UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): September 9, 2021
Sunstone Hotel Investors, Inc.
(Exact Name of Registrant as Specified in Its Charter)
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Maryland |
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001-32319 |
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20-1296886 |
(State or Other Jurisdiction of
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(Commission File Number) |
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(I.R.S. Employer
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200 Spectrum Center Drive, 21st Floor
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92618 |
(Address of Principal Executive Offices) |
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(Zip Code) |
(949) 330-4000
(Registrant’s telephone number including area code)
N/A
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
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Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
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Emerging growth company |
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If an emerging growth company, indicate by checkmark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards pursuant to Section 13(a) of the Exchange Act. ☐
Item 5.02Departure of Directors or Certain Officers; Election of Directors; Appointment of Certain Officers; Compensatory Arrangements of Certain Officers.
Retention Program.
On September 9, 2021, the Board of Directors of Sunstone Hotel Investors, Inc. (the “Company”) approved a one-time retention program (the “Retention Program”) and entered into letter agreements evidencing the program (each, a “Retention Letter”) with each of its named executive officers, Bryan Giglia, Robert Springer and David Klein (each, an “Executive”).
Under the Retention Program, each Executive is eligible to receive a cash bonus subject to his continued employment with the Company through February 28, 2022. In addition, under the Retention Program the Company granted to each Executive a restricted stock award pursuant to its 2004 Long-Term Incentive Plan, which vests as to 50% of the shares subject to the award on each of February 28, 2023 and September 30, 2024, subject to the Executive’s continued employment through the applicable date. The amounts subject to the cash bonus and the restricted stock award for each Executive is set forth in the following table:
Executive |
Cash Retention Award |
Retention Equity Award |
Bryan Giglia |
$585,225 |
$1,170,450 |
Robert Springer |
$496,868 |
$993,736 |
David Klein |
$370,107 |
$740,214 |
Upon a termination of the Executive’s employment by the Company without “cause”, by the Executive for “good reason” or by reason of the Executive's death or disability, then (i) any then-unpaid cash bonus under the Retention Program will be paid to the Executive and (ii) any then-unvested equity award under the Retention Program will vest in full, in each case subject to the Executive’s (or his estate’s) timely execution and non-revocation of a general release of claims.
The foregoing description of the Retention Program is not complete and is subject to and qualified in its entirety by the terms of the form of Retention Letter, a copy of which is filed herewith as Exhibit 10.1 and incorporated herein by reference.
Employment Agreement.
In addition, on September 10, 2021, the Compensation Committee of the Board approved entering into an employment agreement (the “Employment Agreement”) with the Company’s Interim Chief Executive Officer, Douglas Pasquale (the “Executive”). The term of the Employment Agreement is scheduled to expire on the earlier of September 2, 2022 and the date on which the Company appoints a new Chief Executive Officer.
The Employment Agreement provides for an annual base salary of $825,000 and eligibility to receive a cash performance bonus for the term of the Employment Agreement, based on the attainment of performance goals, targeted at $1,850,000, with minimum and maximum bonus opportunities of $750,000 and $3,000,000, respectively. In addition, it provides for a one-time restricted stock award with a dollar-denominated value of $2,250,000, which will vest in full on September 2, 2022, subject to the Executive’s continued employment.
Upon a “qualifying termination” (generally defined as a termination of employment due to the expiration of the employment period, by the Company without “cause”, by the Executive for “good reason” or due to his death or disability), then the Executive will receive the performance bonus and full vesting of the one-time restricted stock award described above. The performance bonus will be equal to no less than the minimum performance bonus but, if the qualifying termination is due to the Executive’s termination without “cause”, for “good reason” or due to his death or disability, then he will receive the greater of the minimum performance bonus and a pro-rated target bonus (pro-rated to reflect his time employed through the termination date). The Company’s obligation to provide these severance payments and benefits is conditioned upon the Executive’s (or his estate’s) timely execution (and non-revocation) of a general release of claims.
The Employment Agreement also includes certain restrictive covenants, including non-solicitation and non-disparagement covenants.
The above summary of the terms of the Employment Agreement is qualified in its entirety by reference to the agreement, a copy of which is filed herewith as Exhibit 10.2 and incorporated herein by reference.
