Exhibit 10.1

 

November 18, 2011

 

Rosemary Esposito

163 Jeffrey Lane

Hurley, New York 12443

 

Dear Rosemary:

 

You and Five Star Quality Care, Inc. (“Five Star” or the “Company”) desire to
enter into this letter agreement (the “Agreement”) for the purposes, among other
things, of (1) providing the terms and conditions of your employment from the
date hereof through December 31, 2012 (the “Resignation Date”), at which time
you will retire from Five Star and (2) transitioning your duties and
responsibilities to the successor to your position, thereby allowing Five Star
and your successor to utilize and benefit from your expertise and experience
(the “Transition Plan”). You and the Company agree that (i) within four
(4) business days after the Effective Date (as defined in Section VII below),
Five Star will be filing a Form 8K with the Securities and Exchange Commission
which will include this Agreement as an exhibit; (ii) simultaneously with such
filing, an email will be sent to all employees of the Company by the Chief
Executive Officer thereof containing the information on Exhibit A-1 annexed; and
(iii) after the email is distributed to all employees of the Company, Five Star,
at the Five Star weekly management call following such email, may confirm to
Company managers the Transition Plan.

 

I. EMPLOYMENT TERM AND TRANSITION PERIOD

 

1.               Employment. Subject to the terms and conditions set forth in
this Agreement, you and the Company agree to continue your employment for the
Term (as defined below).

 

2.               Term. Subject only to allowable earlier termination as
hereinafter provided under Section II hereof, your continued employment shall be
for a term commencing on the date that this Agreement becomes effective, as
defined in Section VII, and ending on the Resignation Date (the “Term”).

 

3.               Capacity. During the Term, you shall continue to serve as
Senior Vice President and Chief Operating Officer of Five Star, except that Five
Star, in its sole discretion, may transition your role to that of a consultant
to the Company any time after June 30, 2012; provided, however, that, at all
times during the Term regardless of whether your duties are being transitioned,
Five Star’s obligations under this Agreement shall not be modified or reduced
and you shall always be treated in a manner consistent with that of a Senior
Vice President and C-level executive of Five Star, with your office remaining as
currently located. During the Term, you agree to use all reasonable efforts to
assist in training any successor to your responsibilities

 

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and to assist Five Star in the transition.

 

4.               Compensation and Benefits. Provided that you timely sign and
return this Agreement and do not revoke this Agreement, as compensation for all
services performed by you under this Agreement and during the Term hereof,
whether in the capacity as Senior Vice President and Chief Operating Officer or
as a consultant, you and Five Star agree to the following:

 

a.               Base Salary. Five Star shall continue to pay you a base salary
(“Base Salary”) at the rate of Three Hundred Thousand Dollars ($300,000) per
annum for the Term. Your Base Salary shall be payable in accordance with the
payroll practices of the Company for its executives.

 

b.              Bonus Compensation. You shall be paid a bonus of not less than
Four Hundred Forty Thousand Dollars ($440,000) for the calendar year 2011 and
Four Hundred Eighty-Four Thousand Dollars ($484,000) for the calendar year 2012.
These bonus payments shall be made at the time bonus payments are made to other
Five Star senior executives, but in no event later than January 31, 2013.

 

c.               Equity Incentives. For the year 2011 only, you shall be
entitled to participate in a manner consistent with prior practices in all stock
grants, stock options, restricted stock or other equity incentives plans
currently and/or hereafter maintained by the Company and in which other senior
executives of Five Star participate. All equity incentives received under this
Agreement, and all of your unvested but previously received equity incentives,
shall fully vest upon the expiration of the Term. You will be responsible for
all resulting taxes. You agree to timely vote all shares, grants, options, and
other equity incentives in accordance with the recommendations of the Board.

 

d.              Vacations. You shall be entitled to four (4) weeks of vacation
per calendar year, to be taken at such times and intervals as you shall
determine, subject to the reasonable business needs of Five Star. Vacation shall
otherwise be governed by the policies of the Company, as in effect from time to
time. Payment for accrued and unused vacation time shall be made to you on the
Resignation Date.

