Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT by and between SUNRISE
SENIOR LIVING, INC. (the “ Company ”) and MARK
ORDAN (the “ Executive ”), executed on November
13, 2008 (the “ Execution Date ”) and effective
as of November 1, 2008 (the “ Effective Date
”).
WHEREAS, the Company is desirous of
employing the Executive as its Chief Executive Officer on the terms
and conditions, and for the consideration, hereinafter set forth,
and the Executive is desirous of being employed by the Company on
such terms and conditions and for such consideration.
NOW, THEREFORE, IT IS HEREBY AGREED
AS FOLLOWS:
1. Term
. The Company hereby agrees to continue to employ the
Executive, and the Executive hereby agrees to continue to serve the
Company, subject to the terms and conditions of this Agreement, for
the period commencing on the Effective Date and ending on the
three-year anniversary thereof (the “ Employment
Period ”); provided that, on such three-year
anniversary of the Effective Date and each annual anniversary of
such date thereafter (such date and each annual anniversary
thereof, a “ Renewal Date ”), unless previously
terminated in accordance with the provisions of Section 3 hereof,
the Employment Period shall be automatically extended so as to
terminate one year from such Renewal Date unless, at least 120 days
prior to the Renewal Date, either party shall give notice to the
other that the Employment Period shall not be so extended.
2. Terms of
Employment . (a) Position and Duties .
(i) During the Employment Period, the Executive shall serve
the Company as its Chief Executive Officer and shall perform
customary and appropriate duties as may be reasonably assigned to
the Executive from time to time by the Board of Directors of the
Company (the “ Board ”). The Executive
shall have such responsibilities, power and authority as those
normally associated with such position in public companies of a
similar stature. The Executive shall report solely and directly to
the Board. The Executive shall perform his services at the
principal offices of the Company in the McLean, Virginia area and
shall travel for business purposes to the extent reasonably
necessary or appropriate in the performance of such services.
During the Employment Period, the Executive shall, without
compensation other than that herein provided, also serve and
continue to serve, if and when elected and re-elected, as a member
of 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 attention and time during normal business hours to the
business and affairs of the Company and, to the extent necessary to
discharge the responsibilities assigned to the Executive hereunder,
to use the Executive’s reasonable best efforts to perform
faithfully and efficiently such responsibilities. During the
Employment Period, it shall not be a violation of this Agreement
for the Executive to serve on corporate (if approved by the Board),
civic or charitable boards or committees, deliver lectures, fulfill
speaking engagements or teach at educational institutions and
manage personal investments, so long as such activities do not
materially interfere with the performance of the Executive’s
responsibilities in accordance with this
Agreement and the Executive complies with
applicable provisions of the Company’s Code of Conduct and
Integrity.
(b)
Compensation . (i) Base Salary .
During the Employment Period, the Executive shall receive an annual
base salary (“ Annual Base Salary ”) at the rate
of $650,000. The Executive’s Annual Base Salary shall be
reviewed at least annually by the Compensation Committee of the
Board (the “ Committee ”) pursuant to its normal
performance review policies for senior executives. The Committee
may, but shall not be required to, increase the Annual Base Salary
at any time for any reason and the term “Annual Base
Salary” as utilized in this Agreement shall refer to the
Annual Base Salary as increased from time to time. The Annual Base
Salary shall not be reduced after any such increase, and any
increase in Annual Base Salary shall not serve to limit or reduce
any other obligation to the Executive under this Agreement.
