SETTLEMENT AGREEMENT
Exhibit 10.1
This Settlement Agreement (“Agreement”) is made this 12th day of June, 2009, by and
between KRG Capital Fund II, L.P. (“KRG Fund II”), KRG Capital Fund II (FF), L.P. (“KRG
Capital (FF)”), KRG Capital Fund II (PA), L.P. (“KRG Capital (PA)”), KRG Co-Investment,
LLC (“KRG Co-Invest”) (KRG Fund II, KRG Capital (FF), KRG Capital (PA) and KRG Co-Invest,
collectively, the “KRG Parties”), Sunrise Senior Living, Inc. (“Sunrise”), and
Trinity Hospice, Inc. (“Trinity”) (Sunrise and Trinity, collectively, the “Sunrise
Parties”) (hereafter, the KRG Parties, ACS and the Sunrise Parties are referred to jointly and
collectively as the “Parties,” or any of them individually as a “Party”).
PREAMBLE
WHEREAS, XXX Xxxx XX, XXX Xxxxxxx (XX) xxx XXX Xxxxxxx (XX) are Delaware limited partnerships;
WHEREAS, KRG Co-Invest is a Colorado limited liability company;
WHEREAS, the KRG Entities maintain a principal place of business in Denver, Colorado;
WHEREAS, KRG Co-Invest is a Colorado limited liability company;
WHEREAS, the KRG Entities maintain a principal place of business in Denver, Colorado;
WHEREAS, Sunrise is a Delaware corporation with a principal place of business in McLean,
Virginia;
WHEREAS, Trinity is a dissolved Delaware corporation with a former principal place of business
in Dallas, Texas;
WHEREAS, on or about June 20, 2002, the KRG Entities acquired a majority interest in Trinity
and ACS acquired a minority interest in Trinity;
WHEREAS, under the terms of that certain Agreement and Plan of Merger dated as of August 2,
2006 (the “Merger Agreement”) by and among Sunrise, Trinity, the KRG Entities and
SETTLEMENT AGREEMENT — Page 1 of 13
ACS, Sunrise acquired ownership of Trinity and Trinity became a wholly-owned subsidiary of
Sunrise (the “Merger”);
WHEREAS, Sunrise has made allegations against the KRG Parties that the KRG Parties recklessly,
negligently and/or fraudulently misrepresented and omitted material facts in connection with the
Merger;
WHEREAS, the Sunrise Parties threatened to xxx the KRG Parties for fraud and misrepresentation
in connection with the Merger Agreement claiming at various times to have suffered substantial
damages as a result of the alleged misrepresentations;
WHEREAS, on January 13, 2009, the KRG Entities filed a lawsuit against the Sunrise Parties in
the Superior Court of the State of Delaware in and for New Castle County, Civil Action No.
09C-01-092 JRJ (the “Delaware Action”) seeking a declaration limiting its liability to the
Sunrise Parties as a matter of law;
WHEREAS, the Parties entered into a Standstill Agreement with respect to the Delaware Action
on February 2, 2009; and
WHEREAS, to avoid the uncertainty, time and expense associated with protracted litigation, the
Parties desire to compromise, resolve and settle the claims, counterclaims, and causes of action
between them, including asserted and unasserted claims finally and forever;
NOW, THEREFORE, in consideration of the covenants and mutual promises and agreements herein
contained, and other valuable consideration, the sufficiency and receipt of which is hereby
acknowledged, the Parties agree as follows:
1. Whereas Clauses. The recitals contained in the foregoing prefatory Whereas clauses
shall have the same force and effect as if set forth in full in the body of this Agreement.
SETTLEMENT AGREEMENT — Page 2 of 13
2. Compromises. The Parties hereby agree that neither the giving of any consideration
hereunder nor its acceptance shall operate as or be evidence of any admission of liability for any
claim hereby released, and further agree that, by the execution of this Agreement, the Parties do
not admit the truthfulness of any of the claims or allegations made by any opposing Party; rather,
such claims, allegations and liability have been, and are hereby, expressly denied by each of the
Parties.
3. Settlement Consideration. The KRG Parties agree to pay to Sunrise the gross amount
of Nine Million Eight Hundred Thirty-Five Thousand Nine Hundred Fifty-One Dollars and No/100
($9,835,951.00) as follows: Within two (2) business days of the Effective Date, the KRG Parties
shall cause to wire transfer to Sunrise the sum of Six Million Seven Hundred Forty-Nine Thousand
Nine Hundred Ninety-Nine and 44/100 ($6,749,999.44) and also deliver joint written authorization
(in the form attached hereto as Exhibit “A”) to the United Bank as Escrow Agent (as defined
pursuant to the Merger Agreement, Section 3.01(b)), instructing the Escrow Agent to release to
Sunrise the sum of Three Million Eighty-Five Thousand Nine Hundred Fifty-One Dollars and 56/100
($3,085,951.56) (as of May 31, 2009) (together with any other interest accrued thereunder through
and as of the date of release).