 

e.               Insurance Benefits. Subject to any contribution therefor
generally required of employees of the Company, Five Star shall maintain and
provide benefits to you pursuant to medical, dental and disability insurance
plans in effect for the other senior executives (collectively, the “Insurance
Benefits”). Your participation in such Insurance Benefits shall be subject to
the terms of the applicable plan documents and generally applicable Company
policies.

 

f.                 Business Expenses. Five Star shall promptly pay or reimburse
you for all reasonable, customary and necessary business expenses incurred or
paid by you in the performance of your duties and responsibilities hereunder,
subject to any reasonable maximum annual limit and other reasonable restrictions
on such expenses

 

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set by Five Star and to such reasonable substantiation and documentation as may
be generally required by the Company from time to time, in all cases such
expenses and reimbursement to be consistent with past practices.

 

g.              Outplacement Benefits. From and after the earlier of the date
upon which you become a consultant to Five Star and January 1, 2012, Five Star
will provide you with outplacement services until December 31, 2013, at a cost
not to exceed $30,000.

 

h.              Resignation. Unless the last day of the Term shall be
accelerated as herein provided, you hereby resign as of the Resignation Date
from Five Star and its subsidiaries. At Five Star’s request, you shall confirm
such resignation by signing a Letter of Resignation substantially in the form
attached as Exhibit A.

 

i.                  Severance Benefits. If you are employed as of the day
preceding the Resignation Date, or if you are terminated prior to the
Resignation Date for reasons other than Cause (as defined below), you will be
entitled to receive the compensation and other benefits as set forth above as
well as the Severance Benefits set forth in the Description of Severance
Benefits attached hereto as Exhibit B, provided you sign and return the Release
of Claims attached hereto as Exhibit C.

 

II. TERMINATION PRIOR TO RESIGNATION DATE

 

(A)               At Your Option. You may terminate your employment under this
Agreement at any time by giving at least thirty (30) days’ advance written
notice to Five Star (“Termination at Your Option”). In the event of a
Termination at Your Option, Five Star may accelerate your departure date and
will have no obligation to pay you after your actual departure date. In the
event of Termination at the Your Option, you shall be entitled to no payments,
salary continuation, severance or other benefits, except for: (i) your Base
Salary to the extent accrued but unpaid through the date of your departure;
(ii) payment for accrued but unused vacation time up to your departure date; and
(iii) statutory benefit continuation rights in accordance with COBRA (or a state
law equivalent), provided you make the appropriate voluntary contribution
payments and subject to applicable law and the requirements of Five Star’s
health insurance plans then in effect.

 

(B)                 At the election of Five Star for Cause. Five Star may,
immediately and unilaterally, terminate your employment under this Agreement for
“Cause” at any time. Termination shall constitute a termination for Cause under
this Section if such termination is for one or more of the following causes:

 

(i)                                     your failure or refusal to render
services to Five Star in accordance with your obligations under this Agreement
or in accordance with acceptable standards for your position as Senior Vice
President and Chief Operating Officer of Five Star, or your refusal to follow
the lawful instructions of Five Star (other than any such failure resulting from
a Disability), which failure or refusal is not cured within thirty (30) days
after a written demand for performance is delivered to you which specifically
identifies the manner in which it is believed that you have not substantially
performed your duties;

 

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(ii)                                  gross negligence, dishonesty or breach of
fiduciary duty in connection with your duties to Five Star;

 

(iii)                               the commission by you of an act of fraud,
embezzlement, or misappropriation of any money or other assets or property
(whether tangible or intangible);

 

(iv)                              the conviction or entry of a pleading of
guilty by you of a felony or crime of moral turpitude;

 

(v)                                 your material breach of this Agreement
and/or your violation of Five Star’s Ethics or Insider Trading Policies; or

 

(vi)                              your becoming ineligible to be employed by a
provider for any governmental program in which Five Star or any of its
affiliates participates.

