Exhibit 10.2

 

SEPARATION AGREEMENT

 

SEPARATION AGREEMENT (“Agreement”) made December 31, 2009 between Five Star
Quality Care, Inc. (“Company”) and Francis R. Murphy III (“Murphy”).

 

RECITAL

 

Murphy was an employee of the Company and has been its Treasurer and Chief
Financial Officer since May 1, 2008.  Murphy’s employment with the Company and
its subsidiaries terminated on the date of this Agreement (the “Separation
Date”) and Murphy has been replaced as the Company’s Treasurer and Chief
Financial Officer as of January 1, 2010.  Murphy and the Company desire to set
forth certain understandings in connection with his termination.

 

NOW, THEREFORE, the parties agree as follows:

 

SECTION 1.  PAYMENTS; INSURANCE AND BENEFITS; RESTRICTED SHARE AGREEMENTS

 

(A)           ON THE SEPARATION DATE, THE COMPANY HAS PAID MURPHY HIS SALARY
PLUS ANY DAYS OF ACCRUED, BUT UNUSED, VACATION TIME THROUGH THE SEPARATION DATE.

 

(B)           IF THIS AGREEMENT BECOMES EFFECTIVE PURSUANT TO SECTION 14, THE
COMPANY WILL PAY MURPHY AGGREGATE SEVERANCE OF $200,000, WHICH WILL BE PAID ON
THE BUSINESS DAY AFTER THIS AGREEMENT BECOMES EFFECTIVE PURSUANT TO SECTION 14.

 

(C)           THE COMPANY HAS PROVIDED MURPHY WITH SEPARATE WRITTEN NOTIFICATION
OF HIS RIGHTS UNDER COBRA TO CONTINUE HIS PARTICIPATION IN THE COMPANY’S GROUP
HEALTH PLAN(S) AT MURPHY’S OWN EXPENSE AFTER THE SEPARATION DATE.  MURPHY’S
ELIGIBILITY TO PARTICIPATE IN ALL OTHER COMPANY BENEFIT PLANS AND ARRANGEMENTS
ENDED ON THE SEPARATION DATE.

 

(D)           IF, AND ON THE BUSINESS DAY FOLLOWING THE DATE, THIS AGREEMENT
BECOMES EFFECTIVE PURSUANT TO SECTION 14, THE COMPANY WILL ENTER INTO AN
ACCELERATED VESTING AGREEMENT IN THE FORM OF EXHIBIT A WITH RESPECT TO THE
RESTRICTED SHARE AGREEMENTS LISTED ON EXHIBIT B.  MURPHY AGREES THAT SO LONG AS
HE OWNS SHARES OF THE COMPANY, AT ANY MEETING OF THE SHAREHOLDERS OF THE
COMPANY, HE WILL VOTE ALL SHARES THEN OWNED BY HIM IN FAVOR OF ALL NOMINEES FOR
DIRECTOR AND ALL PROPOSALS RECOMMENDED BY THE BOARD OF DIRECTORS IN THE PROXY
STATEMENT FOR SUCH MEETING.

 

(E)           ALL PAYMENTS TO MURPHY UNDER SECTION 1(B) SHALL BE REDUCED BY
WITHHOLDINGS REQUIRED BY LAW, INCLUDING WITHHOLDINGS REQUIRED AS A RESULT OF THE
ACCELERATED VESTING AGREEMENT.  IF WITHHOLDING IS REQUIRED AT A TIME WHEN NO
PAYMENT UNDER SECTION 1(B) IS BEING MADE OR SUCH PAYMENT IS INSUFFICIENT TO
COVER ALL WITHHOLDING, MURPHY AGREES TO PAY TO THE COMPANY BY CHECK OR WIRE
TRANSFER OF IMMEDIATELY AVAILABLE FUNDS, AN AMOUNT EQUAL TO THE REQUIRED
WITHHOLDING (AS DETERMINED BY THE COMPANY) OR AT THE OPTION OF THE COMPANY, THE
COMPANY MAY DEDUCT SUCH AMOUNT FROM ANY OTHER CASH PAYMENT THEN BEING MADE OR
OTHERWISE OWING TO MURPHY FROM THE COMPANY OR ANY SUBSIDIARY.

