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EXHIBIT 10.4
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into as
of the 14th day of July, 1998, by and between Xxxxxx X. Xxxxxxx ("Xxxxxxx") and
American Retirement Corporation, a Tennessee corporation ("ARC").
WITNESSETH:
WHEREAS, ARC, Freedom Group, Inc., a Florida corporation ("FGI"), and
the shareholders of FGI have entered into that certain Agreement and Plan of
Merger, dated as of May 29, 1998 (the "Merger Agreement"), to provide for the
merger of FGI with and into ARC (the "Merger"); and
WHEREAS, the closing of the transactions contemplated by the Merger
Agreement (the "Closing") are taking place as of the date hereof.
NOW, THEREFORE, to induce ARC to proceed with the Closing and the
Merger and in consideration of such Closing and Merger, and in further
consideration of the mutual covenants and agreements contained herein and in the
Merger Agreement, and intending to be legally bound thereby, the parties hereto
do hereby agree as follows:
1. Engagement as Consultant.
a. ARC hereby retains and engages Xxxxxxx to render to ARC
consulting services in respect of the operations, properties, and
business of ARC as reasonably requested by ARC for a period ending on
the third anniversary of the date hereof (the "Consulting Term"). Such
services shall include, without limitation, (i) consultation with
respect to the development of new ARC projects, (ii) assistance in the
transition and integration of the operations of FGI with and into ARC,
and (iii) consultation in connection with applications for master trust
or condominium life estate concepts in developed or acquired
communities. Xxxxxxx hereby accepts such engagement and agrees to
render such services upon the terms and conditions herein set forth.
b. At any time and from time to time during the Consulting
Term, at ARC's request, Xxxxxxx agrees to assist and support ARC in any
manner reasonably requested in order to effectuate the transactions
contemplated by the Merger Agreement.
c. It is understood that Xxxxxxx is to act as a consultant and
adviser to ARC and is not an employee, agent of, or co-venturer with
ARC in any respect. Xxxxxxx shall have no right, authority, or power to
act for or on ARC's behalf. The relationship between ARC and Xxxxxxx
shall be that of independent contractor.
2. Noncompetition and Nonsolicitation. For a period of three (3) years
from the date hereof, Xxxxxxx will not, directly or indirectly:
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a. own, manage, operate, control, or participate in the
ownership, management, operation, or control of, or be connected as an
officer, employee, partner, director, consultant, or otherwise with, or
have any financial interest in or aid or assist anyone else in the
conduct of any independent living, assisted living, nursing home,
retirement community or any other business that is in competition in
any way with ARC, or any affiliate thereof (a "Competing Business"),
within a ten (10) mile radius of the operations or facilities of ARC,
or any affiliate thereof.
b. for so long as Xxxxxxx is a director of ARC, and in
addition to subsection (a) above, own, manage, operate, control, or
participate in the ownership, management, operation, or control of, or
be connected as an officer, employee, partner, director, consultant, or
otherwise with, or have any financial interest in or aid or assist
anyone else in the conduct of any Competing Business outside of a ten
(10) mile radius of the operations or facilities of ARC, or any
affiliate thereof unless, prior to entering into, or agreeing to, any
such matter or arrangement, Xxxxxxx first offers to ARC the right to
manage and acquire such Competing Business.
c. Notwithstanding anything in subsection 2(a) or (b) above to
the contrary, Xxxxxxx shall be permitted to (i) retain his ownership
interests in the Currently Owned Communities, and (ii) own, manage,
operate, control, finance and be involved with any business or
enterprise that is located in Maricopa County, Arizona and that is
operated by a joint venture, partnership or company in which Sun Health
Properties Investment or its affiliates has a significant and
meaningful ownership and financial interest. As used herein, "Currently
Owned Communities" shall mean (i) Freedom Square, located in Seminole,
Florida, (ii) Seminole Nursing Pavilion, located in Seminole, Florida,
(iii) Freedom Village at Brandywine, located in Brandywine,
Pennsylvania, (iv) Sarasota Bay Club, located in Sarasota, Florida, (v)
Grandview Terrace, located in Sun City, Arizona, (vi) Freedom Plaza,
located in Peoria, Arizona, (vii) Freedom Village, located in Lake
Forrest, California, and (viii) The Village, located in Hemet,
California.