4. Releases by the Sunrise Parties. In exchange for the consideration provided in
this Agreement, and effective when the First Payment described in Section 3(a) of this Agreement is
received by Sunrise, Sunrise and Trinity, jointly and severally, on behalf of themselves, and their
respective current and former officers, administrators, directors, managers, owners, members,
shareholders, general or limited partners, representatives, agents, employees, attorneys,
predecessors or successors (by merger or otherwise), and assigns, if any, as well as their parents,
affiliates and subsidiaries, divisions and partnerships, past, present and future
SETTLEMENT AGREEMENT — Page 3 of 13
(collectively, the “Sunrise Releasing Parties”) hereby forever release, acquit and
discharge each of XXX Xxxx XX, XXX Xxxxxxx (XX), XXX Xxxxxxx (XX), XXX Co-Invest, KRG Capital
Management, L.P. and each of its series, KRG Capital, LLC and each of its series and American
Capital, Ltd., formerly known as American Capital Strategies, Ltd. (“ACS”), and their respective
current and former officers, administrators, directors, managers, owners, members, shareholders,
general or limited partners, clients, representatives, agents, employees, attorneys, predecessors
or successors (by merger or otherwise), and assigns, if any, as well as their parents, affiliates
and subsidiaries, divisions and partnerships, past, present and future (collectively, the “KRG
Released Parties”) from any and all claims, rights, accountings, debts, dues, covenants,
contracts, suits, counterclaims, demands, actions, causes of action, other liabilities, and/or
damages, if any, which the Sunrise Releasing Parties have, may have or claim to have now, whether
known or unknown, asserted now or in the future, of whatsoever kind or nature whether at law or in
equity, against any or all of the KRG Released Parties relating to or arising from any matters from
the beginning of time to the date of this Agreement, provided that, however, nothing in this
Paragraph 4 shall preclude or be interpreted as precluding the Sunrise Parties from asserting any
claim arising as a result of the alleged failure of performance under this Agreement.
5. Releases by the KRG Parties. In exchange for the consideration provided in this
Agreement, and effective when the First Payment described in Section 3(a) of this Agreement is
received by Sunrise, KRG Fund II, KRG Capital (FF), KRG Capital (PA), and KRG Co-Invest, on behalf
of themselves, KRG Capital Management, L.P. and each of its series, KRG Capital, LLC and each of
its series, and their respective current and former officers, administrators, directors, managers,
owners, members, shareholders, general or limited partners, clients, representatives, agents,
employees, attorneys, predecessors or successors (by merger or
SETTLEMENT AGREEMENT — Page 4 of 13
otherwise), and assigns, if any, as well as their parents, affiliates and subsidiaries,
divisions and partnerships, past, present and future (collectively, the “KRG Releasing
Parties”) hereby forever release, acquit and discharge each of Sunrise and Trinity and their
respective current and former officers, administrators, directors, managers, owners, members,
shareholders, general or limited partners, representatives, agents, employees, attorneys,
predecessors or successors (by merger or otherwise), and assigns, if any, as well as their parents,
affiliates and subsidiaries, divisions and partnerships, past, present and future (collectively,
the “Sunrise Released Parties”) from any and all claims, rights, accountings, debts, dues,
covenants, contracts, suits, counterclaims, demands, actions, causes of action, other liabilities,
and/or damages, if any, which the KRG Releasing Parties have, may have or claim to have now,
whether known or unknown, asserted now or in the future, of whatsoever kind or nature whether at
law or in equity, against any or all of the Sunrise Released Parties relating to or arising from
any matters from the beginning of time to the date of this Agreement, provided that, however,
nothing in this Paragraph 5 shall preclude or be interpreted as precluding the KRG Parties from
asserting any claim arising as a result of the alleged failure of performance under this Agreement.
6. Confidentiality of Settlement. The Parties acknowledge that the terms and
conditions of this Agreement and the Exhibits hereto are considered confidential, and it is
understood that this agreement of confidentiality is part of the consideration for this Agreement.
Upon and after the Effective Date of this Agreement, none of the Parties, nor their attorneys, or
other representatives, will, directly or indirectly, disclose the existence of or the terms and
conditions of this Agreement, or the Exhibits hereto, to third parties or publicize in the media
other than as specified herein, including but not limited to newspapers, magazines, radio,
television, or the internet, except: (a) as necessary to enforce this Agreement; (b) as may be
SETTLEMENT AGREEMENT — Page 5 of 13
required by law, including any applicable securities laws, or in order to comply with a
lawfully issued subpoena from a court of competent jurisdiction; (c) as reasonably necessary in
connection with audits, regulatory or compliance inquiries, or financial or legal due diligence or
claims for insurance coverage; (d) as may be required to the Parties’ attorneys and other
professional advisors for the purpose of seeking their advice; (e) as may be required for the KRG
Parties to make necessary disclosures to the partners in their investment funds and with respect to
fundraising activities if subject to nondisclosure restraints; and (f) as may be required to
Sunrise’s senior lenders or their advisors, provided however, that the recipient (other than a
government regulator) is instructed to maintain the confidentiality of any information disclosed to
it.