 

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SECTION 2.  COVENANTS.  MURPHY 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) MURPHY’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 2 ARE ESSENTIAL TO PROTECT THE COMPANY’S
BUSINESS AND THE GOODWILL ASSOCIATED WITH IT.  ACCORDINGLY, MURPHY COVENANTS AND
AGREES AS FOLLOWS:

 

(A)           CONFIDENTIAL INFORMATION.  FROM AND AFTER THE DATE HEREOF, MURPHY
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, 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 MURPHY FROM (A) MAKING ANY DISCLOSURE REQUIRED BY LAW OR COURT ORDER
PROVIDED MURPHY HAS GIVEN THE COMPANY NOTICE THAT HE IS REQUIRED TO MAKE SUCH
DISCLOSURE SUFFICIENTLY IN ADVANCE OF SUCH DISCLOSURE TO PERMIT THE COMPANY TO
SEEK PROTECTION FROM SUCH REQUIREMENT 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 2(B) BY MURPHY), (II) ACQUIRED
BY MURPHY INDEPENDENTLY OF HIS AFFILIATION WITH THE COMPANY OR ANY OF THE
COMPANY’S SUBSIDIARIES WITHOUT BREACH OF ANY CONFIDENTIALITY OBLIGATION ON THE
PART OF THE DISCLOSING PERSON, OR (III) OF A GENERAL NATURE (THAT IS, NOT
RELATED SPECIFICALLY TO THE COMPANY, ANY OF ITS SUBSIDIARIES OR 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.  MURPHY
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 INFORMATION EMBODIED IN ANY
PHYSICAL OR ELECTRONIC MEDIUM TO THE OWNER THEREOF UPON THE TERMINATION OF
MURPHY’S EMPLOYMENT WITH THE COMPANY OR AT ANY OTHER TIME ON REQUEST.

 

(B)           NO SOLICITATION.  FOR THE PERIOD OF THREE (3) YEARS AND SIX
(6) MONTHS FOLLOWING THE DATE HEREOF, MURPHY SHALL NOT, DIRECTLY OR INDIRECTLY,
(A) SOLICIT ANY EMPLOYEE TO LEAVE THE EMPLOYMENT OF THE COMPANY OR ANY OF THE
COMPANY’S SUBSIDIARIES OR (B) HIRE ANY EMPLOYEE WHO HAS LEFT THE EMPLOY OF THE
COMPANY OR ANY OF THE COMPANY’S SUBSIDIARIES WITHIN SIX (6) MONTHS AFTER
TERMINATION OF SUCH EMPLOYEE’S EMPLOYMENT WITH THE COMPANY OR SUCH SUBSIDIARY,
AS THE CASE MAY BE (UNLESS SUCH EMPLOYEE WAS DISCHARGED WITHOUT CAUSE), PROVIDED
A GENERAL SOLICITATION BY MURPHY’S THEN EMPLOYER NOT DIRECTED TO EMPLOYEES OF
THE COMPANY OR ANY OF THE COMPANY’S SUBSIDIARIES SHALL NOT BE A BREACH OF THIS
PROVISION SO LONG AS MURPHY DOES NOT PARTICIPATE IN ANY MANNER (INCLUDING ANY
VETTING OR INTERVIEWING OF PROSPECTIVE EMPLOYEES).

 

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(C)           COOPERATION.  FROM AND AFTER THE DATE HEREOF, MURPHY 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
MURPHY 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.  FROM AND AFTER THE DATE HEREOF THROUGH DECEMBER 31, 2010, MURPHY SHALL
ALSO REASONABLY COOPERATE WITH THE COMPANY AND ITS SUBSIDIARIES WITH RESPECT TO
TRANSITIONING HIS SERVICES TO THE SUCCESSOR TREASURER AND CHIEF FINANCIAL
OFFICER OF THE COMPANY.

 

SECTION 3.  RIGHTS AND REMEDIES UPON BREACH OF COVENANTS.