d. solicit or accept business from any of ARC's, or any
affiliate thereof's, former or current customers, including actively
sought prospective customers, for purposes of providing products or
services in competition with ARC, or any affiliate thereof; or
e. solicit, interfere with, or endeavor to entice away any
employee of ARC, or any affiliate thereof, other than Xxxxx Xxxxxxx or
Xxxxx Xxxxxxx.
f. Nothing in this Agreement shall be deemed to define,
describe, alter, diminish, minimize or affect any fiduciary duty or
duty of loyalty that Xxxxxxx may now or hereafter owe to ARC or its
affiliates.
3. Consideration and Compensation. In consideration of the performance
by Xxxxxxx of his obligations under Section 1 above and the agreements of
Xxxxxxx contained in Section 2
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above, ARC agrees to pay Xxxxxxx $150,000 per annum during the term of this
Agreement, payable bi-weekly.
4. Nondisclosure. Xxxxxxx shall not disclose to any person any
confidential information possessed or obtained by him with respect to FGI's or
ARC's, or any affiliate thereof's, services, products, improvements,
intellectual property, designs or styles, processes, customers, methods of
marketing or distribution, systems, procedures, plans, proposals, policies, or
methods, the disclosure of which would be damaging to ARC, or any affiliate
thereof, nor shall he make any false statements regarding FGI or ARC, or any
affiliate thereof, or take any other action that would be damaging to ARC, or
any affiliate thereof.
5. Remedies Upon Breach; Reasonableness of Provisions.
a. In the event of a breach of this Agreement by Xxxxxxx, ARC
shall be entitled to any remedy available to it at law or in equity. In
addition, in the event of such breach, Xxxxxxx shall resign from his
position as a member of ARC's board of directors (and any committee(s)
thereof).
b. ARC acknowledges that if ARC fails to make a payment
required hereunder for any reason other than (i) Xxxxxxx'x breach
hereof or (ii) as permitted by the terms of the Merger Agreement, this
Agreement shall, at the election of Xxxxxxx, be null and void and
Xxxxxxx shall be entitled to enforce Section 3 hereof by any remedy
available to him at law or in equity.
6. Termination Upon a Change in Control. Upon a Change in Control (as
defined below) of ARC, Xxxxxxx shall have the right to terminate this Agreement
and neither party shall have any further obligation hereunder. For purposes of
this Agreement, a "Change in Control" means the happening of any of the
following: any person or entity, including a "group" as defined in Section
13(d)(3) of the Exchange Act, other than ARC or a wholly-owned subsidiary of ARC
or any employee benefit plan of ARC or any of its subsidiaries, becomes the
beneficial owner of ARC's securities having greater than 50% of the combined
voting power of the then outstanding securities of ARC that may be cast for the
election of directors of ARC (other than as a result of an issuance of
securities initiated by ARC in the ordinary course of business); (ii) as the
result of, or in connection with, any cash tender or exchange offer, merger or
other business combination, sales of assets or contested election, or any
combination of the foregoing transactions, less than a majority of the combined
voting power of the then outstanding securities of ARC or any successor
corporation or entity entitled to vote generally in the election of the
directors of ARC or such other corporation or entity after such transaction are
held in the aggregate by the holders of ARC's securities entitled to vote
generally in the election of directors of ARC immediately prior to such
transaction; or (iii) during any period of two consecutive years, individuals
who at the beginning of any such period constitute the Board of Directors of ARC
cease for any reason to constitute at least a majority thereof, unless the
election, or the nomination for election by ARC's shareholders, of each director
of ARC first elected during such period was
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approved by a vote of at least two-thirds of the directors of ARC then still in
office who were directors of ARC at the beginning of any such period.
