Exhibit 10.2
EMPLOYMENT
AGREEMENT
THIS EMPLOYMENT AGREEMENT (this
“ Agreement ”), executed as of June 19,
2008, and effective as of July 21, 2008 (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 Arthur Buser (the “
Executive ”).
WHEREAS, Sunstone and the Operating
Partnership (collectively, the “ Company ”)
desire 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:
1. Employment Period .
Subject to the provisions for earlier termination hereinafter
provided, the Executive’s employment hereunder shall be for a
term (the “ Employment Period ”) commencing on
the Effective Date and ending on the fifth anniversary of the
Effective Date (the “ Initial Termination Date
”); provided , however , that this Agreement
shall be automatically extended for one additional year on the
Initial Termination Date and on each subsequent anniversary of the
Initial Termination Date, unless either the Executive or the
Company elects not to so extend the term of the Agreement by
notifying the other party, in writing, of such election not less
than ninety (90) days prior to the last day of the term as
then in effect. For the avoidance of doubt, non-renewal of the
Agreement pursuant to the proviso contained in the preceding
sentence shall not be deemed to give rise to any payment to the
Executive as might be the case in connection with a termination of
this Agreement.
2. Terms of Employment
.
(a) Position and Duties
.
(i) During the Employment Period,
the Executive shall serve as President of Sunstone and the
Operating Partnership and shall perform such employment duties as
are usual and customary for such positions and such other duties as
the Board of Directors of Sunstone (the “ Board
”) shall from time to time reasonably assign to the
Executive. No sooner than January 1, 2009, and no later than
July 1, 2009, and subject to the terms and conditions of this
Agreement, Executive will be appointed to serve as Chief Executive
Officer of Sunstone and the Operating Partnership. The date of such
appointment will be determined by the Board. Subject to any
required stockholder vote, the Executive shall also serve as a
member of the Board during the Employment Period. Prior to the
Executive’s appointment as Chief Executive Officer of
Sunstone and the Operating Partnership, the Executive shall report
directly to the Chief Executive Officer of Sunstone and the
Operating Partnership. Following the Executive’s appointment
as Chief Executive Officer of Sunstone and the Operating
Partnership, the Executive shall report directly to the
Board.
(ii) During the Employment Period,
and excluding any periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote substantially
all of his business time, energy, skill and best efforts to the
performance of his duties hereunder in a manner that will
faithfully and diligently further the business and interests of the
Company. Notwithstanding the foregoing, during the Employment
Period it shall not be a violation of this Agreement for the
Executive to (A) serve on corporate, civic or charitable
boards or committees consistent with the Company’s conflicts
of interests policies and corporate governance guidelines in effect
from time to time, (B) deliver lectures or fulfill speaking
engagements or (C) manage his personal investments, so long as
such activities do not interfere with the performance of the
Executive’s responsibilities as an executive officer of the
Company. It is expressly understood and agreed that to the extent
that any such activities have been conducted by the Executive prior
to the Effective Date and fully disclosed in writing and agreed to
by the Company in writing, the continued conduct of such activities
subsequent to the Effective Date shall not thereafter be deemed to
interfere with the performance of the Executive’s
responsibilities to the Company; provided , however ,
that no such activity shall be permitted that violates any written
non-competition agreement between the parties or prevents the
Executive from devoting substantially all of his business time to
the fulfillment of his duties hereunder.
(iii) The Executive agrees that he
will not take personal advantage of any business opportunity that
arises during his employment by the Company and which may be of
benefit to the Company unless all material facts regarding such
opportunity are promptly reported by the Executive to the Board for
consideration by the Company and the disinterested members of the
Board determine to reject the opportunity and to authorize the
Executive’s participation therein.
(b) Compensation .
(i) Base Salary . During the
Employment Period, the Executive shall receive a base salary (the
“ Base Salary ”) of $425,000 per annum, as the
same may be increased thereafter. The Base Salary will be increased
to $650,000 per annum upon Executive becoming Chief Executive
Officer. The Base Salary shall be paid at such intervals as the
Company pays executive salaries generally. During the Employment
Period, the Base Salary shall be reviewed at least annually for
possible increase (but not decrease) in the Company’s sole
discretion, as determined by the compensation committee of the
Board; provided , however , that the Executive shall
be entitled to an annual increase in Base
-2-
Salary each year, commencing after
the first compensation committee meeting in 2009, equal to the
greater of (x) four percent (4%) and (y) any
cost-of-living increase granted to senior executives of the Company
generally for the same period. Any increase in Base Salary shall
not serve to limit or reduce any other obligation to the Executive
under this Agreement. The term “Base Salary” as
utilized in this Agreement shall refer to Base Salary as so
adjusted.
