’s benefits
under, any of such plans or deprive Employee of any material
fringe benefit enjoyed by Employee at the time of the Change
in Control;

         (5) any purported termination of Employee’s employment
for Cause or Disability without grounds therefor;

         (6) any breach by the Corporation of any provision of
this Agreement; or

         (7) the failure of the Corporation to obtain an
agreement, satisfactory to the Employee, from any successor
or assign of the Corporation to assume and agree to perform
all of the provisions of this Agreement; or,

         (8) the principal executive offices of the Corporation
being located outside of a thirty (30) mile radius of
Raleigh, North Carolina.

12

 

                    (c) In the event that Employee’s employment with the Corporation
terminates under any of the circumstances described above in this Section 8,
Employee shall be entitled to receive all of the following:

     (i) all accrued compensation and any pro rata bonuses to which
he may be entitled and which Employee may have earned up to the
date of termination;

     (ii) a severance payment equal to one and one-half (1.5) times
the amount of the Employee’s current annual compensation plus a
bonus equal to 50% of the Employee’s then current annual salary;
provided, however, that in no case shall the amount used for such
annual compensation or bonus be less than those amounts immediately
prior to the Change in Control. The severance payment shall be
paid in a lump sum upon the date of termination;

     (iii) a continuation of benefits. The Corporation shall
maintain in full force and effect, for one (1) year after the date
of termination, all life insurance, health, accidental death and
dismemberment, and disability plans and other benefit programs in
which Employee is entitled to participate immediately prior to the
termination, provided that Employee’s continued participation is
possible under the general terms and provisions of such plans and
programs. Employee’s continued participation in such plans and
programs shall be at no greater cost to Employee than the cost he
bore for such participation immediately prior to termination. If
Employee’s participation in any such plan or program is barred, the
Corporation shall arrange upon comparable terms, and at no greater
cost to Employee than the cost he bore for such plans and programs
prior to termination, to provide Employee with benefits
substantially similar to, or

13

 

greater than, those which he is entitled to receive under any
such plan or program; and,

(iv) a lump sum payment (or otherwise as specified by Employee to the extent
permitted by the applicable plan) of any and all amounts contributed to a
Corporation pension or retirement plan which Employee is entitled to under the
terms of any such plan.

     9. Remedies. Employee agrees that his breach or violation of Section 6
will result in immediate and irreparable harm to the Corporation for which
legal remedies would be inadequate. Therefore, in addition to any legal or
other relief to which the Corporation may be entitled, the Corporation may seek
legal and equitable relief, including but not limited to, preliminary and
permanent injunctive relief.

     10. Employee Representation. Employee represents and warrants that his
employment and obligations under this Agreement will not breach any duty or
obligation he owes to another person or entity.

     11. Waiver Of Breach. The Corporation’s or Employee’s waiver of any
breach of a provision of this Agreement shall not waive any subsequent breach
by the other party.

     12. Entire Agreement. This Agreement including any exhibit or attachment
hereto: (i) supersedes all other understandings and agreements, oral or
written, between the parties with respect to the subject matter of this
Agreement including any exhibit or attachment hereto; and (ii) constitutes the
sole agreement between the parties with respect to this subject matter. Each
party acknowledges that: (i) no representations, inducements, promises or
agreements, oral or written, have been made by any party or by anyone acting on
behalf of any party, which are not embodied in this Agreement including any
exhibit or attachment hereto; and (ii) no agreement, statement or promise not
contained in this

14

 

Agreement shall be valid. No change or modification of this Agreement shall be
valid or binding upon the parties unless such change or modification is in
writing and is signed by the parties.

     13. Severability. If a court of competent jurisdiction holds that any
provision or sub-part thereof contained in this Agreement is invalid, illegal
or unenforceable, that invalidity, illegality or unenforceability shall not
affect any other provision in this Agreement.

     14. Parties Bound. The terms, provisions, covenants and agreements
contained in this Agreement shall apply to, be binding upon and inure to the
benefit of the Corporation’s successors and assigns. Employee may not assign
this Agreement without the Corporation’s prior written consent.

     15. Governing Law. This Agreement and the employment relationship created
by it shall be governed by North Carolina law. The parties hereby consent to
exclusive jurisdiction in North Carolina for the purpose of any litigation
relating to this Agreement and agree that any litigation by or involving them
relating to this Agreement shall be conducted in the court of Wake County or
the federal court of the United States for the Eastern District of North
Carolina.

15

 

     IN WITNESS WHEREOF, the parties have entered into this Agreement on the
day and year written below.

	 	 	 
	

	 	EMPLOYEE
	 
	 	 
	3/30/04

	 	/s/ James P. Frey
	
 

	 	
 
	Date

	 	James P. Frey
	 
	 	 
	

	 	WINSTON HOTELS, INC.
	 
	 	 
	3/30/04

	 	/s/ Robert W. Winston
	
 

	 	
 
	Date

	 	Robert W. Winston
	

	 	Chief Executive Officer

16

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