Document:

Exhibit 10.2

EXECUTION VERSION

 

TRANSITION SERVICES AGREEMENT

 

This TRANSITION SERVICES AGREEMENT (the “Agreement”), dated as of December 21, 2017, and effective as of January 1, 2018 (the “Effective Date”), is made by and between Drive Shack Inc., a Maryland corporation (the “Company”), and FIG LLC, a Delaware limited liability company (“Service Provider”). The Company and Service Provider are collectively referred to as the “Parties” and each individually as a “Party.”

 

W I T N E S S E T H:

 

WHEREAS, the Company and Service Provider are party to that certain Termination Agreement, dated as of the date hereof (the “Termination Agreement”), pursuant to which the Parties have agreed to terminate Service Provider’s role as external manager of the Company as of the Effective Date; and

 

WHEREAS, pursuant to the Termination Agreement, the Company and its affiliates will continue to require that Service Provider provide or cause to be provided certain services during a transitional period following the Effective Date on the terms and subject to the conditions set forth herein.

 

NOW, THEREFORE, in consideration of the foregoing and the respective representations, warranties, covenants and agreements set forth herein, and intending to be legally bound hereby, subject to the conditions and other terms herein set forth, the parties hereby agree as follows:

 

ARTICLE I

SERVICES

 

1.1          Services. Subject to the terms and conditions of this Agreement, Service Provider shall provide to the Company and its affiliates the services set forth on Schedule A attached hereto (together, the “Services”). The Company acknowledges and agrees that Service Provider may provide Services itself or by or through one or more of its affiliates or, subject to the Company’s prior consent upon reasonable advance notice, third party contractors; provided, however, Service Provider shall remain responsible for Services provided by its affiliates or third party contractors and any subcontracting shall not relieve Service Provider of its obligations hereunder, including with respect to the scope and level of Services. Service Provider shall use commercially reasonable efforts consistent with its general practices to cause each third party contractor on whose services the Services are dependent to comply with the relevant third party contractor’s contractual obligations.

 

1.2          Additional Services. Services not agreed upon in Schedule A but provided during the twelve (12) month period prior to the Effective Date by Service Provider to the Company can be requested in writing. Upon receipt of such notice, within a commercially reasonable period of time under the circumstances, Service Provider and the Company shall discuss in good faith such requested additional services (the “Additional Services”) and the terms and conditions applicable to such services; if Service Provider agrees to provide such Additional Services and the Parties reach an agreement in writing on the terms and conditions for such Additional Services, then Service Provider shall provide such Additional Service on such terms and conditions, and Schedule A shall be deemed amended to include the Additional Services, which shall be provided in accordance with such agreed terms and conditions and the other applicable terms and conditions of this Agreement and the Additional Services shall be deemed to be Services hereunder.

1.3          Performance of Services. Service Provider shall use commercially reasonable efforts to provide, or cause one or more of its affiliates or third party contractors to provide, the Services in accordance with applicable law and any of Service Provider’s written policies and procedures and within the standard and manner that is commensurate in all material respects (in nature, quality and timeliness) with the manner in which they were provided during the one year period prior to the Effective Date, subject to any limitations or restrictions agreed to in writing by the Parties (such agreement not to be unreasonably withheld, conditioned or delayed), which limitations or restrictions are posed by or resulting from (a) any modification in process for providing Services necessitated by the separation of the management of the Company from Service Provider’s continuing operations, (b) any change in scope (as agreed in writing by the Parties from time-to-time during the Term), and (c) any restrictions imposed on Service Provider by applicable law. For the avoidance of doubt, in providing the Services, Service Provider may use any information systems, hardware, software, processes and procedures it deems necessary or desirable in its reasonable discretion.

 

1.4          Connectivity, Compliance and Security Measures. The Company shall comply with all policies and procedures of Service Provider that have been provided to the Company in connection with its access to and use of the Services.

 

1.5          Cost Reimbursements.

 

(a)            As compensation to Service Provider for the Services set forth on Schedule A rendered hereunder, the Company shall, for each Service performed, reimburse Service Provider for its cost of providing the Services, including the allocated cost of, among other things, overhead, employee wages and compensation and out-of-pocket expenses, in each case, determined using Service Provider’s cost allocation methodology consistent with past practice, without any intent to cause Service Provider to receive profit or incur loss (the “Cost Reimbursements”). On a monthly basis, Service Provider shall provide an invoice setting forth the Cost Reimbursements to be charged in arrears to the Company hereunder, including reasonable supporting documentation. Services Fees shall be paid within forty-five (45) days of the Company’s receipt of such invoice. Late payments shall bear interest at the lesser of ten (10%) per annum or the maximum rate allowed by law.