 

(A)           IF MURPHY BREACHES, OR THREATENS TO COMMIT A BREACH OF, ANY OF THE
PROVISIONS OF SECTION 2 (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 RIGHTS AND
REMEDIES SHALL BE INDEPENDENT OF THE OTHERS AND SEVERALLY ENFORCEABLE, AND ALL
OF WHICH RIGHTS AND REMEDIES SHALL BE IN ADDITION TO, AND NOT IN LIEU OF, ANY
OTHER RIGHTS AND REMEDIES AVAILABLE TO THE COMPANY AT LAW OR IN EQUITY.

 

(B)           MURPHY ACKNOWLEDGES AND AGREES THAT THE RESTRICTIVE COVENANTS ARE
REASONABLE AND VALID IN DURATION, SCOPE AND IN ALL OTHER RESPECTS.  IF ANY COURT
DETERMINES THAT ANY OF THE RESTRICTIVE COVENANTS, OR ANY PART THEREOF, IS
INVALID OR UNENFORCEABLE, THE REMAINDER OF THE RESTRICTIVE COVENANTS SHALL NOT
THEREBY BE AFFECTED AND SHALL BE GIVEN FULL EFFECT TO THE GREATEST EXTENT
POSSIBLE, WITHOUT REGARD TO THE INVALID PORTIONS.

 

(C)           IF ANY COURT CONSTRUES ANY OF THE RESTRICTIVE COVENANTS, OR ANY
PART THEREOF, TO BE UNENFORCEABLE BECAUSE OF THE DURATION OF SUCH PROVISION OR
THE SCOPE, SUCH COURT SHALL HAVE THE POWER TO REDUCE THE DURATION OR SCOPE OF
SUCH PROVISION AND, IN ITS REDUCED FORM, SUCH PROVISION SHALL BE ENFORCEABLE AND
SHALL BE ENFORCED TO THE GREATEST EXTENT POSSIBLE.

 

SECTION 4.  REPRESENTATIONS.  WITH RESPECT TO THE PERIOD DURING WHICH HE HAS
BEEN EMPLOYED BY THE COMPANY, MURPHY REPRESENTS, TO THE BEST OF HIS KNOWLEDGE
AND BELIEF, THAT (I) NEITHER THE FINANCIAL BOOKS AND RECORDS OF THE COMPANY AND
ITS SUBSIDIARIES NOR ANY REGULATORY FILINGS OF THE COMPANY OR ANY OF ITS
SUBSIDIARIES WITH THE SECURITIES AND EXCHANGE COMMISSION PRESENT ANY ACCOUNTING
IRREGULARITIES AND THAT ALL FINANCIAL INFORMATION OF THE COMPANY AND ITS
SUBSIDIARIES WAS PREPARED IN COMPLIANCE WITH ALL APPLICABLE ACCOUNTING STANDARDS
AND ALL FINANCIAL INFORMATION IN ANY REGULATORY FILINGS OF THE COMPANY WITH THE
SECURITIES AND EXCHANGE COMMISSION CONFORMED TO THE REGULATIONS OF THE
SECURITIES EXCHANGE ACT OF 1934, (II) NEITHER THE COMPANY NOR ANY SUBSIDIARY IS
IN VIOLATION OF ANY LAW AND (III) NEITHER THE COMPANY NOR ANY SUBSIDIARY HAS
FAILED TO DISCLOSE ANY MATERIAL INFORMATION REQUIRED BY LAW TO BE DISCLOSED IN
ANY REGULATORY FILINGS OF THE COMPANY OR SUCH SUBSIDIARY WITH THE SECURITIES AND
EXCHANGE COMMISSION.

