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Exhibit 10.1
CONSULTING AND
NONCOMPETITION AGREEMENT
CONSULTING
AND NONCOMPETITION AGREEMENT (“Agreement”) made May 1, 2008 between Five Star
Quality Care, Inc. (“Company”) and Evrett W. Benton ("Benton").
RECITAL
Benton is
an employee of the Company and has been its President and Chief Executive
Officer since 2001. Benton has determined terminate his full time
employment with the Company on the date of this Agreement. Benton and
the Company desire to set forth certain understandings in connection with his
termination and to provide for his continuing to provide consulting services to
the Company.
NOW,
THEREFORE, the parties agree as follows:
Section
1. Resignation. By
execution of this Agreement, Benton hereby resigns as President and Chief
Executive Officer of the Company and of each of the Company’s subsidiaries,
effective the date of this Agreement.
Section
2. Consulting. From
the date of this Agreement through November 30, 2011 (“Consulting Period”),
Benton will make himself available for consultation by the Company and its
subsidiaries, at reasonable times and on reasonable advance notice, but shall
not be obliged to provide more than 100 hours of consulting services in any
calendar year during the Consulting Period (prorated for any portion of a
calendar year).
Section
3. Compensation;
Restricted Share Agreements.
(a) During
the Consulting Period, Benton will receive aggregate compensation of $408,500,
payable one-half on the date of this Agreement and one half on February 2,
2009. Additionally, the Company shall reimburse Benton for all
reasonable travel and lodging expenses incurred at the request of the Company
subject to supply of such receipts and other documentation as is consistent with
the Company’s policies and procedures in effect from time to time.
(b) During
the Consulting Period, Benton will be entitled to continue to participate in the
Company’s group health plans in effect from time to time, provided that Benton
shall pay the same portions of the premiums for coverage under such group health
plans as are paid from time to time by senior executives of the
Company.
(c) Benton
and the Company agree that for purposes of Section 2(b) of each of the
Restricted Share Agreements between Benton and the Company listed on Exhibit A
(collectively, the “Share Agreements”), Benton shall be deemed to be providing
“significant services” to the Company through the earlier of (i) November
30, 2011 (i.e., the date on which all the Shares (as defined in the Share
Agreements) issued to Benton pursuant to the Share Agreements would be fully
vested pursuant to the terms thereof), (ii) the date on which Benton ceases to
timely perform consulting services and (iii) the date on which Benton commits a
breach of any of the Restrictive Covenants (defined below).
(d) All
payments to Benton under this Agreement shall be reduced by withholdings
required by law. Additionally, if withholding is required and at a
time there is no cash payment being made to Benton, Benton agrees, on 3 days
prior notice from the Company, to pay to the Company by check or wire transfer
of immediately available funds, an amount equal to the estimated withholding tax
(as determined by the Company) that will be due and payable.
Section
4. Covenants. Benton
acknowledges that (i) the Company and its subsidiaries are engaged in the
business of operating rehabilitation hospitals and senior living communities,
including independent living and congregate care communities, assisted living
communities and nursing homes (the “Company’s Business”); (ii) Benton’s work for
the Company’s Business has given him, and will continue to give him, trade
secrets of, and confidential and/or proprietary information concerning, the
Company’s Business; (iii) the agreements and covenants contained in this Section
4 are essential to protect the Company’s Business and the goodwill associated
with it. Accordingly, Benton covenants and agrees as
follows:
(a) Non-Compete. During
the Consulting Period, Benton shall not, in the United States of America and
Canada, directly or indirectly, (x) enter the employ of or render any services
to any person engaged in a business competitive with the Company’s Business, or
(y) have an interest in any such competitor, whether such interest is direct or
indirect, and including any interest as a partner, shareholder, trustee,
consultant, officer or similarly situated person; provided, however, that in any
case, Benton may own solely as an investment, securities of any such competitor
that are publicly traded if Benton (i) is not a controlling person and (ii) does
not, directly or indirectly, own five percent (5%) or more of any class of
securities of such person..
(b) Confidential
Information. During the Consulting Period and at any time
thereafter, Benton shall not (i) disclose to any person not employed by the
Company or a subsidiary, or not engaged to render services to the Company or a
subsidiary or (ii) use for the benefit of himself or others, any confidential
information of the Company, any of the Company’s subsidiaries or of the
Company’s Business obtained by him, including, without limitation, “know-how,”
trade secrets, details of customers’ or suppliers’ contracts with the Company or
any of the Company’s subsidiaries, pricing policies, financial data, operational
methods, marketing and sales information, marketing plans or strategies,
development techniques or plans, plans to enter into any contract with any
person or any strategies relating thereto, technical processes, designs and
design projects, and other proprietary information of the Company, the Company’s
subsidiaries or of the Company’s Business or the business of any of the
Company’s subsidiaries; provided, however, that this
provision shall not preclude Benton from (a) making any disclosure required by
law or court order or (b) using or disclosing information (i) known generally to
the public (other than information known generally to the public as a result of
a violation of this Section 4(a) by Benton), (ii) acquired by Benton
independently of his affiliation with the Company or any of the Company’s
subsidiaries, or (iii) of a general nature (that is, not related specifically to
the Company’s Business) that ordinarily would be learned, developed or obtained
by individuals similarly active and/or employed in similar capacities by other
companies in the same business as the Company or any of the Company’s
subsidiaries. Benton agrees that all confidential information of the
Company or any of the Company’s subsidiaries shall remain the Company’s or the
Company’s subsidiaries, as the case may be, and to promptly return any
confidential
-2-
information
embodied in any physical or electronic medium to the owner thereof upon the
termination of Benton’s employment with the Company or at any other time on
request.
(c) No
Solicitation. During the Consulting Period, Benton shall not,
directly or indirectly, (a) solicit any employee to leave the employment of the
Company or the employment of any of the Company’s subsidiaries or (b) hire any
employee who has left the employ of the Company or the employ of any of the
Company’s subsidiaries within six (6) months after termination of such
employee’s employment with the Company or such employee’s employment with any of
the Company’s subsidiaries, as the case may be (unless such employee was
discharged by the Company without cause).
(d) Cooperation. From
and after the date hereof, Benton shall reasonably cooperate with the Company
and its subsidiaries with respect to all matters arising during or related to
his employment, including all matters (formal or informal) in connection with
any government investigation, internal investigation, litigation (potential or
ongoing), regulatory or other proceeding which may have arisen or which may
hereafter arise. The Company will reimburse Benton for all out-of
-pocket expenses (not including lost time or opportunity), and will provide
appropriate legal representation in a manner determined by the Company and
reasonably acceptable to Benton.
Section
5. Rights
and Remedies upon Breach of Covenants.
(a) If
Benton breaches, or threatens to commit a breach of, any of the provisions of
Section 4 (the “Restrictive Covenants”), the Company shall have the right and
remedy to have the Restrictive Covenants specifically enforced by any court
having equity jurisdiction, it being acknowledged and agreed that any such
breach or threatened breach will cause irreparable injury to the Company, that
such injury shall be presumed and need not be proven, and that money damages
will not provide an adequate remedy to the Company. Such righ
