SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT by HERSHA HOSPITALITY TRUST

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Exhibit 10.3

SECOND AMENDED AND RESTATED EMPLOYMENT AGREEMENT

THIS AGREEMENT, effective April 18, 2012, is by and between HERSHA HOSPITALITY TRUST, a Maryland real estate investment trust (the "Company"), and NEIL H. SHAH (the "Executive").

WITNESSETH:

WHEREAS, the Company and the Executive entered into that certain Amended and Restated Employment Agreement effective as of June 28, 2007 (the "Prior Agreement"); and

WHEREAS, the Company and the Executive desire to amend the Prior Agreement in certain respects and restate the terms and conditions of the Prior Agreement as set forth herein;

NOW, THEREFORE, in consideration of the premises and mutual obligations hereinafter set forth the parties agree as follows:

1.             Employment.   The Company shall employ the Executive, and the Executive agrees to be so employed, as the Chief Operating Officer of the Company on the terms set forth herein.

2.             Term.   The term (the "Term") of the Executive's employment hereunder shall commence on April 18, 2012 and unless earlier terminated in accordance with the terms hereof, shall expire on December 31, 2014, if written notice of non-renewal is given not later than July 1, 2014 by either party to the other party, and if no such notice is given, this Agreement shall continue for successive one year terms until terminated by either party by written notice to the other party on or prior to July 1 of the year of termination, with such termination to be effective as of December 31 of such year unless otherwise agreed by the parties.  Notwithstanding the foregoing, termination of this Agreement and any termination of the Executive's employment hereunder shall be subject to the provisions of Sections 9, 10 and 11 of this Agreement.

3.             Services.  The Executive shall devote such amount of his time and attention to the Company's affairs as are necessary to perform his duties to the Company as determined by the Company's Board of Trustees (the "Board").  The Executive shall have authority and responsibility with respect to the day-to-day operations and management of the Company and Hersha Hospitality Limited Partnership (the "Partnership"), for which the Company currently serves as sole general partner, and the Company's other subsidiaries ("Subsidiary") (collectively "Affiliates"), as well as implementation of the long range growth strategy of the Company and Affiliates consistent with direction from the Board.

 

 

4.             Compensation.

(a)           During the Term, the Company shall pay the Executive for his services an initial annual base salary of six hundred twenty-five thousand dollars ($625,000.00), to be paid in accordance with the Company's regular payroll procedures, subject to any increases approved by the Board.

(b)           In addition to the base salary, the Executive may be entitled to receive other incentive compensation, including but not limited to, grants of stock options or shares of stock of the Company, which awards shall be made (if at all) in consideration of and as an incentive for services performed solely for the Company, in accordance with rules and criteria established by the Compensation Committee and approved by the Board.  Such criteria may include, but not be limited to, the growth in the Company's net income per share, funds from operations per share or other performance goals.

(c)            In consideration of this amendment and restatement of the Original Agreement, the Company has granted to the Executive a special one time retention Stock Award of 255,010 common shares, subject to the terms and conditions of the 2012 Equity Incentive Plan of the Company and the Stock Award Agreement attached hereto as Exhibit A.

5.             [Intentionally Left Blank]

6.             Expenses.  The Company recognizes that the Executive will have to incur certain out-of-pocket expenses, including but not limited to travel expenses, related to his services and the Company's business and the Company agrees to reimburse the Executive for all reasonable expenses necessarily incurred by him in the performance of his duties upon presentation of a voucher or documentation indicating the amount and business purposes of any such expenses and in accordance with applicable rules of the Internal Revenue Service.  The documentation and expense reimbursement payment must be completed no later than March 15 of the calendar year following the calendar year in which the Executive incurred the expense.