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Item 9.01Financial Statements and Exhibits.
(d) Exhibits
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Exhibit No. |
Description |
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10.1 |
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10.2 |
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Employment Agreement, by and between the Company and Douglas Pasquale. |
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Cover Page Interactive Data File (embedded within the Inline XBRL document). |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
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Sunstone Hotel Investors, Inc. |
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Date: September 13, 2021 |
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By: |
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/s/ Bryan A. Giglia |
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Bryan A. Giglia Principal Financial Officer and Duly Authorized Officer |
Exhibit 10.1
[COMPANY LETTERHEAD]
September [__], 2021
Dear [Name]:
Re:Retention Program
We are pleased to inform you that, in consideration of your services to Sunstone Hotel Investors, Inc. (“Sunstone”) and Sunstone Hotel Partnership, LLC (together with Sunstone, the “Company”), the Company has determined that you are eligible to participate in a special retention bonus program, as further described in this letter (this “Letter”). Capitalized but undefined terms contained in this Letter are defined in that certain [[Third /Fourth] Amended and Restated] Employment Agreement by and between you and the Company, dated [March 31, 2020 / March 31, 2021], as amended from time to time (the “Employment Agreement”).
Cash Bonus. Given your key role in the Company, we would like to reward you with a one-time, special cash bonus in an amount equal to $[____] (the “Retention Bonus”). The Retention Bonus will be paid to you on or within 15 days following February 28, 2022, subject to your continued employment through that date.
Equity Award. In addition, the Company has granted to you a restricted stock award with a dollar-denominated value of $[______] (the “Retention Equity Award”). The number of shares of Sunstone common stock subject to the Retention Equity Award will be determined by dividing this dollar-denominated value by the average closing price of Sunstone’s common stock over the 20 trading days ending three trading days prior to [insert board approval date]. The Retention Equity Award will vest as to 50% of the shares subject to the award on each of February 28, 2023 and September 30, 2024, subject to your continued employment through the applicable vesting date. The Retention Equity Award will be granted under Sunstone’s 2004 Long-Term Incentive Plan (as amended and restated) (the “Plan”) and the terms and conditions of the Retention Equity Award will be set forth in a separate award agreement in a form to be entered into by and between Sunstone and you. Except as otherwise specifically provided in this Letter, the Retention Equity Award will be governed in all respects by the terms of and conditions of the Plan and the award agreement (but such terms and conditions shall not conflict with the terms of this Letter).
Termination of Employment. If your employment is terminated by the Company without Cause, by you for Good Reason or by reason of your death or Disability (each, a “Qualifying Termination”) prior to February 28, 2022, then the Company will pay the Retention Bonus to you within 30 days following your employment termination date. In addition, and notwithstanding anything to the contrary contained in the Employment Agreement, if you experience a Qualifying Termination, the then-unvested portion of your Retention Equity Award will vest in full.
It shall be a condition to your (or your estate’s) right to receive the foregoing payments and accelerated vesting in connection with a Qualifying Termination that you (or your estate, if applicable) execute and deliver to the Company within 21 days (or 45 days, if required by applicable law) following your employment termination date, and do not revoke, a general release of claims in substantially the form attached to the Employment Agreement.
Taxes. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.
Incorporation by Reference. Sections 6, 9, 10, 12(b), 12(d) and 12(e) of the Employment Agreement are hereby incorporated herein by reference and shall apply, mutatis mutandis, to the provisions set forth herein.
Miscellaneous. This Letter shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Letter are not part of the provisions hereof and shall have no force or effect. This Letter may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives. This Letter may be delivered via facsimile, email or other electronic means permitted by the Company, and may be executed in counterparts, each of which shall be deemed an original and all of which shall be constitute one and the same document.
[Signature Page Follows]
IN WITNESS WHEREOF, the parties hereto have caused this Letter to be executed as of the date first written above.
SUNSTONE HOTEL INVESTORS, INC.
a Maryland corporation
By:
Name:
Title:
SUNSTONE HOTEL PARTNERSHIP, LLC
a Delaware limited liability company
By:Sunstone Hotel Investors, Inc.