(ii) Annual
Bonus . (A) In addition to the Annual Base Salary,
the Executive shall be eligible to be awarded, for each fiscal year
of the Company or portion of a fiscal year beginning on or after
the Effective Date, an annual bonus (the “ Annual
Bonus ”) pursuant to the terms of the Company’s
annual incentive plan, as in effect from time to time, which shall
not be inconsistent with the terms of this Agreement. The target
Annual Bonus shall be 150% of the rate of the Annual Base Salary
(the “ Target Bonus ”). The actual annual bonus
may range from 0% to 300% of the rate of the Annual Based Salary,
based upon the level of achievement of performance goals
established by the Committee and ratified by the Board within the
first 90 days of such fiscal year in good faith after due
consultation with the Executive. Each Annual Bonus shall be paid on
the date on which annual bonuses are paid to senior executives of
the Company generally, but not later than two and a half months
after the end of the fiscal year for which the Annual Bonus is
awarded, unless the Executive shall elect to defer the receipt of
such Annual Bonus pursuant to an arrangement that meets the
requirements of Section 409A of the Internal Revenue Code of 1986,
as amended (the “ Code ”).
(B) The Executive shall be awarded for the
2008 fiscal year of the Company an Annual Bonus of not less than
$500,000, which minimum amount shall be paid on November 14, 2008.
Any additional bonus for the 2008 fiscal year of the Company shall
be determined by the Committee in its sole discretion and ratified
by the Board, and may be zero.
(iii) Long-Term
Awards . (A) Commencing on the next annual grant of
long-term awards to senior executives of the Company following the
Effective Date, the Executive shall participate in all long-term
cash and equity incentive plans, practices, policies, and programs
applicable generally to other senior executives of the Company. The
value of Executive’s annual long-term awards shall be
consistent with competitive market levels as determined by the
Committee in good faith on an annual basis.
(B) On the
Execution Date, the Executive shall be granted a promotion award of
1,500,000 stock options (the “ Promotion Options
”) under the Company’s 2008 Omnibus Incentive Plan (or
another shareholder approved plan to purchase Company common stock)
(the “ LTIP ”). The Promotion Options shall have
a term of ten years and have terms and conditions not inconsistent
with those set forth in this Agreement. The exercise price per
share of the Promotion Options will be the closing price per share
of
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the Company
common stock on the Execution Date. The Promotion Options will vest
at a rate of one-third of the total Promotion Options on each of
November 1, 2009, 2010 and 2011, subject to continued employment
through the applicable vesting date.
(iv) Welfare Benefits . The
Executive and/or the Executive’s family, as the case may be,
shall be eligible for participation in, and shall receive benefits
under, welfare benefit plans, practices, policies and programs
provided by the Company to the same extent as provided generally to
similarly situated senior executives of the Company. In addition,
during the Employment Period, Executive and his eligible dependents
shall be entitled to an executive medical and dental insurance plan
providing supplemental first-dollar coverage for the Executive and
his eligible dependents for those items not covered under the
Company’s general health plan (for example, prescriptions,
orthodontia, eye surgery or other coverages which may be excluded
from the group medical plan), at the expense of the Company.
(v) Fringe Benefits . During
the Employment Period, the Executive shall be entitled to fringe
benefits in accordance with the plans, practices, programs and
policies of the Company in effect for other senior executives of
the Company. The Company reserves the right to amend or cancel any
such plan, practice, policy or program in its sole discretion,
subject to the terms of such plan, practice, policy or program and
applicable law.
(vi) Vacation . During the
Employment Period, the Executive shall be entitled to receive four
weeks paid vacation per year.
(vii) Indemnification . During
and following the Employment Period, the Company shall fully
indemnify the Executive for any liability to the fullest extent
applicable to any other officer or director of the Company. In
addition, the Company agrees to continue and maintain, at the
Company’s sole expense, a directors’ and
officers’ liability insurance policy covering Executive both
during and, while potential liability exists, after the Employment
Period that is no less favorable than the policy covering active
directors and senior officers of the Company from time to time.
(viii) Expenses . During the
Employment Period, the Executive shall be entitled to receive
prompt reimbursement for all business expenses incurred by the
Executive in accordance with the Company’s business expense
reimbursement policies.