 

(b)           All sales, use and other taxes, levies and charges imposed by applicable taxing authorities on the provision of Services (collectively, “Taxes”) shall be borne by the Company. If Service Provider or any of its affiliates or third party contractors are required to pay such Taxes, (i) Service Provider shall invoice the Company for such Taxes and (ii) the Company shall promptly reimburse Service Provider therefor in accordance with this Section 1.5(b).

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1.6          Direction and Control of Employees. Unless otherwise agreed by the Parties, for purposes of all compensation and employee benefits and welfare matters, all employees and representatives of Service Provider, its affiliates and third party contractors shall be deemed to be employees or representatives of Service Provider, its affiliates or third party contractors and not employees or representatives of the Company. In performing the Services, such employees and representatives shall be under the direction, control and supervision of Service Provider, its affiliates or third party contractors (and not the Company or its affiliates) and Service Provider, its affiliates and third party contractors shall have the sole right to exercise all authority with respect to the employment (including termination of employment), assignment and compensation of such employees, representatives and third party contractors.

 

1.7          Cooperation of Service Provider. During the Term and following any termination of this Agreement or a Service, Service Provider shall, and shall use commercially reasonable efforts to cause its affiliates and third party contractors to, at the Company’s cost, cooperate in good faith with the Company and its affiliates to transfer records and take such other actions reasonably requested by the Company to enable it to make alternative arrangements for the provision of services substantially consistent with or replacing the Services provided pursuant to this Agreement.

 

1.8          Return of Records owned by the Company. Upon termination of a Service with respect to which Service Provider or its affiliates holds books, records or files, including current or archived copies of computer files, owned by the Company or its affiliates and used by Service Provider, its affiliates or its third party contractors in connection with the provision of a Service to the Company or its affiliates, Service Provider will use commercially reasonable efforts to return all of such books, records or files as soon as reasonably practicable. The Parties acknowledge and agree that copies of emails relating to the conduct of the business of the Company will be fully retained by the Service Provider in its archival records in compliance with its statutory obligations as an investment adviser. Additionally, Service Provider or its affiliates may retain books, records and files (a) as necessary to comply with applicable laws or court orders and (b) to the extent they have become included in automatic “backups” by routine procedures or by electronic communication or information management systems without the requirement to “scrub” such systems or its backup servers, provided that such books, records or files retained by Service Provider shall remain subject to the use and confidentiality restrictions in this Agreement until such books, records or files are destroyed by Service Provider in accordance with its own information technology and record retention policies and applicable law.

 

1.9          Work Product and Intellectual Property. Service Provider acknowledges that any and all writings, documents, designs, data and other materials that Service Provider makes, conceives or develops at any time as a result of Service Provider’s performance of the Services may be utilized by the Company to the extent necessary to receive and use the Services hereunder.  Each Party shall retain the entire right, title and interest in and to intellectual property and other proprietary information that existed prior to, or are created independently of the performance of the Services.  Each of the Parties acknowledge and agree that the Company shall be the sole and exclusive owner of any right, title, license or other interest in or to the intellectual property set forth in Schedule B attached hereto (collectively, the “Company IP”) and Service Provider hereby assigns to the Company any and all of Service Provider’s right, title and interest in and to the Company IP, to the extent Service Provider has any. In addition, the Company shall be the sole and exclusive owner of any right, title, license or other interest in or to, Transition IP solely to the extent exclusively related to the business of the Company. Except for the Company IP and as set forth in the preceding sentence, Service Provider shall be the sole and exclusive owner of any right, title, license or other interest in or to, all Transition IP, and, for the avoidance of doubt, no such items shall be considered a work made for hire within the meaning of Title 17 of the United States Code. For purpose of this Agreement, “Transition IP” shall mean any copyrights, patents, trade secrets and other intellectual property rights to the extent developed, created, modified, or improved, or used or relied upon, by Service Provider or its affiliates or third party contractors in connection with the Services or the performance of Service Provider’s obligations hereunder.

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ARTICLE II

CERTAIN COVENANTS

 

2.1          Cooperation of the Company. The Company shall cooperate with Service Provider in all reasonable respects in the performance of the Services, as applicable.

 

2.2          Independent Contractor. In providing the Services, Service Provider shall act solely as an independent contractor. Nothing herein shall constitute or be construed to be or create a partnership, joint venture or principal/agent relationship between the Company or any of its affiliates or their respective directors, officers or employees, on the one hand, and Service Provider or any of its affiliates or their respective directors, officers or employees, on the other hand.

 

2.3          Compliance with Laws and Regulations. Each Party shall be responsible for its own compliance with any and all applicable laws in connection with its performance under this Agreement.