7.             [Intentionally Left Blank]

8.             Definitions.  For purposes of this Agreement, the following terms shall have the following definitions:

(a)           "Voluntary Termination" means, subject to the provisions of Section 11 hereof, the Executive's voluntary termination of his employment hereunder, which may be effected by the Executive giving the Board not less than sixty (60) days' prior written notice of the Executive's desire to terminate his employment as of a specified date or the Executive's failure to provide the services described in Section 3 hereof for a period greater than four consecutive weeks by reason of the Executive's voluntary refusal to perform such services as determined by the Board.  Notwithstanding the foregoing, if the Executive gives notice of Voluntary Termination and, prior to the expiration of the notice period, the Executive voluntarily refuses or fails to provide the services described in Section 3 hereof for a period greater than two consecutive weeks, the Company may, in its discretion, accelerate the Voluntary Termination effective the date on which the Executive so ceases to carry out his duties as determined by the Board.  For purposes of this Section 8, voluntary refusal to perform services shall not include taking vacation otherwise permitted, the Executive's failure to perform services on account of his illness or the illness of a member of his immediate family (provided such illness is adequately substantiated at the reasonable request of the Company), or any other absence from service with the written consent of the Board.  A Voluntary Termination shall not include the Executive's resignation with Good Reason following a Change in Control (as defined below).

 

 

(b)           "Termination Without Cause" means the termination of the Executive's employment by the Company for any reason other than Voluntary Termination or Termination With Cause.

(c)           "Termination With Cause" means the termination of the Executive's employment by act of the Board for any of the following reasons:

(i)             the Executive's conviction of a felony;

(ii)            the Executive's theft, embezzlement, misappropriation of or intentional and malicious infliction of damage to the Company's (or its subsidiaries') property or business opportunity;

(iii)           the Executive's breach of the covenants in Section 12 hereof;

(iv)           the Executive's neglect of his duties or responsibilities hereunder or his failure or refusal to follow any written direction of the Board or any duly constituted committee thereof, which failure continues for a period of twenty (20) calendar days after Company provides Employee written notice (other than as a result of the Executive's physical or mental inability to perform the services described in Section 3 above, which is addressed in Section 10 below); and

(v)            the Executive's abuse of alcohol, drugs or other substances, or his engaging in other deviant personal activities in a manner that, in the reasonable judgment of the Board, adversely affects the reputation, goodwill or business position of the Company.

9.             Voluntary Termination; Termination With Cause.   If (i) the Executive shall cease being an employee of the Company on account of a Voluntary Termination or (ii) there shall be a Termination With Cause, the Executive shall not be entitled to any compensation after the effective date of such Voluntary Termination or Termination With Cause (except base salary and vacation accrued but unpaid on the effective date of such event).  In the event of a Voluntary Termination (which shall not include the Executive's resignation for Good Reason following a Change in Control as defined by Paragraph 11), or Termination With Cause, the Executive shall continue to be subject to the covenants contained in Section 13 hereof.

 

 

10.           Death or Disability; Termination Without Cause.

(a)           Upon (i) the death of the Executive, or (ii) Disability of the Executive, this Agreement shall terminate and the Company shall continue to pay the Executive or his heirs, devisees, executors, legatees or personal representatives, as appropriate, the payments of the Executive's base salary then in effect through the month following the month in which such event occurs plus vacation accrued but unpaid as of the termination date.  For purposes hereof, a "Disability" means the Executive's becoming permanently disabled within the meaning of the Company's long-term disability plan then in effect for, or applicable to, the Executive.  If the Company does not provide any such benefit, then at the request of the Company, the Executive shall promptly make himself available for an examination by a physician selected by the Company who is board certified in a practice area selected by the Company, and to follow the recommendation of such physician regarding further examination and testing.  The issue to be presented to the physician for determination is whether the Executive suffers from a mental or physical incapacity which materially inhibits or prevents him from carrying out the duties of his full-time employment as described herein, and, if so, whether such condition is more likely than not to exist for a period in excess of one hundred twenty (120) days.  The Executive intends for the Company to be treated as Executive would be with respect to his rights regarding the use and disclosure of his individually identifiable health information or other medical records.  This release authority applies to any information governed by the Health Insurance Portability and