Its Managing Member
By:
Name:
Title:
The undersigned hereby accepts, acknowledges and agrees to all the
terms and provisions of this letter:
_______________________________
[Name]
Exhibit 10.2
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of September 10, 2021 (the “Effective Date”), is entered into by and among Sunstone Hotel Investors, Inc., a Maryland corporation (“Sunstone”), Sunstone Hotel Partnership, LLC, a Delaware limited liability company (the “Operating Partnership,” and together with Sunstone, the “Company”), and Douglas Pasquale (the “Executive”).
WHEREAS, the Company desires to employ the Executive and to enter into an agreement embodying the terms of such employment; and
WHEREAS, the Executive desires to accept employment with the Company, subject to the terms and conditions of this Agreement.
NOW, THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
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(ix)Signing Equity Award. In addition, as soon as practicable following the Effective Date, the Company shall grant the Executive a restricted stock award with a dollar-denominated value of $2,250,000 (the “Signing Award”). The number of shares of the Company’s common stock subject to the Signing Award will be determined by dividing the dollar-denominated value by the trailing 20-trading day average closing price of the Company’s common stock through and including the three days prior to September 10, 2021. Subject to Section 4(a)(i) below, the Signing Award shall vest in full on the twelve-month anniversary of the Employment Start Date, subject to the Executive’s continued employment. The Signing Award shall be granted under the Company’s 2004 Long-Term Incentive Plan (as amended and restated) (the “Plan”) and the terms and conditions of the Signing Award shall be set forth in a separate award agreement in a form to be entered into by and between the Company and the Executive. Except as otherwise specifically provided in this Agreement, the Signing Award shall be governed in all respects by the terms of and conditions of the Plan and the award agreement but shall not conflict with the terms of this Agreement.
(x)Director Compensation. The Executive shall not be eligible to receive any compensation payable to the members of the Board for services on the Board during the Employment Period (including any cash retainers earned, and/or annual stock retainer granted, during the Employment Period).
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For purposes of this Agreement, a termination of employment by the Executive shall not be deemed to be for Good Reason unless (A) the Executive gives the Company written notice describing the event or events which are the basis for such termination within 90 days after the event or events occur, (B) such grounds for termination (if susceptible to correction) are not corrected by the Company within 30 days after the Company’s receipt of such notice, and (C) the Executive terminates his employment no later than 45 days after the Executive provides notice to the Company in accordance with clause (A) of this paragraph.
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The Accrued Obligations shall be paid when due under applicable law and, subject to Section 12(e) below, the Performance Bonus amount (if any) shall be paid on the 30th day after the Date of Termination (or, if not a business day, on the first business day following such 30th day). Notwithstanding anything herein to the contrary, it shall be a condition to the Executive’s right to receive any of the Performance Bonus and/or the accelerated vesting of the Signing Award that the
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Executive (or the Executive’s estate, as applicable) timely execute and deliver to the Company within 21 days (or 45 days, if required by applicable law) and not revoke a release of claims (if any revocation period is required by applicable law) in substantially the form attached hereto as Exhibit A (the “Release”).
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For purposes of clause (a) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of Sunstone’s stockholders, and for purposes of clause (c) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of Sunstone’s stockholders.
Notwithstanding the foregoing, if a Change in Control constitutes a payment event with respect to any payment (or any portion of an payment) that provides for the deferral of compensation that is subject to Section 409A (as defined below), to the extent required to avoid the imposition of additional taxes under Section 409A, the transaction or event described in subsection (a), (b), (c) or (d) with respect to such payment (or portion thereof) shall only constitute a Change in Control for purposes of the payment timing of such payment if such transaction also constitutes a “change in control event” (within the meaning of Section 409A).
