Buser Employment

Amendment to Agreement

Waiver Agreement

Severance Agreement 

Cruse Agreement

Amendment to Employment Agreement

Amendment 2 to Employment Agreement

 

 

 

2/23/2010 10-K  Ex. 10- 14.2 (pertains to 2009 401K registrant contribution waiver)

 

 

EX-10.2 4 dex102.htm EMPLOYMENT AGREEMENT

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”);providedhowever, 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.

(aPosition 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; providedhowever, 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.

(iBase 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; providedhowever, 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.

(iiAnnual 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; providedhowever, 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; providedhowever, 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.

(vWelfare 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.

(ixIndemnification 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); providedhowever, 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 inSections 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); providedhowever, 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;

providedhowever, 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 individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board;

 

-13-


(iii) The consummation by Sunstone (whether directly involving Sunstone or indirectly involving Sunstone through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Sunstone’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction

(A) which results in Sunstone’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Sunstone or the person that, as a result of the transaction, controls, directly or indirectly, Sunstone or owns, directly or indirectly, all or substantially all of Sunstone’s assets or otherwise succeeds to the business of Sunstone (Sunstone or such person, the “Successor Entity”)) directly or indirectly, greater than 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

(B) after which no person or group beneficially owns voting securities representing greater than 50% of the combined voting power of the Successor Entity; providedhowever, that no person or group shall be treated for purposes of this clause (B) as beneficially owning greater than 50% of the combined voting power of the Successor Entity solely as a result of the voting power held in Sunstone prior to the consummation of the transaction; or

(iv) The approval by Sunstone’s stockholders of a liquidation or dissolution of Sunstone.

For purposes of clause (i) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of Sunstone’s stockholders, and for purposes of clause (iii) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of Sunstone’s stockholders.

6. Full Settlement. The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others. In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as expressly provided, such amounts shall not be reduced whether

 

-14-


or not the Executive obtains other employment. If any party to this Agreement institutes any action, suit, counterclaim, appeal, arbitration or mediation for any relief against another party, declaratory or otherwise (collectively, an “Action”), to enforce the terms hereof or to declare rights hereunder, then the Prevailing Party in such Action shall be entitled to recover from the other party all costs and expenses of the Action, including reasonable attorneys’ fees and costs (at the Prevailing Party’s attorneys’ then-prevailing rates) incurred in bringing and prosecuting or defending such Action and/or enforcing any judgment, order, ruling or award (collectively, a “Decision”) granted therein, all of which shall be deemed to have accrued on the commencement of such Action and shall be paid whether or not such Action is prosecuted to a Decision. Any Decision entered in such Action shall contain a specific provision providing for the recovery of attorneys’ fees and costs incurred in enforcing such Decision. A court or arbitrator shall fix the amount of reasonable attorneys’ fees and costs upon the request of either party. Any judgment or order entered in any final judgment shall contain a specific provision providing for the recovery of all costs and expenses of suit, including reasonable attorneys’ fees and expert fees and costs incurred in enforcing, perfecting and executing such judgment. For the purposes of this paragraph, costs shall include, without limitation, in addition to costs incurred in prosecution or defense of the underlying action, reasonable attorneys’ fees, costs, expenses and expert fees and costs incurred in the following: (a) postjudgement motions and collection actions; (b) contempt proceedings; (c) garnishment, levy, debtor and third party examinations; (d) discovery; (e) bankruptcy litigation; and (f) appeals of any order or judgment. “Prevailing Party” within the meaning of this Section includes, without limitation, a party who agrees to dismiss an Action (excluding an Action instituted in contravention of the requirements of Paragraph 12(b) below) in consideration for the other party’s payment of the amounts allegedly due or performance of the covenants allegedly breached, or obtains substantially the relief sought by such party. If the Executive is the Prevailing Party, the Company shall provide payment of such costs and expenses to Executive by December 31 of the year in which the right to payment is established.

7. Certain Additional Payments by the Company.

(a) Anything in this Agreement to the contrary notwithstanding and except as set forth below, in the event it shall be determined that any Payment would be subject to the Excise Tax, then the Executive shall be entitled to receive (at the time set forth in Section 7(b), but no later than by the end of the Executive’s taxable year next following the taxable year in which the Excise Tax is remitted) an additional payment (the “Excise Tax Gross-Up Payment”) in an amount such that, after payment by the Executive of all taxes (and any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Excise Tax Gross-Up Payment, the Executive retains an amount of the Excise Tax Gross-Up Payment equal to the Excise Tax imposed upon the Payments. Notwithstanding the foregoing provisions of this Section 7(a), if it shall be determined that the Executive is entitled to the Excise Tax Gross-Up Payment, but that the Parachute Value of all Payments does not exceed 110% of the Safe Harbor Amount, then no Excise Tax Gross-Up Payment shall be made to the

 

-15-


Executive and the amounts payable under this Agreement shall be reduced so that the Parachute Value of all Payments, in the aggregate, equals the Safe Harbor Amount. The reduction of the amounts payable hereunder, if applicable, shall be made in the following order: (i) acceleration of vesting of any equity awards for which the exercise price exceeds the then fair market value; (ii) the medical benefits under 4(a)(ii); (iii) any cash amount payable under 4(a)(i)(B); and (iv) any other accelerated vesting of equity awards not covered under clause (i) of this sentence. For purposes of reducing the Payments to the Safe Harbor Amount, only amounts payable under this Agreement (and no other Payments) shall be reduced. If the reduction of the amount payable under this Agreement would not result in a reduction of the Parachute Value of all Payments to the Safe Harbor Amount, no amounts payable under the Agreement shall be reduced pursuant to this Section 7(a). The Company’s obligation to make Excise Tax Gross-Up Payments under this Section 7 shall not be conditioned upon the Executive’s termination of employment.

(b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when an Excise Tax Gross-Up Payment is required, the amount of such Excise Tax Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by such nationally recognized accounting firm as may be selected by the Company and reasonably acceptable to the Executive (the “Accounting Firm”); provided, that the Accounting Firm’s determination shall be made based upon “substantial authority “ within the meaning of Section 6662 of the Internal Revenue Code of 1986, as amended (the “Code”). The Accounting Firm shall provide detailed supporting calculations both to the Company and the Executive within 15 business days of the receipt of notice from the Executive that there has been a Payment or such earlier time as is requested by the Company. All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Excise Tax Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to the Executive within five days of the receipt of the Accounting Firm’s determination (but in any event, no later than by the end of the Executive’s taxable year next following the taxable year in which the Excise Tax is remitted). Any determination by the Accounting Firm shall be binding upon the Company and the Executive, unless the Company obtains an opinion of outside legal counsel, based upon at least “substantial authority “ within the meaning of Section 6662 of the Code, reaching a different determination, in which event such legal opinion shall be binding upon the Company and the Executive. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Excise Tax Gross-Up Payments that will not have been made by the Company should have been made (the “Underpayment”), consistent with the calculations required to be made hereunder. In the event the Company exhausts its remedies pursuant to Section 7(c) and the Executive thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly (no later than by the end of the Executive’s taxable year next following the taxable year in which the Excise Tax is remitted) paid by the Company to or for the benefit of the Executive.

 

-16-


(c) The Executive shall notify the Company in writing of any claim by the Internal Revenue Service that, if successful, would require the payment by the Company of the Excise Tax Gross-Up Payment. Such notification shall be given as soon as practicable, but no later than 10 business days after the Executive is informed in writing of such claim. The Executive shall apprise the Company of the nature of such claim and the date on which such claim is requested to be paid. The Executive shall not pay such claim prior to the expiration of the 30-day period following the date on which the Executive gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Executive in writing prior to the expiration of such period that the Company desires to contest such claim, the Executive shall:

(i) give the Company any information reasonably requested by the Company relating to such claim,

(ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to-time, including, without limitation, accepting legal representation with respect to such claim by an attorney reasonably selected by the Company,

(iii) cooperate with the Company in good faith in order effectively to contest such claim, and

(iv) permit the Company to participate in any proceedings relating to such claim;

providedhowever, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such-contest, and shall indemnify and hold the Executive harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7(c), the Company shall control all proceedings taken in connection with such contest, and, at its sole discretion, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the applicable taxing authority in respect of such claim and may, at its sole discretion, either direct the Executive to pay the tax claimed and sue for a refund or contest the claim in any permissible manner, and the Executive agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; providedhowever, that, if the Company directs the Executive to pay such claim and sue for a refund, the Company shall advance the amount of such payment to the Executive, on an interest-free basis, and shall indemnify and hold the Executive harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties) imposed with respect to such advance or with respect to any imputed income in connection with such advance; and providedfurther, that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Executive with respect to which such contested amount is claimed to

 

-17-


be due is limited solely to such contested amount. Furthermore, the Company’s control of the contest shall be limited to issues with respect to which the Excise Tax Gross-Up Payment would be payable hereunder, and the Executive shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority.

(d) If, after the receipt by the Executive of an Excise Tax Gross-Up Payment or an amount advanced by the Company pursuant to Section 7(c), the Executive becomes entitled to receive any refund with respect to the Excise Tax to which such Excise Tax Gross-Up Payment relates or with respect to such claim, the Executive shall (subject to the Company’s complying with the requirements of Section 7(c), if applicable) promptly (no later than by the end of the Executive’s taxable year next following the taxable year in which the Excise Tax is remitted) pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by the Executive of an amount advanced by the Company pursuant to Section 7(c), a determination is made that the Executive shall not be entitled to any refund with respect to such claim and the Company does not notify the Executive in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Excise Tax Gross-Up Payment required to be paid.

(e) Notwithstanding any other provision of this Section 7, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Excise Tax Gross-Up Payment, and the Executive hereby consents to such withholding.

(f) Any other liability for unpaid or unwithheld Excise Taxes shall be borne exclusively by the Company, in accordance with Section 3403 of the Code. The foregoing sentence shall not in any manner relieve the Company of any of its obligations under this Employment Agreement.

(g) The parties to this Agreement intend that the provisions of this Section 8 is to put the Executive into the same position he would have been in had the Excise Tax not been applicable to him. These provisions shall be interpreted in a manner consistent with this intention.

(h) Definitions. The following terms shall have the following meanings for purposes of this Section 7:

(i) “Excise Tax “ shall mean the excise tax imposed by Section 4999 of the Code, together with any interest or penalties imposed with respect to such excise tax.

 

-18-


(ii) “Parachute Value” of a Payment shall mean the present value as of the date of the Change in Control for purposes of Section 280G of the Code of the portion of such Payment that constitutes a “parachute payment “ under Section 280G(b)(2), as determined by the Accounting Firm for purposes of determining whether and to what extent the Excise Tax will apply to such Payment.

(iii) A “Payment” shall mean any payment or distribution in the nature of compensation (within the meaning of Section 280G(b)(2) of the Code) to or for the benefit of the Executive, which is paid or payable pursuant to this Agreement or any other plan or agreement of the Company.

(iv) The “Safe Harbor Amount” shall mean 2.99 times the Executive’s “base amount, “ within the meaning of Section 280G(b)(3) of the Code.

(v) “Value” of a Payment shall mean the economic present value of a Payment as of the date of the Change in Control for purposes of Section 280G of the Code, as determined by the Accounting Firm using the discount rate required by Section 280G(d)(4) of the Code.

8. Successors.

(a) This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

(b) This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

(c) The Company will require any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company “ shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

9. Payment of Financial Obligations. The payment or provision to the Executive by the Company of any remuneration, benefits or other financial obligations pursuant to this Agreement shall be allocated to the Operating Partnership, Sunstone, Sunstone Hotel TRS Lessee, Inc. and, if applicable, any of their respective subsidiaries and/or affiliates in accordance with any employee sharing and expense allocation agreement, by and between Sunstone and the Operating Partnership, as in effect from time to time.

 

-19-


10. Miscellaneous.

(a) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. The captions of this Agreement are not part of the provisions hereof and shall have no force or effect. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(b) Arbitration. To the fullest extent allowed by law, any controversy, claim or dispute between Executive and the Company (and/or any of its owners, directors, officers, employees, affiliates, or agents) relating to or arising out of Executive’s employment or the cessation of that employment will be submitted to final and binding arbitration in the county in which Executive worked for determination by one arbitrator with hotel industry experience in accordance with the American Arbitration Association’s ( “AAA”) National Rules for the Resolution of Employment Disputes, as the exclusive remedy for such controversy, claim or dispute. In any such arbitration, the parties may conduct discovery in accordance with the applicable rules of the arbitration forum, except that the arbitrator shall have the authority to order and permit discovery as the arbitrator may deem necessary and appropriate in accordance with applicable state or federal discovery statutes. The arbitrator shall issue a reasoned, written decision, and shall have full authority to award all remedies which would be available in court. The parties shall share the filing fees required for the arbitration, provided that Executive shall not be required to pay an amount in excess of the filing fees required by a federal or state court with jurisdiction. The Company shall pay the arbitrator’s fees and any AAA administrative expenses. Any judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof. Possible disputes covered by the above include (but are not limited to) unpaid wages, breach of contract, torts, violation of public policy, discrimination, harassment, or any other employment-related claims under laws including but not limited to, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the California Fair Employment and Housing Act, the California Labor Code, and any other statutes or laws relating to an employee’s relationship with his/her employer, regardless of whether such dispute is initiated by the Executive or the Company. Thus, this bilateral arbitration agreement applies to any and all claims that the Company may have against the Executive, including but not limited to, claims for misappropriation of Company property, disclosure of proprietary information or trade secrets, interference with contract, trade libel, gross negligence, or any other claim for alleged wrongful conduct or breach of the duty of loyalty by the Executive. However, notwithstanding anything to the contrary contained herein, Company and Executive shall have their respective rights to seek and obtain injunctive relief with respect to any controversy, claim or dispute to the extent permitted by law. Claims for workers’ compensation benefits and unemployment insurance (or any other claims where mandatory arbitration is prohibited by law) are not

 

-20-


covered by this arbitration agreement, and such claims may be presented by either Executive or the Company to the appropriate court or government agency. BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH EXECUTIVE AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY. This arbitration agreement is to be construed as broadly as is permissible under applicable law.

(c) Notices. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive: at the Executive’s most recent address on the records of the Company,

with a copy to:

JMBM | JefferMangels, Butler & Marmaro LLP

1900 Avenue of the Stars, 7th Floor

Los Angeles, California 90067

Attn: Louise Ann Fernandez, Esq.

If to Sunstone or the Operating Partnership:

Sunstone Hotel Investors, Inc.

903 Calle Amanecer, Suite 100

San Clemente, CA 92673

Attn: Corporate Secretary

with a copy to:

Gibson, Dunn & Crutcher, LLP

333 South Grand Ave.

Los Angeles, California 90071

Attn: Michael F. Sfregola, Esq.

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

(d) Sarbanes-Oxley Act of 2002. Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that any transfer or deemed transfer of funds hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of the Exchange Act and the rules and regulations promulgated thereunder, then such transfer or deemed transfer shall not be made to the extent necessary or appropriate so as not to violate the Exchange Act and the rules and regulations promulgated thereunder.