 

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SECTION 5.  GENERAL RELEASE OF CLAIMS.  IN EXCHANGE FOR THE PROMISES SET FORTH
HEREIN, MURPHY, ON BEHALF OF HIMSELF AND HIS HEIRS, EXECUTORS, ADMINISTRATORS
AND ASSIGNS, HEREBY RELEASES AND FOREVER DISCHARGES THE COMPANY AND ITS
AFFILIATES AND SUBSIDIARIES, AND ALL OF THEIR RESPECTIVE DIRECTORS, OFFICERS,
EMPLOYEES, AGENTS, SUCCESSORS, AND ASSIGNS, IN THEIR OFFICIAL AND INDIVIDUAL
CAPACITIES (THE “COMPANY RELEASEES”), FROM ANY AND ALL SUITS, CLAIMS, DEMANDS,
DEBTS, SUMS OF MONEY, DAMAGES, INTEREST, ATTORNEYS’ FEES, EXPENSES, ACTIONS,
CAUSES OF ACTION, JUDGMENTS, ACCOUNTS, PROMISES, CONTRACTS, AGREEMENTS, AND ANY
AND ALL CLAIMS OF LAW OR IN EQUITY, WHETHER NOW KNOWN OR UNKNOWN, WHICH MURPHY
NOW HAS OR EVER HAVE HAD AGAINST ANY OF THE COMPANY RELEASEES, INCLUDING, BUT
NOT LIMITED TO, ANY CLAIMS UNDER TITLE VII OF THE CIVIL RIGHTS ACT OF 1964, THE
AMERICANS WITH DISABILITIES ACT, THE AGE DISCRIMINATION IN EMPLOYMENT ACT, THE
OLDER WORKER BENEFITS PROTECTION ACT, THE FAMILY AND MEDICAL LEAVE ACT,
MASSACHUSETTS GENERAL LAWS CHAPTERS 149 AND 151B AND ANY OTHER FEDERAL, STATE OR
LOCAL STATUTE, REGULATION, ORDINANCE OR COMMON LAW CREATING EMPLOYMENT-RELATED
CAUSES OF ACTION, ALL CLAIMS RELATED TO OR ARISING OUT OF MURPHY’S EMPLOYMENT BY
THE COMPANY OR THE TERMINATION OF SUCH EMPLOYMENT AND ALL RIGHTS AND CLAIMS TO
RECOVER ANY MONETARY BENEFITS OR DAMAGES IN CONNECTION WITH ANY PROCEEDING
BROUGHT AGAINST ANY OF THE COMPANY RELEASEES ON MURPHY’S BEHALF OR ON BEHALF OF
A CLASS OF WHICH MURPHY MAY BE A MEMBER WITH RESPECT TO ANY OF THE FOREGOING. 
THIS GENERAL RELEASE OF CLAIMS SHALL NOT APPLY TO (A) ANY VESTED INTEREST MURPHY
MAY HAVE IN ANY 401(K), PENSION OR EMPLOYEE WELFARE PLAN BY VIRTUE OF MURPHY’S
EMPLOYMENT BY THE COMPANY; (B) ANY CLAIM THAT MAY NOT BE WAIVED BY LAW; AND
(C) ANY CLAIM BY MURPHY TO ENFORCE THIS AGREEMENT. THE RELEASES SET FORTH IN
THIS SECTION 5 DO NOT TAKE EFFECT UNLESS THIS AGREEMENT BECOMES EFFECTIVE
PURSUANT TO SECTION 14 BELOW.

 

SECTION 6.  NON-DISPARAGEMENT.  MURPHY SHALL NOT TAKE ANY ACTION OR MAKE ANY
STATEMENT, WRITTEN OR ORAL, THAT DISPARAGES THE COMPANY, ANY OF ITS SUBSIDIARIES
OR ANY OF THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS, OR THAT HAS
THE INTENDED OR FORESEEABLE EFFECT OF HARMING THE COMPANY’S OR ANY SUBSIDIARY’S
REPUTATION OR THE PERSONAL OR BUSINESS REPUTATION OF ANY OF THEIR RESPECTIVE
OFFICERS, DIRECTORS, EMPLOYEES OR AGENTS.