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(a) Best Pay Cap. Notwithstanding any other provision of this Agreement, in the event that any payment or benefit received or to be received by the Executive (including any payment or benefit received in connection with a termination of the Executive’s employment, whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (all such payments and benefits, including the payments and benefits under Section 4 hereof, being hereinafter referred to as the “Total Payments”) would be subject (in whole or part) to the excise tax imposed under Section 4999 of the Code (the “Excise Tax”) then, if elected by the Executive, after taking into account any reduction in the Total Payments provided by reason of Section 280G of the Code in such other plan, arrangement or agreement, any cash payments shall first be reduced, and any noncash payments shall thereafter be reduced, to the extent necessary so that no portion of the Total Payments is subject to the Excise Tax but only if (i) the net amount of such Total Payments, as so reduced (and after subtracting the net amount of federal, state and local income taxes on such reduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such reduced Total Payments) is greater than or equal to (ii) the net amount of such Total Payments without such reduction (but after subtracting the net amount of federal, state and local income taxes on such Total Payments and the amount of Excise Tax to which the Executive would be subject in respect of such unreduced Total Payments and after taking into account the phase out of itemized deductions and personal exemptions attributable to such unreduced Total Payments).
(b) Certain Exclusions. For purposes of determining whether and the extent to which the Total Payments will be subject to the Excise Tax, (i) no portion of the Total Payments the receipt or enjoyment of which the Executive shall have waived at such time and in such manner as not to constitute a “payment” within the meaning of Section 280G(b) of the Code shall be taken into account; (ii) no portion of the Total Payments shall be taken into account which, in the written opinion of an independent, nationally recognized accounting firm (the “Independent Advisors”) selected by the Company, does not constitute a “parachute payment” within the meaning of Section 280G(b)(2) of the Code (including by reason of Section 280G(b)(4)(A) of the Code) and, in calculating the Excise Tax, no portion of such Total Payments shall be taken into account which, in the opinion of the Independent Advisors, constitutes reasonable compensation for services actually rendered, within the meaning of Section 280G(b)(4)(B) of the Code, in excess of the “base amount” (as defined in Section 280G(b)(3) of the Code) allocable to such reasonable compensation; and (iii) the value of any non-cash benefit or any deferred payment or benefit included in the Total Payments shall be determined by the Independent Advisors in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.
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If to the Executive: at the Executive’s most recent address on the records of the Company.
If to Sunstone or the Operating Partnership:
Sunstone Hotel Investors, Inc.
200 Spectrum Center Drive, 21st Floor
Irvine, California 92618
Attn: Corporate Secretary
with a copy to:
Latham & Watkins
355 South Grand Ave., Suite 100
Los Angeles, California 90071-1560
Attn: Steven Stokdyk, Esq.
or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.
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[signatures follow on next page]
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IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.
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GENERAL RELEASE
For a valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Sunstone Hotel Investors, Inc., a Maryland corporation, Sunstone Operating Partnership, LLC, a Delaware limited liability company and each of their partners, subsidiaries, associates, affiliates, successors, heirs, assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof. The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment, any alleged torts or other alleged legal restrictions on Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With Disabilities Act, and the California Fair Employment and Housing Act. Notwithstanding the foregoing, this general release (the “Release”) shall not operate to release any rights or claims of the undersigned (i) to payments or benefits under Section 4(a) of that certain Employment Agreement, dated as of September 10, 2021, between Sunstone Hotel Investors, Inc., Sunstone Operating Partnership, LLC and the undersigned (the “Employment Agreement”), whichever is applicable to the payments and benefits provided in exchange for this Release, (ii) with respect to Section 2(b)(vi) of the Employment Agreement, (iii) to accrued or vested benefits the undersigned may have, if any, as of the date hereof under any applicable plan, policy, practice, program, contract or agreement with the Company, (iv) to any Claims, including claims for indemnification and/or advancement of expenses arising under any indemnification agreement between the undersigned and the Company or under the bylaws, certificate of incorporation of other similar governing document of the Company, (v) to any Claims which cannot be waived by an employee under applicable law or (vi) with respect to the undersigned’s right to communicate directly with, cooperate with, or provide information to, any federal, state or local government regulator.
THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:
“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS THAT THE CREDITOR OR RELEASING PARTY DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE AND THAT, IF KNOWN BY HIM OR HER, WOULD HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR OR RELEASED PARTY.”
THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.
IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:
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The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.
The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.
The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.
IN WITNESS WHEREOF, the undersigned has executed this Release this ___ day of _____, 20__.
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Douglas Pasquale
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INDEMNIFICATION AGREEMENT
(attached)
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