(ii) Annual Bonus . In
addition to the Base Salary, the Executive shall be eligible to
earn, for each fiscal year of the Company ending during the
Employment Period, an annual cash performance bonus (an “
Annual Bonus ”) under the Company’s bonus plan
or plans applicable to senior executives. The amount of the Annual
Bonus and the performance goals applicable to the Annual Bonus for
any applicable Employment Period shall be determined in accordance
with the terms and conditions of said bonus plan as in effect from
time to time with the following targets: (A) prior to
appointment as Chief Executive Officer (1) threshold target
equal to 75% of Base Salary; (2) mid-point target equal to
100% of Base Salary ( “ Target Annual Bonus ”);
(3) high target equal to 125% of Base Salary; and
(4) superior (maximum) target equal to 150% of Base Salary;
and (B) after appointment to Chief Executive Officer
(1) threshold target equal to 75% of Base Salary;
(2) mid-point target equal to 150% of Base Salary ( “
Target Annual Bonus ”); (3) high target equal to
175% of Base Salary; and (4) superior (maximum) target equal
to 200% of Base Salary; provided , however , that no
minimum bonus is guaranteed. The Annual Bonus payable, if any, in
respect of any calendar year performance period shall be paid no
later than March 15 after the end of such calendar year
performance period. The terms and conditions of any such bonus plan
shall be determined by the compensation committee of the Board in
its sole discretion. Notwithstanding the foregoing, for the period
beginning on the Effective Date and ending on December 31,
2008, and if the Company meets the objective financial goals and
targets consistent with the Company’s annual plan and budget
set by the compensation committee and Executive meets his
individual performance goals for such year, the Executive will
receive a bonus of at least 75% of Base Salary ( “ 2008
Bonus ”). Any Annual Bonus earned for 2008 shall be
pro-rated for the number of days of the year that the Executive is
employed by the Company and shall be paid to the Executive no later
than March 15, 2009.
(iii) Equity
Awards.
(A) Upfront Restricted Stock
Award . Sunstone shall grant the Executive such number of
restricted shares of Sunstone common stock (the “
Restricted Stock ”) as is determined pursuant to this
Section 2(b)(iii), without the payment of any
monetary
-3-
consideration by the Executive. On
the Effective Date, the number of restricted shares granted to
Executive shall be equal to the quotient obtained by dividing
(i) $2,900,000 by (ii) the average closing price of the
Company’s common stock on the New York Stock Exchange (or any
other securities market that then constitutes the principal trading
market for the common stock) over the twenty trading days ending
three days prior to the date of grant (i.e., the date on which the
Board shall approve the grant of the Restricted Stock). Upon
appointment to Chief Executive Officer, Executive shall be granted
a number of shares of restricted stock equal to the quotient
obtained by dividing (i) $2,100,000 by (ii) the average
closing price of the Company’s common stock on the New York
Stock Exchange (or any other securities market that then
constitutes the principal trading market for the common stock) over
the twenty trading days immediately preceding the date of
appointment (i.e., the date on which the Board shall approve the
appointment to Chief Executive Officer). Consistent with the
foregoing, the terms and conditions of the Restricted Stock shall
be set forth in a restricted stock agreement (the “
Restricted Stock Agreement ”) to be entered into by
Sunstone and the Executive, which agreement provides that, subject
to the Executive’s continued employment with the Company,
such Restricted Stock shall vest 10%, 15%, 20%, 25% and 30% on the
first, second, third, fourth and fifth anniversaries of the
Effective Date and the date of appointment to Chief Executive
Officer, respectively.
(B) Annual Equity Awards .