 

-21-


(e) Section 409A. The parties agree that this Agreement is intended to comply with the requirements of Section 409A of the Code and the regulations promulgated thereunder ( “Section 409A”) or an exemption from Section 409A. In the event that after execution of this Agreement either party makes a determination inconsistent with the preceding sentence, it shall promptly notify the other party of the basis for its determination. The parties agree to renegotiate in good faith the terms of this Agreement if it is mutually determined that this Agreement as structured would have adverse tax consequences to the Executive. Notwithstanding anything in this Agreement to the contrary, if the Executive is a “specified employee “ as described in Section 409A, and any amount to which the Executive would otherwise be entitled during the first six months following a separation of service that constitutes nonqualified deferred compensation within the meaning of Section 409A and that is therefore not exempt from Section 409A as involuntary separation pay or a short-term deferral, will be accumulated and paid on the first business day of the seventh month following the date of such separation from service. For purposes of this Agreement, each amount to be paid or benefit to be provided hereunder shall be construed as a separate identified payment for purposes of Section 409A. With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions: (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.

(f) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement. If any provision or term hereof is deemed to have exceeded applicable legal authority or shall be in conflict with applicable legal limitations, such provision shall be reformed and rewritten as necessary to achieve consistency with such applicable law.

(g) Withholding. The Company may withhold from any amounts payable under this Agreement such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. In addition, notwithstanding any other provision of this Agreement, the Company may, in its sole discretion, withhold and pay over to the Internal Revenue Service or any other applicable taxing authority, for the benefit of the Executive, all or any portion of any Excise Tax Gross-Up Payment and the Executive hereby consents to such withholding.

(h) No Waiver. The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder, including, without limitation, the right of the Executive to terminate employment for Good Reason pursuant to Section 3(c) of this Agreement, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

-22-


(iEntire Agreement. As of the Effective Date, this Agreement, the Noncompetition Agreement and the Non-Disclosure Agreement, each of which is being entered into between the parties concurrently herewith, constitute the final, complete and exclusive agreement between the Executive and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to Executive by the Company.

(j) Representations and Warranties. The Executive represents and warrants to the Company that (i) this Agreement is valid and binding upon and enforceable against him in accordance with its terms, (ii) the Executive is not bound by or subject to any contractual or other obligation that would be violated by his execution or performance of this Agreement, including, but not limited to, any non-competition agreement presently in effect, and (iii) the Executive is not subject to any pending or, to the Executive’s knowledge, threatened claim, action, judgment, order, or investigation that could adversely affect his ability to perform his obligations under this Agreement or the business reputation of the Company. The Executive has not entered into, and agrees that he will not enter into, any agreement either written or oral in conflict herewith.

(k) Consultation with Counsel. The Executive acknowledges that he has had a full and complete opportunity to consult with counsel and other advisors of his own choosing concerning the terms, enforceability and implications of this Agreement, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability or implications of this Agreement other than as reflected in this Agreement.

(l) Counterparts. This Agreement may be executed simultaneously in two counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

[signatures follow next page]

 

-23-


IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“EXECUTIVE”

 

 

 

SUNSTONE HOTEL INVESTORS, INC.,

a Maryland corporation

 

 

 

 

 

 

 

 

By:

 

 

Arthur Buser

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

 

SUNSTONE HOTEL PARTNERSHIP, LLC,

a Delaware limited liability company

 

 

 

 

 

 

 

 

By:

 

Sunstone Hotel Investors, Inc.

Its: Managing Member

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

Its:

 

 

 

-24-


EXHIBIT A

TO EMPLOYMENT AGREEMENT

GENERAL RELEASE

For a valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Sunstone Hotel Investors, Inc., a Maryland corporation, Sunstone Operating Partnership, LLC, a Delaware limited liability company and each of their partners, subsidiaries, associates, affiliates, successors, heirs, assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may hereafter have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof. The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With Disabilities Act, and the California Fair Employment and Housing Act.

THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542, WHICH PROVIDES AS FOLLOWS:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS SETTLEMENT WITH THE DEBTOR. “

THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

A-1


IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

(A) HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;

(B) HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND

(C) HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.

The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.

The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.

The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.

IN WITNESS WHEREOF, the undersigned has executed this Release this ___ day of _______, 20__.

 

 

 

  

 

 

A-2


EXHIBIT B

TO EMPLOYMENT AGREEMENT

NON-DISCLOSURE AGREEMENT

This Non-Disclosure Agreement ( “Agreement”) is made as of this 19th day of June, 2008 by and among Sunstone Hotel Investors, Inc., a Maryland corporation ( “Sunstone”), and Sunstone Hotel Partnership, LLC, a Delaware limited liability company ( “Operating Partnership”) (Sunstone and the Operating Partnership collectively, the “Company”), and Arthur Buser ( “Executive”).

For good and valuable consideration, Executive and Company hereby agree as follows:

1. This Agreement will be effective on July 21, 2008.

2. Executive hereby assigns to Company all rights or interests that Executive may presently have or which may be acquired during the term of Executive’s employment with the Company, in Company “Proprietary Information “ as defined below in Section 5, and acknowledges that all such Proprietary Information is the sole property of Company and its assigns.

3. Subject to the provisions of Section 7 hereof, in the event that, during the term of Executive’s employment with the Company, Executive creates or assists in the creation of any Company “Proprietary Information, “ or any other Company intellectual property, and/or Executive prepares, accumulates or otherwise comes into possession of any materials or information during the course of performance of Executive’s duties which relate in any manner to Company’s business or development of services, Executive agrees that all such “Proprietary Information “ and intellectual property shall be and remain the property of Company. In the event Executive’s employment with Company is terminated, for any reason, Executive shall promptly deliver to Company all such “Proprietary Information “ and intellectual property (and any copies thereof), as well as any materials related to Company’s trade secrets or confidential information (and any copies thereof), which are within Executive’s custody or control.

4. Executive agrees to disclose to Company all “Proprietary Information “ and intellectual property developed during the term of his employment, whether made solely or jointly with others, which relate to Company’s business, research, or development of products and services.

5. During the term of Executive’s employment with Company and thereafter, Executive will not offer or disclose by any means, or use in any manner, for Executive’s own benefit or the benefit of any other person or entity (other than Company or its affiliates), any Company “Proprietary Information “ or Company intellectual property. As used herein, the terms “Proprietary Information, “ “intellectual property “ and “trade secrets, “ shall include, but not be

 

B-1


limited to: (a) all information of any kind regarding Company’s business, research, marketing, sales, operations and products and plans for development of new business products and services; (b) all operational designs and techniques related to business, marketing and financial information or data of any kind related to Company’s business and business opportunities; (c) all information of any kind regarding Company’s suppliers, vendors, consultants, agents and customers, including lists or compilations of any such persons or entities; (d) all information of any kind regarding Company’s officers, directors and shareholders (other than Executive), including their respective abilities, functions, conduct or pay; (e) all proprietary information of any kind received or developed under agreement or other arrangement by Company with any third party; and (f) all unpublished materials received or developed, including all works of authorship, which relate to the business of Company, including but not limited to those concerning proprietary, trade secret or Company-private information, investment strategies, development plans, research and development data, and any other technical reports relating to Company’s business operations now existing or which may be developed during the term of Executive’s employment with Company.

6. Executive understands and agrees that a breach of the provisions contained herein could cause significant and irreparable harm to Company that could not be satisfactorily compensated in monetary terms. Accordingly, and without in any way limiting Company from taking any other legal action to which it may be entitled to under law or in equity, in the event of any such breach or threatened breach, Company will be entitled to injunctive relief including the immediate ex parte issuance, without bond, of a temporary restraining order against any such breach of threatened breach.

7. This Agreement shall not apply to: (a) any invention developed by Executive which qualifies under the provisions of California Labor Code, Section 2870; (b) any information which is or becomes publicly available, unless it becomes such as a result of a breach of this Agreement; (c) any information which Company subsequently discloses to any other person or entity without restriction; or (d) disclosure required by law or legal process; provided, that if Executive receives actual notice that the Executive is or may be required by law or legal process to disclose any such information, Executive shall promptly so notify Company, but in any event no more than five (5) days after the receipt of such notice.

8. No amendment or modification to this Agreement shall be valid unless in writing signed by Executive and an authorized officer of Company.

9. The execution of this Agreement shall not be construed in any manner to alter Executive’s employment with Company as provided in his Employment Agreement.

 

B-2


10. The waiver by any party of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach thereof or as a waiver of any other provisions of this Agreement. The remedies set forth herein are nonexclusive and are in addition to any other remedies that any party may have at law or in equity.

11. If any legal action, arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach or default in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover attorneys’ fees and costs as set forth in the Employment Agreement.

12. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive: at the Executive’s most recent address on the records of the Company,

with a copy to:

JMBM | JefferMangels, Butler & Marmaro LLP

1900 Avenue of the Stars, 7th Floor

Los Angeles, California 90067

Attn: Louise Ann Fernandez, Esq.

If to the Company:

c/o Sunstone Hotel Investors, Inc.

903 Calle Amanecer, Suite 100

San Clemente, CA 92673

Attn: Corporate Secretary

with a copy to:

Gibson, Dunn & Crutcher, LLP

333 South Grand Ave.

Los Angeles, California 90071

Attn: Michael F. Sfregola, Esq.

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

13. This Agreement is entered into and shall be governed and interpreted in accordance with the laws of the State of California, without regard to or application of choice of law rules or principles. It shall be binding upon and inure to the benefit of the parties, and to their respective heirs, personal representatives, successors and assigns. In the event that any provision of this Agreement is found by a court, arbitrator or other tribunal to illegal, invalid or unenforceable, then the remaining provisions of this Agreement shall not be voided, but shall be enforced to the maximum extent permissible by law.

 

B-3


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first set forth above.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“EXECUTIVE”

 

 

 

SUNSTONE HOTEL INVESTORS, INC.,

a Maryland corporation

 

 

 

 

 

 

 

 

By:

 

 

Arthur Buser

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

 

SUNSTONE HOTEL PARTNERSHIP, LLC,

a Delaware limited liability company

 

 

 

 

 

 

 

 

By:

 

Sunstone Hotel Investors, Inc.

 

 

 

 

 

 

Its:

 

Managing Member

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

Its:

 

 

 

B-4


EXHIBIT C

TO EMPLOYMENT AGREEMENT

NONCOMPETITION AGREEMENT

THIS NONCOMPETITION AND NONSOLICITATION AGREEMENT (this “Agreement”) is dated as of June 19, 2008, 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”). Sunstone and the Operating Partnership are collectively referred to herein as the “Company.”

WHEREAS, concurrently with the execution of this Agreement, the Company and the Executive have entered into (i) an employment agreement, pursuant to which the Company has agreed to employ the Executive, and the Executive has agreed to be employed by the Company, as its President (the “Employment Agreement”), and (ii) a non-disclosure agreement (the “Non-Disclosure Agreement”);

WHEREAS, Sunstone shall, as of the effective date of the Employment Agreement, grant the Executive              shares of restricted stock (the “Restricted Stock”), the terms and conditions of which shall be set forth in a restricted stock agreement (the “Restricted Stock Agreement”) to be entered into by the Company and the Executive;

WHEREAS, the Company and the Executive agree that, in connection with the execution of the Employment Agreement and the Executive’s employment and the grant of Restricted Stock, the Executive will not engage in competition with the Company pursuant to the terms and conditions hereof;

WHEREAS, capitalized terms used herein without definition shall have the meanings ascribed thereto in the Employment Agreement.

NOW, THEREFORE, in furtherance of the foregoing and in exchange for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto hereby agree as follows:

1. Noncompetition; Nonsolicitation.

(a) During the Employment Period and, if the Executive’s employment is terminated by the Company or the Executive terminates his employment for any reason that results (either automatically or at the Company’s election) in continued or accelerated vesting of all equity awards granted to the Executive that were outstanding and unvested at the time of termination, for one (1) year thereafter, the Executive shall not engage in Competition (as defined below) with the Company or any of its subsidiaries or affiliates.

 

C-1


(b) The term “Competition” for purposes of this Agreement shall mean the taking of any of the following actions by the Executive: (i) the conduct of, directly or indirectly (including, without limitation, engaging in, assisting or performing services for), any business that engages in any activity which is directly competitive with the business of the Company, whether such business is conducted by the Executive individually or as principal, partner, officer, director, consultant, security holder, creditor, employee, stockholder, member or manager of any person, partnership, corporation, limited liability company or any other entity; and/or (ii) ownership of interests in any business which is competitive, directly or indirectly, with any business carried on by the Company (or any successor thereto) or its subsidiaries or affiliates; providedhowever, that the term “Competition” shall be deemed to exclude the direct or indirect ownership by the Executive of up to three percent of the outstanding equity interests of any public company.

(c) During the Employment Period and, if the Executive’s employment is terminated by the Company or the Executive terminates his employment for any reason, for one (1) year thereafter, the Executive shall not, directly or indirectly, solicit the employment of or employ any person who is then or has been within three (3) months prior to the time of such action, an employee of the Company, or any affiliate of either Sunstone or the Operating Partnership.

2. Specific Performance. The Executive acknowledges that in the event of breach or threatened breach by the Executive of the terms of Section 1 hereof, the Company could suffer significant and irreparable harm that could not be satisfactorily compensated in monetary terms, and that the remedies at law available to the Company may otherwise be inadequate and the Company shall be entitled, in addition to any other remedies to which it may be entitled to under law or in equity, to specific performance of this Agreement by the Executive including the immediate ex parte issuance, without bond, of a temporary restraining order enjoining the Executive from any such violation or threatened violation of Section 1 hereof and to exercise such remedies cumulatively or in conjunction with all other rights and remedies provided by law and not otherwise limited by this Agreement. The Executive hereby acknowledges and agrees that the Company shall not be required to post bond as a condition to obtaining or exercising any such remedies, and the Executive hereby waives any such requirement or condition.

3. Adequacy of Consideration. The Executive acknowledges that his receipt of the Restricted Stock pursuant to the Employment Agreement and the Restricted Stock Agreement will be full, fair and adequate to support his obligations hereunder.

4. Confidential Information; Intangible Assets and Goodwill. The Executive acknowledges and agrees that he has been and will be exposed to proprietary information, intellectual property and trade secrets concerning Sunstone’s business, as more fully described in the Non-Disclosure Agreement. The Executive expressly acknowledges and understands that the Company and its affiliates would not have entered into the Restricted Stock Agreement, or any other agreements with the Executive, but for the fact that the Executive is concurrently entering into the Employment Agreement.

 

C-2


5. Reasonableness of Covenants. The Executive agrees that all of the covenants contained in this Agreement are reasonably necessary to protect the legitimate interests of the Company and its affiliates, are reasonable with respect to time and territory and that he has read and understands the descriptions of the covenants so as to be informed as to their meaning and scope.

6. Attorneys’ Fees. If any legal action, arbitration or other proceeding is brought for the enforcement of this Agreement, or because of an alleged dispute, breach or default in connection with any of the provisions of this Agreement, the prevailing party shall be entitled to recover attorneys’ fees and costs as set forth in the Employment Agreement.

7. No Alteration of Employment Status. The execution of this Agreement shall not be construed in any manner to alter the Executive’s employment with the Company as provided in the Employment Agreement.

8. Effect of Waiver. The waiver by either party of a breach of any provision of this Agreement will not operate or be construed as a waiver of any subsequent breach thereof or as a waiver of any other provision of this Agreement. The remedies set forth herein are nonexclusive and are in addition to any other remedies that the Company may have at law or in equity.

9. Severability. Any provision of this Agreement which is deemed invalid, illegal or unenforceable in any jurisdiction shall, as to that jurisdiction and subject to this paragraph, be ineffective to the extent of such invalidity, illegality or unenforceability, without affecting in any way the remaining provisions hereof in such jurisdiction or rendering that any other provisions of this Agreement invalid, illegal or unenforceable in any other jurisdiction. Notwithstanding the foregoing, if any provision of this Agreement should be deemed invalid, illegal or unenforceable because its scope or duration is considered excessive, such provision shall be modified so that the scope of the provision is reduced only to the minimum extent necessary to render the modified provision valid, legal and enforceable.

