Exhibit 10.1
EMPLOYMENT
AGREEMENT
AGREEMENT by and between SUNRISE
SENIOR LIVING, INC. (the “ Company ”) and
Richard J. Nadeau (the “ Executive ”), effective as of February
25, 2009 (the “ Effective Date ”).
WHEREAS, the Company is desirous
of employing the Executive as its Chief Financial 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 Financial
Officer 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 $500,000. 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, typically in March. 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
Seven Hundred Fifty Thousand (750,000) 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.
2
(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. TheCompany 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;
3
(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, including, but not limited to, the Company ceasing to
be a publicly traded company;
(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). Provided , further
, that if the Good Reason event is that the Company ceases to be a
publicly traded company, Executive agrees that he will remain with
the Company for a period of at least six (6) months following the
Notice of Termination. 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
4
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 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
5
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) 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 ”).
6
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 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
7
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 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
8
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 of its
affiliated companies and for which the Executive qualifies pursuant
to its terms, nor shall anything herein limit or otherwise affect
such rights as the Executive may have under any contract or
agreement with the Company or any of its affiliated companies.
Amounts that are vested benefits or that the Executive is otherwise
entitled to receive pursuant to the terms of any plan, program,
policy or practice of or any contract or agreement with the Company
or a