(ix) Other Benefits . During
the Employment Period, the Executive shall be entitled to
participate in all executive and employee benefit plans and
programs of the Company on the same basis as provided generally to
other senior executives of the Company. The Company reserves the
right to amend or cancel any such plan or program in its sole
discretion, subject to the terms of such plan or program and
applicable law.
3. Termination
of Employment . (a) Death or Disability .
The Executive’s employment shall terminate automatically upon
the Executive’s death during the Employment Period. If the
Disability (as defined below) of the Executive has occurred during
the Employment Period, the Company may provide the Executive with
written notice in accordance with Section 9(b) of this Agreement of
its intention to terminate the Executive’s employment. In
such event, the Executive’s employment with the Company shall
terminate effective on the 30th
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day after receipt of such notice by the Executive (the “
Disability Effective Date ”), provided that,
within the thirty (30) days after such receipt, the Executive shall
not have returned to full-time performance of the Executive’s
duties. For purposes of this Agreement, “ Disability
” shall mean the absence of the Executive from the
Executive’s duties with the Company on a full-time basis for
one hundred and twenty (120) consecutive days or one hundred and
eighty (180) days within any twelve month period as a result of
incapacity due to mental or physical illness.
(b) Cause
. The Company may terminate the Executive’s employment
during the Employment Period either with or without Cause. For
purposes of this Agreement, “ Cause ” shall
mean:
(i) The
Executive’s willful failure to perform or substantially
perform the Executive’s duties with the Company;
(ii)
Illegal conduct or gross misconduct by the Executive that is
willful and demonstrably and materially injurious to the
Company’s business, financial condition or reputation;
(iii)
A willful and material breach by the Executive of the
Executive’s obligations under this Agreement, including
without limitation the restrictive covenants and confidentiality
provisions set forth in Section 8 of the Agreement; or
(iv) The
Executive’s indictment for, or entry of a plea of guilty or
nolo contendere with respect to, a felony crime or a crime
involving moral turpitude, fraud, forgery, embezzlement or similar
conduct.
provided , however , that the actions in (i) and
(iii) above will not be considered Cause unless the Executive has
failed to cure such actions within 30 days of receiving written
notice specifying with particularity the events allegedly giving
rise to Cause and that such actions will not be considered Cause
unless the Company provides such written notice within 90 days of
any member of the Board (excluding the Executive, if applicable at
the time of such notice) having knowledge of the relevant action.
Further, no act or failure to act by the Executive will be deemed
“willful” unless done or omitted to be done not in good
faith or without reasonable belief that such action or omission was
in the Company’s best interests, and any act or omission by
the Executive pursuant to authority given pursuant to a resolution
duly adopted by the Board or on the advice of counsel for the
Company will be deemed made in good faith and in the best interests
of the Company. The Executive will not be deemed to be discharged
for Cause unless and until there is delivered to the Executive a
copy of a resolution duly adopted by the affirmative vote of not
less than two thirds (2/3) of the entire membership of the Board
(excluding the Executive, if he is then a member of the Board), at
a meeting called and duly held for such purpose (after reasonable
notice to Executive and an opportunity for the Executive and the
Executive’s counsel to be heard before the Board), finding in
good faith that Executive is guilty of the conduct set forth above
and specifying the particulars thereof in detail.
(c) Good
Reason . The Executive’s employment may be
terminated during the Employment Period by the Executive for Good
Reason or by the Executive voluntarily
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without Good Reason. “ Good
Reason ” means the occurrence of any one of the following
events without the prior written consent of Executive:
(i) A material
diminution of the Executive’s duties or responsibilities,
authorities, powers or functions (including removal, without Cause,
from the Board);
(ii) A relocation
that would result in the Executive’s principal location of
employment being moved 35 miles or more away from his current
principal location and, as a result, the Executive’s commute
increasing by 35 miles or more; or
(iii) Any
material breach of this Agreement by the Company.