 

SECTION 7.  ASSIGNMENT.  IN THE EVENT THAT THE COMPANY SHALL BE MERGED WITH, OR
CONSOLIDATED INTO, ANY OTHER PERSON OR ENTITY, OR IN THE EVENT THAT IT SHALL
SELL AND TRANSFER SUBSTANTIALLY ALL OF ITS ASSETS TO ANOTHER PERSON OR ENTITY,
THE TERMS OF THIS AGREEMENT SHALL INURE TO THE BENEFIT OF, AND BE ASSUMED BY,
THE PERSON OR ENTITY RESULTING FROM SUCH MERGER OR CONSOLIDATION, OR TO WHICH
THE COMPANY’S ASSETS SHALL BE SOLD AND TRANSFERRED. THIS AGREEMENT SHALL NOT BE
ASSIGNABLE BY MURPHY.

 

SECTION 8.  GOVERNING LAW. THIS AGREEMENT WILL BE GOVERNED BY THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES
THAT MIGHT LEAD TO THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION.

 

SECTION 9.  JURISDICTION; SERVICE OF PROCESS.  ANY ACTION OR PROCEEDING SEEKING
TO ENFORCE ANY PROVISION OF, OR BASED ON ANY RIGHT ARISING OUT OF, THIS
AGREEMENT MAY BE BROUGHT AGAINST EITHER OF THE PARTIES IN THE STATE COURTS OF
MASSACHUSETTS OR IN THE UNITED STATES DISTRICT COURT IN BOSTON, MASSACHUSETTS
AND EACH OF THE PARTIES CONSENTS TO THE JURISDICTION OF SUCH COURTS (AND OF THE
APPROPRIATE APPELLATE COURTS) IN ANY SUCH ACTION OR PROCEEDING AND WAIVES ANY
OBJECTION TO VENUE LAID THEREIN. PROCESS IN ANY ACTION OR PROCEEDING REFERRED TO
IN THE PRECEDING SENTENCE MAY BE SERVED ON EITHER PARTY ANYWHERE IN THE WORLD.

 

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SECTION 10.  COUNTERPARTS.  THIS AGREEMENT MAY BE EXECUTED IN ONE OR MORE
COUNTERPARTS, EACH OF WHICH WILL BE DEEMED TO BE AN ORIGINAL COPY OF THIS
AGREEMENT AND ALL OF WHICH, WHEN TAKEN TOGETHER, WILL BE DEEMED TO CONSTITUTE
ONE AND THE SAME AGREEMENT, BUT IN PROVING THIS AGREEMENT, IT SHALL NOT BE
NECESSARY TO PRODUCE MORE THAN ONE OF SUCH COUNTERPARTS.

 

SECTION 11.  SECTION HEADINGS; CONSTRUCTION.  THE HEADINGS OF SECTIONS IN THIS
AGREEMENT ARE PROVIDED FOR CONVENIENCE ONLY AND WILL NOT AFFECT ITS CONSTRUCTION
OR INTERPRETATION. ALL REFERENCES TO “SECTION” OR “SECTIONS” REFER TO THE
CORRESPONDING SECTION OR SECTIONS OF THIS AGREEMENT UNLESS OTHERWISE SPECIFIED.
ALL WORDS USED IN THIS AGREEMENT WILL BE CONSTRUED TO BE OF SUCH GENDER OR
NUMBER AS THE CIRCUMSTANCES REQUIRE. UNLESS OTHERWISE EXPRESSLY PROVIDED, THE
WORD “INCLUDING” DOES NOT LIMIT THE PRECEDING WORDS OR TERMS.

 

SECTION 12.  NOTICES. ALL NOTICES, CONSENTS, WAIVERS, AND OTHER COMMUNICATIONS
UNDER THIS AGREEMENT SHALL BE IN WRITING AND WILL BE DEEMED TO HAVE BEEN DULY
GIVEN WHEN (A) DELIVERED BY HAND, (B) SENT BY FACSIMILE (WITH A COPY SENT BY
NATIONALLY RECOGNIZED OVERNIGHT DELIVERY SERVICE) OR (C) WHEN SENT BY NATIONALLY
RECOGNIZED OVERNIGHT DELIVERY SERVICE, IN EACH CASE TO THE APPROPRIATE ADDRESSES
SET FORTH BELOW (OR TO SUCH OTHER ADDRESSES AS A PARTY MAY DESIGNATE BY NOTICE
TO THE OTHER PARTIES):

 

 

Murphy:

                                               

 

 

                                               

 

 

Facsimile:

 

 

 

 

the Company:

Five Star Quality Care, Inc.