10. Governing Law. This Agreement shall be governed, construed, interpreted and enforced in accordance with the laws of the State of Delaware, without regard to the conflict of laws principles thereof and shall be subject to the arbitration provisions of Section 10(b) of the Employment Agreement.

11. Entire Agreement. This Agreement, together with the Employment Agreement, the Non-Disclosure Agreement and the Restricted Stock Agreement, contains the entire agreement and understanding between the Company and the Executive with respect to the subject matter hereof, and no representations, promises, agreements or understandings, written or oral, not herein contained shall be of any force or effect. This Agreement shall not be changed unless in writing and signed by both the Executive and the Board of Directors of Sunstone.

 

C-3


12. Assignment. This Agreement may not be assigned by the Executive, but may be assigned by the Company to any successor to its business and will inure to the benefit of and be binding upon any such successor.

13. Notice. All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

If to the Executive: at the Executive’s most recent address on the records of the Company,

 

 

 

 

with a copy to:

 

JMBM | JefferMangels, Butler & Marmaro LLP

1900 Avenue of the Stars, 7th Floor

Los Angeles, California 90067

Attn: Louise Ann Fernandez, Esq.

 

 

If to the Company :

  

c/o Sunstone Hotel Investors, Inc.

 

  

903 Calle Amanecer, Suite 100

 

  

San Clemente, CA 92673

 

  

Attn: Corporate Secretary

with a copy to:

  

 

 

  

Gibson, Dunn & Crutcher, LLP

333 South Grand Ave.

Los Angeles, California 90071

Attn: Michael F. Sfregola, Esq.

or to such other address as either party shall have furnished to the other in writing in accordance herewith. Notice and communications shall be effective when actually received by the addressee.

14. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

15. Executive’s Acknowledgment. The Executive acknowledges (a) that he has had the opportunity to consult with independent counsel of his own choice concerning this Agreement, and (b) that he has read and understands this Agreement, is fully aware of its legal effect, and has entered into it freely based on his own judgment.

 

C-4


IN WITNESS WHEREOF, the parties have executed this Agreement as of the date and year first above written.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

“EXECUTIVE”

 

 

 

SUNSTONE HOTEL INVESTORS, INC.,

a Maryland corporation

 

 

 

 

 

 

 

 

By:

 

 

Arthur Buser

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

Its:

 

 

 

 

 

 

 

 

 

SUNSTONE HOTEL PARTNERSHIP, LLC,

a Delaware limited liability company

 

 

 

 

 

 

 

 

By:

 

Sunstone Hotel Investors, Inc.

 

 

 

 

 

 

Its:

 

Managing Member

 

 

 

 

 

 

 

 

 

 

 

By:

 

 

 

 

 

 

 

 

 

 

Name:

 

 

 

 

 

 

 

 

 

 

Its:

 

 

 

C-5

 

 

EX-10.1 3 dex101.htm AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT, DATED JANUARY 22, 2009

Exhibit 10.1

AMENDMENT NO. 1 TO

EMPLOYMENT AGREEMENT

This AMENDMENT NO. 1 TO EMPLOYMENT AGREEMENT (THIS “AMENDMENT NO. 1”), is executed as of January 22, 2009, 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 L. Buser, Jr. (the “Executive”).

WHEREAS, Sunstone, the Operating Partnership and the Executive are parties to an Employment Agreement (the “Employment Agreement”), effective as of the Effective Date (as defined in the Employment Agreement);

WHEREAS, the Employment Agreement provides that Executive is entitled to a bonus for 2008 performance (the “2008 Bonus”);

WHEREAS, Sunstone, the Operating Partnership and the Executive desire to amend the Employment Agreement to reflect Executive’s decision to forgo the 2008 Bonus;

NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which are acknowledged, the parties agree as follows:

1. Bonus. The last two sentences of Section 2(b)(ii) are deleted and replaced with the following:

“Notwithstanding anything herein to the contrary, for the period from the Effective Date through December 31, 2008, Executive will not be paid a bonus. For all other purposes under this Agreement, the “2008 Bonus” means zero dollars.”

2. Equity Award. The last sentence of Section 2(b)(iii)(A) is deleted and replaced with the following:

“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 (1) the Effective Date with respect to the July 2008 grant and (2) February 5, 2009, with respect to the grant made in connection with Executive’s appointment to CEO.”


3. Effect on Employment Agreement. The terms of the Employment Agreement not modified by this Amendment No. 1 will remain in force and are not affected by this Amendment No. 1.

4. Miscellaneous. This Amendment No. 1 will be governed and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws. Capitalized terms used but not defined in this Amendment No. 1 are used with the meanings assigned in the Employment Agreement.

[Signature page follows]

 

2


IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 as of the date and year first written above.

 

 

 

 

“Executive”

 

/s/ Arthur L. Buser Jr.

Arthur L. Buser Jr.

 

Sunstone Hotel Investors, Inc.

 

 

By:

 

/s/ Robert A. Alter

Name:

 

Robert A. Alter

Title:

 

Chairman

 

Sunstone Hotel Partnership, LLC

 

 

By:

 

/s/ Robert A. Alter

Name:

 

Robert A. Alter

Title:

 

Chairman

 

 

 

EX-10.14.2 4 dex10142.htm WAIVER AGREEMENT

Exhibit 10.14.2

SUNSTONE HOTEL INVESTORS, INC.

WAIVER AGREEMENT

This Waiver Agreement (this “Agreement”), dated as of February 19, 2010, is made by and between Sunstone Hotel Investors, Inc. and Sunstone Hotel Partnership, LLC (together, the “Company”) and Arthur Buser (“Executive”).

RECITALS

 

 

A.

The Company and Executive are parties to that certain Employment Agreement, effective July 21, 2008 (as amended from time to time, the “Employment Agreement”).

 

 

B.

The Company maintains a 401(k) Savings and Retirement Plan (the “401(k) Plan”).

 

 

C.

Pursuant to the Employment Agreement and the 401(k) Plan, Executive is entitled to receive certain compensation and benefits.

 

 

D.

Executive and the Company wish to enter into this Agreement, pursuant to which Executive will waive his right and entitlement to receive certain compensation and benefits under the Employment Agreement and the 401(k) Plan for calendar year 2009 and the Company will make certain acknowledgements.

In consideration of the covenants and undertakings contained herein, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the Company and Executive hereby agree as follows:

1. Waiver. Executive hereby waives, relinquishes and gives up any and all right, title, claim and interest that Executive may have to receive each of: (i) any profit-sharing contribution from the Company under the 401(k) Plan in respect of calendar year 2009; (ii) any increase in Base Salary (as such term is defined in the Employment Agreement) over the Base Salary level in effect for Executive as of December 31, 2009; and (iii) any Annual Bonus (as such term is defined in the Employment Agreement) in respect of calendar year 2009 to the extent that such Annual Bonus would otherwise exceed three hundred fifty-nine thousand four hundred twenty-three dollars and 08/100 cents ($359,423.08).

2. Annual Bonus; Payment in Shares. In consideration of the waivers contained in this Agreement, the Company hereby agrees to pay Executive an Annual Bonus in the amount of three hundred fifty-nine thousand four hundred twenty-three dollars and 08/100 cents ($359,423.08) in respect of calendar year 2009, which Annual Bonus shall otherwise be payable in accordance with the terms and conditions of the Employment Agreement. The Company further agrees to pay such Annual Bonus, less the sum of all applicable withholdings, in a number of shares of fully vested Company common stock (in lieu of cash) determined by dividing the net dollar value of such Annual Bonus by the average closing price of the Company’s common stock for the twenty-day period ending February 12, 2010, which is three business days prior to the grant date for restricted stock granted to employees under the Company’s 2004 Long Term Incentive Plan (which average price was $8.74).


3. Company Acknowledgements. In consideration of the waivers contained in this Agreement, the Company hereby acknowledges and agrees that, (i) in the event that Executive becomes entitled to receive payments under Section 4(a) and/or Section 5 of the Employment Agreement in connection with Executive’s termination of employment, such payments shall be determined, to the extent applicable to the calculations thereof, as if Executive had earned and been paid an Annual Bonus in respect of calendar year 2009 without regard to the waivers contained in this Agreement; and (ii) Executive’s additional annual equity award under Section 2(b)(iii)(B) of the Employment Agreement shall be paid at the “high” level (i.e., 250% of Base Salary) in respect of calendar year 2009.

4. No Good Reason. Executive hereby acknowledges and agrees that nothing contained in this Agreement shall, or shall be construed so as to, constitute Good Reason (as defined in the Employment Agreement) for purposes of the Employment Agreement or any other agreement between Executive and the Company.

5. Applicable Law. This Agreement shall be administered, interpreted and enforced under the internal laws of the State of California, without giving effect to any choice of law or conflict of law provision or rule (whether of the State of California or any other jurisdiction) that would cause the application of the laws of any jurisdiction other than the State of California.

6. Enforceability. If any provision of this Agreement is determined to be invalid or unenforceable, it shall be adjusted rather than voided, to achieve the intent of the parties to the extent possible, and the remainder of the Agreement shall be enforced to the maximum extent possible.

7. Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

8. Captions. The captions contained in this Agreement are included for convenience only and shall have no bearing on the meaning or interpretation of the provisions contained herein.

[SIGNATURE PAGE FOLLOWS]

 

2


IN WITNESS WHEREOF, the Company and Executive have caused this Agreement to be executed as of the date first above written.

 

 

 

 

 

 

 

 

 

 

SUNSTONE HOTEL INVESTORS, INC.

 

 

 

 

 

EXECUTIVE

 

 

 

 

 

By:

 

/s/ Arthur Buser

 

 

 

 

 

/s/ Arthur Buser

 

 

 

 

 

 

 

 

(Signature)

 

 

 

 

 

Its:

 

President & CEO

 

 

 

 

 

Arthur Buser

 

 

 

 

 

 

 

 

 

 

SUNSTONE HOTEL PARTNERSHIP, LLC

 

 

 

 

 

 

 

 

 

 

 

By:

 

/s/ Arthur Buser

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Its:

 

President

 

 

 

 

 

 

 

3

 

 

 

 

 

EX-99.2 3 dex992.htm SEPARATION AGREEMENT AND GENERAL RELEASE

Exhibit 99.2

SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS

THIS SEPARATION AGREEMENT AND GENERAL RELEASE OF ALL CLAIMS (this “Agreement”) is made and entered into as of this 17th day of December, 2010, by and between Arthur L. Buser, Jr., an individual (the “Executive”), and Sunstone Hotel Investors, Inc., a Maryland corporation, (“Sunstone”) and Sunstone Hotel Partnership, LLC, a Delaware limited liability company (the “Operating Partnership”) (together with Sunstone, the “Company”).

WHEREAS, Executive is employed by the Company as its Chief Executive Officer pursuant to that certain employment agreement dated as of July 21, 2008, as amended (the “Employment Agreement”);

WHEREAS, Executive and the Company now desire to terminate their employment relationship and to resolve amicably, fully and finally all matters between them, including, but in no way limited to, those matters relating to the employment relationship between them and the termination of that relationship;

WHEREAS, the Company has agreed to provide Executive with certain additional rights and benefits (as described below) in exchange for Executive’s full release of any and all claims that Executive may have against the Company and/or any of the “Executive Released Parties” (as that term is defined herein) as provided herein, Executive’s cooperation in certain matters relating to the business of the Company and the Executive Released Parties as provided herein, and all of the other covenants, promises and terms contained in this Agreement; and

NOW THEREFORE, in consideration of the recitals above and the mutual promises and obligations contained herein, and other good and valuable consideration, the receipt and sufficiency of which are expressly acknowledged, it is agreed as follows:

1. Resignation. Executive hereby resigns from his employment and any and all offices, directorships and other positions with the Company, as well as each subsidiary or affiliate of the Company, and the Company hereby accepts such resignation, effective December 17, 2010 (the “Resignation Date”). Executive acknowledges and agrees that he will have no further duties or responsibilities and no further authority on behalf of the Company or its affiliates after the Resignation Date, other than as specifically set forth herein.

2. Accrued Obligations. The Company will pay to Executive his full base salary, at the annual rate of $650,000, along with all accrued, unused vacation in accordance with Company policy, through the Resignation Date, regardless of whether Executive signs this Agreement (the “Accrued Obligations”). For avoidance of doubt, the parties acknowledge that Executive currently has 169.92 hours of accrued, unused vacation as of the date hereof. Executive’s benefits shall continue thought the Resignation Date, and his benefits will not continue thereafter, except as provided in this Agreement. Executive shall also be reimbursed for all business expenses incurred in accordance with Company Policy for which he was not

 

Page 1 of 17


previously reimbursed. Executive understands that except as set forth in Section 2 and Section 3, Executive shall not be entitled to any further wages (including bonuses or other incentive compensation) or benefits from the Company.

3. Separation Benefits. In consideration of Executive’s release of all claims and his other covenants and agreements contained herein, and provided that this Agreement has been executed by Executive by the twenty-first (21st) day following the date of presentation hereof and has not been revoked by Executive as of the eighth (8th) calendar day following Executive’s execution of this Agreement, the Company shall provide Executive with the following separation benefits:

 

 

(a)

Sunstone shall pay Executive $2,420,846, consisting of two (2) times his current annual base salary ($650,000) and two (2) times his annual bonus for the past year ($569,423), less all applicable federal, state, and/or local taxes and all other authorized payroll deductions in a single lump sum on July 1, 2011.

 

 

(b)

On July 1, 2011, Sunstone shall pay to Executive $44,470.49. Executive shall be eligible to elect to continue his healthcare benefits in accordance with COBRA and/or Cal-COBRA at his own expense and shall be responsible for timely electing to continue his and his family’s healthcare insurance benefits under COBRA and/or Cal-COBRA if he desires to do so, and such continuation shall be subject to the applicable laws and regulations under COBRA and/or Cal-COBRA.

 

 

(c)

In February 2011, Sunstone shall pay into Executive’s 401k account a $7350 matching contribution for 2010, and on July 1, 2011, pay to Executive an amount equal to the amount the Company would have contributed as a profit sharing contribution to Executive’s 401k account for 2010 had he remained employed with the Company through the date of such profit sharing contribution.

 

 

(d)

On the Effective Date, as defined in Section 8, 276,122.66 shares of unvested restricted stock shall become vested and immediately unrestricted. Executive may satisfy the minimum statutory withholding obligation imposed under Section 3.2(a) of the Sunstone Hotel Investors, Inc. 2004 Long-Term Incentive Plan, as amended effective May 5, 2010, (the “LTIP”) as specified in Section 3.2(b) of the LTIP. For the avoidance of doubt, the following equity will vest:

 

Grant Date

  

Number of Shares of Stock
That Will Vest (and  original
vesting schedule date)

 

July 21, 2008

  

 

 

38,233 (July 21, 2011) and

47,792 (July 21, 2012)

  

  

January 22, 2009

  

 
 

54,878 (February 5, 2011) and
73,171 (February 5, 2012)

  
  

February 18, 2010

  

 
 

31,024.33 (February 18, 2011) and
31,024.33 (February 18, 2012)

  
  

Total

  

 

276,123

  

 

Page 2 of 17


All other unvested equity grants shall not vest, but shall terminate as of the Resignation Date and Executive shall have no further rights therein.