provided , however , that the actions in (i)
through (iii) above will not be considered Good Reason unless the
Executive shall describe the basis for the occurrence of the Good
Reason event in reasonable detail in a Notice of Termination (as
defined below) provided to the Company in writing within 30 days of
the Executive’s knowledge of the actions giving rise to the
Good Reason, and the Company has failed to cure such actions within
30 days of receiving such Notice of Termination (and if the Company
does effect a cure within that period, such Notice of Termination
shall be ineffective). Unless the Executive gives the Company
notice within 90 days of the initial existence of any event which,
after any applicable notice and the lapse of any applicable 30-day
grace period, would constitute Good Reason, such event will cease
to be an event constituting Good Reason.
(d) Notice of
Termination . Any termination of employment by the
Company or the Executive shall be communicated by Notice of
Termination (as defined below) to the other party hereto given in
accordance with Section 11(b) of this Agreement. For purposes of
this Agreement, a “ Notice of Termination ”
shall mean a written notice that (i) indicates the termination
provision in this Agreement relied upon and (ii) specifies the Date
of Termination (as defined below) if other than the date of receipt
of such notice. The failure by the Company or the Executive to set
forth in the Notice of Termination any fact or circumstance that
contributes to a showing of Cause or Good Reason shall not waive
any right of the Company or the Executive, respectively, hereunder
or preclude the Company or the Executive, respectively, from
asserting such fact or circumstance in enforcing the
Company’s or the Executive’s rights hereunder.
(e) Date of
Termination . “ Date of Termination ”
shall mean (i) if the Executive’s employment is terminated by
the Company for Cause or other than for Cause, death or Disability,
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), (ii) if the
Executive’s employment is terminated by reason of death or by
the Company for Disability, the date of death of the Executive or
the Disability Effective Date, as the case may be, and (iii) if the
Executive resigns with or without Good Reason, thirty (30) days
from the date of the Company’s receipt of the Notice of
Termination, or such later date as is mutually agreed by the
Company and the Executive (subject to the Company’s right to
cure in the case of a resignation for Good Reason). Notwithstanding
the foregoing, in no event shall the Date of Termination occur
until the Executive experiences a “separation from
service” within the meaning of
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Section 409A of the Code and,
notwithstanding anything contained herein to the contrary, the date
on which such separation from service takes place shall be the
“Date of Termination.”
4. Obligations
of the Company upon Termination . (a) By the
Company Other Than for Cause, Death or Disability; By the Executive
for Good Reason . Subject to Section 5, if, during the
Employment Period, (x) the Company shall terminate the
Executive’s employment other than for Cause, death or
Disability or (y) the Executive shall terminate employment for Good
Reason:
(i) the Company
shall pay to the Executive the following amounts:
(A) a lump sum cash
payment within 30 days after the Date of Termination equal to the
aggregate of the following amounts: (1) the Executive’s
Annual Base Salary and vacation pay through the Date of
Termination, (2) the Executive’s accrued Annual Bonus for the
fiscal year immediately preceding the fiscal year in which the Date
of Termination occurs (other than any portion of such Annual Bonus
that was previously deferred, which portion shall instead be paid
in accordance with the applicable deferral election) if such bonus
has not been paid as of the Date of Termination, and (3) the
Executive’s business expenses that have not been reimbursed
by the Company as of the Date of Termination that were incurred by
the Executive prior to the Date of Termination in accordance with
the applicable Company policy, in the case of each of clauses (1)
through (3), to the extent not previously paid (the sum of the
amounts described in clauses (1) through (3) shall be hereinafter
referred to as the “ Accrued Obligations ”);
and
(B) subject to the
Executive’s delivery (and non-revocation) of an executed
release of claims against the Company and its officers, directors,
employees and affiliates in substantially the form attached hereto
as Exhibit A (the “ Release ”), which
Release must be delivered to the Company not later than 22 days
after the Date of Termination (or such longer period of time
permitted by the Company, but in no event later than the latest
business day that is not more than two months after the end of the
calendar year in which the Date of Termination occurs) (the “
Release Deadline ”), an amount equal to the sum of (x)
