Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers.
Officer Appointments
Pursuant to the previously announced succession plan, on January 1, 2020
Sotherly Hotels Inc. (the "Company"), as recommended by the Company's
Nominating, Corporate Governance and Compensation Committee (the "NCGC
Committee") and approved by the Company's Board of Directors, made several
appointments to its senior leadership team. On January 1, 2020, the Company
appointed Andrew M. Sims to the newly-created officer position of Chairman of
the Board of Directors. In this role, Mr. Sims will be responsible for advising
the Company on strategic matters and major transactions, including acquisitions,
dispositions, franchising and branding decisions, as well as capital market
transactions. Mr. Sims, age 62, previously served as Chairman of the Board of
Directors and Chief Executive Officer since the Company's initial public
offering in 2004. Additional biographical information for Mr. Sims is contained
in the Company's 2019 annual meeting proxy statement, which was filed with the
Securities and Exchange Commission on March 21, 2019, and which biographical
information is incorporated herein by reference.
On January 1, 2020, the Company appointed David R. Folsom as President and Chief
Executive Officer. Mr. Folsom, age 55, previously served as the Company's Chief
Operating Officer since 2006, where he has played a significant role in the
growth of the Company's footprint. Additional biographical information for Mr.
Folsom is contained in the Company's 2019 annual meeting proxy statement, which
was filed with the Securities and Exchange Commission on March 21, 2019, and
which biographical information is incorporated herein by reference.
On January 1, 2020, the Company appointed Scott M. Kucinski as Executive Vice
President and Chief Operating Officer. Mr. Kucinski, age 38, joined the Company
in 2004 as Development Analyst, and since 2014 has served as the Company's Vice
President - Operations and Investor Relations. In that role, he has helped
oversee the Company's corporate operations activities including capital markets
transactions, acquisitions and dispositions, asset management, investor
relations, and compliance matters. Mr. Kucinski received a bachelor of arts
degree from Washington and Lee University and holds a masters of business
administration degree from the Mason School of Business at the College of
William and Mary.
Non-Officer Appointment
On January 1, 2020, the Company appointed Robert E. Kirkland IV as General
Counsel. Mr. Kirkland, age 37, joined the Company in 2013 as Compliance Officer,
where he has helped manage the Company's public company compliance program,
provided legal support for various corporate transactions, and managed the
shareholder service function of the Company, while acting as a conduit to
outside counsel. Mr. Kirkland received a bachelor of arts degree from the
University of North Carolina at Chapel Hill and holds a juris doctor degree from
the Charleston School of Law. Mr. Kirkland is admitted to the North Carolina
State Bar and is registered with the Virginia State Bar as a Corporate Counsel
Registrant. Mr. Kirkland is the son-in-law of the Chairman of the Board of
Directors, Andrew M. Sims.
Employment Agreements
On January 1, 2020, the Company, as recommended by the Company's NCGC Committee
and approved by the Company's Board of Directors, entered into separate
employment agreements, each effective as of January 1, 2020, between the Company
and each of the following: Andrew M. Sims, Chairman of the Board of Directors
(the "Sims Agreement"); David R. Folsom, President and Chief Executive Officer
("the Folsom Agreement"); Scott M. Kucinski, Executive Vice President and Chief
Operating Officer (the "Kucinski Agreement"); and Robert E. Kirkland IV, General
Counsel (the "Kirkland Agreement").
Each agreement has an initial term ending on December 31, 2024. Thereafter, the
term of each agreement will be automatically extended for an additional year, on
each anniversary of the commencement date of the agreements, unless either party
gives one hundred eighty (180) days prior written notice that the term will not
be extended. The Sims Agreement replaces the previous employment agreement
between the Company and Mr. Sims, which the parties agreed to terminate in
connection with entry into the new agreement. The Folsom Agreement replaces the
previous employment agreement between the Company and Mr. Folsom, which the
parties agreed to terminate in connection with entry into the new agreement.