 

In the event of a termination for Cause pursuant to the provisions of clauses
(i) through (vi) above, inclusive, you shall be entitled to no payments, salary
continuation, severance or other benefits, except for: (i) your Base Salary to
the extent accrued but unpaid through the termination date; (ii) payment for
accrued but unused vacation time up to the termination date; and (iii) statutory
benefit continuation rights in accordance with COBRA (or a state law
equivalent), provided you make the appropriate voluntary contribution payments
and subject to applicable law and the requirements of Five Star’s health
insurance plans then in effect.

 

(C)  Due to Death or Disability. Your employment will terminate during the Term
if you die or suffer a Disability (as defined below). If this Agreement
terminates due to your death or Disability, you shall be entitled to no
payments, salary continuation, severance or other benefits, except for: (i) Base
Salary and prorated bonus to the extent accrued but unpaid through the date of
such death or Disability; (ii) payment for accrued but unused vacation time up
to the date of such death or the date of Disability; and (iii) statutory benefit
continuation rights in accordance with COBRA, provided you make the appropriate
voluntary contribution payments and subject to applicable law and the
requirements of Five Star’s health insurance plans then in effect. For the
purposes of this Agreement, “Disability” shall mean any physical incapacity or
mental incompetence (x) as a result of which you are unable to perform
substantially all your essential duties and responsibilities hereunder (from
your corporate or a remote office) for an aggregate of 120 days, whether or not
consecutive, during any twelve month period, and (y) which cannot be reasonably
accommodated by Five Star without undue hardship. However, notwithstanding
anything to the contrary, the life insurance policy benefits and long term
disability benefits which you have earned during your employment shall be
benefits payable to you, or your estate, the event of death or Disability during
the Term. The validity of a determination for Disability by Five Star shall be
subject to challenge by you pursuant to the Arbitration Provision provided
herein, and nothing in the Release provided in this Agreement shall prevent such
a challenge by you.

 

If your employment terminates for any reason other than the reasons set forth in
Sections (A), (B), and/or (C) above, then you shall receive all the benefits,
payments, severance (provided you timely execute Exhibit C), participations and
compensation outlined in this Agreement as if you were employed as of the
Resignation Date.

 

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III.              RELEASE

 

In consideration of this Agreement and the performance of Five Star of its
obligations hereunder, you hereby agree to release and forever discharge Five
Star and its respective successors, predecessors, parent companies, affiliates,
subsidiaries, assigns, officers, directors, members, managers, shared services
providers, employees, agents, attorneys, and representatives from any and all
claims, demands, and causes of action of whatever kind or nature, whether known
or unknown, suspected or unsuspected, which you have or at any time heretofore
may have had against Five Star and its respective successors, predecessors,
parent companies, affiliates, subsidiaries, assigns, officers, directors,
members, managers, shared services providers, employees, agents, attorneys, and
representatives from the beginning of the world until the Effective Date,
including, without limiting the generality of the foregoing, any claims arising
from or relating to your employment with Five Star, breach of contract, breach
of the implied covenant of good faith and fair dealing, intentional infliction
of emotional distress, retaliation, negligence, gross negligence, wrongful
discharge, personal injuries or any other occurrence to the Effective Date; any
claims arising under Title VII of the Civil Rights Act of 1964, as amended; the
Age Discrimination in Employment Act of 1967, as amended; The Equal Pay Act, as
amended; the Fair Labor Standards Act, as amended; the Employment Retirement
Income Security Act, as amended; the Americans with Disabilities Act of 1990, as
amended; the Occupational Safety and Health Act, as amended; the Worker
Adjustment and Retraining Notification Act, as amended; the Older Workers
Benefits Protection Act; the Civil Rights Act of 1991, as amended; the Family
and Medical Leave Act, as amended; any claims under 42 U.S.C. §§ 1981, 12001;
the Massachusetts Fair Employment Practices Act; the Massachusetts Civil Rights
Act; Massachusetts Wage Act; and the Massachusetts Equal Rights Act; and any
other statutory, common law or other legal or equitable claims of any nature
whatsoever arising out of your employment with Five Star.