 

 

400 Centre Street

 

 

Newton, MA 02458

 

 

Attention: President

 

 

FACSIMILE: 617.796.8385

 

SECTION 13.  ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE COMPANY AND MURPHY WITH RESPECT TO THE SUBJECT MATTER AND SUPERSEDES
ALL PRIOR WRITTEN AND ORAL AGREEMENTS AND UNDERSTANDINGS BETWEEN THE COMPANY AND
MURPHY WITH RESPECT THERETO. THIS AGREEMENT MAY NOT BE AMENDED EXCEPT BY A
WRITTEN AGREEMENT EXECUTED BY THE PARTY TO BE CHARGED WITH THE AMENDMENT.

 

SECTION 14.  CONSULTATION WITH COUNSEL; TIME TO SIGN; REVOCATION.  MURPHY HAS
THE RIGHT TO AND SHOULD CONSULT AN ATTORNEY WITH RESPECT TO THIS AGREEMENT. 
MURPHY WILL HAVE TWENTY-ONE (21) DAYS FROM RECEIPT OF THIS AGREEMENT TO DECIDE
WHETHER TO SIGN THIS AGREEMENT.  IF THIS AGREEMENT HAS NOT BEEN RETURNED TO THE
COMPANY, C/O ITS PRESIDENT, SIGNED BY MURPHY WITHIN TWENTY-ONE (21) DAYS AFTER
RECEIPT BY MURPHY, THIS AGREEMENT SHALL NOT BE VALID.  ANY CHANGES MADE TO THIS
AGREEMENT AFTER MURPHY RECEIVES IT, WHETHER MATERIAL OR IMMATERIAL, WILL NOT
START THE RUNNING OF A NEW 21-DAY CONSIDERATION PERIOD.  MURPHY SHALL HAVE SEVEN
(7) DAYS AFTER SIGNING THIS AGREEMENT TO REVOKE HIS SIGNATURE, WHICH CAN BE
ACCOMPLISHED BY DELIVERING A WRITTEN NOTICE OF REVOCATION TO THE COMPANY, C/O
ITS PRESIDENT, BEFORE THE EXPIRATION OF THE SEVEN (7) DAY REVOCATION PERIOD. 
THIS AGREEMENT SHALL NOT BE EFFECTIVE (AND NEITHER THE COMPANY NOR MURPHY HAVE
ANY OBLIGATIONS HEREUNDER) UNTIL THE EXPIRATION OF THE SEVEN (7) DAY REVOCATION
PERIOD.

 

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SECTION 15.  VOLUNTARY EXECUTION; NO REPRESENTATIONS.  BY SIGNING THIS AGREEMENT
MURPHY ACKNOWLEDGES THAT HE IS DOING SO KNOWINGLY AND VOLUNTARILY, AND THAT HE
IS RECEIVING BENEFITS HEREUNDER TO WHICH HE IS NOT OTHERWISE ENTITLED.  MURPHY
ALSO ACKNOWLEDGES THAT HE IS NOT RELYING ON ANY REPRESENTATIONS OR PROMISES BY
THE COMPANY OR BY ANY REPRESENTATIVE OF THE COMPANY CONCERNING THE MEANING OF
ANY ASPECT OF THIS AGREEMENT EXCEPT AS STATED HEREIN.

 

EXECUTED under seal as of the date first above written.

 

 

 

Five Star Quality Care, Inc.

 

 

 

 

 

By: 

/s/ Bruce J. Mackey, Jr.

 

 

Bruce J. Mackey, Jr., President

 

 

 

/s/ Francis R. Murphy III

 

Francis R. Murphy III

 

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EXHIBIT A

 

ACCELERATED VESTING AGREEMENT

 

THIS ACCELERATED VESTING AGREEMENT (this “Agreement”), dated as of
                      , 2010, is by and among Five Star Quality Care, Inc., a
Maryland corporation (the “Company”) and Francis R. Murphy III (“Murphy”).