Executive hereby acknowledges and agrees that, he shall not be eligible to receive any payments or other consideration under this Agreement until after the Effective Date. For avoidance of doubt, Executive acknowledges and agrees that if he does not timely sign this Agreement, or if he revokes this Agreement, he will have no right to receive any of the payments or benefits under this Agreement, and the Company shall have no further obligation to him hereunder. Notwithstanding the foregoing, Executive will receive his regular compensation through the termination of his employment.

The Company and Executive understand and agree that the payments and benefits provided in this Agreement are not materially related to any known or contemplated change in control within the meaning of Section 280G of the Internal Revenue Code. The Company represents that as of the Resignation Date, it does not know of an event or contemplate an event that would constitute a change in control within the meaning of Section 280G of the Internal Revenue Code of the Company or Section 5 of the Employment Agreement on or before March 17, 2011.

4. No Other Separation Benefits. As of the Effective Date, the payments and benefits provided hereunder are in lieu of any severance payment or severance benefits under the Employment Agreement, any Company severance plan or any other Company plan, policy, program or arrangement whatsoever, whether written or unwritten, formal or informal, Executive’s rights to any severance compensation or severance benefits from the Company, other than as set forth herein, shall cease as of the Resignation Date, and Executive’s active participation in any other Company plan, policy, program or arrangement whatsoever, whether written or unwritten, formal or informal, shall cease as of the Resignation Date and Executive’s rights and benefits thereunder shall be governed in accordance with the terms of such plan, policy, program or arrangement.

5. Code Section 409A. The parties intend that Executive shall not be subject to the payment of additional taxes and interest under Section 409A of the Code with respect to any of the payments or benefits being made to Executive under this Agreement. In furtherance of this intent, and notwithstanding anything to the contrary in this Agreement, this

 

Page 3 of 17


Agreement shall be interpreted, operated, and administered in a manner consistent with these intentions, and the payment of consideration, compensation, and benefits pursuant to this Agreement shall be interpreted and administered in a manner intended to avoid the imposition of additional taxes under Section 409A of the Code.

 

 

(e)

Notwithstanding any provision to the contrary in this Agreement, no payment or distribution under this Agreement which constitutes an item of deferred compensation under Section 409A of the Code and becomes payable by reason of Executive’s termination of employment with the Company will be made to Executive unless Executive’s termination of employment constitutes a “separation from service” (as such term is defined in Treasury Regulations issued under Section 409A of the Code).

 

 

(f)

In addition, no such payment or distribution will be made to Executive prior to the earlier of (i) the expiration of the six (6)-month period (the “Six-Month Delay”) measured from the date of Executive’s “separation from service” (as such term is defined in Treasury Regulations issued under Section 409A of the Code) or (ii) the date of Executive’s death, if Executive is deemed at the time of such separation from service to be a “key employee” within the meaning of that term under Section 416(i) of the Code and to the extent such delayed commencement is otherwise required in order to avoid a prohibited distribution under Section 409A(a)(2) of the Code. All payments and benefits which had been delayed pursuant to the immediately preceding sentence shall be paid to Executive in a lump sum upon expiration of such six-month period (or, if earlier, upon the Executive’s death).

 

 

(g)

To the extent that any reimbursable expenses hereunder (including, without limitation, expenses paid or reimbursed under Section 2) are deemed to constitute compensation to Executive, such expenses shall be paid or reimbursed reasonably promptly, but not later than by December 31 of the year following the year in which the expense was incurred. The amount of such expenses eligible for reimbursement in one calendar year shall not affect the amount of expenses eligible for reimbursement in any other calendar year, and Executive’s right to reimbursement of any such expenses shall not be subject to liquidation or exchange for any other benefit.

6. General Release by Executive. Subject to Section 7 below, Executive hereby releases and discharges forever the Company, and each of its divisions, affiliates and subsidiaries, and each of their present and former directors, officers, employees, trustees, agents, attorneys, administrators, plans, plan administrators, parent corporations, subsidiaries, divisions, related and affiliated companies and entities, shareholders, members, representatives, predecessors, successors and assigns, and all persons acting by, through, under or in concert with them (hereinafter collectively referred to as the “Executive Released Parties”), from and against

 

Page 4 of 17


all liabilities, claims, demands, liens, causes of action, charges, suits, complaints, grievances, contracts, agreements, promises, obligations, costs, losses, damages, injuries, attorneys’ fees, and other legal responsibilities (collectively referred to as “Claims”), of any form whatsoever, including, but not limited to, any claims in law, equity, contract, tort, or any claims under the California Labor Code, the California Civil Code, the California Business and Professions Code, the California Fair Employment and Housing Act, Title VII of the Civil Rights Act of 1964, as amended, the Americans With Disabilities Act, the Age Discrimination in Employment Act (“ADEA”), as amended by the Older Workers Benefit Protection Act of 1990 (29 U.S.C. §§ 621, et seq.), the Sarbanes-Oxley Act of 2002, the Employee Retirement Income Security Act of 1974, or any other local ordinance or federal or state statute, regulation or constitution, whether known or unknown, unforeseen, unanticipated, unsuspected or latent, which Executive or Executive’s successors in interest now own or hold, or have at any time heretofore owned or held, or may at any time own or hold by reason of any matter or thing arising from any cause whatsoever prior to the date of execution of this Agreement, and without limiting the generality of the foregoing, from all claims, demands and causes of action based upon, relating to, or arising out of: (a) Executive’s employment relationship with the Company and/or any of the Executive Released Parties and the termination of that relationship; (b) Executive’s relationship as a shareholder in any of the Executive Released Parties; (c) Executive’s relationship with any of the Executive Released Parties as a member of any boards of directors; and (d) any other type of relationship (business or otherwise) between Executive and any of the Executive Released Parties.

7. Exclusions from General Release. Notwithstanding the generality of Section 6, Executive does not release the following claims and rights:

 

 

(a)

Executive’s rights under this Agreement;

 

 

(b)

Executive’s rights under Section 7 of the Employment Agreement;

 

 

(c)

Executive’s rights as a shareholder in any of the Executive Released Parties with respect to any claims arising after the Resignation Date;

 

 

(d)

any claims for unemployment compensation or any state disability insurance benefits pursuant to the terms of applicable state law;

 

 

(e)

claims to continued participation in certain of the Company’s group benefit plans pursuant to the terms and conditions of the federal law known as COBRA or the comparable California law known as Cal-COBRA;

 

 

(f)

any rights vested prior to the Resignation Date to benefits under any Company-sponsored retirement or welfare benefit plan;

 

 

(g)

Executive’s rights to any restricted stock vested prior to the Resignation Date or pursuant to this Agreement, and, subject to the terms of this Agreement, his rights under the July 21, 2008, January 22, 2009 and

 

Page 5 of 17


 

February 18, 2010 restricted stock award certificates and restricted stock award agreements, and the LTIP;

 

 

(h)

Executive’s rights to indemnity and/or advancement of expenses pursuant to applicable state law, the Company’s articles, bylaws or other corporate governance documents, the protections of any director’ and officers’ liability policies of the Company or any of its affiliates, and/or the indemnification agreement by and between Executive and the Company dated as of July 21, 2008 (the “Indemnity Agreement”), whether or not arising out of events pre- or post-dating this Agreement; and

 

 

(i)

any other right that may not be released by private agreement.

(collectively, the “Executive Unreleased Claims”).

8. Rights Under the ADEA. Without limiting the scope of the foregoing release of Claims in any way, Executive certifies that this release constitutes a knowing and voluntary waiver of any and all rights or claims that exist or that Executive has or may claim to have under ADEA. This release does not govern any rights or claims that might arise under the ADEA after the date this Agreement is signed by the parties. Executive acknowledges that: (a) the consideration provided pursuant to this Agreement is in addition to any consideration that he would otherwise be entitled to receive; (b) he has been and is hereby advised in writing to consult with an attorney prior to signing this Agreement; (c) he has been provided a full and ample opportunity to review this Agreement, including a period of at least twenty-one (21) days within which to consider it; (d) to the extent that Executive takes less than twenty-one (21) days to consider this Agreement prior to execution, Executive acknowledges that he had sufficient time to consider this Agreement with counsel and that he expressly, voluntarily and knowingly waives any additional time; and (e) Executive is aware of his right to revoke this Agreement at any time within the seven (7)-day period following the date on which he executes the Agreement and that the Agreement shall not become effective or enforceable until the calendar day immediately following the expiration of the seven (7)-day revocation period (the “Effective Date”). Executive further understands that he shall relinquish any right he has to the consideration specified in this Agreement if he exercises his right to revoke it, and shall instead receive only such consideration as provided in his Employment Agreement. Notice of revocation must be made in writing and must be received by the Executive Chairman of the Board of Directors of the Company, no later than 5:00 p.m. (Pacific Time) on the seventh (7th) calendar day immediately following the date on which Executive executes this Agreement.

9. Unknown Claims. It is further understood and agreed that Executive waives all rights under Section 1542 of the California Civil Code and/or any statute or common law principle of similar effect in any jurisdiction with respect to any Claims other than the Executive Unreleased Claims. Section 1542 reads as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT

 

Page 6 of 17


TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Notwithstanding the provisions of Section 1542 or any statute or common law principle of similar effect in any jurisdiction, and for the purpose of implementing a full and complete release and discharge of all claims, Executive expressly acknowledges that this Agreement is intended to include in its effect, without limitation, all claims which Executive does not know or suspect to exist in Executive’s favor at the time of execution hereof, and that the general release agreed upon contemplates the extinguishment of any such claims.

10. Covenant Not To Sue. Executive represents and covenants that he has not filed, initiated or caused to be filed or initiated, any Claim, charge, suit, complaint, grievance, action or cause of action against the Company or any of the Executive Released Parties. Except to the extent that such waiver is precluded by law, Executive further promises and agrees that he will not file, initiate, or cause to be filed or initiated any Claim, charge, suit, complaint, grievance, action, or cause of action based upon, arising out of, or relating to any Claim, demand, or cause of action released herein, nor shall Executive participate, assist or cooperate in any Claim, charge, suit, complaint, grievance, action or proceeding regarding any of the Executive Released Parties, whether before a court or administrative agency or otherwise, unless required to do so by law. The parties acknowledge that this Agreement will not prevent the Executive from filing a charge with the Equal Employment Opportunity Commission (or similar state agency) or participating in any investigation conducted by the Equal Employment Opportunity Commission (or similar state agency); providedhowever, that Executive acknowledges and agrees that any Claims by Executive, or brought on his behalf, for personal relief in connection with such a charge or investigation (such as reinstatement or monetary damages) would be and hereby are barred.

11. No Assignment. Executive represents and warrants that he has made no assignment or other transfer, and covenants that he will make no assignment or other transfer, of any interest in any Claim which he may have against the Executive Released Parties, or any of them.

12. Indemnification of Executive Released Parties. Executive agrees to indemnify and hold harmless the Executive Released Parties, and each of them, against any loss, claim, demand, damage, expenses, or any other liability whatsoever, including reasonable attorneys’ fees and costs resulting from: (a) any assignment or transfer, or attempted assignment or transfer, of any Claims released hereunder or (b) any action or proceeding brought by Executive or Executive’s successors in interest, or any other, if such action or proceeding arises out of, is based upon, or is related to any Claims, demands, or causes of action released herein; providedhowever, that this indemnification provision shall not apply to any challenge by Executive of the release of claims under the ADEA, Title VII, or similar discrimination laws, and any right of the Executive Released Parties to recover attorneys’ fees and/or expenses for such breach shall be governed by applicable law. It is the intention of the parties that this indemnity

 

Page 7 of 17


does not require payment as a condition precedent to recovery by any of the Executive Released Parties under this indemnity.

13. No Admission. Executive and the Company each understands that the foregoing payments and consideration are received by Executive and the Company in connection with the parties’ resolution of all matters between them, including, but not limited to, all matters relating to their employment relationship and the termination of that relationship, and that neither this Agreement nor the aforesaid payments and consideration are to be construed as an admission on the part of any of the Executive Released Parties or the Company Released Parties of any wrongdoing or liability, nor to be admissible as evidence in any proceeding, other than for enforcement of the provisions of this Agreement.

14. Non-Disparagement by Executive. Subject to Section 17, Executive agrees not to make any statements, whether written or oral, that are disparaging of the Executive Released Parties and/or their businesses. For avoidance of doubt, statements by Executive, which Executive reasonably and in good faith believes to be accurate and truthful, made to the Company, or its subsidiaries, affiliates or representatives pursuant to Executive’s obligations under Section 16 hereof shall not be deemed a violation of this Section 14. The parties recognize that the damages that may result from a breach of thisSection 14 are uncertain; consequently, the parties agree that $5,000 is a reasonable estimate of the damages that result from each violation of this Section 14, and agree that the Executive shall be obligated to pay $5,000 per violation as liquidated damages. In the event that any of the Executive Released Parties believe Executive has breached this Section 14, their sole remedy shall be to seek liquidated damages through arbitration in accordance with Section 25 of this Agreement, and that in the event of any such arbitration, the prevailing party shall be entitled to an award of his, her or its reasonable attorneys’ fees and costs in prosecuting or defending the claim of a violation of this Section 14.

15. Non-Disparagement by the Company. The Company and the Directors who are signatories to this Agreement agree not to make any statements, written or oral, that are disparaging of Executive and/or his businesses. The foregoing portion of this Section shall apply only to representatives of the Company at the level of executive officer or director or individuals acting at their direction. The parties recognize that the damages that may result from a breach of this Section 15 are uncertain; consequently, the parties agree that $5,000 is a reasonable estimate of the damages that result from each violation of this Section 15, and agree that the Company or the Directors who are signatories to the Agreement shall be obligated to pay $5,000 per violation as liquidated damages. In the event that Executive believes the Company or the Directors has breached this Section 15, Executive’s sole remedy shall be to seek liquidated damages through arbitration in accordance with Section 25 of this Agreement, and that in the event of any such arbitration, the prevailing party shall be entitled to an award of his, her or its reasonable attorneys’ fees and costs in prosecuting or defending the claim of a violation of thisSection 15.

16. Cooperation. Subject to Section 17, Executive agrees to cooperate fully with the Company and its subsidiaries and affiliates in transitioning his duties in response to reasonable requests for information about the business of the Company or its subsidiaries or affiliates or Executive’s involvement and participation therein; the defense or prosecution of any

 

Page 8 of 17


claims or actions now in existence or which may be brought in the future against or on behalf of the Company or its subsidiaries or affiliates which relate to event or occurrences that transpired while Executive was employed by the Company; and in connection with any investigation or review by any federal, state or local regulatory, quasi-regulatory or self-governing authority (including, without limitation, the Securities and Exchange Commission) as any such investigation or review relates to events or occurrences that transpired while Executive was employed by the Company. Executive’s full cooperation shall include, but not be limited to, being available to meet and speak with officers or employees of the Company and/or its counsel at reasonable times and locations, executing accurate and truthful documents, appearing at the Company’s request as a witness at depositions, trials or other proceedings without the necessity of a subpoena, and taking such other actions as may reasonably be requested by of the Company and/or its counsel to effectuate the foregoing. In requesting such services, the Company will consider other commitments that Executive may have at the time of the request, and Executive’s availability and obligations under this Section shall in all instances reasonably be subject to Executive’s other commitments. Moreover, Executive shall not be required to spend more than 5 hours in any calendar month in response to requests from the Company; however, this limitation shall not apply to testimony compelled by legal process of any court or governmental agency of competent jurisdiction. The Company agrees to reimburse Executive for any reasonable, out-of-pocket travel, hotel and meal expenses incurred in connection with Executive’s performance of obligations pursuant to this Section for which Executive has obtained prior, written approval from the Company, and the Company shall pay Executive $350 per hour for any services performed by Executive at the request of the Company pursuant to this Section 16.