 

This release shall not be a defense to any alleged breach or breach of this
Agreement by Five Star.

 

IV.             CONFIDENTIALITY

 

(a) You acknowledge that Five Star and its affiliates, including, but not
limited to, Reit Management & Research LLC (“RMR”) and its managed companies,
continually develop Confidential Information, that you have developed
Confidential Information for Five Star and its affiliates and will continue to
do so and that you have learned of and will continue to learn of Confidential
Information during the course of your service hereunder. You will comply with
the policies and procedures of Five Star and its affiliates for protecting
Confidential Information and will not disclose to any person or entity or use,
other than as required by applicable law or for the proper performance of your
duties and responsibilities to Five Star and its affiliates, any Confidential
Information obtained by you incident to your prior employment, your service or
your association with Five Star or any of its affiliates, provided that you may
divulge any Confidential Information that may be required by law and may
disclose such information to your personal advisors for purposes of enforcing or
interpreting this Agreement. You understand that this restriction shall continue
to apply after your service hereunder terminates, regardless of the

 

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reason for such termination. The confidentiality obligation under this
Section shall not apply to information which is generally known or readily
available to the public at the time of disclosure or becomes generally known
through no wrongful act on the part of you. Following termination of your
service hereunder, you will not communicate or divulge any Confidential
Information without the Five Star’s prior written consent or as may otherwise be
required by law or legal process.

 

(b)         All documents, records, tapes and other media of every kind and
description relating to the business of Five Star, RMR, any RMR managed company,
or their affiliates and any copies in whole or in part thereof (the “Documents”)
whether or not prepared by you shall be the sole and exclusive property of Five
Star and its affiliates. You will surrender to Five Star at the time your
service hereunder terminates all property of Five Star, including without
limitation all Documents containing Confidential Information then in your
possession.

 

(c)          “Confidential Information” means any and all information of Five
Star and its affiliates, including, but not limited to, RMR and its managed
companies, that is not generally known by others with whom they compete or do
business, and any and all information, publicly known in whole or in part or
not, which, if disclosed by Five Star or its affiliates would assist in
competition against them. Confidential Information includes without limitation
such information relating to (i) the development, research, testing, marketing
and financial activities of Five Star and its affiliates, (ii) the costs,
sources of supply, financial performance and strategic plans of Five Star and
its affiliates, and (iii) the identity and special needs of the customers of
Five Star and its affiliates. Confidential Information also includes any
information that Five Star or any of its affiliates have received, or may
receive hereafter, belonging to others with any understanding, express or
implied, that the information would not be disclosed. Notwithstanding the
foregoing, the term Confidential Information shall not apply to information
which is generally known or readily available in the public domain or to the
public at the time of disclosure or becomes generally known through no wrongful
act on your part.

 

V.                                    NON-DISPARAGEMENT

 

You shall not make any oral or written statements or comments which may be
considered derogatory, disparaging, critical, or negative about Five Star or RMR
or their respective officers, management, employees, or affiliates; or which may
be considered detrimental in any way to the good business name or reputation of
Five Star or RMR or their respective officers, management, employees, or
affiliates. Nothing in this provision shall prevent you from testifying
truthfully in connection with any litigation, arbitration or administrative
proceeding when compelled by subpoena, regulation or court order.

