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Exhibit
10.3
EMPLOYMENT AGREEMENT
AGREEMENT by and between
SUNRISE SENIOR LIVING, INC. (the " Company ")
and DANIEL J. SCHWARTZ (the " Executive
"), effective as
of January 16, 2009 (the " Effective Date
").
WHEREAS, the Company is
desirous of employing the Executive as its Senior Vice President,
Operations, 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 Senior Vice
President, Operations, and shall perform customary and appropriate
duties as may be reasonably assigned to the Executive from time to
time by the Company. The Executive shall report to the Chief
Executive Officer. 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.
(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 $350,000. 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 100% of the rate of the Annual Base Salary (the "
Target Bonus "); however, the actual Annual Bonus may vary
and range from 0% to 150% of the Target Bonus, depending on actual
performance of the Company and 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 ").
(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. In connection with this
Agreement, the Executive shall be granted an award of Two
Hundred Thousand (200,000) stock options (the "
Retention
Options ") under the Company’s 2008 Omnibus Incentive
Plan (or another shareholder approved plan to purchase Company
common stock) (the " LTIP "). The Retention 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 Retention Options will be the closing
price per share of the Company common stock on the date of grant.
The Retention Options will vest at a rate of one-third of the
total Retention Options on each of the first three
anniversaries of the date of grant, 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.
(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
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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 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;
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(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.
(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 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;
(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
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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 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
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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) if
the Executive makes a timely election to receive COBRA coverage
under Section 4980B of the Code, the Company will pay the cost of
such coverage during the period it remains in effect, not to exceed
18 months following the Date of Termination (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 Retention
Options will vest. If the Date of Termination occurs prior to the
second anniversary of the Effective Date, a number of the
unvested Retention Options will vest equal to the sum of (i)
1/3 of the total number of Retention Options plus (ii) a
number of Retention Options equal to 1/3 of the total number
of Retention 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 Retention 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 Retention 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 Retention 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 Retention 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
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
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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; provided that the Post-Employment Health Care
Benefits shall be provided to the qualified beneficiaries of the
Executive who elect COBRA coverage. 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 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, then the
Company shall pay and provide to the Executive, as
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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 the number of days in the
current fiscal year through the Date of Termination and the
denominator of which is 365;
(d) the Post-Employment Health Care
Benefits;
(e) full
vesting of the Retention Options as of the Date of
Termination, and the Executive shall have the full remaining term
of the Retention Options to exercise the Retention Options;
provided that this benefit shall apply even if the Date of
Termination is more than two years following the Change of
Control;
(f) waiver of all service-based
vesting conditions in respect of all equity-based awards held by
the Executive on the Date of Termination and, for stock options, a
one-year post-termination exercise period; provided that (i) this
benefit shall apply even if the Date of Termination is more than
two years following the Change of Control, (ii) any applicable
performance conditions will continue to apply and be tested on the
Date of Termination;
and
(g) the Other Benefits.
Notwithstanding the foregoing provisions of Section
5, in the event that the Executive is a Specified Employee, amounts
and benefits that are deferred compensation (within the meaning of
Section 409A of the Code) that would otherwise be payable or
provided under Section 5 (other than the Accrued Obligations)
during the six-month period immediately following the Date of
Termination shall instead be paid, with Interest, on the 409A
Payment Date. For the avoidance of doubt, the parties hereto
acknowledge that the payments and benefits described in this
Section 5 are intended to be exempt from the operation of Section
409A of the Code and not "deferred compensation" within the meaning
of Section 409A.
6.
Non-exclusivity of Rights . Except as specifically
provided, nothing in this Agreement shall prevent or limit the
Executive’s continuing or future participation in any plan,
program, policy or practice provided by the Company or
any
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