 

2.4          Limitation of Liability; Indemnity.

 

(a)            It is the intent of the Parties that each Party will be responsible for its own acts, errors and omissions and that each Party is liable to the other Party for any actual direct damages incurred by the non-breaching Party as a result of the breaching Party’s failure to perform its obligations in the manner required by this Agreement. Notwithstanding the foregoing, no Party will be liable hereunder for, and each Party hereby expressly waives any and all rights with respect to, exemplary, punitive, presumptive, special, incidental, lost profits, consequential or speculative damages. SUBJECT TO SECTION 2.4(C), IN NO EVENT SHALL SERVICE PROVIDER’S LIABILITY IN THE AGGREGATE FOR ANY AND ALL DAMAGES AND LOSSES HEREUNDER EXCEED $2,000,000.

 

(b)           The Company shall indemnify, defend and hold Service Provider and its successors, assigns, members, affiliates, employees, officers, participants, shareholders, directors and personal representatives, harmless from and against all losses, liabilities, claims, damages, costs and expenses (including, without limitation, reasonable attorneys’ fees and expenses) (collectively, the “Losses”) that arise out of this Agreement (including the provision of Services to or receipt and use of Services by the Company and its affiliates), except for Losses to the extent arising from any breach of this Agreement by Service Provider or the gross negligence or willful misconduct of Service Provider. The foregoing indemnity shall survive the termination of this Agreement.

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(c)            Service Provider shall indemnify, defend and hold the Company and its successors, assigns, members, affiliates, employees, officers, participants, shareholders, directors and personal representatives, harmless from and against all Losses arising from the gross negligence or willful misconduct of Service Provider; provided, that, in no event shall Service Provider’s liability in the aggregate for all Losses indemnified under this Section 2.4(c) exceed $10,700,000. The foregoing indemnity shall survive the termination of this Agreement.

 

ARTICLE III

TERM AND TERMINATION

 

3.1          Term. This Agreement shall commence on the Effective Date and terminate on the earliest to occur of (a) the date on which this Agreement is terminated pursuant to Section 3.3, (b) the latest date on which any Service is to be provided as indicated on Schedule A or (c) the date on which the provision of all Services has been canceled pursuant to Section 3.2 (such period, the “Term”). The Company may extend the Term or the provision of any individual Service for an additional period requested by the Company on notice provided no less than 60 days prior to the then-current scheduled end of the Term or expiration date for such Service, in each case, for a period of time not to exceed that set forth in Schedule A.

 

3.2          Termination of Individual Services. The Company may terminate at any time any individual Service provided under this Agreement on a Service-by-Service basis upon written notice to Service Provider identifying the particular service to be terminated and the effective date of termination, which date shall not be less than thirty (30) days after receipt of such notice unless Service Provider otherwise agrees; provided that the Company shall reimburse Service Provider for any actual costs and expenses owed by Service Provider or its affiliates with respect to such Service to the extent owed by Service Provider in connection with such Service up to the date that such Service would otherwise have been provided (i.e., in the absence of such early termination) under Schedule A; provided further that Service Provider shall reasonably promptly inform the Company if any Services depend upon a Service for which the Company has provided notice of termination, and Service Provider shall be under no further obligation to provide such dependent Services upon such termination.

 

3.3          Termination of Agreement.

 

(a)            This Agreement may be terminated at any time by the mutual written consent of Service Provider and the Company.

 

(b)           Either Service Provider or the Company (the “Initiating Party”) may terminate this Agreement with immediate effect by written notice to the other Party on or at any time after the other Party is in material breach of any of its obligations under this Agreement and has failed to remedy the breach within thirty (30) days of receipt of written notice from the Initiating Party giving particulars of the breach and requiring the other Party to remedy the breach.

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(c)            Without prejudice to the other rights or remedies Service Provider may have, Service Provider may terminate this Agreement with immediate effect by written notice to the Company if the Company shall have failed to pay any sum due and payable to Service Provider in accordance with Section 1.5 hereof for a period of at least thirty (30) days, unless such amount is being disputed in good faith.

 

(d)           Except as otherwise provided in this Agreement, all rights and obligations of Service Provider and the Company shall cease to have effect immediately upon termination of this Agreement except that termination shall not affect the accrued rights and obligations of Service Provider and the Company at the date of termination or any rights and obligations that expressly survive the termination of this Agreement.

 

ARTICLE IV

DISPUTE RESOLUTION

 

4.1          Appointed Representative. Each Party shall appoint a representative who shall be responsible for administering the dispute resolution provisions in Section 4.2 (each, an “Appointed Representative”). Each Appointed Representative shall have the authority to resolve any Agreement Disputes on behalf of the Party appointing such representative.

 

4.2          Negotiation and Dispute Resolution.

 

(a)            Except as otherwise provided in this Agreement or in the Termination Agreement, in the event of a controversy, dispute or claim arising out of, in connection with, or in relation to the interpretation, performance, nonperformance, validity, termination or breach of this Agreement or the Termination Agreement or otherwise arising out of, or in any way related to this Agreement or the Termination Agreement or any of the transactions contemplated hereby or thereby (each, an “Agreement Dispute”), the Appointed Representatives shall negotiate in good faith for thirty (30) days to settle any such Agreement Dispute.