The Sims Agreement provides for Mr. Sims' annual salary and possible additional
compensation in the form of a cash bonus and stock awards. For the 12-month
period ending December 31, 2020, Mr. Sims will receive a salary of $485,000. For
each of the remaining four years under the term of the agreement, Mr. Sims'
salary is subject to review and adjustment by the NCGC Committee. In addition,
the Sims Agreement provides that the Company must nominate him to serve as a
member of the Board of Directors, include him in the proxy materials delivered
to stockholders in connection with a stockholder meeting to elect directors, and
recommend him for election, and continue to nominate and recommend him for
election to the board during the term of the Sims Agreement; subject, however,
to the determination of the NCGC Committee that he satisfies the standards
established for service on the Board of Directors. A failure to nominate,
include in proxy materials or recommend for election Mr. Sims to serve on the
Board of Directors or
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his involuntary removal from the Board of Directors, unless for cause or
pursuant to a vote of the stockholders of the Company, constitutes good reason
for Mr. Sims to resign under his employment agreement and would entitle Mr. Sims
to receive certain benefits outlined therein.
The Folsom Agreement provides for Mr. Folsom's annual salary and possible
additional compensation in the form of a cash bonus and stock awards. For the
12-month period ending December 31, 2020, Mr. Folsom will receive a salary of
$550,000. For each of the remaining four years under the term of the agreement,
Mr. Folsom's salary is subject to review and adjustment by the NCGC
Committee. On January 1, 2020, Mr. Folsom received a restricted stock grant
30,000 restricted shares of the Company's common stock. No shares of stock shall
vest until the earliest of any of the following occurrences: (1) Mr. Folsom's
death, (2) Mr. Folsom's disability, (3) Mr. Folsom's termination without cause,
(4) Mr. Folsom's resignation for good reason, (5) the expiration of the Folsom
Agreement as a result of the Company's election not to renew the Folsom
Agreement, (6) the extension of the Folsom Agreement for a one-year renewal term
by virtue of neither party providing notice not to extend (which extension shall
be deemed to occur on January 1, 2025), or (7) the execution of a new or
successor employment agreement between the parties at any time on or before
December 31, 2024 (which execution shall be deemed to occur on the date it has
been signed by both parties). If vesting occurs as a result of any of the events
described in (1) through (6) above, the full amount of shares shall immediately
vest and be delivered to Mr. Folsom as of the date of the occurrence of such
event. If vesting occurs as a result of the event described in (7) above, the
shares shall vest and be delivered in five equal installments of six thousand
(6,000) shares each year for five (5) years, with the first installment vesting
on the date of execution of the new or successor agreement, and subsequent
installments vesting on each anniversary of such execution. In the event that
Mr. Folsom's employment is terminated by the Company for cause, by Mr. Folsom
without good reason, or by virtue of the expiration of the Folsom Agreement as a
result of the Mr. Folsom's election not to renew the Folsom Agreement, the full
amount of the restricted shares shall be forfeited. In the event that the
restricted shares vest in accordance with (7) above, the new or successor
employment agreement between the parties shall provide for accelerated vesting
of any undelivered and/or unvested amount of shares in the event that Mr.
Folsom's employment is terminated, prior to the expiration of the five-year
vesting period, by the Company without cause, as a result of Mr. Folsom's death
or disability, or by the Mr. Folsom for good reason, in each case as may be
defined in such new or successor agreement. The Folsom Agreement also provides
that the failure of Andrew M. Sims to act as Charmain of the Board of Directors
of the Company constitutes good reason for Mr. Folsom to resign, and the
complete liquidation or dissolution of the Company constitutes a change in
control. In the event that the Company elects not to renew the Folsom Agreement,
Mr. Folsom is entitled to receive the following: (i) any accrued but unpaid
salary and bonuses; (ii) a severance payment equal to Mr. Folsom's combined
salary and actual bonus compensation for the preceding fiscal year, to be paid
within five (5) days of Mr. Folsom's last day of employment; and (iii) payment
of the full premium (including administrative fee) for continuing health
insurance coverage under COBRA or any similar state law for a period of two (2)
years following the expiration of the Folsom Agreement.
