Document:

EXHIBIT 10.1

 

FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT

 

THIS
FIRST AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) dated as of
July 22, 2005 by and among FIVE STAR QUALITY CARE, INC. (the “Borrower”), and WACHOVIA BANK, NATIONAL ASSOCIATION,
as Lender (the “Lender”).

 

WHEREAS,
the Borrower and the Lender have entered into that certain Credit and Security
Agreement dated as of May 9, 2005 (as in effect immediately prior to
the date hereof, the “Credit Agreement”); and

 

WHEREAS,
the Borrower and the Lender desire to amend certain provisions of the Credit
Agreement on the terms and conditions contained herein.

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:

 

Section 1.  Specific
Amendment to Credit Agreement.  The
parties hereto agree that the Credit Agreement is amended by adding the
following to the end of the definition “EBITDA” contained in Section 1.1:

 

If
the Borrower or any Subsidiary has acquired or disposed of (whether by
purchase, merger, or otherwise), any of the assets of, or a majority of the
Equity Interests in, a Person or a division, line of business or other business
unit of a Person during the relevant period for determining compliance with the
financial covenant set forth in Section 10.1.(a) [Maximum Leverage
Ratio], EBITDA for the relevant period shall be calculated for such purposes
after giving pro forma effect to such acquisition or disposition, as if such
acquisition or disposition (and, in each case, any related incurrence,
repayment or assumption of Indebtedness) had occurred on the first day of the
relevant period for determining EBITDA. 
Any such pro forma calculations may include operating and other expense
reductions and other adjustments for such period resulting from any acquisition
that is being given pro forma effect to the extent that such operating and
other expense reductions and other adjustments (a) are of the type that
would be permitted pursuant to Article XI of Regulation S-X under the
Securities Act of 1933 or (b) are reasonably consistent with the purposes
of such Regulation S-X as determined in good faith by the Borrower and agreed
to by the Lender.

 

Section 2.  Conditions
Precedent.  The effectiveness of this
Amendment is subject to receipt by the Lender of each of the following, each in
form and substance satisfactory to the Lender:

 

(a)                                  A
counterpart of this Amendment duly executed by the Borrower; and

 

 

(b)                                 Such
other documents, instruments and agreements as the Lender may reasonably
request.

 

Section 3.  Representations.  The Borrower represents and warrants to the
Lender that:

 

(a)                                  Authorization.  The Borrower has the right and power, and has
taken all necessary action to authorize it, to execute and deliver this
Amendment and to perform its obligations hereunder and under the Credit
Agreement, as amended by this Amendment, in accordance with their respective
terms.  This Amendment has been duly
executed and delivered by a duly authorized officer of the Borrower and each of
this Amendment and the Credit Agreement, as amended by this Amendment, is a
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its respective terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

 

(b)                                 Compliance
with Laws, etc.  The execution and
delivery by the Borrower of this Amendment and the performance by the Borrower
of this Amendment and the Credit Agreement, as amended by this Amendment, in
accordance with their respective terms, do not and will not, by the passage of
time, the giving of notice or otherwise: 
(i) require any Governmental Approval or violate any Applicable Law
relating to any Loan Party; (ii) conflict with, result in a breach of or
constitute a default under the organizational documents of any Loan Party, or
any indenture, agreement or other instrument to which any Loan Party is a party
or by which it or any of its respective properties may be bound; or (iii) result
in or require the creation or imposition of any Lien upon or with respect to
any property now owned or hereafter acquired by any Loan Party.

 

(c)                                  No
Default.  No Default or Event of
Default has occurred and is continuing as of the date hereof nor will exist
immediately after giving effect to this Amendment.

 

Section 4.  Reaffirmation
of Representations by Borrower.  The
Borrower hereby repeats and reaffirms all representations and warranties made
by the Borrower to the Lender in the Credit Agreement and the other Loan
Documents to which it is a party on and as of the date hereof with the same
force and effect as if such representations and warranties were set forth in
this Amendment in full.