 

RECITAL

 

Pursuant to those certain Restricted Share Agreements, one dated as of
November 17, 2007, and one dated November 24, 2008, by and between the Company
and Murphy (the “Restricted Share Agreements”), the Company granted Murphy the
Shares (as defined in each Restricted Share Agreement) subject to the vesting
and repurchase provisions described therein.

 

In connection with the termination of Murphy’s employment with the Company
pursuant to that certain Separation Agreement dated December 31, 2009 (the
“Separation Agreement”), Murphy and the Company have agreed to have all of the
Shares granted pursuant to the Restricted Share Agreements vest immediately,
subject to and upon the terms and conditions set forth herein.

 

NOW, THEREFORE, the parties agree as follows:

 

1.             ACCELERATED VESTING; RELATED AGREEMENTS.

 

(A)           PROVIDED THAT MURPHY SHALL HAVE SATISFIED HIS OBLIGATIONS UNDER
SECTION 1(B), THE COMPANY AND MURPHY HEREBY AGREE THAT, EFFECTIVE AS OF THE
SEPARATION DATE (AS DEFINED IN THE SEPARATION AGREEMENT), THE SHARES SHALL BE
FULLY VESTED AND THAT THE COMPANY SHALL HAVE NO FURTHER RIGHT TO REPURCHASE THE
SHARES PURSUANT TO SECTION 2 OF THE RESTRICTED SHARE AGREEMENT.

 

(B)           CONTEMPORANEOUSLY WITH THE EXECUTION OF THIS AGREEMENT, MURPHY
SHALL DELIVER TO THE COMPANY, BY BANK OR CERTIFIED CHECK, AN AMOUNT EQUAL TO THE
ESTIMATED WITHHOLDING TAX (AS DETERMINED BY THE COMPANY) THAT WILL BE DUE AND
PAYABLE IN CONNECTION WITH THE CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY
SECTION 1(A) UNLESS THE COMPANY HAS OTHERWISE DEDUCTED SUCH AMOUNTS FROM
PAYMENTS OTHERWISE DUE MURPHY PURSUANT TO THE SEPARATION AGREEMENT.

 

(C)           MURPHY ACKNOWLEDGES AND AGREES THAT (I) THE SHARES HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES
LAWS AND MAY NOT BE SOLD, PLEDGED, TRANSFERRED OR OTHERWISE DISPOSED OF IN THE
ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT OR AN OPINION OF COUNSEL
ACCEPTABLE TO THE COMPANY THAT REGISTRATION IS NOT REQUIRED, AND (II) ANY
CERTIFICATE OR ACCOUNT STATEMENT REPRESENTING THE SHARES SHALL BEAR A LEGEND
SUBSTANTIALLY IN THE FOLLOWING FORM:

 

THE SHARES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933.  THE SHARES MAY NOT BE SOLD, TRANSFERRED OR ASSIGNED IN THE ABSENCE OF
AN EFFECTIVE REGISTRATION STATEMENT FOR THESE SHARES OR AN

 

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OPINION OF THE COMPANY’S COUNSEL THAT REGISTRATION IS NOT REQUIRED.

 

(D)           MURPHY ACKNOWLEDGES AND AGREES THAT HE IS RESPONSIBLE FOR ALL TAX
OBLIGATIONS AND/OR LIABILITY CREATED UNDER STATE AND FEDERAL TAX LAWS BY VIRTUE
OF THE TRANSACTIONS CONTEMPLATED HEREBY AND AGREES TO INDEMNIFY THE COMPANY FOR
ANY TAX LIABILITY THAT MAY BE IMPOSED ON IT BY VIRTUE OF SUCH TRANSACTIONS.

 

2.             MISCELLANEOUS PROVISIONS.

 

(A)           AMENDMENT, MODIFICATION AND SEVERABILITY.  THIS AGREEMENT MAY NOT
BE AMENDED OR MODIFIED OR WAIVED EXCEPT BY A WRITTEN AGREEMENT SIGNED BY THE
PARTY AGAINST WHOM ENFORCEMENT OF SUCH AMENDMENT, MODIFICATION OR WAIVER IS
SOUGHT.