During each fiscal year of the Employment Period commencing with
the year ending December 31, 2009, the Executive shall be
eligible to earn additional annual equity awards under the
Company’s long-term incentive plan, subject to vesting and
other conditions determined by the compensation committee. The
amount of the annual equity award shall be determined by the
compensation committee in accordance with the terms and conditions
of plans as in effect from time to time with the following targets:
(A) prior to appointment as Chief Executive Officer
(1) threshold target equal to 100% of Base Salary;
(2) mid-point target equal to 150% of Base Salary;
(3) high target equal to 200% of Base Salary; and
(4) superior (maximum) target equal to 250% of Base Salary;
and (B) after appointment as Chief Executive Officer
(1) threshold target equal to 150% of Base Salary;
(2) mid-point target equal to 200% of Base Salary;
(3) high target equal to 250% of Base Salary; and
(4) superior (maximum) target equal to 300% of Base Salary;
provided , however , that no minimum equity award is
guaranteed.
-4-
(C) Withholding Tax .
Notwithstanding the terms of any restricted stock agreement to the
contrary, the Executive shall be entitled to satisfy any tax
withholding obligation in connection with the awards described in
(A) and (B) above by electing to have the Company
withhold shares otherwise issuable pursuant to the vested portion
of such awards having a fair market value (as determined under the
Company’s long-term incentive plan) equal to the amount of
the tax to be withheld in lieu of any other form of
payment.
(iv) Incentive, Savings and
Retirement Plans . During the Employment Period, the Executive
shall be eligible to participate in all other incentive plans,
practices, policies and programs, and all savings and retirement
plans, policies and programs, in each case that are applicable
generally to senior executives of the Company.
(v) Welfare Benefit Plans .
During the Employment Period, the Executive and the
Executive’s eligible family members shall be eligible for
participation in the welfare benefit plans, practices, policies and
programs (including, if applicable, medical, dental, vision,
disability, employee life, group life and accidental death
insurance plans and programs) maintained by the Company for its
senior executives; provided, however, that if the Executive elects
to remain on COBRA under his prior employer’s welfare plans,
the Company will reimburse such COBRA payments from the Effective
Date through December 31, 2008 in an aggregate amount not to
exceed $25,000.
(vi) Business Expenses .
During the Employment Period, the Executive shall be entitled to
receive prompt reimbursement for all reasonable business expenses
incurred by the Executive in accordance with the policies,
practices and procedures of the Company provided to senior
executives of the Company.
(vii) Fringe Benefits .
During the Employment Period, the Executive shall be entitled to
such fringe benefits and perquisites as are provided by the Company
to its senior executives from time to time, in accordance with the
policies, practices and procedures of the Company.
(viii) Vacation . During the
Employment Period, the Executive shall be entitled to paid vacation
of four weeks in each calendar year in accordance with the plans,
policies, programs and practices of the Company applicable to its
senior executives.
(ix) Indemnification
Agreement . On the Effective Date, Sunstone and the Executive
shall enter into an indemnification agreement in the form adopted
by the Board for the officers of Sunstone and which contains
customary terms and conditions for a public company.
-5-
(x) Special Expenses
.
(A) Relocation . The Company
agrees to reimburse the Executive for his reasonable and actual
out-of-pocket relocation expenses incurred in moving his family and
household goods from Los Angeles, California to Orange County,
California. Such reimbursement shall include reimbursement for
temporary housing and other temporary living expenses for the
Executive and his family in Orange County, California and any
moving expenses and shall include, but not be limited to, title,
escrow, legal, finance, brokerage and other reasonable closing
costs for the sale of the Executive’s home in Los Angeles,
California and the purchase of the Executive’s new home in
Orange County, California. The Company shall pay such reimbursement
to the Executive within forty-five (45) days of receiving from
the Executive receipts evidencing such relocation expenses. To the
extent any payments under this Section 2(b)(x) are taxable to
Executive, the Company shall pay to Executive an additional cash
payment in an amount such that Executive will be in the same
position as he would have been had no taxes been imposed upon or
incurred as a result of any payments under this
Section 2(b)(x) or under this sentence (the “
Relocation Gross-Up Amount ”). The Company shall pay
the Executive the Relocation Gross-Up Amount within forty-five
(45) days after receiving from the Executive a calculation in
reasonable detail of the Gross-Up Amount. Notwithstanding the
foregoing, the aggregate amount payable by the Company to Executive
pursuant to this Section 2(b)(x) shall in no event exceed
$100,000 (exclusive of the Relocation Gross-Up Amount), and the
Company shall only be obligated to make any such payments to the
Executive to the extent incurred within the eighteen
(18) months immediately following the Effective Date. In no
event shall any expense reimbursement be made after the last day of
the calendar year following the calendar year in which the
Executive incurred such expense.