 

(b)           Nothing said or disclosed, nor any document produced, in the course of any negotiations, conferences and discussions in connection with efforts to settle an Agreement Dispute that is not otherwise independently discoverable shall be offered or received as evidence or used for impeachment or for any other purpose, but shall be considered as to have been disclosed for settlement purposes.

 

(c)            If a satisfactory resolution of any Agreement Dispute is not achieved by the Appointed Representatives within thirty (30) days, each Party will be entitled to refer the dispute to arbitration in accordance with Section 4.3.

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4.3          Arbitration.

 

(a)            If a satisfactory resolution of any Agreement Dispute is not achieved by the Appointed Representatives within thirty (30) days, such Agreement Dispute shall be resolved, at the request of either Party, by arbitration administered by the CPR under its Arbitration Rules (the “CPR Rules”), conducted in New York, New York. There shall be three arbitrators. Each Party shall appoint one arbitrator. The two Party-appointed arbitrators shall agree on a third arbitrator who will chair the arbitral tribunal. Any arbitrator not appointed within a reasonable time shall be appointed in accordance with the CPR Rules. Any controversy concerning whether an Agreement Dispute is an arbitrable Agreement Dispute, whether arbitration has been waived, whether an assignee of this Agreement is bound to arbitrate, or as to the interpretation or enforceability of this Section 4.3 will be determined by the arbitrators. In resolving any Agreement Dispute, the Parties intend that the arbitrators apply the substantive laws of the State of New York, without regard to any choice of law principles thereof that would mandate the application of the laws of another jurisdiction. The Parties intend that the provisions to arbitrate set forth herein be valid, enforceable and irrevocable, and any award rendered by the arbitrators shall be final and binding on the Parties. The Parties agree to comply with any award made in any such arbitration proceedings and agree to enforcement of or entry of judgment upon such award, in any court of competent jurisdiction, including any New York State or federal court. The arbitrators shall be entitled, if appropriate, to award monetary damages and other remedies, subject to the provisions of Section 2.4(a). The Parties will use commercially reasonable efforts to encourage the arbitrators to resolve any arbitration related to any Agreement Dispute as promptly as practicable. Except as required by applicable law, including disclosure or reporting requirements, the arbitrators and the Parties shall maintain the confidentiality of all information, records, reports, or other documents obtained in the course of the arbitration, and of all awards, orders, or other arbitral decisions rendered by the arbitrators.

 

(b)           The arbitrators may consolidate arbitration under this Agreement with any arbitration arising under or relating to the Termination Agreement if the subjects of the Agreement Disputes thereunder arise out of or relate essentially to the same set of facts or transactions. Such consolidated arbitration will be determined by the arbitrators appointed for the arbitration proceeding that was commenced first in time.

 

(c)            Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and the Termination Agreement during the course of dispute resolution pursuant to the provisions of this ARTICLE IV with respect to all matters not subject to such dispute resolution.

 

ARTICLE V

MISCELLANEOUS

 

5.1          Amendments; Waiver. This Agreement may not be amended, altered or otherwise modified, and no provision hereof may be waived, except by written instrument executed by the Company and Service Provider.

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5.2          Confidentiality. Each Party shall treat as confidential and shall not make available or disclose any information or material of the other Party that is or has been (a) disclosed by such other Party under or in connection with this Agreement, whether orally, electronically, in writing or otherwise, including copies or (b) learned or acquired by the other Party in connection with this Agreement (collectively, “Confidential Material”) to any Person, or make or permit any use of such Confidential Material without the prior written consent of the other Party. (The Party disclosing such information or materials, the “Disclosing Party”; the Party receiving such information or materials, the “Receiving Party”). Notwithstanding the foregoing, Confidential Material may be disclosed on a need to know basis to personnel and third party contractors of the Receiving Party and its affiliates as required for the purpose of fulfilling the Receiving Party’s obligations or exercising Receiving Party’s rights under this Agreement. The Receiving Party shall take all reasonable steps to ensure that any such Confidential Material disclosed in accordance with this Section 5.2 is treated as confidential by such Person. The provisions of this Section 5.2 shall not apply to any Confidential Material which: (i) is or becomes commonly known within the public domain other than by breach of this Agreement or any other agreement; (ii) is obtained from a third party who is lawfully authorized to disclose such information free from any obligation of confidentiality; or (iii) is independently developed without reference to any Confidential Material. Notwithstanding any other provision of this Agreement, if the Receiving Party or any of its Representatives is (A) compelled in any legal process or proceeding to disclose any Confidential Material of the Disclosing Party or (B) requested or required by any governmental entity to disclose any Confidential Material, the Receiving Party shall, to the extent not prohibited by law or rule, promptly notify the Disclosing Party in writing of such request or requirement so that the Disclosing Party may seek an appropriate protective order and/or waive in writing the Receiving Party’s compliance with the provisions of this Section 5.2. If, in the absence of a protective order or the receipt of a waiver hereunder, the Receiving Party is nonetheless compelled to disclose Confidential Material, the Receiving Party, after written notice to the Disclosing Party (to the extent not prohibited by law or rule), may disclose such Confidential Material only to the extent so required by Applicable Law. Each Party shall exercise reasonable efforts to obtain reliable assurances that confidential treatment will be accorded the Confidential Material so disclosed.