 

Section 5.  Certain References.  Each reference to the Credit Agreement in any
of the Loan Documents shall be deemed to be a reference to the Credit Agreement
as amended by this Amendment.

 

Section 6.  Expenses.  The Borrower shall reimburse the Lender upon
demand for all costs and expenses (including attorneys’ fees) incurred by the
Lender in connection with the preparation, negotiation and execution of this
Amendment and the other agreements and documents executed and delivered in
connection herewith.

 

2

 

Section 7.  Benefits.  This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.

 

Section 8.  GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

Section 9.  Effect.  Except as expressly herein amended, the terms
and conditions of the Credit Agreement and the other Loan Documents remain in
full force and effect.  The amendments
contained herein shall be deemed to have prospective application only, unless
otherwise specifically stated herein.

 

Section 10.  Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.

 

Section 11.  Definitions.  All capitalized terms not otherwise defined
herein are used herein with the respective definitions given them in the Credit
Agreement.

 

[Signatures on Next Page]

 

3

 

IN
WITNESS WHEREOF, the parties hereto have caused this First Amendment to Credit
and Security Agreement to be executed as of the date first above written.

 

	
   

  	
  THE BORROWER:

  
	
   

  	
   

  
	
   

  	
  FIVE STAR
  QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J.
  Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce J. Mackey
  Jr.

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Treasurer, Chief Financial

  Officer and Assistant Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE LENDER:

  
	
   

  	
   

  
	
   

  	
  WACHOVIA BANK,
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ David
  Blackman

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David Blackman

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Managing Director

  	
   

  
							

 

4EXHIBIT 10.2

 

SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT

 

THIS
SECOND AMENDMENT TO CREDIT AND SECURITY AGREEMENT (this “Amendment”) dated as
of August 15, 2005 by and among FIVE STAR QUALITY CARE, INC. (the “Borrower”), each of the
parties identified as “Guarantor” on the signature pages hereto (each a “Guarantor”),
and WACHOVIA BANK, NATIONAL ASSOCIATION,
as Lender (the “Lender”).

 

WHEREAS,
the Borrower and the Lender have entered into that certain Credit and Security
Agreement dated as of May 9, 2005, as amended by that First Amendment
dated July 22, 2005 (as amended, the “Credit Agreement”); and

 

WHEREAS,
the Borrower and the Lender desire to amend certain provisions of the Credit
Agreement on the terms and conditions contained herein.

 

NOW,
THEREFORE, for good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by the parties hereto, the parties hereto hereby
agree as follows:

 

Section 1.  Specific
Amendments to Credit Agreement.  The
parties hereto agree that the Credit Agreement is amended as follows:

 

(a)                                  The definition of “EBITDA” found in Section 1.1
of the Credit Agreement, is amended and restated in its entirety as follows:

 

“‘EBITDA’ means, with respect to the Borrower and its
consolidated Subsidiaries for any period (without duplication): net income
(loss) of such Persons for such period determined on a consolidated basis,
exclusive of the following (but only to the extent included in determination of
such net income (loss)): (i) depreciation and amortization, including
amortization of intangibles pursuant to Statement of Financial
Accounting Standards number 141 and the like; (ii) Interest Expense; (iii) income tax expense; (iv) extraordinary
or non-recurring gains and losses; and (v) expenses incurred by the
Borrower during the fiscal quarters ended September 30, 2005 and December 31,
2005  directly arising from the purchase
and termination of one or more Sunrise Operating Agreements.  If
the Borrower or any Subsidiary has acquired or disposed of (whether by
purchase, merger, or otherwise), any of the assets of, or a majority of the
Equity Interests in, a Person or a division, line of business or other business
unit of a Person during the relevant period for determining compliance with the
financial covenants set forth in Section 10.1., EBITDA for the relevant
period shall be calculated for such purposes after giving pro forma effect to
such acquisition or disposition, as if such acquisition or disposition (and, in
each case, any related incurrence, repayment or assumption of Indebtedness) had
occurred on the first day of the relevant period for determining EBITDA.  Any such pro forma calculations may include
operating and other expense

 

 

reductions and other adjustments for such period
resulting from any acquisition that is being given pro forma effect to the
extent that such operating and other expense reductions and other adjustments (a) are
of the type that would be permitted pursuant to Article XI of Regulation
S-X under the Securities Act of 1933 or (b) are reasonably consistent with
the purposes of such Regulation S-X as determined in good faith by the Borrower
and agreed to by the Lender.”