 

VI.                                NON-SOLICITATION

 

You agree that some restrictions on your activities during and after your
service hereunder are necessary to protect the good will, Confidential
Information and other legitimate interests of Five Star. Accordingly, you agree
that, during the Term and for three (3) years immediately following the
Resignation Date, you will not, without the prior written consent of

 

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Five Star, solicit, attempt to solicit, assist others to solicit, hire, or
assist others to hire for employment outside of Five Star any person who is, or
within the preceding six months was, an officer, manager, employee, or
consultant of Five Star or RMR. You further agree, that during the Term and for
three (3) years following the Resignation Date, you shall not, directly or
indirectly, without the written consent of Five Star, solicit any account of RMR
or Five Star or their affiliates, or otherwise persuade such account to
terminate or diminish its relationship with Five Star or RMR or their
affiliates; provided that this restriction shall only apply to accounts which
have had a relationship with Five Star or RMR or their affiliates within the
immediate two (2) years preceding the Resignation Date.

 

You acknowledge that if you were to breach any of the covenants contained in
this Section, the damage to Five Star would be irreparable. You therefore agree
that Five Star in addition to any other remedies available to it, will be
entitled to preliminary and permanent injunctive relief against any breach or
threatened breach by you or any of said covenants. The prevailing party shall
have their reasonable attorneys’ fees paid by the non-prevailing party, the
amount and liability for which shall be determined by the fact-finder. The
parties agree that, in the event that any provision of this Section shall be
determined by any court of competent jurisdiction to be unenforceable, such
provision shall be deemed to be modified to permit its enforcement to the
maximum extent permitted by law.

 

VII.                                ADEA ACKNOWLEDGEMENTS

 

In addition to the provisions contained herein and by execution of this
Agreement, you hereby acknowledge that: (i) you have has sought advice of
counsel regarding your rights under the Age Discrimination in Employment Act of
1967, as amended (“ADEA”) prior to executing this Agreement; and (ii) you
expressly understand that you are knowingly and voluntarily waiving your rights
and claims under the ADEA by entering into this Agreement in exchange the
provisions of this Agreement.

 

You hereby acknowledge that you have been advised that you are given twenty-one
(21) days within which to consider this Agreement before signing it, and that
you have expressly and voluntarily chosen to sign this Agreement. You also
acknowledge that you are aware that under the ADEA you have seven (7) days from
the date you sign this Agreement to revoke your signature before this Agreement
becomes effective. If you intend to revoke your signature, you shall do so by
written notice addressed to and received by the Five Star Chief Executive
Officer, Bruce Mackey, 400 Centre Street, Newton, Massachusetts 02458, within
seven (7) days of the date you execute this Agreement, after which the Agreement
becomes final and binding. The Parties agree that if you exercise your right to
revoke this Agreement, then you are not entitled to any of the Severance
Benefits described in Exhibit B and this Agreement becomes null and void. This
Agreement shall become effective eight (8) days after full execution by the
Parties if Five Star has not received written notice from you revoking your
signature (the “Effective Date”).

 

VIII.                            OTHER LEGAL ACKNOWLEDGEMENTS

 

You acknowledge that you have been advised to retain, and have had the
opportunity to retain, an attorney for advice regarding the effect of this
Agreement prior to signing it. You further acknowledge that you were offered and
advised to take time to study this Agreement

 

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before signing it. Moreover, you acknowledge that you have read and understand
the Agreement, have had it explained to you thoroughly by your attorney and
execute it knowingly, voluntarily, and without coercion.

 

IX.                                TAX PROVISIONS

 

You agree that you shall be responsible for your own tax obligations or
liabilities created under state or federal laws by the payment of financial
consideration under this Agreement. You further agree that you shall indemnify
Five Star for any tax obligations or liabilities that may be imposed on it by
virtue of the payment of financial consideration under this Agreement.

 

X.                                    INDEMNIFICATION

 

Five Star shall indemnify you in accordance with the Indemnification Agreement
made and entered between you and Five Star as of March 2004. Nothing contained
or referenced herein shall alter, amend, modify, or waive any of the terms of
such Indemnification Agreement.

 

XI.                                ENTIRE AGREEMENT

 

This Agreement represents the Parties’ entire agreement and understanding. This
Agreement may not be amended or altered except by the written agreement of the
Parties. The Parties acknowledge that they are not relying on any promises or
oral or written statements or representations other than those in this
Agreement. No waiver of any provision of this Agreement will be valid unless in
writing and signed by the party against whom such waiver is charged.