17. Truthful Testimony; Notice of Request for Testimony. Nothing in this Agreement is intended to or shall preclude either party from providing testimony that such party reasonably and in good faith believes to be truthful in response to a valid subpoena, court order, regulatory request or other judicial, administrative or legal process or otherwise as required by law. Executive shall notify the Company in writing as promptly as practicable after receiving any such request of the anticipated testimony and at least ten (10) days prior to providing such testimony (or, if such notice is not possible under the circumstances, with as much prior notice as is possible) to afford the Company a reasonable opportunity to challenge the subpoena, court order or similar legal process. Moreover, nothing in this Agreement shall be construed or applied so as to limit any person from providing candid statements that such party reasonably and in good faith believes to be truthful to any governmental or regulatory body or any self-regulatory organization.

18. General Release by the Company. Subject to Section 19 below, the Company and each of the members of the Board of Directors (the “Company Releasors”) hereby releases and discharges forever Executive and his heirs, estates, successors and assigns, attorneys, and all persons acting by, through, under or in concert with them (hereinafter collectively referred to as the “Company Released Parties”), from and against all liabilities, claims, demands, liens, causes of action, charges, suits, complaints, grievances, contracts, agreements, promises, obligations, costs, losses, damages, injuries, attorneys’ fees, and other legal responsibilities (collectively referred to as “Claims”), of any form whatsoever, including, but not limited to, any claims in law, equity, contract, tort, or any local ordinance or federal or

 

Page 9 of 17


state statute, regulation or constitution, whether known or unknown, unforeseen, unanticipated, unsuspected or latent, which the Company Releasors or their successors in interest now own or hold, or have at any time heretofore owned or held, or may at any time own or hold by reason of any matter or thing arising from any cause whatsoever prior to the date of execution of this Agreement, and without limiting the generality of the foregoing, from all claims, demands and causes of action based upon, relating to, or arising out of: (a) Executive’s employment relationship with the Company and/or any of the Executive Released Parties and the termination of that relationship; (b) Executive’s relationship as a shareholder, optionholder or holder of any interest whatsoever in any of the Executive Released Parties; (c) Executive’s relationship with any of the Executive Released Parties as a member of any boards of directors; and (d) any other type of relationship (business or otherwise) between Executive and any of the Executive Released Parties.

19. Exclusions from General Release. Notwithstanding the generality of Section 18, the Company Releasors’ do not release the following claims and rights:

 

 

(a)

Any claims against the Company Released Parties that would not be subject to indemnification by the Company pursuant to the Indemnification Agreement;

 

 

(b)

The Company’s rights under this Agreement;

 

 

(c)

The Company’s rights under Section 7 of the Employment Agreement;

 

 

(d)

Subject to the terms of this Agreement, the Company’s rights under the July 21, 2008, January 22, 2009 and February 18, 2010 restricted stock award certificates and restricted stock award agreements, and LTIP; and

 

 

(e)

any other right that may not be released by private agreement.

(collectively, the “Company Unreleased Claims”).

20. Unknown Claims. It is further understood and agreed that the Company Releasors waive all rights under Section 1542 of the California Civil Code and/or any statute or common law principle of similar effect in any jurisdiction with respect to any Claims other than the Company Unreleased Claims. Section 1542 reads as follows:

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

Notwithstanding the provisions of Section 1542 or any statute or common law principle of similar effect in any jurisdiction, and for the purpose of implementing a full and complete release

 

Page 10 of 17


and discharge of all claims, the Company Releasors expressly acknowledge that this Agreement is intended to include in its effect, without limitation, all claims which the Company Releasors do not know or suspect to exist in their favor at the time of execution hereof, and that the general release agreed upon contemplates the extinguishment of any such claims.

21. Covenant Not To Sue. The Company Releasors represent and covenant that they have not filed, initiated or caused to be filed or initiated, any Claim, charge, suit, complaint, grievance, action or cause of action against Executive or any of the Company Released Parties. Except to the extent that such waiver is precluded by law, the Company Releasors further promise and agree that they will not file, initiate, or cause to be filed or initiated any Claim, charge, suit, complaint, grievance, action, or cause of action based upon, arising out of, or relating to any Claim, demand, or cause of action released herein, nor shall the Company Releasors participate, assist or cooperate in any Claim, charge, suit, complaint, grievance, action or proceeding regarding any of the Company Released Parties, whether before a court or administrative agency or otherwise, unless required to do so by law.

22. No Assignment. The Company Releasors represent and warrant that they have made no assignment or other transfer, and covenants that it will make no assignment or other transfer, of any interest in any Claim which he may have against the Company Released Parties, or any of them.

23. Indemnification of Company Released Parties. The Company agrees to indemnify and hold harmless the Company Released Parties, and each of them, against any loss, claim, demand, damage, expenses, or any other liability whatsoever, including reasonable attorneys’ fees and costs resulting from: (a) any assignment or transfer, or attempted assignment or transfer, of any Claims released hereunder or (b) any action or proceeding brought by the Company Releasors or the Company Releasors’ successors in interest, or any other, if such action or proceeding arises out of, is based upon, or is related to any Claims, demands, or causes of action released herein. It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by any of the Company Released Parties under this indemnity.

24. Return of Property. Executive covenants and agrees that he shall immediately return to the Company, on or before the Resignation Date, all Company property in his possession, custody or control, consisting of Executive’s keys, gym card and credit card, but excluding the mobile phone issued to the Executive. Executive represents and warrants that he does not have possession, custody or control of any additional Company property. The Company shall return to Executive a chair, artwork and laptop privacy screen owned by Executive. The Company shall allow executive to download personal information and records from the Company-issued laptop used by Executive, and shall remove such information from the Company’s systems. The parties agree that such downloading shall be done under the supervision of Company personnel and/or its designated information technology consultant to ensure that Company information is not downloaded.

 

Page 11 of 17


25. Arbitration. Except as is necessary for any of the Executive Released Parties or the Company Released Parties to enforce their rights under this Agreement through provisional or interim injunctive relief or specific performance, the parties agree that any disputes or controversies arising out of, relating to or in connection with this Agreement and/or Executive’s employment relationship with the Company and the termination of that relationship shall be submitted to binding arbitration before a single neutral arbitrator in Los Angeles, California, in accordance with the rules of the JAMS governing employment disputes then in effect, as the exclusive remedy for resolving any and all such disputes. Judgment may be entered on the arbitrator’s award in any court having jurisdiction. Each party shall bear one-half of the arbitration fees and expenses.

26. Notices. All notices, requests, demands and other communications that are required or may be given under this Agreement shall be in writing and shall be deemed to have been duly given when received if personally delivered, or, if not personally delivered shall be deemed to have been duly given (i) the day it is transmitted if transmitted by telecopy, electronic or digital transmission method with electronic confirmation of receipt; (ii) the day after it is sent, if sent for next-day delivery to a domestic address by recognized overnight delivery service (e.g., FedEx); and (iii) on the third day after it is sent, if sent by certified or registered mail, return receipt requested. In each case notice shall be sent to:

 

If to the Company:

  

 

Sunstone Hotel Investors, Inc..

120 Vantis, Suite 350

Aliso Viejo, CA 92656

Attention: Executive Chairman, Board of Directors

with a copy to:

  

 

Latham & Watkins LLP

355 South Grand Avenue

Los Angeles, CA 90071-1560

Attention: Steven B. Stokdyk

If to Executive:

  

 

Arthur L. Buser, Jr.

205 Monarch Bay Drive

Dana Point, CA 92629

with a copy to:

  

 

Gregory J. Scandaglia

Scandaglia & Ryan

Suite 3400

55 East Monroe

Chicago, IL 60603

 

And

 

Carla J. Rozycki

 

Page 12 of 17


 

  

Jenner & Block LLP

353 North Clark Street

Chicago, IL 60654-3456

Either Party may change the address for notice by sending written notice of a change of address to the other Party in accordance with this Section.

27. No Presumption Against Drafter. Executive and the Company understand that this Agreement is deemed to have been drafted jointly by the parties. Any uncertainty or ambiguity shall not be construed for or against any party based on attribution of drafting to any party.

28. Headings. The Section headings in this Agreement are for the convenience of the parties only, and shall not limit or modify, in any way, the contents of this Agreement or any Section of this Agreement.

29. Counterparts. This Agreement may be executed in counterparts, which together shall constitute one and the same Agreement. The parties may execute more than one copy of this Agreement, each of which copies shall constitute an original. A facsimile signature shall be deemed to be the same as an original signature.

30. Attorneys’ Fees. Except as otherwise provided in this Agreement, each party shall bear its own attorney’s fees in the event of any dispute arising out of or relating to this Agreement and/or in connection with the negotiation of this Agreement, provided however, that the Company shall pay up to $25,000 to Executive’s Counsel to defray fees actually incurred by Executive in connection with the negotiation of this Agreement.

31. Entire Agreement. Executive and the Company understand that this Agreement represents the entire agreement and understanding between the parties with respect to the subject matter hereof and, except as expressly stated in this Agreement, supersedes any prior agreement, understanding or negotiations respecting such subject matter, including but not limited to the Executive’s Employment Agreement; provided, however, that this agreement shall not supersede: (i) Executive’s obligations under any agreement, including his Employment Agreement, with respect to any restrictions on the use of confidential information or trade secrets, any restriction on the solicitation of employees or any assignment of intellectual property rights; (ii) the parties’ rights under the Indemnity Agreement; (iii) the parties’ rights, except as modified by the Agreement, under the July 21, 2008, January 22, 2009 and February 18, 2010 restricted stock award certificates and restricted stock award agreements, and the LTIP, as amended effective May 5, 2010; and (iv) the parties’ rights under Section 7 of the Employment Agreement. No change to or modification of this Agreement shall be valid or binding unless it is in writing and signed by Executive and a duly authorized representative of the Company.

 

Page 13 of 17


32. No Reliance. Executive and the Company understand and acknowledge that reliance is placed wholly upon Executive’s and the Company’s own judgment, belief and knowledge as to the propriety of entering into this Agreement. Executive and the Company further acknowledge that each of them is relying solely upon the contents of this Agreement, that there have been no other representations or statements made by any of the Executive Released Parties or Executive, and that Executive and the Company are not relying on any other representations or statements whatsoever of any of the Executive Released Parties or Executive as an inducement to enter into this Agreement, and if any of the facts upon which Executive or the Company now relies in making this Agreement shall hereafter prove to be otherwise, this Agreement shall nonetheless remain in full force and effect.

33. No Waiver. No waiver of any breach of any term or provision of this Agreement shall be construed to be, nor shall be, a waiver of any other breach of this Agreement. No waiver shall be binding unless in writing and signed by the party waiving the breach.

34. Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the heirs, representatives, successors and assigns of each of the parties to it.

35. Choice of Law. This Agreement shall be governed and construed under the laws of the State of California, without regard to its conflict of laws rules.

36. Announcement. Executive shall have an opportunity to review the Form 8-K to be filed in connection with the Agreement prior to its filing.

37. Acknowledgement. Executive acknowledges that Executive has personally read this Agreement and that Executive has reviewed, or has had the opportunity to review, this Agreement with legal counsel of Executive’s own choosing. Executive further acknowledges that he has been provided a full and ample opportunity to study this Agreement, that it fully and accurately reflects the content of any and all understandings and agreements between the parties concerning the matters referenced herein. The Company acknowledges that it has reviewed, or has had the opportunity to review, this Agreement with legal counsel of the Company’s own choosing. The Company further acknowledges that it has been provided a full and ample opportunity to study this Agreement, that it fully and accurately reflects the content of any and all understandings and agreements between the parties concerning the matters referenced herein.

[Signature page follows]

 

Page 14 of 17


IN WITNESS WHEREOF, this Agreement is executed by the parties hereto as of the date indicated by the signature.

 

 

 

 

DATED: December 17, 2010

 

 

 

/s/ Arthur L. Buser, Jr.

 

 

 

Arthur L. Buser, Jr.

 

 

 

Sunstone Hotel Investors, Inc.,

a Maryland corporation

DATED: December 17, 2010

 

 

By:

 

/s/ Robert A. Alter

 

 

 

Robert A. Alter

 

 

Its:

 

Executive Chairman of the Board of Directors

 

 

 

Sunstone Hotel Partnership, LLC,

a Delaware limited liability company

DATED: December 17, 2010

 

 

By:

 

/s/ Robert A. Alter

 

 

 

Robert A. Alter

 

 

Its:

 

Manager

 

Page 15 of 17


For purposes of Sections 15 and 18 through 23 only:

 

DATED: December 17, 2010

 

 

 

/s/ Robert A. Alter

 

 

 

Robert A. Alter

DATED: December 17, 2010

 

 

 

/s/ Lewis N. Wolff

 

 

 

Lewis N. Wolff

DATED: December 17, 2010

 

 

 

/s/ Thomas A. Lewis, Jr.

 

 

 

Thomas A. Lewis, Jr.

DATED: December 17, 2010

 

 

 

/s/ Z. Jamie Behar

 

 

 

Z. Jamie Behar

 

Page 16 of 17


 

 

 

 

/s/ Keith M. Locker

DATED: December 17, 2010

 

 

 

Keith M. Locker

DATED: December 17, 2010

 

 

 

/s/ Keith P. Russell

 

 

 

Keith P. Russell

 

Page 17 of 17

 

 

 

 

EX-10.2 2 a10-15127_1ex10d2.htm EX-10.2

Exhibit No. 10.2

 

EMPLOYMENT AGREEMENT

 

THIS EMPLOYMENT AGREEMENT (this “Agreement”), dated as of August 4, 2010 (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 Kenneth E. Cruse (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 third anniversary of the Effective Date (the “Initial Termination Date”); providedhowever, that this Agreement shall be automatically extended for three additional years on the Initial Termination Date and on each subsequent third 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 constitute a termination without Cause or for Good Reason (each as defined below).

 

2.                                       Terms of Employment.

 

(a)                                  Position and Duties.

 

(i)                                     During the Employment Period, the Executive shall serve as Executive Vice President and Chief Financial Officer 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 Company shall from time to time reasonably assign to the Executive.  The Executive shall report directly to the Chief Executive Officer of the Company.

 

(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 and, with respect to service with a for-profit entity, with the written consent of the Company’s Chief Executive Officer, (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.

 



 

(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.

 

(b)                                 Compensation.

 

(i)                                     Base Salary.  During the Employment Period, the Executive shall receive a base salary (the “Base Salary”) of Three Hundred Fifty Thousand Dollars ($350,000) per annum.  The Base Salary shall be paid in installments at such intervals as the Company pays executive salaries generally, but not less often than monthly.  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 (the “Compensation Committee”) of the Board of Directors of the Company (the “Board”).  The term “Base Salary” as utilized in this Agreement shall refer to Base Salary as so adjusted.  Any increase in Base Salary shall not serve to limit or reduce any other obligation to the Executive under this Agreement.

 

(ii)                                  Annual Bonus.  In addition to the Base Salary, the Executive shall be eligible to earn, for each calendar year 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 any Annual Bonus and the performance goals applicable to such Annual Bonus for the relevant year 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: (1) threshold target equal to 50% of Base Salary; (2) mid-point target equal to 75% 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; providedhowever, that no minimum bonus is guaranteed and any bonus may equal zero in any given year.  The Annual Bonus payable, if any, in respect of any calendar year performance period shall be paid no later than the March 15 immediately following such calendar year performance period.  The terms and conditions of any such bonus plan shall be determined by the Compensation Committee in its sole discretion.