(B) Legal Expenses . Within
thirty (30) days of the receipt by the Company of detailed
invoices from the Executive, the Executive shall be entitled to
reimbursement of attorney’s fees necessary to complete
negotiation of this Agreement up to a maximum of
$10,000.
-6-
(c) Additional Agreements .
As a condition to the Company entering into this Agreement, the
Executive shall concurrently herewith enter into a
(i) Non-Disclosure Agreement with the Company (the “
Non-Disclosure Agreement ”), a form of which is set
forth as Exhibit B hereto, and (ii) a Noncompetition
Agreement with the Company (the “ Noncompetition
Agreement ”), a form of which is set forth as Exhibit
C hereto.
3. Termination of Employment
.
(a) Death or Disability . The
Executive’s employment shall terminate automatically upon the
Executive’s death or Disability during the Employment Period.
For purposes of this Agreement, “ Disability ”
means Executive’s inability by reason of physical or mental
illness to fulfill his obligations hereunder for 90 consecutive
days or on a total of 150 days in any 12-month period which, in the
reasonable opinion of an independent physician selected by the
Company or its insurers and reasonably acceptable to the Executive
or the Executive’s legal representative, renders Executive
unable to perform the essential functions of his job, even after
reasonable accommodations are made by the Company. The Company is
not, however, required to make unreasonable accommodations for
Executive or accommodations that would create an undue hardship on
the Company.
(b) Cause . The Company may
terminate the Executive’s employment during the Employment
Period for Cause or without Cause. For purposes of this Agreement,
“ Cause ” shall mean the occurrence of any one
or more of the following events:
(i) The Executive’s continued
and willful failure to perform or gross negligence in performing
his duties owed to the Company, which is not cured within fifteen
(15) days following a written notice being delivered to the
Executive by the Board, which notice specifies such failure or
negligence;
(ii) The Executive’s
commission of an act of fraud or material dishonesty in the
performance of his duties;
(iii) The Executive’s
conviction of, or entry by the Executive of a guilty or no contest
plea to, any felony or any felony or misdemeanor involving moral
turpitude;
(iv) Any breach by the Executive of
his fiduciary duty or duty of loyalty to the Company; or
(v) The Executive’s material
breach of any of the provisions of this Agreement, which is not
cured within fifteen (15) days following written notice
thereof from the Company, or any breach of the Noncompetition
Agreement or the Non-Disclosure Agreement, which notice specifies
such material breach.
-7-
The termination of employment of the Executive
shall not be deemed to be for Cause unless and until there shall
have been delivered to the Executive a copy of a resolution duly
adopted by the affirmative vote of a majority the Board at a
meeting of the Board called and held for such purpose (after
reasonable notice is provided to the Executive and the Executive is
given an opportunity to be heard before the Board), finding that,
in the good faith opinion of the Board, sufficient Cause exists to
terminate the Executive pursuant to this Section 3(b) ;
provided , that if the Executive is a member of the Board,
the Executive shall not participate in the deliberations regarding
such resolution, vote on such resolution, nor shall the Executive
be counted in determining a majority of the Board.