 

XII.                            NATURE OF AGREEMENT

 

The parties understand and agree that neither this Agreement nor the payment or
acceptance of any sum provided for herein shall be construed as an admission by
any party of any liability or wrongdoing of any kind to the other party.

 

XIII.                        SEVERABILITY

 

If any portion or provision of this Agreement shall to any extent be declared
illegal or unenforceable by a court of competent jurisdiction, then the
remainder of this Agreement, or the application of such portion or provision in
circumstances other than those as to which it is so declared illegal or
unenforceable, shall not be affected thereby, and each portion and provision of
this Agreement shall be valid and enforceable to the fullest extent permitted by
law.

 

XIV.                       SECTION 409A

 

Each payment made under this Agreement shall be treated as a separate payment
and the right to a series of installment payments under this Agreement is to be
treated as a right to a

 

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series of separate payments. Notwithstanding anything to the contrary in this
Agreement, if at the time of your separation from service, you are a “specified
employee,” as defined below, any and all amounts payable under this Agreement on
account of such separation from service that would (but for this provision) be
payable within six (6) months following the date of termination, will instead be
paid on the next business day following the expiration of such six (6) month
period or, if earlier, upon your death; except (A) to the extent of amounts that
do not constitute a deferral of compensation within the meaning of Treasury
regulation Section 1.409A-1(b) (including without limitation by reason of the
safe harbor set forth in Section 1.409A-1(b)(9)(iii), as determined by Five Star
in its reasonable good faith discretion); or (B) other amounts or benefits that
are not subject to the requirements of Section 409A of the Code. For purposes of
this Agreement, all references to “termination of employment” and correlative
phrases shall be construed to require a “separation from service” (as defined in
Section 1.409A-1(h) of the Treasury regulations after giving effect to the
presumptions contained therein), and the term “specified employee” means an
individual determined by Five Star to be a specified employee under Treasury
regulation Section 1.409A-1(i).

 

XV.                               COUNTERPARTS

 

This Agreement may be executed in two or more counterparts, each of which shall
be deemed an original it shall not be necessary in making proof of this
Agreement to produce or account for more than one such counterpart; and a
facsimile or personal document format (“.pdf”) form of signatures hereto shall
constitute original execution hereof.

 

XVI.                           APPLICABLE LAW, JURISDICTION, VENUE, AND DISPUTE
RESOLUTION

 

The Parties agree that this Agreement will be deemed to have been drafted
jointly by the Parties and, in the event of a dispute, shall not be construed in
favor of or against either party by reason of such party’s contribution to the
drafting of the Agreement. This Agreement is interpreted, enforced and governed
by and under the laws of the Commonwealth of Massachusetts without regard to
conflict of law, provision, or rule that would cause the application of the laws
of any other jurisdiction. The Parties agree that the adjudication of any
dispute shall take place in Boston, Massachusetts and the Parties agree to
submit to the jurisdiction of Massachusetts. Any controversy, dispute or claim
arising out of or relating to this Agreement or breach thereof shall first be
settled through good faith negotiation. If the dispute cannot be settled through
negotiation, the parties agree to attempt in good faith to settle the dispute by
mediation administered by JAMS. If the parties are unsuccessful at resolving the
dispute through mediation, the parties agree to compulsory and binding
arbitration administered by JAMS pursuant to its Employment Arbitration Rules &
Procedures and subject to JAMS Policy on Employment Arbitration Minimum
Standards of Procedural Fairness. Judgment on the Award may be entered in any
court having jurisdiction. The prevailing party shall be awarded from the
non-prevailing party all costs, fees, and expenses assessed by JAMS as well as
the prevailing party’s reasonable attorneys’ fees and expenses.

 

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XVII. BINDING NATURE OF AGREEMENT

 

This Agreement is binding upon and shall inure to the benefit of the Parties
hereto, their respective heirs, administrators, beneficiaries, representatives,
executors, successors and assigns.