 

(B)           NOTICES.  ALL NOTICES, REQUESTS OR OTHER COMMUNICATIONS REQUIRED
OR PERMITTED HEREUNDER SHALL BE GIVEN IN WRITING AND DELIVERED BY HAND,
OVERNIGHT DELIVERY SERVICE OR CERTIFIED MAIL AND SHALL BE DEEMED TO HAVE BEEN
DELIVERED ON THE DATE OF RECEIPT, TO THE ADDRESSES SET FORTH BELOW:

 

The Company:

 

Five Star Quality Care, Inc.

400 Centre Street

Newton, MA 02458

Attn:  President

 

Murphy:

 

Francis R. Murphy III

                                   

                        

 

(C)           ENTIRE AGREEMENT.  THIS AGREEMENT CONSTITUTES THE ENTIRE AGREEMENT
BETWEEN THE PARTIES CONCERNING THE SUBJECT MATTER HEREOF AND SUPERSEDES ALL
PRIOR AND CONTEMPORANEOUS AGREEMENTS, UNDERSTANDINGS, NEGOTIATIONS AND
DISCUSSIONS, WHETHER ORAL OR WRITTEN.

 

(D)           BINDING EFFECT.  THIS AGREEMENT SHALL BE BINDING UPON AND INURE TO
THE BENEFIT OF THE PARTIES HERETO AND THEIR RESPECTIVE HEIRS, EXECUTORS,
ADMINISTRATORS, SUCCESSORS AND PERMITTED ASSIGNS, BUT THIS AGREEMENT SHALL NOT
BE ASSIGNED BY ANY OF THE PARTIES HERETO WITHOUT THE PRIOR WRITTEN CONSENT OF
THE OTHER PARTIES AND ANY ASSIGNMENT MADE ABSENT SUCH CONSENT SHALL BE VOID AB
INITIO.  THIS AGREEMENT AND THE LEGAL RELATIONS BETWEEN AND AMONG THE PARTIES
HERETO SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE
COMMONWEALTH OF MASSACHUSETTS WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS
OF LAWS.  THIS AGREEMENT MAY BE EXECUTED IN TWO OR MORE COUNTERPARTS, EACH OF
WHICH SHALL BE DEEMED AN ORIGINAL, BUT ALL OF WHICH TOGETHER SHALL CONSTITUTE
ONE AND THE SAME INSTRUMENT.  THIS AGREEMENT AND OTHER

 

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DOCUMENTS REFERRED TO HEREIN WHICH FORM A PART HEREOF, EMBODY THE ENTIRE
AGREEMENT AND UNDERSTANDING OF THE PARTIES HERETO IN RESPECT OF THE SUBJECT
MATTER HEREOF.  THERE ARE NO RESTRICTIONS, PROMISES, WARRANTIES, COVENANTS OR
UNDERTAKINGS OTHER THAN THOSE EXPRESSLY SET FORTH OR REFERRED TO HEREIN.  THIS
AGREEMENT SUPERSEDES ALL PRIOR AGREEMENTS AND UNDERSTANDINGS BETWEEN THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER HEREOF.

 

(E)           FURTHER ASSURANCES.  FROM TIME TO TIME AFTER THE DATE HEREOF,
MURPHY AGREES TO EXECUTE AND DELIVER SUCH OTHER INSTRUMENTS AND TAKE SUCH OTHER
ACTIONS AS THE COMPANY MAY REASONABLY REQUEST IN CONNECTION WITH THE
TRANSACTIONS CONTEMPLATED HEREBY.

 

IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal
as of the date first above written.

 

 

 

Five Star Quality Care, Inc.

 

 

 

 

 

By: 

 

 

 

Name:

 

 

Title:

 

 

 

 

 

 

 

Francis R. Murphy III

 

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EXHIBIT B

 

Restricted Share Agreement between Francis R. Murphy III and Five Star Quality
Care, Inc. dated November 19, 2007.

 

Restricted Share Agreement between Francis R. Murphy III and Five Star Quality
Care, Inc. dated November 24, 2008.

 

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