the product of two times the Executive’s Annual Base Salary,
plus (y) the product of 0.75 times the Executive’s Target
Bonus as in effect for the fiscal year of the Company in which the
Date of Termination occurs, payable in a lump sum within 30 days
after the Date of Termination; and
(ii) to the extent
permitted by the Company’s group health insurance carrier,
the Executive shall be allowed to purchase, on an after-tax basis,
group health benefits otherwise offered by the Company to its
active employees generally until the Executive attains, or in the
case of his death, would have attained, the age of 65 (but as to
his children, only through their attainment of age 22). The receipt
of such health care benefits shall be conditioned upon the
Executive making a timely election to receive COBRA coverage
provided to former employees under Section 4980B of the Code and
continuing such coverage for so long as it may be available, and
thereafter continuing to
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pay an amount
equal to the monthly COBRA premium as in effect at the Company from
time to time in respect of the applicable level of coverage. If
Executive allows such coverage to lapse by not paying the
applicable amount, such coverage may not thereafter be reinstated
(the benefits provided pursuant to this Section 4(a)(ii), the
“ Post-Employment Health Care Benefits ”);
(iii) if the Date
of Termination occurs on or after the second anniversary of the
Effective Date, all remaining unvested Promotion Options will vest.
If the Date of Termination occurs prior to the second anniversary
of the Effective Date, a number of the unvested Promotion Options
will vest equal to the sum of (i) 1/3 of the total number of
Promotion Options plus (ii) a number of Promotion Options equal to
1/3 of the total number of Promotion Options multiplied by a
fraction, the numerator of which is the number of days from the
latest anniversary of the Effective Date through the date of
termination, and the denominator of which is 365. Any Promotion
Options which are not vested as of the Date of Termination (after
application of this Section 4(a)(iii)) shall terminate immediately
upon the Date of Termination. The Executive shall have one year
following the Date of Termination to exercise any Promotion Options
that are vested as of the Date of Termination (after application of
this Section 4(a)(iii)).
(iv) unvested
equity-based awards held by the Executive on the Date of
Termination other than the Promotion Options shall be treated in a
manner similar to and consistent with that described in the
preceding Section 4(a)(iii) with respect to the Promotion Options
(i.e., pro-rata vesting for open vesting periods, based on service
performed during the period plus one year and, for stock options, a
one-year post-termination exercise period); provided that (A) any
applicable performance conditions will continue to apply and be
tested on the Date of Termination, and (B) if the terms of any
individual equity-based award are more generous to the Executive
than described in this Section 4(a)(iv), then such more generous
terms shall apply. The benefits provided pursuant to this Section
4(a)(iv) and Section 4(a)(iii) (in the aggregate, the “
Equity Award Vesting Benefits ”) shall be subject to
the Executive’s delivery of an executed Release prior to the
Release Deadline (and non-revocation thereof); and
(v) to the extent
not theretofore paid or provided, the Company shall timely pay or
provide to the Executive any other amounts or benefits required to
be paid or provided or that the Executive is eligible to receive
under any plan, program, policy or practice or contract or
agreement of the Company and its affiliated companies through the
Date of Termination (such other amounts and benefits shall be
hereinafter referred to as the “ Other Benefits
”).
Notwithstanding the foregoing provisions of Section 4(a)(i), in
the event that the Executive is a “specified employee”
(within the meaning of Section 409A of the Code and with such
classification to be determined in accordance with the methodology
established by the applicable employer) (a “ Specified
Employee ”), amounts and benefits (other than the Accrued
Obligations) that are deferred compensation (within the meaning of
Section 409A of the Code) that would otherwise be payable or
provided under Section 4(a)(i) during the six-month period
immediately following the Date of Termination shall instead be
paid, with interest on any delayed payment at the applicable
federal rate provided for in Section 7872(f)(2)(A) of the Code
(“ Interest ”), on the
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first business day after the date that is
six months following the Date of Termination (the “ 409A
Payment Date ”). For the avoidance of doubt, the parties
hereto acknowledge that the severance payments and benefits
described in this Agreement are intended to be exempt from the
operation of Section 409A of the Code and not “deferred
compensation” within the meaning of Section 409A.