The Kucinski Agreement provides for Mr. Kucinski's annual salary and possible
additional compensation in the form of a cash bonus and stock awards. For the
12-month period ending December 31, 2020, Mr. Kucinski will receive a salary of
$214,500 plus a cost of living adjustment. For the 12-month period ending
December 31, 2021, Mr. Kucinski will receive a salary increase of $37,500 plus a
cost of living adjustment. For each of the remaining three years under the term
of the agreement, Mr. Kucinski's salary is subject to review and adjustment by
the NCGC Committee. On January 1, 2020, Mr. Kucinski received a restricted stock
grant 15,000 restricted shares of the Company's common stock. The restricted
stock grant shall vest in full on the earlier of: (i) December 31, 2024 or (ii)
upon death, disability, termination without cause, or resignation for good
reason.
The Kirkland Agreement provides for Mr. Kirkland's annual salary and possible
additional compensation in the form of a cash bonus and stock awards. For the
12-month period ending December 31, 2020, Mr. Kirkland will receive a salary of
$145,659. For the 12-month period ending December 31, 2021, Mr. Kirkland will
receive a $17,500 salary increase plus cost of living adjustment. For each of
the remaining three years under the term of the agreement, Mr. Kirkland's salary
is subject to review and adjustment by the NCGC Committee. Mr. Kirkland is the
son-in-law of the Chairman of the Board of Directors, Andrew M. Sims.
In addition, pursuant to each of the agreements, the executives are also be
entitled to receive:
1. An annual cash performance bonus in a target amount between 25% and 35% of
salary for that calendar year, based upon the attainment of quantitative
performance goals set forth in a performance plan established by the NCGC
Committee by January 31 of each year; and
2. Customary benefits, including a term life insurance policy of $1 million and
disability insurance in an amount such that, upon the occurrence of any
event causing disability, each executive shall be entitled to receive the
same monthly payments as would have been made under his respective
agreement.
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In addition, each of the executives will be entitled to receive benefits under
his respective agreement if the Company terminates his employment without cause
or such executive resigns with good reason or if there is a change in control of
the Company during the term of the agreement. Under these scenarios, each
executive is entitled to receive the following:
• any accrued but unpaid salary and bonuses;
• vesting of any previously issued stock options or restricted stock;
• payment of the executive's life, health and disability insurance coverage
for a period of five (5) years following termination (provided, however,
that such right terminates if the executive accepts other employment that
would reasonably be expected to provide such insurance);
• any unreimbursed expenses; and
• a severance payment equal to three (3) times the executive's combined salary
and actual bonus compensation for the preceding fiscal year, to be paid
within five (5) days of the executive officer's last day of employment.
Copies of the Sims Agreement, Folsom Agreement, Kucinski Agreement, and Kirkland
Agreement are attached hereto as Exhibits 10.21, 10.22, 10.23, and 10.24,
respectively, and each is incorporated herein by reference as though it were
fully set forth herein. The foregoing summary descriptions of the employment
agreements are not intended to be complete and are qualified in their entirety
by the complete text of each agreement.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
Exhibit Number Description
10.24 Executive Employment Agreement between Sotherly Hotels Inc. and
Andrew M. Sims, dated as of January 1, 2020.
10.25 Executive Employment Agreement between Sotherly Hotels Inc. and
David R. Folsom, dated as of January 1, 2020.
10.26 Executive Employment Agreement between Sotherly Hotels Inc. and
Scott M. Kucinski, dated as of January 1, 2020.
10.27 Executive Employment Agreement between Sotherly Hotels Inc. and
Robert E. Kirkland IV, dated as of January 1, 2020.
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