 

(iii)                               Equity Awards. During the Employment Period, the Executive shall be eligible to earn equity awards under the Company’s long-term incentive plan, subject to vesting and other conditions determined by the Compensation Committee, in its sole discretion.  The form, amount and terms of equity awards, if any, 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: (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; providedhowever, that no minimum equity award is guaranteed and any award may equal zero in any given year.

 

(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,

 

2



 

vision, disability, employee life, group life and accidental death insurance plans and programs) maintained by the Company for its senior executives.

 

(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 in accordance with the plans, policies, programs and practices of the Company applicable to its senior executives.

 

3.                                       Termination of Employment.

 

(a)                                  Death or Disability.  The Executive’s employment shall terminate upon the Executive’s death or Disability during the Employment Period.  For purposes of this Agreement, “Disability” means the Executive’s inability by reason of permanent physical or mental illness to fulfill his obligations hereunder for 120 consecutive days or on a total of 180 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 the 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 the Executive or accommodations that would create an undue hardship on the Company.  For purposes of clarity, this provision is not intended to, and does not, alter or affect any and all rights the Executive has to avail himself of leaves of absence in accordance with Company policies applicable to senior executives and/or his rights under applicable disability and leave of absences laws, including, without limitation, the Americans with Disabilities Act, the Family and Medical Leave Act, the California Fair Employment and Housing Act, and the California Family Rights Act.

 

(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 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, which notice specifies such failure or negligence;

 

(ii)                                  The Executive’s willful commission of an act of fraud or material dishonesty in the performance of his duties, the nature of which, and the support for which, shall be provided to the Executive in writing;

 

(iii)                               The indictment of the Executive, conviction of the Executive, or entry by the Executive of a guilty or no contest plea to any felony or any other felony or misdemeanor involving moral turpitude;

 

3



 

(iv)                              Any material 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, or any other written agreement between the Executive and the Company, which is not cured within fifteen (15) days following written notice thereof from the Company.

 

(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:

 

(i)                                     A material reduction in the Executive’s title, duties, authority, responsibilities, reporting relationships, or the assignment to the Executive of any duties materially inconsistent with the Executive’s position, title, authority, duties, or responsibilities;

 

(ii)                                  The Company’s reduction of the Executive’s annual Base Salary, bonus opportunity, or equity award opportunity as in effect or as may be increased from time to time;

 

(iii)                               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; provided, however, if the Company moves to Aliso Viejo, California, within 12 months from the Effective Date, then such relocation of the Company’s headquarters must be more than thirty five (35) miles from such location in Aliso Viejo, California, in order to constitute Good Reason; or

 

(iv)                              The Company’s material breach of its obligations under this Agreement.

 

For purposes of this Agreement, a termination of employment by the Executive shall not be deemed to be for Good Reason unless (A) the Executive gives the Company written notice describing the event or events which are the basis for such termination within 90 days after the event or events occur, (B) such grounds for termination (if susceptible to correction) are not corrected by the Company within 30 days of the Company’s receipt of such notice, and (C) the Executive terminates his employment no later than 30 days after the Executive provides notice to the Company in accordance with clause (A) of this paragraph.

 

(d)                                 Notice of Termination.  Any termination other than due to death 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.

 

4



 

(e)                                  Date of Termination.  “Date of Termination” means (i) if the Executive’s employment is terminated by the Company other than due to the Executive’s 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), as the case may be, (ii) if the Executive’s employment is terminated by the Executive other than due to the Executive’s death or Disability, 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 (iii) 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 is determined as described in Section 3(a) of this Agreement, as the case may be.  Notwithstanding the foregoing, with respect to any payments that become payable to the Executive in connection with his termination of employment with the Company, including without limitation any Severance Payments, Date of Termination means the date on which the Executive experiences a “separation from service” within the meaning of Section 409A (as defined below).

 

4.                                       Obligations 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 (whether or not in connection with a Change in Control (as defined below)):

 

(i)                                     The Executive shall be paid in two lump sum payments the amounts set forth in (A) and (B) below (other than vested benefits, which shall be paid as and when due under the terms of the applicable plan or program) and outstanding equity awards shall vest as set forth in (C) below: (A) the Executive’s earned but unpaid Base Salary, accrued but unpaid vacation pay through the Date of Termination, any vested amounts due to the Executive under any plan, program or policy of the Company 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 (if any), plus an amount equal to a pro rata share of the Target Annual Bonus determined by multiplying the Target Annual Bonus by a fraction the numerator of which is the number of days elapsed in the year through the Date of Termination and the denominator of which is 365 (together, the “Accrued Obligations”), (B) an amount (the “Severance Amount”) equal to two (2) times the sum of (x) the Base Salary in effect on the Date of Termination (but in no event less than the Base Salary set forth in Section 2(b)(i) above) plus (y) the greater of (xx) the Target Annual Bonus and (yy) the actual Annual Bonus paid to the Executive in respect of the last full calendar year immediately preceding the Date of Termination, and (C) all outstanding stock options, restricted stock units and other 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 become immediately vested and, as applicable, exercisable in full (the “Vesting Acceleration”). The Accrued Obligations shall be paid when due under applicable law and, subject to Section 10(e) below, the Severance Amount shall be paid on the sixtieth (60th) day after the Date of Termination (or, if not a business day, on the first business day following such sixtieth (60th) day).

 

(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

 

5



 

had not been terminated, based on the Executive’s applicable elections in effect on the Termination Date (or at the Company’s election, pay the applicable COBRA premium for such coverage) (the “Continuation Benefits”); providedhowever, 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 eligibility shall be reported promptly by the Executive to the Company, but in any event within fifteen (15) days after such eligibility begins.  Notwithstanding the foregoing, if during the period of Continuation Benefits, any plan pursuant to which such benefits are to be provided ceases to be exempt from the application of Section 409A under Treasury Regulation Section 1.409A-1(a)(5), then an amount equal to each such remaining premium shall thereafter be paid to the Executive as currently taxable compensation in substantially equal monthly installments over the remainder of the Continuation Benefits period.

 

(iii)                               Notwithstanding anything herein to the contrary, it shall be a condition to the Executive’s right to receive any of the Severance Amount, the Vesting Acceleration and/or the Continuation Benefits that the Executive timely execute, deliver to the Company and not revoke a release of claims in substantially the form attached hereto as Exhibit A.

 

(b)                                 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, outstanding stock options, restricted stock units and other 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 immediately vest, but only to the extent such outstanding awards were scheduled to vest within the twelve (12) month period immediately following the Date of Termination; 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); providedhowever, 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.

 

6



 

(c)                                  Other Terminations.  If the Executive’s employment with the Company terminates for any reason other than those described in Sections 4(a) and (b) above, the Company shall pay to the Executive the Accrued Obligations in accordance with Section 4(a) above and shall have no further obligations to the Executive under this Agreement.

 

5.                                       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 the 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; providedhowever, 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 individual whose initial assumption of office occurs as a result of an election contest with respect to the election or removal of directors or other solicitation of proxies or consents by or on behalf of a person other than the Board;

 

(iii)                               The consummation by Sunstone (whether directly involving Sunstone or indirectly involving Sunstone through one or more intermediaries) of (x) a merger, consolidation, reorganization, or business combination or (y) a sale or other disposition of all or substantially all of Sunstone’s assets or (z) the acquisition of assets or stock of another entity, in each case, other than a transaction,

 

(A)                              which results in Sunstone’s voting securities outstanding immediately before the transaction continuing to represent (either by remaining outstanding or by being converted into voting securities of Sunstone or the person that, as a result of the transaction, controls, directly or indirectly,

 

7



 

Sunstone or owns, directly or indirectly, all or substantially all of Sunstone’s assets or otherwise succeeds to the business of Sunstone (Sunstone or such person, the “Successor Entity”)) directly or indirectly, greater than 50% of the combined voting power of the Successor Entity’s outstanding voting securities immediately after the transaction, and

 

(B)                                after which no person or group beneficially owns voting securities representing greater than 50% of the combined voting power of the Successor Entity; providedhowever, that no person or group shall be treated for purposes of this clause (B) as beneficially owning greater than 50% of the combined voting power of the Successor Entity solely as a result of the voting power held in Sunstone prior to the consummation of the transaction; or

 

(iv)                              The approval by Sunstone’s stockholders of a liquidation or dissolution of Sunstone.

 

For purposes of clause (i) above, the calculation of voting power shall be made as if the date of the acquisition were a record date for a vote of Sunstone’s stockholders, and for purposes of clause (iii) above, the calculation of voting power shall be made as if the date of the consummation of the transaction were a record date for a vote of Sunstone’s stockholders.

 

6.                                       Full Settlement.  The Company’s obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Executive or others.  In no event shall the Executive be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Executive under any of the provisions of this Agreement and except as expressly provided, such amounts shall not be reduced whether or not the Executive obtains other employment.  If any party to this Agreement institutes any action, suit, counterclaim, appeal, arbitration or mediation for any relief against another party, declaratory or otherwise (collectively, an “Action”), to enforce the terms hereof or to declare rights hereunder, then the Prevailing Party in such Action shall be entitled to recover from the other party all costs and expenses of the Action, including reasonable attorneys’ fees and costs (at the Prevailing Party’s attorneys’ then-prevailing rates) incurred in bringing and prosecuting or defending such Action and/or enforcing any judgment, order, ruling or award (collectively, a “Decision”) granted therein, all of which shall be deemed to have accrued on the commencement of such Action and shall be paid whether or not such Action is prosecuted to a Decision.  Any Decision entered in such Action shall contain a specific provision providing for the recovery of attorneys’ fees and costs incurred in enforcing such Decision.  A court or arbitrator shall fix the amount of reasonable attorneys’ fees and costs upon the request of either party.  Any judgment or order entered in any final judgment shall contain a specific provision providing for the recovery of all costs and expenses of suit, including reasonable attorneys’ fees and expert fees and costs incurred in enforcing, perfecting and executing such judgment.  For the purposes of this paragraph, costs shall include, without limitation, in addition to costs incurred in prosecution or defense of the underlying action, reasonable attorneys’ fees, costs, expenses and expert fees and costs incurred in the following:  (a) post-judgment motions and collection actions; (b) contempt proceedings; (c) garnishment, levy, debtor and third party examinations; (d) discovery; (e) bankruptcy litigation; and (f) appeals of any order or judgment.  “Prevailing Party” within the meaning of this Section includes, without limitation, a party who agrees to dismiss an Action (excluding an Action instituted in contravention of the requirements of Section 10(b) below) in consideration for the other party’s payment of the amounts allegedly due or performance of the covenants allegedly breached, or obtains substantially the relief sought by such party.  If the Executive is the Prevailing Party, the

 

8



 

Company shall provide payment of such costs and expenses to the Executive by December 31 of the year in which the right to payment is established.

 

7.                                       Successors.

 

(a)                                  This Agreement is personal to the Executive and without the prior written consent of the Company shall not be assignable by the Executive otherwise than by will or the laws of descent and distribution.  This Agreement shall inure to the benefit of and be enforceable by the Executive’s legal representatives.

 

(b)                                 This Agreement shall inure to the benefit of and be binding upon the Company and its successors and assigns.

 

(c)                                  The Company will require any successor (whether direct or indirect, by purchase merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

 

8.                                       Payment of Financial Obligations.  The payment or provision to the Executive by the Company of any remuneration, benefits or other financial obligations pursuant to this Agreement shall be allocated to the Operating Partnership, Sunstone, Sunstone Hotel TRS Lessee, Inc. and, if applicable, any of their respective subsidiaries and/or affiliates in accordance with any employee sharing and expense allocation agreement, by and between Sunstone and the Operating Partnership, as in effect from time to time.

 

9.                                       Indemnification Agreement.  The Company and the Executive agree to execute, concurrently herewith, the Indemnification Agreement attached hereto as Exhibit B (the “Indemnification Agreement).  The parties acknowledge and agree that the Indemnification Agreement shall supersede in its entirety and replace the Indemnification Agreement previously entered into between the Executive and the Company, dated as of December, 2006.

 

10.                                 Miscellaneous.

 

(a)                                  Governing Law.  This Agreement shall be governed by and construed in accordance with the laws of the State of California, without reference to principles of conflict of laws.  The captions of this Agreement are not part of the provisions hereof and shall have no force or effect.  This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

 

(b)                                 Arbitration.  To the fullest extent allowed by law, any controversy, claim or dispute between the Executive and the Company (and/or any of its owners, directors, officers, employees, affiliates, or agents) relating to or arising out of the Executive’s employment or the cessation of that employment will be submitted to final and binding arbitration in the county in which the Executive worked for determination by one arbitrator with hotel industry experience in accordance with the American Arbitration Association’s (“AAA”) National Rules for the Resolution of Employment Disputes, as the exclusive remedy for such controversy, claim or dispute.  In any such arbitration, the parties may conduct discovery in accordance with the applicable rules of the arbitration forum, except that the arbitrator shall have the authority to

 

9



 

order and permit discovery as the arbitrator may deem necessary and appropriate in accordance with applicable state or federal discovery statutes.  The arbitrator shall issue a reasoned, written decision, and shall have full authority to award all remedies which would be available in court.  The parties shall share the filing fees required for the arbitration, provided that the Executive shall not be required to pay an amount in excess of the lesser of the filing fees required by a federal or state court with jurisdiction.  The Company shall pay the arbitrator’s fees and any AAA administrative expenses.  Any judgment upon the award rendered by the arbitrator(s) may be entered in any court having jurisdiction thereof.  Possible disputes covered by the above include (but are not limited to) unpaid wages, breach of contract, torts, violation of public policy, discrimination, harassment, or any other employment-related claims under laws including but not limited to, Title VII of the Civil Rights Act of 1964, the Americans With Disabilities Act, the Age Discrimination in Employment Act, the California Fair Employment and Housing Act, the California Labor Code, and any other statutes or laws relating to an employee’s relationship with his/her employer, regardless of whether such dispute is initiated by the Executive or the Company.  Thus, this bilateral arbitration agreement applies to any and all claims that the Company may have against the Executive, including but not limited to, claims for misappropriation of Company property, disclosure of proprietary information or trade secrets, interference with contract, trade libel, gross negligence, or any other claim for alleged wrongful conduct or breach of the duty of loyalty by the Executive.  However, notwithstanding anything to the contrary contained herein, Company and the Executive shall have their respective rights to seek and obtain injunctive relief with respect to any controversy, claim or dispute to the extent permitted by law.  Claims for workers’ compensation benefits and unemployment insurance (or any other claims where mandatory arbitration is prohibited by law) are not covered by this arbitration agreement, and such claims may be presented by either the Executive or the Company to the appropriate court or government agency.  BY AGREEING TO THIS BINDING ARBITRATION PROVISION, BOTH THE EXECUTIVE AND THE COMPANY GIVE UP ALL RIGHTS TO TRIAL BY JURY.  This arbitration agreement is to be construed as broadly as is permissible under applicable law.

 

(c)                                  Notices.  All notices and other communications hereunder shall be in writing and shall be given by hand delivery to the other party or by registered or certified mail, return receipt requested, postage prepaid, addressed as follows:

 

If to the Executive:  at the Executive’s most recent address on the records of the Company.

 

If to Sunstone or the Operating Partnership:

 

Sunstone Hotel Investors, Inc.
903 Calle Amanecer, Suite 100
San Clemente, CA 92673
Attn:  Corporate Secretary

 

with a copy to:

 

Latham & Watkins
335 South Grand Ave.
Los Angeles, California 90071
Attn:  Steven Stokdyk, Esq.