 

5.3          Force Majeure. Any delay, failure or omission by any Party in the performance of any obligation under this Agreement shall not be deemed a breach of this Agreement or create any liability, if such delay, failure or omission arises from any cause or causes beyond the reasonable control of such party, including, but not limited to, acts of God, fire, storm, flood, earthquake, governmental regulation or direction, war, terrorist acts, insurrection, riot, invasion, strike or lockout; provided, however, that (a) the affected Party shall promptly notify the other Party of the existence of such cause or causes and its anticipated duration, (b) the affected Party shall make commercially reasonable efforts to prevent, limit and remove the effects of any such cause or causes and (c) the affected Party shall resume the performance whenever such causes are removed.

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5.4          Notices. Unless expressly provided otherwise in this Agreement, all notices, requests, demands and other communications required or permitted under this Agreement shall be in writing and shall be deemed to have been duly given, made and received when delivered against receipt or upon actual receipt of (i) personal delivery, (ii) delivery by reputable overnight courier, (iii) delivery by facsimile transmission against answerback, (iv) delivery by registered or certified mail, postage prepaid, return receipt requested, addressed as set forth below:

 

If to Service Provider, at:

 

FIG LLC

1345 Avenue of the Americas

45th Floor

New York, New York 10105

 Attention: Mr. David N. Brooks

 

If to the Company, at:

 

Drive Shack Inc.

111 West 19th Street

8th Floor

New York, New York 10011

 Attention: Ms. Sarah L. Watterson

 

Either party may alter the address to which communications or copies are to be sent by giving notice of such change of address in conformity with the provisions of this Section 5.4 for the giving of notice.

 

5.5          Entire Agreement. This Agreement contains the entire agreement and understanding among the parties hereto with respect to the subject matter of this Agreement, and supersedes all prior and contemporaneous agreements, understandings, inducements and conditions, express or implied, oral or written, of any nature whatsoever with respect to the subject matter of this Agreement. The express terms of this Agreement control and supersede any course of performance and/or usage of the trade inconsistent with any of the terms of this Agreement. This Agreement may not be modified or amended other than by an agreement in writing executed by the Parties.

 

5.6          Binding Nature Of Agreement; Successors And Assigns. This Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective heirs, personal representatives, successors and permitted assigns as provided in this Agreement. This Agreement may not be assigned by either of the Parties without the prior written consent of the other Party, except that either Party may assign its rights hereunder to any of its affiliates.

 

5.7          Controlling Law. This Agreement and all questions relating to its validity, interpretation, performance and enforcement shall be governed by and construed, interpreted and enforced in accordance with the laws of the State of New York, notwithstanding any New York or other conflict-of-law provisions to the contrary.

 

5.8          Indulgences, Not Waivers. Neither the failure nor any delay on the part of a party to exercise any right, remedy, power or privilege under this Agreement shall operate as a waiver thereof, nor shall any single or partial exercise of any right, remedy, power or privilege preclude any other or further exercise of the same or of any other right, remedy, power or privilege, nor shall any waiver of any right, remedy, power or privilege with respect to any occurrence be construed as a waiver of, or estoppel with respect to, such right, remedy, power or privilege with respect to any other occurrence. No waiver shall be effective unless it is in writing and is signed by the party asserted to have granted such waiver.

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5.9          Titles Not to Affect Interpretation. The titles of paragraphs and subparagraphs contained in this Agreement are for convenience only, and they neither form a part of this Agreement nor are they to be used in the construction or interpretation of this Agreement.

 

5.10          Execution in Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts of this Agreement, individually or taken together, shall bear the signatures of all of the parties reflected hereon as the signatories.

 

5.11          Provisions Separable. The provisions of this Agreement are independent of and separable from each other, and no provision shall be affected or rendered invalid or unenforceable by virtue of the fact that for any reason any other or others of them may be invalid or unenforceable in whole or in part.

 

5.12          Gender. Words used herein regardless of the number and gender specifically used, shall be deemed and construed to include any other number, singular or plural, and any other gender, masculine, feminine or neuter, as the context requires.