Sunrise will provide to the KRG Entities at least three (3) business days in advance of filing
for their review the proposed language that will appear in any filing on Form 8-K that Sunrise
files with the United States Securities and Exchange Commission describing this Agreement. If
required to file the Settlement Agreement itself, Sunrise will file it as an exhibit to its next
required filing on Form 10-Q. Sunrise will in good faith consider incorporating any comments from
the KRG Entities with respect to such filings.
7. Dismissal of Delaware Action. Upon the execution of this Agreement and payment of
the Settlement Consideration, counsel for KRG shall execute and promptly file the Notice of
Voluntary Dismissal With Prejudice of the Delaware Action attached hereto as Exhibit “B” and made a
part hereof dismissing the Delaware Action with prejudice and asking the Court to retain
jurisdiction for purposes of enforcing any provision of this Agreement. Filing counsel shall
promptly provide as-filed copies to opposing counsel.
SETTLEMENT AGREEMENT — Page 6 of 13
8. Non-Disparagement. The Parties shall not knowingly make any disparaging or
derogatory statements or comments, in any material respect, either directly or indirectly, to any
third persons regarding each other; except, however, with respect to statements and comments that
(a) are made for lawful competitive reasons or for personnel-related actions involving any Party
and its employees, agents, contractors or consultants in the ordinary course of business or (b) are
made under legal compulsion and are believed to be factually correct.
9. No Reliance. In executing this Agreement, the Parties have not seen, heard or
relied upon any promises, statements, representations, covenants, or warranties, whether express or
implied, made by one another or by any representative or other person or entity, except to the
extent that a matter is expressly stated in this Agreement.
10. Authorization to Execute. The signatories for the corporate Parties hereto
represent and warrant that they have been granted specific authority by their respective principals
to execute the Agreement on behalf of the corporate party.
11. Entire Agreement. Each Party hereby acknowledges that such Party is a
sophisticated company and each Party and their counsel have reviewed, fully understand, and
voluntarily consent to this Agreement without relying on any representations, oral or written, of
the other Party or its counsel not contained therein. It is further understood and agreed that no
subsequent amendment, change or addition to this Agreement shall be binding upon any of the Parties
hereto unless reduced to writing and signed by all the Parties.
12. Execution in Counterpart. This Agreement may be executed in any number of
counterparts and facsimiles, each of which shall be deemed an original, but all of which taken
together shall constitute one and the same instrument.
SETTLEMENT AGREEMENT — Page 7 of 13
13. Severability. Should any provision of this Agreement become or be held unlawful,
unenforceable or invalid by reason of any statute, ordinance, law and/or decision of any court of
law or equity, the same shall be ineffective to that extent, without in any way invalidating or
affecting the remaining provisions of this Agreement.
14. Cooperation. The Parties shall immediately cause to be prepared and executed any
and all other pleadings or other documents reasonably necessary to complete and consummate the
settlement contemplated by this Agreement, if requested.
15. Notices. Notices to be given under this Agreement shall be in writing and shall
be sent to the addresses set forth below (unless subsequently changed by any Party in writing) by
any of the following methods: (i) by certified or registered mail, return receipt requested, (ii)
by hand, (iii) by electronic mail (with confirmation of receipt and a hard copy by first class
mail), (iv) by facsimile transaction (with confirmation of receipt and a hard copy by first class
mail), and (v) by overnight courier service, with such notice being deemed received on the first
business day after being sent by hand, by electronic mail with confirmation of receipt, by
facsimile transaction, or by overnight courier service, or on the day of receipt or rejection for
certified or registered mail, return receipt requested.
(a) If to the KRG Parties:
Xxxxxxx X. Xxxxxxxxx, Managing Director
Xxxxxxx X. Xxxxxxx, Chief Operating Officer
KRG Capital Management, L.P.
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxx 0000
Xxxxxx, XX 00000
Xxxxxxx X. Xxxxxxxxx, Managing Director
Xxxxxxx X. Xxxxxxx, Chief Operating Officer
KRG Capital Management, L.P.