(c) Good Reason . The
Executive’s employment may be terminated by the Executive for
Good Reason or by the Executive without Good Reason. For purposes
of this Agreement, “ Good Reason ” shall mean
the occurrence of any one or more of the following events without
the Executive’s prior written consent unless the Company
cures the circumstances constituting Good Reason (provided such
circumstances are capable of cure) prior to the Date of Termination
(as defined below):
(i) A material reduction in the
Executive’s titles, duties, authority and responsibilities,
reporting relationships, or the assignment to the Executive of any
duties materially inconsistent with the Executive’s position,
authority, duties or responsibilities without the written consent
of the Executive;
(ii) The Company’s reduction
of the Executive’s annual Base Salary or bonus opportunity as
in effect or as may be increased from time to time;
(iii) A material reduction is made
to any benefits provided under any employee benefit plan in which
the Executive is eligible to participate, or which is otherwise
provided to the Executive in connection with his employment,
including benefits under Sections 2(b) (vi), 2b(vii), 2(b)(ix)
herein, except to the extent any such benefits are reduced for all
senior executives of the Company and the Executive’s
reduction is proportionate to that of other senior
executives;
(iv) The relocation of the
Company’s headquarters to a location more than thirty five
(35) miles from the Company’s current headquarters in
San Clemente, California;
(v) After the Executive’s
appointment as Chief Executive Officer, the failure of the Board
(or committee thereof) to nominate the Executive for election as a
director of Company in any proxy statement in which directors are
to be selected and in which he must be elected to serve, or to
continue to serve, as director;
-8-
(vi) The Company’s failure to
cure a material breach of its obligations under this Agreement
within fifteen (15) days after written notice is delivered to
the Board by the Executive which specifically identifies the manner
in which the Executive believes that the Company has breached its
obligations under this Agreement; or
(vii) The failure of the Board to
appoint the Executive as Chief Executive Officer on or prior to
July 1, 2009.
The Company shall not assert any
claim that Good Reason is absent unless and until there shall have
been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of a majority the Board, including a
majority of the independent directors, at a meeting of the Board
called and held for such purpose (after reasonable notice is
provided to the Executive and the Executive is given an opportunity
to be heard before the Board), finding that, in the good faith
opinion of the Board, Good Reason does not exist pursuant to this
Section 3(c).
(d) Notice of Termination .
Any termination by the Company for Cause, or by the Executive for
Good Reason, shall be communicated by Notice of Termination to the
other parties hereto given in accordance with
Section 10(c) of this Agreement. For purposes of this
Agreement, a “ Notice of Termination ” means a
written notice which (i) indicates the specific termination
provision in this Agreement relied upon, (ii) to the extent
applicable, sets forth in reasonable detail the facts and
circumstances claimed to provide a basis for termination of the
Executive’s employment under the provision so indicated and
(iii) if the Date of Termination (as defined below) is other
than the date of receipt of such notice, specifies the termination
date (which date shall be not more than thirty (30) days after
the giving of such notice). The failure by the Executive or the
Company to set forth in the Notice of Termination any fact or
circumstance which contributes to a showing of Good Reason or Cause
shall not waive any right of the Executive or the Company,
respectively, hereunder or preclude the Executive or the Company,
respectively, from asserting such fact or circumstance in enforcing
the Executive’s or the Company’s rights
hereunder.
(e) Date of Termination .
“ Date of Termination ” means (i) if the
Executive’s employment is terminated by the Company for
Cause, the date of receipt of the Notice of Termination or any
later date specified therein (which date shall not be more than
thirty (30) days after the giving of such notice), as the case
may be, (ii) if the Executive’s employment is terminated
by the Company other than for Cause or Disability, the Date of
Termination shall be the date on which the Company notifies the
Executive of such termination, (iii) if the Executive’s
employment is terminated by the Executive with or without Good
Reason, the Date of Termination shall be the thirtieth day after
the date on which the Executive notifies the Company of such
termination, unless otherwise agreed by the Company and the
Executive, and (iv) if the Executive’s employment is
terminated by reason of death or Disability, the Date of
Termination shall be the date of death or Disability of the
Executive, as the case may be.
-9-
4. Obligation of the Company Upon
Termination .
(a) Without Cause or For Good
Reason . If, during the Employment Period, the Company shall
terminate the Executive’s employment without Cause or the
Executive shall terminate his employment for Good
Reason:
(i) The Executive shall be paid, in
two lump sum payments (A) the Executive’s earned but
unpaid Base Salary and accrued but unpaid vacation pay through the
Date of Termination, and any Annual Bonus required to be paid to
the Executive pursuant to Section 2(b)(ii) above for any
fiscal year of the Company that ends on or before the Date of
Termination to the extent not previously paid (the “
Accrued Obligations ”), and (B) an amount (the
“ Severance Amount ”) equal to two
(2) times (the “ Severance Multiple ”) the
sum of (x) the Base Salary in effect on the Date of
Termination plus (y) the Bonus Severance Amount (as defined
below) in effect on the Date of Termination. Notwithstanding
anything herein to the contrary, from and after the date that the
Executive is appointed Chief Executive Officer, the Severance
Multiple for purposes of this Section 2(b)(i) shall be three
(3) rather than two (2). For purposes hereof, the Bonus
Severance Amount shall equal: (A) if the Date of Termination
is on or prior to December 31, 2008, the 2008 Bonus,
(B) if the Date of Termination is during the calendar year
2009 prior to the Executive’s appointment as Chief Executive
Officer, 100% of his Base Salary for such year, (C) if the
Date of Termination is during the calendar year 2009 after the
Executive’s appointment as Chief Executive Officer, 150% of
his Base Salary for such year and (D) if the Date of
Termination is during the remainder of the Employment Period, the
lesser of the 150% of his Base Salary for the year in which the
Date of Termination takes place or the actual Annual Bonus that the
Executive earned in the prior calendar year. The Accrued
Obligations shall be paid when due under California law and the
Severance Amount shall be paid no later than 60 days after the Date
of Termination.