 

(b)                                 Section 1.1 of the Credit Agreement is
amended by adding the following definitions to such section in appropriate
alphabetical order:

 

“‘Second Amendment’ means that certain
Second Amendment to Credit and Security Agreement dated as of August 15,
2005 by and among the Borrower, the Guarantors and the Lender.”

 

“‘Second Amendment Date’ means the date
upon which the Lender receives evidence in form and substance reasonably
satisfactory to the Lender that all conditions precedent to the effectiveness
of the Second Amendment have been satisfied.”

 

(c)                                  Section 10.1 (c) of the Credit
Agreement is amended and restated in its entirety as follows:

 

“(c)                            Minimum Net Worth. 
Tangible Net Worth at any time to be less than (i) $50,000,000 (ii) plus
75% of the Net Proceeds of all Equity Issuances effected by the Borrower or any
Subsidiary (other than Equity Issuances to the Borrower or any of its
Subsidiaries) after the Second Amendment Date.”

 

Section 2.  Conditions
Precedent.  The effectiveness of this
Amendment is subject to receipt by the Lender of each of the following, each in
form and substance satisfactory to the Lender:

 

(a)                                  A
counterpart of this Amendment duly executed by the Borrower and each Guarantor;

 

(b)                                 Evidence
that Borrower has consummated an Equity Issuance and evidence of receipt by the
Borrower of cash Net Proceeds therefrom in an amount not less than $25,000,000;

 

(c)                                  Evidence
that SNH and/or its Subsidiaries and
one or more of the Subsidiaries of the Borrower have agreed that SNH and/or its
Subsidiaries will (i) purchase the six so-called “Gordon” properties from
Subsidiaries of the Borrower for an aggregate consideration of not less than
$58,000,000 and (ii) lease such properties back to one or more
Subsidiaries of the Borrower upon fair and reasonable terms which are no
less favorable to such Subsidiaries than would be obtained in a comparable arm’s
length transaction with a Person that is not an Affiliate; and

 

(d)                                 Such
other documents, instruments and agreements as the Lender may reasonably
request.

 

2

 

Section 3.  Effectiveness. Upon satisfaction of
the conditions precedent contained in Section 2, this Amendment shall be
deemed to be effective as of the date hereof. 
The amendments contained herein shall be deemed to have prospective
application only from date hereof, unless otherwise specifically stated herein.

 

Section 4.  Representations.  The Borrower represents and warrants to the
Lender that:

 

(a)                                  Authorization.  The Borrower has the right and power, and has
taken all necessary action to authorize it, to execute and deliver this
Amendment and to perform its obligations hereunder and under the Credit
Agreement, as amended by this Amendment, in accordance with their respective
terms.  This Amendment has been duly
executed and delivered by a duly authorized officer of the Borrower and each of
this Amendment and the Credit Agreement, as amended by this Amendment, is a
legal, valid and binding obligation of the Borrower enforceable against the
Borrower in accordance with its respective terms except as (i) the
enforceability thereof may be limited by bankruptcy, insolvency or similar laws
affecting creditors rights generally and (ii) the availability of
equitable remedies may be limited by equitable principles of general
applicability.