 

[The remainder of this page is intentionally left blank.]

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IN WITNESS WHEREOF, the Parties hereto have executed this Agreement on the date first written above.

 

	
 

	
DRIVE SHACK INC.

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ Sarah L. Watterson

	
 

	
 

	
Name:

	
Sarah L. Watterson

	
 

	
 

	
Title:

	
Chief Executive Officer and President

 

	
 

	
FIG LLC

	
 

	
 

	
 

	
 

	
 

	
By:

	
/s/ David N. Brooks

	
 

	
 

	
Name:

	
David N. Brooks

	
 

	
 

	
Title:

	
Secretary

 

[Signature Page to Transition Services Agreement]Exhibit 10.3

 

December 12, 2017

 

Sarah L. Watterson

 

Dear Sarah:

It is with great pleasure that we extend to you an offer to join Drive Shack Inc., 1345 Avenue of the Americas, 45th Floor, New York, NY 10105, (212) 479-3195 (the “Company”), as set forth below.  This letter is referred to herein as the “Letter Agreement.”

	
Title and Start Date:

	
You and the Company acknowledge and agree that this Letter Agreement and your transfer to Drive Shack are subject to the approval of SoftBank Group Corp. (“SoftBank”).  Subject to this SoftBank approval, beginning on January 1, 2018 (the “Start Date”), you will devote your full working time to the Company as Chief Executive Officer & President, reporting to the Board of Directors, except that you may take on other work that has been discussed with the Company’s Board.

	 	 
	
Work Location:

	
Your principal work location will be New York, NY, in addition to travel as required in connection with the performance of your duties.

	 	 
	
Compensation:

	
Your base salary will be paid at the rate of $200,000 per annum on a salary basis to compensate you for all hours you work, regardless of whether more or less than 40 in a regularly scheduled workweek.  You are an exempt employee.  As defined by federal and state regulations, an exempt employee is not eligible for overtime compensation.  You will be paid twice a month with a pay date of the 15th and last day of each month.  On each pay date, you will be paid for the hours you worked during the prior pay period.  Based on your anticipated start date, you will receive your first pay on January 15, 2018. The Company reserves the right to modify its payroll practices and payroll schedule at its sole discretion, consistent with applicable law.

 

As additional compensation, you may be eligible to participate in a bonus incentive plan.  In order to be eligible for any bonus while employed at the Company, you must be an active employee at, and not have given or received notice of termination prior to, the time of the bonus payment.  The Company reserves the right, at its sole discretion, to change, rescind, amend, suspend, discontinue, and/or otherwise modify any section of, or the entire plan at any time without advance notification.

 

(initial here) ____________

	

Employment Offer Letter 

Sarah L. Watterson

December 12, 2017

	
2 of 7

 

	
Work Authorization:

 

	
Employment with the Company is contingent upon your provision of documentation establishing your identity and unrestricted authorization to work in the United States within the time period specified by law.  If you are unsure whether you have unrestricted authorization, please contact Ellen Barrera at 212-497-2955.

	 	 
	
Policies and 

 Procedures:

	
You agree to comply fully with all the Company policies and procedures applicable to employees, as amended and implemented from time to time, including, without limitation, tax, regulatory and compliance procedures.

	 	 
	
Employment Relationship:

	
This Letter Agreement is not a contract of employment for any specific period of time, and subject to the notice provisions herein, your employment is “at will” and may be terminated by you or by the Company at any time for any reason or no reason whatsoever.  In each case where the term “the Company” is used in this Letter Agreement it shall mean, in addition to the Company, any affiliate of the Company by whom you may be employed on a full-time basis at the applicable time.

 

If you resign from your employment with the Company, you must provide ninety (90) days advance written notice to the Company (the “Notice Period,” which Notice Period shall be considered a “Protective Covenant” (as hereinafter defined) for purposes of this Letter Agreement).  The Company may, in its sole discretion, direct you to cease performing your duties, refrain from entering the Company’s offices and restrict your access to the Company systems, trade secrets and confidential information, in each case during all or part of the Notice Period.  During the Notice Period, you shall continue to be an employee of the Company, the Company shall continue to pay you your base salary and benefits, and you shall be entitled to all other benefits and entitlements (subject to clause (iii) below) as an employee until the end of the Notice Period, except that (i) you will not be entitled to receive any bonus not already paid prior to the commencement of the Notice Period; (ii) your base salary, benefits, and entitlements will cease if you breach any of your agreements with or obligations to the Company or its affiliates, including, without limitation, choosing to resign or otherwise stop performing your duties before the end of the Notice Period, or breaching any of those “Protective Covenants” set forth below and incorporated herein; (iii) you will not accrue any further vacation during the Notice Period, and during the Notice Period you will use any and all accrued, unused vacation you may have as of the commencement of the Notice Period; and (iv) such Notice Period shall be disregarded for purposes of the vesting of equity, if any.