(ii) For a period of eighteen
(18) months following the Termination Date, the Company shall,
at the Company’s sole expense, continue to provide the
Executive and the Executive’s eligible family members with
group health insurance coverage at least equal to that which would
have been provided to them if the Executive’s employment had
not been terminated (or at the Company’s election, pay the
applicable COBRA premium for such coverage); provided ,
however , that if the Executive becomes re-employed with
another employer and is eligible to receive group health insurance
coverage under another employer’s plans, the Company’s
obligations under this Section 4(a)(ii) shall be reduced to
the extent comparable coverage is actually available to the
Executive and the Executive’s eligible family members, and
any such coverage shall be reported by the Executive to the
Company.
-10-
(iii) Notwithstanding anything to
the contrary in any award agreement, all outstanding equity awards
granted to the Executive under any of the Company’s equity
incentive plans (or awards substituted therefor covering the
securities of a successor company) shall continue to vest in
accordance with their then existing terms without further action by
the Board or any committee thereof.
(iv) To the extent not theretofore
paid or provided, the Company shall timely pay or provide to the
Executive any vested benefits and other amounts or benefits
required to be paid or provided or which the Executive is eligible
to receive as of the Termination Date under any plan, program,
policy or practice or contract or agreement of the Company and its
affiliates (such other amounts and benefits shall be hereinafter
referred to as the “ Other Benefits ”).
Notwithstanding the foregoing, it shall be a condition to the
Executive’s right to receive the amounts and benefits
provided for in Sections 4(a)(i)(B) , 4(a)(ii) and
4(a)(iii) above that the Executive execute, deliver to the
Company and not revoke a release of claims in substantially the
form attached hereto as Exhibit A .
(b) For Cause or Without Good
Reason . If the Executive’s employment shall be
terminated by the Company for Cause or by the Executive without
Good Reason during the Employment Period, the Company shall have no
further obligations to the Executive under this Agreement other
than pursuant to Sections 6 and 7 hereof, and the
obligation to pay to the Executive the Accrued Obligations, and to
provide the Other Benefits and Executive shall retain all equity
awards to the Executive under any of the Company’s equity
incentive plans (or awards substituted therefor covering the
securities of a successor company) that vested prior to termination
of Executive’s employment, subject to the terms and
conditions of any such award. In the event the Company elects, in
writing, at the time of the Executive’s termination of
employment for Cause or by the Executive without Good Reason to
subject the Executive to the restrictions set forth in
Section 1(a) of the Noncompetition Agreement, notwithstanding
anything to the contrary in any award agreement, all outstanding
equity awards granted to the Executive that have not vested at the
time of termination of the Executive’s employment for Cause
or by the Executive without Good Reason shall continue to vest in
accordance with their then existing terms without further action by
the Board or any committee thereof. Except as set forth in the
immediately preceding sentence, if the Executive’s employment
shall be terminated by the Company for Cause or by the Executive
without Good Reason, any Restricted Stock or other equity awards
granted to the Executive shall immediately cease vesting and shall
terminate and be of no further force or effect.