 

If the terms of this Agreement are acceptable to you, please sign, date, and
return it to me. Should you sign this Agreement, it will take effect as a
legally-binding agreement under seal between and among you and Five Star in
accordance with the terms set forth above. The enclosed copy of this Agreement,
which you should also sign and date, is for your records.

 

 

Five Star Quality Care, Inc.,

 

 

 

 

 

 

 

 

By:

/s/ Bruce Mackey

 

 

Name:

Bruce Mackey

 

 

Title:

Chief Executive Officer

 

 

 

 

 

 

 

 

Accepted and Agreed:

 

 

 

 

 

 

 

 

/s/ Rosemary Esposito

 

11/18/11

Rosemary Esposito, in her own capacity

 

Date

 

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EXHIBIT A

 

Confirmation of Resignation

 

 

December 31, 2012

 

Mr. Bruce J. Mackey

President

Five Star Quality Care, Inc.

400 Centre Street

 

Newton, MA 02458

 

Dear Bruce:

 

This letter confirms my resignation as of December 31, 2012 from all positions
and offices that I currently hold at Five Star Quality Care, Inc. and its
subsidiaries, including, without limitation, the positions of Senior Vice
President, Chief Operating Officer and Chief Clinical Officer. This resignation
is not the result of any dispute or disagreement with the Company.

 

 

Sincerely,

 

 

 

 

 

Rosemary Esposito

 

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EXHIBIT A-1

 

Email from CEO to Five Star Employees

 

Rosemary Esposito has resigned as Chief Operating Office of Five Star Quality
Care, effective December 31, 2012. We are grateful to Rosemary for the many
contributions she has made to the Company’s success and strategic directives.
The Company anticipates a smooth transition of her duties. We thank Rosemary for
her many contributions and wish her the best of success in the future.

 

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EXHIBIT B

 

Description of Severance Benefits

 

In recognition of your years of service to Five Star, Five Star has elected to
confer upon you severance benefits. Provided that you timely sign, return and do
not revoke Attachment C, Five Star will pay you severance pay in the form of
continuation of your Base Salary, less all applicable state and federal taxes,
from the Resignation Date until December 31, 2014 (“Severance Period”). This
severance pay will be paid in accordance with Five Star’s normal payroll
procedures but in no event earlier than the eighth (8th) day after your
execution of Attachment C.

 

All other benefits, except the life insurance benefit and long-term disability
(each of which will be maintained by Five Star at current levels), will cease
upon your resignation on December 31, 2012. Notwithstanding the foregoing, if
permitted under the terms and regulations of Five Star’s health insurance plan
in effect as of the Resignation Date, you may continue to be enrolled in Five
Star’s health insurance plan during the Severance Period. You agree that, should
you continue to be enrolled in Five Star’s health insurance plan during the
Severance Period, you will be responsible for the payment of all of your
employee contributions. To the extent you are ineligible to be enrolled in Five
Star’s health insurance plan during the Severance Period, if eligible to do so,
you may elect to continue receiving group medical insurance pursuant to the
federal “COBRA” law, 29 U.S.C. § 1161 et seq., after your resignation on
December 31, 2012. All premium costs for “COBRA” shall be paid by you on a
monthly basis for as long as, and to the extent that, you remain eligible for
COBRA continuation.

 

You agree to be available for consulting services, not to exceed 100 hours per
year, during the Severance Period at Five Star’s sole discretion.

 

In the event of your death during the Severance Period, the severance pay
delineated herein accruing from and after your date of death shall cease to be
payable, but the full value of the life insurance benefit shall be paid to your
life insurance beneficiary.