 

 (initial here) ____________

	

Employment Offer Letter 

Sarah L. Watterson

December 12, 2017

	
3 of 7

 

	
Benefits:

	
You (and your spouse, registered domestic partner and/or eligible dependents, if any) shall be entitled to participate in the same manner as other similarly situated employees of the Company in any employee benefit plan that the Company has adopted or may adopt, maintain or contribute to for the benefit of such employees generally, subject to satisfying the applicable eligibility requirements.  Your participation will be subject to the terms of the applicable plan documents and generally applicable Company policies.  Notwithstanding the foregoing, the Company may, consistent with applicable law, prospectively modify or terminate any employee benefit plan at any time.

	 	 
	
Paid Time Off:

	
You may be eligible for Paid Time Off pursuant to the Company’s Paid Time Off (PTO) Policy.  Please refer to the PTO Policy for more details.  Requests for approval of timing of PTO shall be submitted in accordance with Company policy.  The amount of PTO days provided per year may be modified, consistent with applicable law, in the discretion of the Company.

	 	 
	
Protective Covenants:

	
You shall not, directly or indirectly, without prior written consent of the Company, at any time during your employment hereunder or for six (6) months thereafter if you resign your employment or are terminated for Cause (which six (6) month period shall be inclusive of the Notice Period (as defined above)), be involved or connected in any manner (including, but not limited to, provide consultative services to, own, manage, operate, join, control, participate in, be engaged in, and/or employed by) any business, individual, partner, firm, corporation, or other entity that competes with (any such action, individually, and in the aggregate, to “compete with”), the Company anywhere in the United States of America, including, but not limited to, any such business, individual, partner, firm, corporation, or other entity engaged in the business of operating amusement or eatertainment venues.  Notwithstanding anything else herein, the mere “beneficial ownership” by you, either individually or as a member of a “group” (as such terms are used in Rule 13(d) issued under the United States Securities Exchange Act of 1934, as amended from time to time) of not more than five percent (5%) of the voting stock of any public company shall not be deemed a violation of this Letter Agreement.

 

(initial here) ____________

	

Employment Offer Letter 

Sarah L. Watterson

December 12, 2017

	
4 of 7

 

	 	
You further agree that you shall not, directly or indirectly, for your benefit or for the benefit of any other person (including, without limitation, an individual or entity), or knowingly assist any other person to during your employment with the Company and for twelve (12) months thereafter, in any manner:

 

(a)          hire or Solicit (as hereinafter defined) the employment or services of any person who provided services to the Company or any member of the Company Group, as an employee, independent contractor or consultant at the time of termination of your employment with the Company, or within six (6) months prior thereto;

 

(b)          Solicit any person who is an employee of the Company or any member of the Company Group to apply for or accept employment with any enterprise;

 

(c)          accept employment or work, in any capacity (including as an employee, consultant or independent contractor), with any firm, corporation, partnership or other entity that is, directly or indirectly, owned or controlled by any Former Employee of the Company involving the provision of services that are substantially similar to the services that you provided to the Company at any time during the twelve months prior to your termination of employment with the Company;

 

(d)          Solicit or otherwise attempt to establish any business relationship (in connection with any business in competition with the Company with any limited partner, investor, person, firm, corporation or other entity that is, at the time of your termination of employment, or was a Client, Investor or Business Partner of the Company or any member of the Company Group; or

 

(e)          Interfere with or damage (or attempt to interfere with or damage) any relationship between the Company and any member of the Company Group and the respective Clients, Investors, Business Partners, or employees of the foregoing entities.

 

For purposes of this Letter Agreement, the term “Solicit” means (a) active solicitation of any Client, Investor, or Business Partner or Company employee; (b) the provision of non-public information regarding any Client, Investor, or Business Partner or Company employee to any third party where such information could be useful to such third party in attempting to obtain business from such Client, Investor, or Business Partner or attempting to hire any such Company employee; (c) participation in any meetings, discussions, or other communications with any third party regarding any Client, Investor, or Business Partner or Company employee where the purpose or effect of such meeting, discussion or communication is to obtain business from such Client, Investor, or Business Partner or employ such Company employee; or (d) any other passive use of non-public information about any Client, Investor, or Business Partner, or Company employee which has the purpose or effect of assisting a third party to obtain business from Clients, Investors, or Business Partners, assisting a third party to hire any Company employee or causing harm to the business of the Company.