-11-
(c) Death or Disability . If
the Executive’s employment is terminated by reason of the
Executive’s death or Disability during the Employment
Period:
(i) The Accrued Obligations shall be
paid to the Executive’s estate or beneficiaries or to the
Executive, as applicable, in cash within 30 days of the Date of
Termination;
(ii) 100% of the Executive’s
annual Base Salary, as in effect on the Date of Termination, shall
be paid to the Executive’s estate or beneficiaries or to the
Executive, as applicable, in cash within 30 days of the Date of
Termination;
(iii) Notwithstanding anything to
the contrary in any award agreement, all outstanding equity awards
granted to the Executive under any of the Company’s equity
incentive plans (or awards substituted therefor covering the
securities of a successor company) shall continue to vest for an
additional (12) months following Executive’s death or
Disability; and
(iv) For a period of eighteen
(18) months following the Date of Termination, the Executive
and the Executive’s eligible family members shall continue to
be provided, at the Company’s sole expense, with group health
insurance coverage at least equal to that which would have been
provided to them if the Executive’s employment had not been
terminated (or at the Company’s election, pay the applicable
COBRA premium for such coverage); provided , however
, that if the Executive becomes re-employed with another employer
and is eligible to receive group health insurance coverage under
another employer’s plans, the Company’s obligations
under this Section 4(c)(iv) shall be reduced to the
extent comparable coverage is actually available to the Executive
and the Executive’s eligible family members, and any such
coverage shall be reported by the Executive to the Company;
and
(v) The Other Benefits shall be paid
or provided to the Executive on a timely basis.
5. Termination Upon a Change in
Control . If a Change in Control (as defined herein) occurs
during the Employment Period, and the Executive’s employment
is terminated by the Company without Cause or by the Executive for
Good Reason, in each case within twelve (12) months after or
three (3) months before the effective date of the Change in
Control, then the Executive shall be entitled to the payments and
benefits provided in Section 4(a) , subject to the
terms and conditions thereof; provided, that for purposes of this
Section 5 , the Severance Amount shall equal an amount
equal to three (3) times the sum of (x) the Base Salary
in effect on the Date of Termination or immediately prior to the
Change in Control, whichever is greater, plus (y) the actual
Annual Bonus that the Executive earned in the prior year. In
addition, in the event of
-12-
such a termination of the Executive’s
employment, notwithstanding anything to the contrary in any award
agreement, all outstanding equity awards granted to the Executive
under any of the Company’s equity incentive plans (or awards
substituted therefore covering the securities of a successor
company) shall become immediately vested and exercisable in full.
If Executive’s employment is terminated and payment made
pursuant to Section 4(a) prior to the effective date of
the Change in Control, then payment or vesting of any additional
amount attributable to the proviso in the preceding sentence shall
be made within thirty (30) days following the Change in
Control. For purposes of this Agreement, “ Change in
Control ” shall mean the occurrence of any of the
following events:
(i) Any transaction or event
resulting in the beneficial ownership of voting securities,
directly or indirectly, by any “person “ or
“group “ (as those terms are defined in Sections
3(a)(9) , 13(d) , and 14(d) of the Securities
Exchange Act of 1934 ( “ Exchange Act ”) and the
rules thereunder) having “beneficial ownership “ (as
determined pursuant to Rule 13d-3 under the Exchange Act) of
securities entitled to vote generally in the election of directors
( “ voting securities ”) of Sunstone that
represent greater than 50% of the combined voting power of
Sunstone’s then outstanding voting securities (unless
Executive has beneficial ownership of at least 50% of such voting
securities), other than any transaction or event resulting in the
beneficial ownership of securities:
(A) By a trustee or other fiduciary
holding securities under any employee benefit plan (or related
trust) sponsored or maintained by Sunstone or any person controlled
by Sunstone or by any employee benefit plan (or related trust)
sponsored or maintained by Sunstone or any person controlled by
Sunstone, or
(B) By Sunstone or a corporation
owned, directly or indirectly, by the stockholders of Sunstone in
substantially the same proportions as their ownership of the stock
of Sunstone, or
(C) Pursuant to a transaction
described in clause (iii) below that would not be a Change in
Control under clause (iii),
(ii) Individuals who, as of the
Effective Date, constitute the Board (the “ Incumbent
Board ”) cease for any reason to constitute at least a
majority of the Board;
provided , however , that any individual becoming
a director subsequent to the date hereof whose election by
Sunstone’s stockholders, or nomination for election by the
Board, was approved by a vote of at least a majority of the
directors then comprising the Incumbent Board shall be considered
as though such individual were a member of the Incumbent Board, but
excluding, for this purpose, any such i