 

10



 

or to such other address as either party shall have furnished to the other in writing in accordance herewith.  Notice and communications shall be effective when actually received by the addressee.

 

(d)           Sarbanes-Oxley Act of 2002.  Notwithstanding anything herein to the contrary, if the Company determines, in its good faith judgment, that any transfer or deemed transfer of funds hereunder is likely to be construed as a personal loan prohibited by Section 13(k) of the Exchange Act and the rules and regulations promulgated thereunder, then such transfer or deemed transfer shall not be made to the extent necessary or appropriate so as not to violate the Exchange Act and the rules and regulations promulgated thereunder.

 

(e)           Section 409A.  The parties agree that this Agreement is intended to comply with the requirements of Section 409A of the Code and the regulations promulgated thereunder (“Section 409A”) or an exemption from Section 409A.  In the event that after execution of this Agreement, the Company or the Executive determines that any compensation or benefits provided hereunder may not be exempt from or compliant with Section 409A, such party shall promptly notify the other party of the basis for its determination.  The parties agree to renegotiate in good faith the terms of this Agreement if it is mutually determined that this Agreement as structured would have adverse tax consequences to the Executive.  For purposes of this Agreement, each amount to be paid or benefit to be provided hereunder shall be construed as a separate identified payment for purposes of Section 409A.  With respect to any reimbursement of expenses of, or any provision of in-kind benefits to, the Executive, as specified under this Agreement, such reimbursement of expenses or provision of in-kind benefits shall be subject to the following conditions:  (i) the expenses eligible for reimbursement or the amount of in-kind benefits provided in one taxable year shall not affect the expenses eligible for reimbursement or the amount of in-kind benefits provided in any other taxable year, except for any medical reimbursement arrangement providing for the reimbursement of expenses referred to in Section 105(b) of the Code; (ii) the reimbursement of an eligible expense shall be made no later than the end of the year after the year in which such expense was incurred; and (iii) the right to reimbursement or in-kind benefits shall not be subject to liquidation or exchange for another benefit.  Notwithstanding anything to the contrary in this Agreement,  no compensation or benefits payable in connection with a “separation from service” (within the meaning of Section 409A), including without limitation any Severance  Payments, shall be paid to the Executive during the 6-month period following his “separation from service” to the extent that the Company reasonably determines that the Executive is a “specified employee” at the time of such “separation from service” and that paying such amounts at the time or times indicated in this Agreement would be a prohibited distribution under Internal Revenue Code Section 409A(a)(2)(b)(i).  If the payment of any such amounts is delayed as a result of the previous sentence, then on the first business day following the end of such 6-month period (or such earlier date upon which such amount can be paid under Section 409A without being subject to such additional taxes, including as a result of the Executive’s death), the Company shall pay to the Executive a lump-sum amount equal to the cumulative amount that would have otherwise been payable to the Executive during such 6-month period, without interest thereon.

 

(f)            Severability.  The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement.  If any provision or term hereof is deemed to have exceeded applicable legal authority or shall be in conflict with applicable legal limitations, such provision shall be reformed and rewritten as necessary to achieve consistency with such applicable law.

 

11



 

(g)           Withholding.  The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

 

(h)           No Waiver.  The Executive’s or the Company’s failure to insist upon strict compliance with any provision of this Agreement or the failure to assert any right the Executive or the Company may have hereunder shall not be deemed to be a waiver of such provision or right or any other provision or right of this Agreement.

 

(i)            Employment At-Will.  The Executive acknowledges that his employment with the Company is “at-will” for all purposes and, subject to the termination and severance obligations contained in Sections 3 and 4 above, the Executive hereby agrees that the Company may dismiss him and terminate his employment with the Company at any time, with or without Cause.  Inclusion under any benefit plan or compensation arrangement will not give the Executive any right or claim to any benefit hereunder except to the extent such right has become fixed under the express terms of this Agreement.

 

(j)            Entire Agreement.  As of the Effective Date, this Agreement, together with the Indemnification Agreement, constitutes the final, complete and exclusive agreement between the Executive and the Company with respect to the subject matter hereof and replaces and supersedes any and all other agreements, offers or promises, whether oral or written, made to the Executive by the Company, including without limitation, the Change in Control Agreement by and among Sunstone Hotel Investors, Inc. and the Executive, dated February 15, 2007.

 

(k)           Representations and Warranties.  The Executive represents and warrants to the Company that (i) this Agreement is valid and binding upon and enforceable against him in accordance with its terms, (ii) the Executive is not bound by or subject to any contractual or other obligation that would be violated by his execution or performance of this Agreement, including, but not limited to, any non-competition agreement presently in effect, and (iii) the Executive is not subject to any pending or, to the Executive’s knowledge, threatened claim, action, judgment, order, or investigation that could adversely affect his ability to perform his obligations under this Agreement or the business reputation of the Company.  The Executive has not entered into, and agrees that he will not enter into, any agreement either written or oral in conflict herewith.

 

(l)            Consultation with Counsel.  The Executive acknowledges that he has had a full and complete opportunity to consult with counsel and other advisors of his own choosing concerning the terms, enforceability and implications of this Agreement, and that the Company has not made any representations or warranties to the Executive concerning the terms, enforceability or implications of this Agreement other than as reflected in this Agreement.

 

(m)          Counterparts.  This Agreement may be executed simultaneously in two counterparts, each of which shall be deemed an original but which together shall constitute one and the same instrument.

 

[signatures follow next page]

 

12



 

IN WITNESS WHEREOF, the Executive has hereunto set the Executive’s hand and, pursuant to the authorization from the Board, the Company has caused these presents to be executed in its name on its behalf, all as of the day and year first above written.

 

 

EXECUTIVE:

 

SUNSTONE HOTEL INVESTORS, INC.,  

a Maryland corporation

 

 

 

 

/s/ Kenneth E. Cruse

 

By:

/s/ Arthur L. Buser, Jr.

Kenneth E. Cruse

 

 

Name:

Arthur L. Buser, Jr.

 

 

 

Its:

President and CEO

 

 

 

 

 

 

SUNSTONE HOTEL PARTNERSHIP, LLC,

 

 

a Delaware limited liability company

 

 

 

 

 

 

By:

Sunstone Hotel Investors, Inc.

 

 

 

Its: Managing Member

 

 

 

 

 

 

 

 

By:

/s/ Arthur L. Buser, Jr.

 

 

 

 

Name:

Arthur L. Buser, Jr.

 

 

 

 

Its:

President and CEO

 

13



 

EXHIBIT A

 

TO EMPLOYMENT AGREEMENT

 

GENERAL RELEASE

 

For a valuable consideration, the receipt and adequacy of which are hereby acknowledged, the undersigned does hereby release and forever discharge the “Releasees” hereunder, consisting of Sunstone Hotel Investors, Inc., a Maryland corporation, Sunstone Operating Partnership, LLC, a Delaware limited liability company and each of their partners, subsidiaries, associates, affiliates, successors, heirs, assigns, agents, directors, officers, employees, representatives, lawyers, insurers, and all persons acting by, through, under or in concert with them, or any of them, of and from any and all manner of action or actions, cause or causes of action, in law or in equity, suits, debts, liens, contracts, agreements, promises, liability, claims, demands, damages, losses, costs, attorneys’ fees or expenses, of any nature whatsoever, known or unknown, fixed or contingent (hereinafter called “Claims”), which the undersigned now has or may have against the Releasees, or any of them, by reason of any matter, cause, or thing whatsoever from the beginning of time to the date hereof.  The Claims released herein include, without limiting the generality of the foregoing, any Claims in any way arising out of, based upon, or related to the employment or termination of employment of the undersigned by the Releasees, or any of them; any alleged breach of any express or implied contract of employment; any alleged torts or other alleged legal restrictions on Releasee’s right to terminate the employment of the undersigned; and any alleged violation of any federal, state or local statute or ordinance including, without limitation, Title VII of the Civil Rights Act of 1964, the Age Discrimination In Employment Act, the Americans With Disabilities Act, and the California Fair Employment and Housing Act.

 

THE UNDERSIGNED ACKNOWLEDGES THAT HE HAS BEEN ADVISED BY LEGAL COUNSEL AND IS FAMILIAR WITH THE PROVISIONS OF CALIFORNIA CIVIL CODE SECTION 1542,WHICH PROVIDES AS FOLLOWS:

 

“A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS OR HER FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF KNOWN BY HIM OR HER MUST HAVE MATERIALLY AFFECTED HIS OR HER SETTLEMENT WITH THE DEBTOR.”

 

THE UNDERSIGNED, BEING AWARE OF SAID CODE SECTION, HEREBY EXPRESSLY WAIVES ANY RIGHTS HE MAY HAVE THEREUNDER, AS WELL AS UNDER ANY OTHER STATUTES OR COMMON LAW PRINCIPLES OF SIMILAR EFFECT.

 

IN ACCORDANCE WITH THE OLDER WORKERS BENEFIT PROTECTION ACT OF 1990, THE UNDERSIGNED IS HEREBY ADVISED AS FOLLOWS:

 

(A)          HE HAS THE RIGHT TO CONSULT WITH AN ATTORNEY BEFORE SIGNING THIS RELEASE;

 

(B)           HE HAS TWENTY-ONE (21) DAYS TO CONSIDER THIS RELEASE BEFORE SIGNING IT; AND

 

A-1



 

(C)           HE HAS SEVEN (7) DAYS AFTER SIGNING THIS RELEASE TO REVOKE THIS RELEASE, AND THIS RELEASE WILL BECOME EFFECTIVE UPON THE EXPIRATION OF THAT REVOCATION PERIOD.

 

The undersigned represents and warrants that there has been no assignment or other transfer of any interest in any Claim which he may have against Releasees, or any of them, and the undersigned agrees to indemnify and hold Releasees, and each of them, harmless from any liability, Claims, demands, damages, costs, expenses and attorneys’ fees incurred by Releasees, or any of them, as the result of any such assignment or transfer or any rights or Claims under any such assignment or transfer.  It is the intention of the parties that this indemnity does not require payment as a condition precedent to recovery by the Releasees against the undersigned under this indemnity.

 

The undersigned agrees that if he hereafter commences any suit arising out of, based upon, or relating to any of the Claims released hereunder or in any manner asserts against Releasees, or any of them, any of the Claims released hereunder, then the undersigned agrees to pay to Releasees, and each of them, in addition to any other damages caused to Releasees thereby, all attorneys’ fees incurred by Releasees in defending or otherwise responding to said suit or Claim.

 

The undersigned further understands and agrees that neither the payment of any sum of money nor the execution of this Release shall constitute or be construed as an admission of any liability whatsoever by the Releasees, or any of them, who have consistently taken the position that they have no liability whatsoever to the undersigned.

 

IN WITNESS WHEREOF, the undersigned has executed this Release this 4th day of August, 2010.

 

 

 

 

/s/ Kenneth E. Cruse

 

 

Kenneth E. Cruse

 

A-2



 

EXHIBIT B

 

INDEMNIFICATION AGREEMENT

 

THIS INDEMNIFICATION AGREEMENT is made and entered into this 4th day of August, 2010 (the “Agreement”), by and between Sunstone Hotel Investors, Inc., a Maryland corporation (the “Company”), and Kenneth E. Cruse (“Indemnitee”).

 

WHEREAS, at the request of the Company, Indemnitee currently serves as an officer of the Company and may, therefore, be subjected to claims, suits or proceedings arising as a result of his service; and

 

WHEREAS, as an inducement to Indemnitee to continue to serve as an officer, the Company has agreed to indemnify and to advance expenses and costs incurred by Indemnitee in connection with any such claims, suits or proceedings, to the maximum extent permitted by law; and

 

WHEREAS, the parties by this Agreement desire to set forth their agreement regarding indemnification and advance of expenses;

 

NOW, THEREFORE, in consideration of the premises and the covenants contained herein, the Company and Indemnitee do hereby covenant and agree as follows:

 

Section 1. Definitions. For purposes of this Agreement:

 

(a)                                  Change in Control” means a Change in Control as defined in the Employment Agreement attached to this Agreement.

 

(b)                                 Corporate Status” means the status of a person who is or was a director, trustee, officer, employee or agent of the Company or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise (each, an “Enterprise”) for which such person is or was serving at the request of the Company.

 

(c)                                  Disinterested Director” means a director of the Company who is not and was not a party to the Proceeding in respect of which indemnification or advance of Expenses is sought by Indemnitee.

 

(d)                                 Effective Date” means the date set forth in the first paragraph of this Agreement.

 

(e)                                  Expenses” shall include all reasonable and out-of-pocket attorneys’ fees, retainers, court costs, transcript costs, fees of experts, witness fees, travel expenses, duplicating costs, printing and binding costs, telephone charges, postage, delivery service fees, and all other disbursements or expenses of the types customarily incurred in connection with prosecuting, defending, preparing to prosecute or defend, investigating, or being or preparing to be a witness in a  Proceeding. Expenses shall also include Expenses incurred in connection with any appeal resulting from any Proceeding, including without limitation the premiums, security for, and other costs relating to any cost bond, supersede as bond or other appeal bond or its equivalent.

 

B-1



 

(f)                                    Independent Counsel” means a law firm, or a member of a law firm, that is experienced in matters of corporation law and neither is, nor in the past five years has been, retained to represent: (i) the Company or Indemnitee in any matter material to either such party (other than with respect to matters concerning Indemnitee under this Agreement or of other indemnitees under similar agreements), or (ii) any other party to or witness in the Proceeding giving rise to a claim for indemnification hereunder. Notwithstanding the foregoing, the term “Independent Counsel” shall not include any person who, under the applicable standards of professional conduct then prevailing, would have a conflict of interest in representing either the Company or Indemnitee in an action to determine Indemnitee’s rights under this Agreement. If a Change of Control has not occurred, Independent Counsel shall be selected by the Board of Directors, with the approval of Indemnitee, which approval will not be unreasonably withheld. If a Change of Control has occurred, Independent Counsel shall be selected by Indemnitee.

 

(g)                                 Proceeding” includes any threatened, pending or completed action, suit, arbitration, alternate dispute resolution mechanism, investigation, administrative hearing or any other proceeding, whether civil, criminal, administrative or investigative (including on appeal), except one pending or completed on or before the Effective Date, unless otherwise specifically agreed in writing by the Company and Indemnitee.

 

(h)                                 Reference to “fines” shall include any excise tax assessed with respect to any employee benefit plan (other than excise taxes imposed under Internal Revenue Code Section 4999); references to “serving at the request of the Company” shall include any service as an officer, director, committee member or official which imposes duties on, or involves services by, such officer, with respect to an employee benefit plan, its participants or beneficiaries; and action taken or omitted to be taken by Indemnitee with respect to an employer benefit plan in the performance of Indemnitee’s duties for a purpose reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to be a purpose that is” “not opposed to the best interests of the Company” as referred to in this Agreement.

 

Section 2. Services by Indemnitee. Indemnitee will serve as an officer of the Company. However, this Agreement shall not impose any obligation on Indemnitee or the Company to continue Indemnitee’s service to the Company beyond any period otherwise required by law or by other agreements or commitments of the parties, if any, provided that this Agreement shall continue in force after such time as Indemnitee has ceased to serve as an officer of the Company and Indemnitee will retain all rights provided under this Agreement after such time.