 

(b)                                 Compliance
with Laws, etc.  The execution and
delivery by the Borrower of this Amendment and the performance by the Borrower
of this Amendment and the Credit Agreement, as amended by this Amendment, in
accordance with their respective terms, do not and will not, by the passage of
time, the giving of notice or otherwise: 
(i) require any Governmental Approval or violate any Applicable Law
relating to any Loan Party; (ii) conflict with, result in a breach of or
constitute a default under the organizational documents of any Loan Party, or
any indenture, agreement or other instrument to which any Loan Party is a party
or by which it or any of its respective properties may be bound; or (iii) result
in or require the creation or imposition of any Lien upon or with respect to
any property now owned or hereafter acquired by any Loan Party.

 

(c)                                  No
Default.  No Default or Event of
Default has occurred and is continuing as of the date hereof nor will exist
immediately after giving effect to this Amendment.

 

Section 5.  Reaffirmation
of Representations by Borrower.  The
Borrower hereby repeats and reaffirms all representations and warranties made
by the Borrower to the Lender in the Credit Agreement and the other Loan
Documents to which it is a party on and as of the date hereof with the same
force and effect as if such representations and warranties were set forth in
this Amendment in full.

 

Section 6.  Reaffirmation of Guaranty to Guarantor.  The Guarantor hereby reaffirms its continuing
obligations to the Lender under its obligations under Article XII of the
Credit Agreement and agrees that the transactions contemplated by this
Amendment shall not in any way affect the validity and enforceability of its
obligations under Article XII of the Credit Agreement, or reduce, impair
or discharge the obligations of the Guarantor thereunder.

 

3

 

Section 7.  Certain References.  Each reference to the Credit Agreement in any
of the Loan Documents shall be deemed to be a reference to the Credit Agreement
as amended by this Amendment.

 

Section 8.  Expenses.  The Borrower shall reimburse the Lender upon
demand for all costs and expenses (including attorneys’ fees) incurred by the
Lender in connection with the preparation, negotiation and execution of this
Amendment and the other agreements and documents executed and delivered in
connection herewith.

 

Section 9.  Benefits.  This Amendment shall be binding upon and
shall inure to the benefit of the parties hereto and their respective
successors and assigns.

 

Section 10.  GOVERNING LAW.  THIS AMENDMENT SHALL BE GOVERNED BY, AND
CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS EXECUTED, AND TO BE FULLY PERFORMED, IN SUCH STATE.

 

Section 11.  Effect.  Except as expressly herein amended, the terms
and conditions of the Credit Agreement and the other Loan Documents remain in
full force and effect.  The amendments
contained herein shall be deemed to have prospective application only, unless
otherwise specifically stated herein.

 

Section 12.  Counterparts.  This Amendment may be executed in any number
of counterparts, each of which shall be deemed to be an original and shall be
binding upon all parties, their successors and assigns.

 

Section 13.  Definitions.  All capitalized terms not otherwise defined
herein are used herein with the respective definitions given them in the Credit
Agreement.

 

[Signatures on Next Page]

 

4

 

IN
WITNESS WHEREOF, the parties hereto have caused this First Amendment to Credit
and Security Agreement to be executed as of the date first above written.

 

	
   

  	
  THE BORROWER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  FIVE STAR
  QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J.
  Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Name: Bruce J.
  Mackey Jr.

  
	
   

  	
   

  	
   Title: Treasurer, Chief Financial

  Officer and Assistant Secretary

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  THE LENDER:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  WACHOVIA BANK,
  NATIONAL ASSOCIATION

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Rex E. Rudy

  	
   

  
	
   

  	
   

  	
  Name: Rex E.
  Rudy

  
	
   

  	
   

  	
  Title: Managing Director

  
						

 

 

[Signatures Continued on Next Page]

 

5

 

[Signature Page to Second Amendment to Credit
and Security Agreement dated as of

August 15, 2005 with Five Star Quality
Care, Inc.]

 

	
   

  	
  THE GUARANTORS:

  
	
   

  	
   

  
	
   

  	
  ALLIANCE
  PHARMACY SERVICES, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-CA, INC.

  
	
   

  	
  FIVE STAR
  QUALITY CARE-IA, INC.