7. Severability; Headings. In the event that any provision of this
Agreement is declared invalid or unenforceable, such invalidity or
unenforceability shall in no way effect the validity or enforceability of any
other provision. The clauses and provisions of this Agreement that are deemed to
be invalid or unenforceable shall be limited so that they shall remain in effect
to the extent permitted by law. The headings herein are for reference purposes
only and are not intended in any way to describe, interpret, define, or limit
the extent or intent of this Agreement or any part hereof.
8. Modification. No modification, amendment, or waiver of any of the
provisions of this Agreement shall be effective unless made in a writing
specifically referring to this Agreement, and signed by each of the parties
hereto.
9. Successors and Assigns. The rights and obligations of ARC hereunder
shall be binding upon and run in favor of the successors and assigns of ARC. The
rights and obligations of Xxxxxxx hereunder shall be binding upon, shall inure
to the benefit of, and shall be enforceable by the heirs, successors, assigns,
and legal or personal representatives of Xxxxxxx. Xxxxxxx may not assign,
transfer, or otherwise dispose of any of his rights or obligations without the
prior written consent of ARC.
10. Notices. All notices and other communications pursuant to this
Agreement shall be in writing and shall be deemed given if delivered personally,
sent by nationally recognized, overnight courier, or mailed by registered or
certified mail (return receipt requested), postage prepaid, or sent by facsimile
(followed with a copy sent by courier or registered or certified mail) to the
parties at the following addresses (or at such address for a party as shall be
specified by notice hereunder):
To ARC:
American Retirement Corporation
000 Xxxxxxxx Xxxxx, Xxxxx 000
Xxxxxxxxx, XX 00000
Attention: W.E. Sheriff
Telephone: (000) 000-0000
Fax: (000) 000-0000
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with a copy to:
Bass, Xxxxx & Xxxx PLC
0000 Xxxxx Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attention: T. Xxxxxx Xxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
To Xxxxxxx:
Xxxxxx X. Xxxxxxx
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxxxx, XX 00000
Telephone: (000) 000-0000
Fax: (000) 000-0000
with a copy to:
Holland & Knight LLP
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxxxxxxx, XX 00000
Attention: Xxxxxx X. Xxxxxx
Telephone: (000) 000-0000
Fax: (000) 000-0000
All such notices and other communications shall be deemed to have been received
(a) in the case of personal delivery, on the date of such delivery, (b) in the
case of delivery by nationally recognized, overnight courier, on the business
day following dispatch, (c) in the case of mailing, on the fifth business day
following such mailing, and (d) in the case of a facsimile, when the party
receiving such facsimile shall have confirmed receipt of the communication (or
when the copy sent by courier or registered or certified mail shall have been
deemed to have been received pursuant to clause (a), (b), or (c)).
11. Entire Agreement; Governing Law. This Agreement shall constitute
the entire Agreement between the parties with respect to the subject matter
hereof and shall be governed by the laws of the State of Tennessee as such laws
are applied to agreements between Tennessee residents entered into and to be
performed entirely in Tennessee without regard to the principles of conflict of
laws thereof.
12. Prevailing Party. In the event of any dispute that results in a
suit or other legal proceeding to construe or enforce any provision of this
Agreement or because of an alleged breach, default, or misrepresentation in
connection with any of the provisions of this Agreement, the parties
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agree that the prevailing party (in addition to all other amounts and relief to
which such party may be entitled) shall be entitled to recover reasonable
attorneys' fees and other costs incurred in any action or proceeding.
13. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed shall constitute an original
hereof, but all of which together shall constitute one agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed on the date and year first above written.
AMERICAN RETIREMENT CORPORATION
By: /s/ H. Xxxx Xxxxxxxx
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Name: H. Xxxx Xxxxxxxx
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Title: Executive Vice President
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XXXXXX X. XXXXXXX
/s/ Xxxxxx X. Xxxxxxx
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