0000 Xxxxxxxx Xxxxxx
Xxxxx Xxx, Xxxxx 0000
Xxxxxx, XX 00000
And
SETTLEMENT AGREEMENT — Page 8 of 13
Blank Rome LLP
One Xxxxx Square
000 X. 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esquire
One Xxxxx Square
000 X. 00xx Xxxxxx
Xxxxxxxxxxxx, XX 00000
Attention: Xxxxx X. Xxxxx, Esquire
(b) If to the Sunrise Parties:
Sunrise Senior Living, Inc.
0000 Xxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, Esquire
Sunrise Senior Living, Inc.
0000 Xxxxxxxx Xxxxx
XxXxxx, Xxxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, Esquire
And
XXXXXX, XXXX & XXXXXXXX LLP
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esquire
0000 Xxxxxxxxxxx Xxxxxx, X.X.
Xxxxxxxxxx, XX 00000-0000
Attention: Xxxxx X. Xxxxxxxx, Esquire
16. Choice of Law and Venue. The Parties each agree that the laws of the State of
Delaware shall govern the enforceability, interpretation and legal effect of this Agreement and any
claim arising from or related to this Agreement. The Parties also agree that exclusive
jurisdiction and exclusive venue of any action to enforce, construe or validate the provisions of
this Agreement, or any document executed in connection herewith, shall be in a court of competent
jurisdiction in the State of Delaware. The Parties further agree that they shall have available
all remedies at law and equity to enforce a breach by any Party hereto of the provisions of this
Agreement. Notwithstanding the foregoing, the Parties each agree that they shall not seek
rescission, cancellation or termination of this Agreement in a future proceeding under this
Section.
17. Effective Date. The “Effective Date” of this Agreement shall be the date
upon which the last Party executes and delivers this Agreement.
SETTLEMENT AGREEMENT — Page 9 of 13
18. Prevailing Party. In the event that any Party shall pursue any action against any
other Party relating to or arising out of this Agreement, the prevailing Party shall be entitled to
recover its reasonable attorneys’ fees (including, if applicable, reasonable and documented charges
for in-house counsel and expert witness fees), court costs and other legal expenses from the losing
Party under such laws as may govern any such dispute. This provision includes any award of
injunctive relief or monetary damages.
19. Reasonableness of Settlement: The Parties to this Agreement acknowledge and
agree that the settlement set forth in this Agreement represents a fair, adequate and reasonable
compromise of claims under all of the circumstances, including with respect to the complexity,
expense and likely duration of litigation, the risks of establishing liability and damages, the
uncertainty of the outcome of litigation, the probability of recovery and all other attendant risks
to litigation, and that they have determined to enter into this Agreement after investigation and
consideration sufficient to inform themselves of the merits of the Settlement.
20. Allocation. The Parties have considered the allegations, the undisputed facts,
the theories of liability and the relative exposure of KRG, Sunrise and Trinity in connection with
the subject matter of the Delaware Action and agree that a fair and proper allocation of the
Settlement Amount is as follows: KRG 100 %, Sunrise 0 % and Trinity 0 %.
IN WITNESS WHEREOF, the parties have executed this Agreement to be effective as of the
Effective Date.
REMAINDER OF PAGE INTENTIONALLY LEFT BLANK
SETTLEMENT AGREEMENT — Page 10 of 13
| SUNRISE PARTIES: | ||||||
| SUNRISE SENIOR LIVING, INC. | ||||||
| By: Name: |
/s/ Xxxx X. Xxxxx
|
|||||
| Title: | Chief Executive Officer | |||||
| TRINITY HOSPICE, INC. | ||||||
| By: Name: |
/s/ Xxxxxx X. Xxxx
|
|||||
| Title: | President | |||||
SETTLEMENT AGREEMENT — Page 11 of 13
| KRG PARTIES: | ||||||
| KRG CAPITAL FUND II, L.P. | ||||||
| KRG CAPITAL FUND II (FF), L.P. | ||||||
| KRG CAPITAL FUND II (PA), L.P. | ||||||
| By: KRG Capital Management, L.P., with respect to its | ||||||
| Class II-QP and Class II-FF Series, its general partner |
||||||
| By: KRG Capital, LLC, with respect to its Class II-QP and | ||||||
| Class II-FF Series, its general partner | ||||||
| By: Name: |
/s/ Xxxxxxx X. Xxxxxxxxx
|
|||||
| Title: | Managing Director | |||||
| KRG CO-INVESTMENT, LLC | ||||||
| By: Capital Resources Growth, Inc., a managing member | ||||||
| By: Name: |
/s/ Xxxxxxx X. Xxxxxxxxx
|
|||||
| Title: | Managing Director | |||||
SETTLEMENT AGREEMENT — Page 12 of 13
EXHIBIT LIST FOR SETTLEMENT AGREEMENT
A. Letter to United Bank authorizing release of Escrow Fund
B. Delaware Notice of Voluntary Dismissal with Prejudice
SETTLEMENT AGREEMENT — Page 13 of 13