(b) Death .
If the Executive’s employment is terminated by reason of the
Executive’s death during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive’s legal representatives under this Agreement, other
than (i) payment of Accrued Obligations, (ii) the Other Benefits
and (iii) the Equity Award Vesting Benefits and the Post-Employment
Health Care Benefits. The Accrued Obligations shall be paid to the
Executive’s estate or beneficiary, as applicable, in a lump
sum in cash within thirty (30) days of the Date of Termination. The
term “Other Benefits” as utilized in this Section 4(b)
shall include death benefits as in effect on the date of the
Executive’s death with respect to senior executives of the
Company.
(c)
Disability . If the Executive’s employment is
terminated by reason of the Executive’s Disability during the
Employment Period, the Company shall provide the Executive with (i)
the Accrued Obligations and the Post-Employment Health Care
Benefits, (ii) the Other Benefits and (iii) subject to the
Executive’s delivery of an executed Release prior to the
Release Deadline (and non-revocation thereof), the Equity Award
Vesting Benefits, and shall have no other severance obligations
under this Agreement. The Accrued Obligations shall be paid to the
Executive in a lump sum in cash within thirty (30) days of the Date
of Termination. The term “Other Benefits” as utilized
in this Section 4(c) shall include short-term and long-term
disability benefits as in effect on the date of the
Executive’s Disability with respect to senior executives of
the Company.
(d) Cause; By
the Executive other than for Good Reason . If the
Executive’s employment shall be terminated for Cause or the
Executive’s employment shall be terminated by the Executive
other than for Good Reason during the Employment Period, this
Agreement shall terminate without further obligations to the
Executive other than the obligation to provide the Executive with
(i) the Accrued Obligations and, if such termination is by the
Executive other than for Good Reason, the Post-Employment Health
Care Benefits and (ii) the Other Benefits; provided ,
however , that if the Executive’s employment shall be
terminated for Cause, the term “Accrued Obligations”
shall not be deemed to include the Executive’s Annual Bonus
for the fiscal year immediately preceding the fiscal year in which
the Date of Termination occurs. The Accrued Obligations shall be
paid to the Executive in a lump sum in cash within thirty (30) days
of the Date of Termination.
5.
Change of Control . In the event that during the Employment
Period but more than six months after the Execution Date, the
Executive’s employment is terminated by the Company other
than for Cause, death or Disability, or by the Executive for Good
Reason either (x) before a Change of Control (as defined in the
Company’s 2008 Omnibus Incentive Plan) but after a definitive
agreement is executed, the consummation of which would result in a
Change of Control, and such termination arose in connection with or
anticipation of such Change of Control, or (y) upon or within two
(2) years after a Change of Control occurring more than six months
following the Execution Date, then the Company shall pay and
provide to the Executive,
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as applicable, in lieu of the payments and
benefits described in Section 4, within 30 days following the Date
of Termination:
(a) the Accrued Obligations;
(b) a lump sum payment equal to the
product of (i) two and (ii) the sum of (A) the Annual Base Salary
and (B) the average Annual Bonus received by the Executive in
respect of the two fiscal years of the Company immediately
preceding the fiscal year in which the Change of Control occurs (or
if the Date of Termination occurs before the Annual Bonus payment
date in respect of such two fiscal years, the Target Bonus for the
fiscal year in which the Change of Control occurs);
(c) an amount equal to the product of
(i) the Target Bonus and (ii) a fraction, the numerator of which is
t