 

Section 3. Indemnification - General. The Company shall indemnify, and advance Expenses to, Indemnitee (a) as provided in this Agreement and (b) otherwise to the maximum extent permitted by Maryland law in effect on the date hereof and as amended from time to time; provided, however, that no change in Maryland law shall have the effect of reducing the benefits available to Indemnitee hereunder based on Maryland law as in effect on the date hereof. The rights of Indemnitee provided in this Section 3 shall include, without limitation, the rights set forth in the other sections of this Agreement, including any additional indemnification permitted by Section 2-418 of the Maryland General Corporation Law (“MGCL”), the charter or bylaws of the Company, a resolution of stockholders or directors, another agreement or otherwise.

 

Section 4. Proceedings Other Than Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 4 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to or a witness in any threatened,

 

B-2



 

pending, or completed Proceeding, other than a Proceeding by or in the right of the Company. Pursuant to this Section 4, Indemnitee shall be indemnified against all judgments, penalties, fines and amounts paid in settlement and all Expenses actually and reasonably incurred by him or on his behalf in connection with a Proceeding by reason of his Corporate Status unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to the Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty, (ii) Indemnitee actually received an improper personal benefit in money, property or services, or (iii) in the case of any criminal Proceeding, Indemnitee had reasonable cause to believe that his conduct was unlawful.

 

Section 5. Proceedings by or in the Right of the Company. Indemnitee shall be entitled to the rights of indemnification provided in this Section 5 if, by reason of his Corporate Status, he is, or is threatened to be, made a party to or a witness in any threatened, pending or completed Proceeding brought by or in the right of the Company to procure a judgment in its favor. Pursuant to this Section 5, Indemnitee shall be indemnified against all amounts paid in settlement and all Expenses actually and reasonably incurred by him or on his behalf in connection with such Proceeding unless it is established that (i) the act or omission of Indemnitee was material to the matter giving rise to such a Proceeding and (a) was committed in bad faith or (b) was the result of active and deliberate dishonesty or (ii) Indemnitee actually received an improper personal benefit in money, property or services.

 

Section 6. Court-Ordered Indemnification. Notwithstanding any other provision of this Agreement, a court of appropriate jurisdiction, upon application of Indemnitee and such notice as the court shall require, may order indemnification in the following circumstances:

 

(a)                                  if it determines Indemnitee is entitled to reimbursement under Section 2-418(d)(1) of the MGCL, the court shall order indemnification, in which case Indemnitee shall be entitled to recover the expenses of securing such reimbursement; or

 

(b)                                 if it determines that Indemnitee is fairly and reasonably entitled to indemnification in view of all the relevant circumstances, whether or not Indemnitee (i) has met the standards of conduct set forth in Section 2-418(b) of the MGCL or (ii) has been adjudged liable for receipt of an improper personal benefit under Section 2-418(c) of the MGCL, the court may order such indemnification as the court shall deem proper. However, indemnification with respect to any Proceeding by or in the right of the Company or in which liability shall have been adjudged in the circumstances described in Section 2-418(c) of the MGCL shall be limited to Expenses actually and reasonably incurred by him or on his behalf in connection with a Proceeding.

 

Section 7. Indemnification for Expenses of a Party Who is Wholly or Partly Successful. Notwithstanding any other provision of this Agreement, and without limiting any such provision, to the extent that Indemnitee is, by reason of his Corporate Status, made a party to and is successful, on the merits or otherwise, in the defense of any Proceeding, he shall be indemnified for all Expenses actually and reasonably incurred by him or on his behalf in connection therewith. If Indemnitee is not wholly successful in such Proceeding but is successful, on the merits or otherwise, as to one or more but less than all claims, issues or matters in such Proceeding, the Company shall indemnify Indemnitee under this Section 7 for all Expenses actually and reasonably incurred by him or on his behalf in connection with each successfully resolved claim, issue or matter, allocated on a reasonable and proportionate basis. For purposes of this Section and without limitation, the termination of any claim, issue or matter

 

B-3



 

in such a Proceeding by dismissal, with or without prejudice, shall be deemed to be a successful result as to such claim, issue or matter.

 

Section 8. Advance of Expenses. Notwithstanding any provision herein to the contrary, the Company shall advance all Expenses actually and reasonably incurred by or on behalf of Indemnitee in connection with any Proceeding (other than a Proceeding brought to enforce indemnification under this Agreement, applicable law, the Charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors) to which Indemnitee is, or is threatened to be, made a party or a witness, within ten days after the receipt by the Company of a statement or statements from Indemnitee requesting such advance or advances from time to time, whether prior to or after final disposition of such Proceeding. Such statement or statements shall reasonably evidence the Expenses incurred by Indemnitee and shall include or be preceded or accompanied by a written affirmation by Indemnitee of Indemnitee’s good faith belief that the standard of conduct necessary for indemnification by the Company as authorized by law and by this Agreement has been met and a written undertaking by or on behalf of Indemnitee, in substantially the form attached hereto as Exhibit B-1 or in such form as may be required under applicable law as in effect at the time of the execution thereof, to reimburse the portion of any Expenses advanced to Indemnitee relating to claims, issues or matters in the Proceeding as to which it shall ultimately be established that the standard of conduct has not been met. To the extent that Expenses advanced to Indemnitee do not relate to a specific claim, issue or matter in the Proceeding, such Expenses shall be allocated on a reasonable and  proportionate basis. The undertaking required by this Section 8 shall be an unlimited general obligation by or on behalf of Indemnitee and shall be accepted without reference to Indemnitee’s financial ability to repay such advanced Expenses and without any requirement to post security therefor. Advances shall be unsecured and interest free.

 

Section 9. Procedure for Determination of Entitlement to Indemnification.

 

(a)                                  To obtain indemnification under this Agreement, Indemnitee shall submit to the Company a written request, including therein or therewith such documentation and information as is reasonably available to Indemnitee and is reasonably necessary to determine whether and to what extent Indemnitee is entitled to indemnification. The omission to notify the Company will not relieve the Company from any liability that it may have to Indemnitee other than under this Agreement. The Secretary of the Company shall, promptly upon receipt of such a request for indemnification, advise the Board of Directors in writing that Indemnitee has requested indemnification.

 

(b)                                 Upon written request by Indemnitee for indemnification pursuant to the first sentence of Section 9(a) hereof, a determination, if required by applicable law, with respect to Indemnitee’s entitlement thereto shall promptly be made in the specific case: (i) if a Change in Control shall have occurred, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee; or (ii) if a Change of Control shall not have occurred, (A) by the Board of Directors (or a duly authorized committee thereof) by a majority vote of a quorum consisting of Disinterested Directors (as herein defined), or (B) if a quorum of the Board of Directors consisting of Disinterested Directors is not obtainable or, even if obtainable, such quorum of Disinterested Directors so directs, by Independent Counsel in a written opinion to the Board of Directors, a copy of which shall be delivered to Indemnitee, or (C) if so directed by a majority of the members of the Board of Directors, by the stockholders of the Company. If it is so determined that Indemnitee is entitled to indemnification, payment to

 

B-4



 

Indemnitee shall be made within ten days after such determination. Indemnitee shall cooperate with the person, persons or entity making such determination with respect to Indemnitee’s entitlement to indemnification, including providing to such person, persons or entity upon reasonable advance request any documentation or information which is not privileged or otherwise protected from disclosure and which is reasonably available to Indemnitee and reasonably necessary to such determination in the discretion of the Board of Directors or Independent Counsel if retained pursuant to clause (ii)(B) of this Section 9. Any Expenses actually and reasonably incurred by Indemnitee in so cooperating with the person, persons or entity making such determination shall be borne by the Company (irrespective of the determination as to Indemnitee’s entitlement to indemnification) and the Company shall indemnify and hold Indemnitee harmless therefrom.

 

Section 10. Presumptions and Effect of Certain Proceedings.

 

(a)                                  In making a determination with respect to entitlement to indemnification hereunder, the person or persons or entity making such determination shall presume that Indemnitee is entitled to indemnification under this Agreement if Indemnitee has submitted a request for indemnification in accordance with Section 9(a) of this Agreement, and the Company shall have the burden of proof to overcome that presumption in connection with the making of any determination contrary to that presumption. Neither the failure of the Company (including by its directors or independent legal counsel) to have made a determination prior to the commencement of any action pursuant to this Agreement that indemnification is proper in the circumstances because Indemnitee has met the applicable standard of conduct, nor an actual determination by the Company (including by its directors or independent legal counsel) that Indemnitee has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that Indemnitee has not met the applicable standard of conduct.

 

(b)                                 The termination of any Proceeding by judgment, order, settlement, conviction, a plea of nolo contendere or its equivalent, or an entry of an order of probation prior to judgment, does not create a presumption that Indemnitee did not meet the requisite standard of conduct described herein for indemnification.

 

(c)                                  Unless Indemnitee has reason to believe otherwise, for purposes of any determination of good faith, Indemnitee shall be deemed to have acted in good faith if Indemnitee’s action is based on the records or books of account of the Enterprise, including financial statements, or on information supplied to Indemnitee by the officers of the Enterprise in the course of their duties, or on the advice of legal counsel for the Enterprise or on information or records given or reports made to the Enterprise by an independent certified public accountant or by an appraiser or other expert selected with reasonable care by the Enterprise. The provisions of this Section 10(d) shall not be deemed to be exclusive or to limit in any way the other circumstances in which the Indemnitee may be deemed to have met the applicable standard of conduct set forth in this Agreement.

 

(d)                                 The knowledge and/or actions, or failure to act, of any director, officer, agent or employee of the Enterprise, excluding the Indemnitee, shall not be imputed to Indemnitee for purposes of determining the right to indemnification under this Agreement.

 

B-5



 

Section 11. Remedies of Indemnitee.

 

(a)                                  If (i) a determination is made pursuant to Section 9 of this Agreement that Indemnitee is not entitled to indemnification under this Agreement, (ii) advance of Expenses is not timely made pursuant to Section 8 of this Agreement, (iii) no determination of entitlement to indemnification shall have been made pursuant to Section 9(b) of this Agreement within 30 days after receipt by the Company of the request for indemnification, (iv) payment of indemnification is not made pursuant to Section 7 of this Agreement within ten days after receipt by the Company of a written request therefor, or (v) payment of indemnification is not made within ten days after a determination has been made that Indemnitee is entitled to indemnification, Indemnitee shall be entitled to an adjudication in an appropriate court located in the State of Maryland, or in any other court of competent jurisdiction, of his entitlement to such indemnification or advance of Expenses. Alternatively, Indemnitee, at his option, may seek an award in arbitration to be conducted by a single arbitrator pursuant to the commercial Arbitration Rules of the American Arbitration Association. Indemnitee shall commence such proceeding seeking an adjudication or an award in arbitration within 180 days following the date on which Indemnitee first has the right to commence such proceeding pursuant to this Section 11(a); provided, however, that the foregoing clause shall not apply to a proceeding brought by Indemnitee to enforce his rights under Section 7 of this Agreement.

 

(b)                                 In any judicial proceeding or arbitration commenced pursuant to this Section 11 the Company shall have the burden of proving that Indemnitee is not entitled to indemnification or advance of Expenses, as the case may be.

 

(c)                                  If a determination shall have been made pursuant to Section 9(b) of this Agreement that Indemnitee is entitled to indemnification, the Company shall be bound by such determination in any judicial proceeding or arbitration commenced pursuant to this Section 11, absent a misstatement by Indemnitee of a material fact, or an omission of a material fact necessary to make Indemnitee’s statement not materially misleading, in connection with the request for indemnification.

 

(d)                                 In the event that Indemnitee, pursuant to this Section 11, seeks a judicial adjudication of or an award in arbitration to enforce his rights under, or to recover damages for breach of, this Agreement, Indemnitee shall be entitled to recover from the Company, and shall be indemnified by the Company for, any and all Expenses actually and reasonably incurred by him in such judicial adjudication or arbitration. If it shall be determined in such judicial adjudication or arbitration that Indemnitee is entitled to receive part but not all of the indemnification or advance of Expenses sought, the Expenses incurred by Indemnitee in connection with such judicial adjudication or arbitration shall be appropriately prorated.

 

Section 12. Defense of the Underlying Proceeding.

 

(a)                                  Indemnitee shall notify the Company promptly upon being served with or receiving any summons, citation, subpoena, complaint, indictment, information, notice, request or other document relating to any Proceeding which may result in the right to indemnification or the advance of Expenses hereunder; provided, however, that the failure to give any such notice shall not disqualify Indemnitee from the right, or otherwise affect in any manner any right of Indemnitee, to indemnification or the advance of

 

B-6



 

Expenses under this Agreement unless the  Company’s ability to defend in such Proceeding or to obtain proceeds under any insurance policy is materially and adversely prejudiced thereby, and then only to the extent the Company is thereby actually so prejudiced.

 

(b)                                 Subject to the provisions of the last sentence of this Section 12(b) and of Section 12(c) below, the Company shall have the right to defend Indemnitee in any Proceeding which may give rise to indemnification hereunder; provided, however, that the Company shall notify Indemnitee of any such decision to defend within 15 calendar days following receipt of notice of any such Proceeding under Section 12(a) above. The Company shall not, without the prior written consent of Indemnitee, which shall not be unreasonably withheld or delayed, consent to the entry of any judgment against Indemnitee or enter into any settlement or compromise which (i) includes an admission of fault of Indemnitee or (ii) does not include, as an unconditional term thereof, the full release of Indemnitee from all liability in respect of such Proceeding, which release shall be in form and substance reasonably satisfactory to Indemnitee. This Section 12(b) shall not apply to a Proceeding brought by Indemnitee under Section 11 above or Section 18 below.

 

(c)                                  Notwithstanding the provisions of Section 12(b) above, if in a Proceeding to which Indemnitee is a party by reason of Indemnitee’s Corporate Status, (iIndemnitee reasonably concludes, based upon an opinion of counsel to Indemnitee, that he may have separate defenses or counterclaims to assert with respect to any issue which may not be consistent with other defendants in such Proceeding, (ii) Indemnitee reasonably concludes, based upon an opinion of counsel to Indemnitee, that an actual or apparent conflict of interest or potential conflict of interest exists between Indemnitee and the Company, or (iii) if the Company fails to assume the defense of such Proceeding in a timely manner, Indemnitee shall be entitled to be represented by separate legal counsel of Indemnitee’s choice, at the expense of the Company. In addition, if the Company fails to comply with any of its obligations under this Agreement or in the event that the Company or any other person takes any action to declare this Agreement void or unenforceable, or institutes any Proceeding to deny or to recover from Indemnitee the benefits intended to be provided to Indemnitee hereunder, Indemnitee shall have the right to retain counsel of Indemnitee’s choice, at the expense of the Company (subject to Section 11(d)), to represent Indemnitee in connection with any such matter.

 

Section 13. Non-Exclusivity; Survival of Rights; Subrogation; Insurance.

 

(a)                                  The rights of indemnification and advance of Expenses as provided by this Agreement shall not be deemed exclusive of any other rights to which Indemnitee may at any time be entitled under applicable law, the Charter or Bylaws of the Company, any agreement or a resolution of the stockholders entitled to vote generally in the election of directors or of the Board of Directors, or otherwise. No amendment, alteration or repeal of this Agreement or of any provision hereof shall limit or restrict any right of Indemnitee under this Agreement in respect of any action taken or omitted by such Indemnitee in his Corporate Status prior to such amendment, alteration or repeal. To the extent that a change in Maryland law, whether by statute or judicial decision, permits greater indemnification or advancement of Expenses than would be afforded currently under the Company’s charter or bylaws or this Agreement, except with respect to suits against the Company relating to this Agreement, it is the intent of the parties hereto that Indemnitee shall enjoy by this Agreement the greater benefits so afforded by such change. No right or remedy herein conferred is intended to be exclusive of any other right or remedy, and

 

B-7