 

(initial here) ____________

	

Employment Offer Letter 

Sarah L. Watterson

December 12, 2017

	
5 of 7

 

	 	
For purposes of this Letter Agreement, the term “Client,” “Investor,” or “Business Partner” shall mean (A) anyone who is or has been a Client, Investor, or Business Partner of any member of the Company Group during your employment; and (B) any prospective Client, Investor, or Business Partner to whom any member of the Company Group made a new business presentation (or similar offering of services) at any time during the one (1) year period immediately preceding, or two (2) month period immediately following, your employment termination (but only if initial discussions between any member of the Company Group and such prospective Client, Investor, or Business Partner relating to the rendering of services occurred prior to the termination date).  Notwithstanding the preceding paragraph, the Protective Covenants shall not apply to Clients who are currently your clients at your current employer.

 

For purposes of this Letter Agreement, the term “Former Employee” shall mean anyone who was an employee of or exclusive consultant to any member of the Company Group as of, or at any time during the one-year period immediately preceding, the termination of your employment.

	 	 
	 	
Any works of authorship, databases, discoveries, developments, improvements, computer programs, or other intellectual property, etc.  (“Works”) that you make or conceive, or have made or conceived, solely or jointly, during the period of your employment with the Company, whether or not patentable or registerable under copyright, trademark or similar statutes, which either (i) are related to or useful in the current or anticipated business or activities of any member of the Company Group; (ii) fall within your responsibilities as employed by the Company; or (iii) are otherwise developed by you through the use of the confidential information, equipment, software, or other facilities or resources of any member of the Company Group or at times during which you are or have been an employee constitute “work for hire” under the United States Copyright Act, as amended.  If for any reason any portion of the Works shall be deemed not to be a “work for hire,” then you hereby assign to the Company all rights, title and interest therein and shall cooperate to establish the Company’s ownership rights, including the execution of all documents necessary to establish the Company’s exclusive ownership rights.

 

(initial here) ____________ 

	

Employment Offer Letter 

Sarah L. Watterson

December 12, 2017

	
6 of 7

 

	 	
As a condition of employment, you will be required to sign a Confidentiality and Proprietary Rights Agreement, in a form acceptable to the Company, and that agreement shall remain in full force and effect after it is executed and following termination of your employment for any reason with the Company or any of its affiliates.  The obligations set forth in such agreement shall be considered “Protective Covenants” for purposes of this Letter Agreement and are incorporated herein by reference.

	 	 
	 	
The provisions set forth above in (or incorporated into) this “Protective Covenants” section, together with the Notice Period above, are collectively referred to in this Letter Agreement as the “Protective Covenants” (and each is a “Protective Covenant”).

 

“Cause” means (i) your misconduct or gross negligence in the performance of your duties to the Company; (ii) your failure to perform your duties to the Company or to follow the lawful directives of the Board of Directors of Drive Shack Inc. (the “Board”); (iii) your commission of, indictment for, conviction of, or pleading of guilty or nolo contendere to, a felony, or any crime involving moral turpitude; (iv) your failure to cooperate in any audit or investigation of the business or financial practices of any member of Drive Shack Inc. or any of its direct or indirect subsidiaries (collectively, the “Company Group”); (v) your performance of any act of theft, embezzlement, fraud, malfeasance, dishonesty or misappropriation of the property of any member of the Company Group; or (vi) your breach of this Letter Agreement or any other agreement with a member of the Company Group, or a violation of the  code of conduct or other written policy of any such entity.

 

This Letter Agreement supersedes any prior representations or agreements, whether written or oral, and, along with the Company’s policies and procedures in the employee handbook, sets forth the terms of your employment with the Company.  This Letter Agreement may only be modified by a written agreement signed by you and an officer of the Company.

This Letter Agreement shall be construed, interpreted and governed in accordance with the laws of the State of New York without regard to conflict of laws principles.  All actions and proceedings relating directly or indirectly to this Letter Agreement shall be litigated in any state court or federal court located in the State of New York, County of New York.

If you agree with the terms of this Letter Agreement and accept this offer of employment, please sign and date this Letter Agreement in the space provided below and return a copy to Ellen Barrera (ebarrera@driveshack.com), to indicate your acceptance.  We look forward to you joining the Company.

 

(initial here) ____________

	

Employment Offer Letter 

Sarah L. Watterson

December 12, 2017

	
7 of 7

 This Letter Agreement may be signed in counterparts, each of which shall be deemed an original, with the same effect as if the signatures were upon the same instrument.

This offer expires on December 21, 2017.

Sincerely,

DRIVE SHACK INC.

By: _____________________

By signing below, I affirm my understanding of, and agreement to, the terms and conditions set forth above, and hereby accept this offer of employment.  I agree that I have been notified of my pay rate, overtime rate (if eligible), allowances, and designated payday at the time of my hire.  I have told my employer what my primary language is as shown below:

___ My primary language is English.

___ My primary language is _____.

Legal Name (Printed):________________________Signature:___________________________

Date:          /          /

 

(initial here) ____________

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