 

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EXHIBIT C

 

Release of Claims

 

WAIVER AND RELEASE OF CLAIMS

 

You agree to release and forever discharge Five Star and its respective
successors, predecessors, parent companies, affiliates, subsidiaries, assigns,
officers, directors, members, managers, shared services providers, employees,
agents, attorneys, and representatives from any and all claims, demands, and
causes of action of whatever kind or nature, whether known or unknown, suspected
or unsuspected, which you have or at any time heretofore may have had against
Five Star and its respective successors, predecessors, parent companies,
affiliates, subsidiaries, assigns, officers, directors, members, managers,
shared services providers, employees, agents, attorneys, and representatives
from the beginning of the world until the date of this Exhibit C, including
without limiting the generality of the foregoing, any claims arising from or
relating to your employment with Five Star, breach of contract, breach of the
implied covenant of good faith and fair dealing, intentional infliction of
emotional distress, retaliation, negligence, gross negligence, wrongful
discharge, personal injuries or any other occurrence to the date of this
Agreement; any claims arising under Title VII of the Civil Rights Act of 1964,
as amended; the Age Discrimination in Employment Act of 1967, as amended; The
Equal Pay Act, as amended; the Fair Labor Standards Act, as amended; the
Employment Retirement Income Security Act, as amended; the Americans with
Disabilities Act of 1990, as amended; the Occupational Safety and Health Act, as
amended; the Worker Adjustment and Retraining Notification Act, as amended; the
Older Workers Benefits Protection Act; the Civil Rights Act of 1991, as amended;
the Family and Medical Leave Act, as amended; any claims under 42 U.S.C. §§
1981, 12001; the Massachusetts Fair Employment Practices Act; the Massachusetts
Civil Rights Act; Massachusetts Wage Act; and the Massachusetts Equal Rights
Act; and any other statutory, common law or other legal or equitable claims of
any nature whatsoever arising out of your employment with Five Star. This
release does not apply to any claim which arises from conduct occurring
subsequent to the date of the execution of this Exhibit C.

 

ACKNOWLEDGEMENTS

 

In addition to the provisions contained herein and by execution of this
Agreement, you hereby acknowledge that: (i) you have sought advice of counsel
regarding his rights under the Age Discrimination in Employment Act of 1967, as
amended (“ADEA”) prior to executing this Agreement; and (ii) you expressly
understand that you are knowingly and voluntarily waiving your rights and claims
under the ADEA by entering into this Agreement in exchange for the Severance
Benefits described in Exhibit B.

 

You hereby acknowledge that you have been advised that you are given twenty-one
(21) days within which to consider this Agreement before signing it, and that
you have expressly and voluntarily chosen to sign this Agreement. You also
acknowledge that you are aware that under the ADEA you have seven (7) days from
the date you sign this Agreement to revoke your signature before this Agreement
becomes effective. If you intend to revoke your signature, you shall do so by
written notice addressed to and received by Five Star Chief Executive Officer,
Bruce Mackey, 400 Centre Street, Newton, Massachusetts 02458, within seven
(7) days of the date you execute this Agreement, after which the Agreement
becomes final and binding. The Parties agree that if you exercise your right to
revoke this Agreement, then you are not entitled to

 

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any of the Severance Benefits described in Exhibit B and this Agreement becomes
null and void. This Agreement shall become effective eight (8) days after full
execution by the Parties if Five Star has not received written notice from you
revoking your signature (the “Effective Date”).

 

This release shall not be a defense to any alleged breach or breach by Five Star
with respect to the payment of Severance obligations set forth in Exhibit B of
this Agreement.

 

I hereby provide this release of claims as of the date indicated below and
acknowledge that the execution of this Exhibit C is in further consideration of
the benefits set forth in Exhibit B to the Agreement, to which I acknowledge I
would not be entitled if I did not sign this release of claims. I intend that
this Exhibit C become a binding agreement between me and Five Star if I do not
revoke my acceptance within seven (7) days.

 

 

 

 

 

Rosemary Esposito

 

 

 

 

 

 

 

 

Dated:

*

 

 

 

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*To be signed and returned to the Chief Executive Officer of Five Star on, and
not before, December 31, 2012 or the date of termination for reasons other than
Cause if earlier than December 31, 2012.

 

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