  
	
   

  	
  FIVE STAR
  QUALITY CARE-NE, INC.

  
	
   

  	
  THE HEARTLANDS RETIREMENT COMMUNITY –

  ELLICOTT CITY I, INC.

  
	
   

  	
  FIVE STAR
  QUALITY CARE-AZ, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-CA, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-COLORADO, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-CT, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-GA, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-IA, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-MO, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-NE, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-WI, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-WY, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-FL, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-KS, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-MD, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-NC, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-VA, LLC

  
	
   

  	
  FS LAFAYETTE
  TENANT TRUST

  
	
   

  	
  FS LEISURE PARK
  TENANT TRUST

  
	
   

  	
  FS LEXINGTON
  TENANT TRUST

  
	
   

  	
  FS TENANT POOL I
  TRUST

  
	
   

  	
  FS TENANT POOL
  II TRUST

  
	
   

  	
  FS TENANT POOL
  III TRUST

  
	
   

  	
  FS TENANT POOL
  IV TRUST

  
	
   

  	
  MORNINGSIDE OF
  BELMONT, LLC

  
	
   

  	
  MORNINGSIDE OF
  GALLATIN, LLC

  
	
   

  	
  MORNINGSIDE OF
  SPRINGFIELD, LLC

  
	
   

  	
  FSQC FUNDING
  CO., LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE-CA II, LLC

  
	
   

  	
  FIVE STAR
  QUALITY CARE TRUST

  
	
   

  	
  FS TENANT
  HOLDING COMPANY TRUST

  
	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Bruce J.
  Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Name:

  	
  Bruce J. Mackey Jr.

  	
   

  
	
   

  	
   

  	
  Title:

  	
   Treasurer, Chief Financial Officer

  and Assistant Secretary

  	
   

  
						

 

 

[Signatures Continued on Next Page]

 

6

 

[Signature Page to Second Amendment to Credit
and Security Agreement dated as of

August 15, 2005 with Five Star Quality
Care, Inc.]

 

	
   

  	
  THE GUARANTORS
  (cont.):

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MORNINGSIDE OF BELLGRADE, RICHMOND, LLC

  
	
   

  	
  MORNINGSIDE OF CHARLOTTESVILLE, LLC

  
	
   

  	
  MORNINGSIDE OF
  NEWPORT NEWS, LLC

  
	
   

  	
  MORNINGSIDE OF SKIPWITH-RICHMOND, LLC

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By: LIFETRUST
  AMERICA, INC., its
  Member

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Bruce J.
  Mackey Jr.

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Bruce J. Mackey Jr.

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Treasurer, Chief
  Financial Officer

  and Assistant Secretary

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  MORNINGSIDE OF
  ALABAMA, L.P.

  
	
   

  	
  MORNINGSIDE OF
  ANDERSON, L.P.

  
	
   

  	
  MORNINGSIDE OF ATHENS, LIMITED

  PARTNERSHIP

  
	
   

  	
  MORNINGSIDE OF
  COLUMBUS, L.P.

  
	
   

  	
  MORNINGSIDE OF DALTON, LIMITED

  PARTNERSHIP

  
	
   

  	
  MORNINGSIDE OF
  DECATUR, L.P.

  
	
   

  	
  MORNINGSIDE OF
  EVANS, LIMITED PARTNERSHIP

  
	
   

  	
  MORNINGSIDE OF
  GREENWOOD, L.P.

  
	
   

  	
  MORNINGSIDE OF KENTUCKY, LIMITED

  PARTNERSHIP

  
	
   

  	
   

  
	
   

  	
  By: LIFETRUST
  AMERICA, INC., its
  General Partner

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Bruce J.
  Mackey Jr.

  	
   

  
	
   

  	
   

  	
   

  	
  Name:

  	
  Bruce J. Mackey Jr.

  	
   

  
	
   

  	
   

  	
   

  	
  Title:

  	
  Treasurer, Chief
  Financial

  Officer and Secretary

  	
   

  
								

 

7

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