Document:

Exhibit
10.1

 

EXECUTION
VERSION

 

FIFTH AMENDMENT dated as of March 22,
2010 (this “Amendment”), to the CREDIT AGREEMENT dated as of August 15,
2008, as heretofore amended (as so amended, the “Credit Agreement”),
among CEPHALON, INC., a Delaware corporation, the LENDERS party thereto and
JPMORGAN CHASE BANK, N.A., as Administrative Agent.

 

WHEREAS, the Lenders have
agreed to extend credit to the Borrower under the Credit Agreement on the terms
and subject to the conditions set forth therein; and

 

WHEREAS, the Borrower has
requested that the Lenders amend certain provisions of the Credit Agreement and
the Guarantee and Collateral Agreement, and the Lenders whose signatures appear
below, constituting at least the Required Lenders, are willing to amend the Credit
Agreement and the Guarantee and Collateral Agreement on the terms and subject
to the conditions set forth herein.

 

NOW, THEREFORE, in
consideration of the mutual agreements herein contained and other good and
valuable consideration, the sufficiency and receipt of which are hereby
acknowledged, the parties hereto hereby agree as follows:

 

SECTION 1.  Defined Terms.  Capitalized terms used but not otherwise
defined herein (including in the recitals hereto) have the meanings assigned to
them in the Credit Agreement.

 

SECTION 2.  Amendments to the Credit
Agreement.  (a) Section 1.01
of the Credit Agreement is hereby amended as follows:

 

(i)            The
following new defined terms are hereby inserted in the appropriate alphabetical
order:

 

“Anesta AG”
means Anesta AG, a company organized under the laws of Switzerland.

 

“Cephalon Lux”
means Cephalon Luxembourg S.à r.l., a Luxembourg
private limited liability company (société à responsabilité
limitée).

 

“European
Restructuring Contribution” means the contribution by the Loan Parties to the capital of Lux SCS of (a) all
the issued and outstanding Equity Interests in Cephalon
Lux, (b) all the issued and outstanding Equity Interests in Anesta AG and (c) all the issued and outstanding Equity
Interests in Cephalon Holdings Ltd.

 

“Mepha Acquisition”
means the acquisition by Cephalon Lux from Mepha Holding AG of all the issued
and outstanding Equity Interests in Mepha AG.

 

 

“Mepha AG”
means Mepha AG, a company organized under the laws of Switzerland.

 

“Mepha Acquisition
Consideration Contribution” means the contribution by CIH to the capital of
Lux SCS of approximately $600,000,000 in cash, provided that such
contribution is made in connection with the consummation of the Mepha
Acquisition and all the proceeds thereof are used by Lux SCS, directly or
indirectly through its subsidiaries, to effect the Mepha Acquisition.

 

“Mepha Holding AG”
means Mepha Holding AG, a company organized under the laws of Switzerland.

 

“Lux SCS”
means a to be formed company organized under the laws of Luxembourg that is a
wholly owned Subsidiary.

 

(b)           Section 6.04 of the
Credit Agreement is hereby amended by
deleting the word “and” immediately before clause (y) thereof, replacing the period at the end of clause (y) thereof
with a semicolon  and inserting the following new clauses at the end thereof:

 

“(z) the European Restructuring
Contribution; and

 

(aa) the Mepha Acquisition Consideration Contribution.”

 

SECTION 3.  Amendment
to the Guarantee and Collateral Agreement.  Section 3.05(a) of the Guarantee and
Collateral Agreement is hereby amended to amend and restate in its entirety the
final sentence thereof as follows:

 

“Each Grantor agrees not to effect or permit
any change described in the first sentence of this paragraph unless all
filings have been made under the Uniform Commercial Code or otherwise that are
required in order for the Administrative Agent to continue at all times
following such change to have a valid, legal and perfected security interest in
all the Collateral.”

 

SECTION 4.  Representations and
Warranties.  The Borrower
hereby represents and warrants to the Administrative Agent and to each of the
Lenders, as of the Fifth Amendment Effective Date (as defined below), that:

 

(a) 
The execution, delivery and performance by the Borrower of this
Amendment have been duly authorized by all necessary corporate or other
organizational and, if required, stockholder or other equityholder action.  This Amendment has been duly executed and
delivered by the Borrower and this Amendment, the Credit Agreement, as amended
by this Amendment, and the Guarantee and Collateral Agreement, as amended by
this Amendment, constitute legal, valid and binding obligations of the
Borrower, enforceable against it in accordance with its terms, subject to
applicable bankruptcy, insolvency, reorganization, moratorium and other laws
affecting creditors’ rights generally and to general principles of equity,
regardless of whether considered in a proceeding in equity or at law.

 

2

 

(b) 
The representations and warranties of the Borrower and the Subsidiary
Loan Parties set forth in the Credit Agreement and the other Loan Documents are
true and correct in all material respects on and as of the Fifth Amendment
Effective Date, except in the case of any such representation or warranty that
expressly relates to an earlier date, in which case such representation or
warranty is true and correct in all material respects on and as of such earlier
date.

 

(c) 
On and as of the Fifth Amendment Effective Date, after giving effect to
this Amendment, no Default has occurred and is continuing.

 

(d) 
The Equity Interests in Anesta
AG, Cephalon Lux and Cephalon Holdings Ltd that, in each case, immediately
prior to the effectiveness of this Amendment are subject to the Liens created
in favor of the Administrative Agent under the Security Documents do not
represent all or substantially all the Collateral.

 

SECTION 5.  Effectiveness.  This Amendment shall become effective, as of
the date first above written, on the date (the “Fifth Amendment Effective
Date”) on which the Administrative Agent shall have received duly executed
counterparts hereof that, when taken together, bear the authorized signatures
of the Borrower and Lenders constituting at least the Required Lenders, provided
that the Administrative Agent shall have received all fees and other amounts
due and payable to it or any of its Affiliates on or prior to the Fifth
Amendment Effective Date and reimbursement of all reasonable and documented
out-of-pocket expenses (including fees, charges and disbursements of counsel)
required to be reimbursed by the Borrower under the Credit Agreement or
hereunder.

 

SECTION 6.  Effect of this Amendment.  (a)  Except as expressly set forth
herein, this Amendment shall not by implication or otherwise limit, impair,
constitute a waiver of or otherwise affect the rights and remedies of the
Lenders or the Administrative Agent under the Credit Agreement or any other
Loan Document, and shall not alter, modify, amend or in any way affect any of
the terms, conditions, obligations, covenants or agreements contained in the
Credit Agreement or any other Loan Document, all of which are ratified and
affirmed in all respects and shall continue in full force and effect.  Nothing herein shall be deemed to entitle any
Loan Party to a consent to, or a waiver, amendment, modification or other
change of, any of the terms, conditions, obligations, covenants or agreements
contained in the Credit Agreement or any other Loan Document in similar or
different circumstances.

 

(b)           On and after the Fifth
Amendment Effective Date, each reference in the Credit Agreement or the
Guarantee and Collateral Agreement to “this Agreement”, “hereunder”, “hereof”, “herein”,
or words of like import, and each reference to the Credit Agreement or the
Guarantee and Collateral Agreement in any other Loan Document shall be deemed
to be a reference to the Credit Agreement or the Guarantee and Collateral
Agreement, as the case may be, as amended hereby.  This Amendment shall constitute a “Loan
Document” for all purposes of the Credit Agreement and the other Loan
Documents.

 

3

 

SECTION 7.  Applicable Law.  THIS AMENDMENT SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.

 

SECTION 8.  Counterparts.  This Amendment may be executed in
counterparts (and by different parties hereto on different counterparts), each
of which shall constitute an original but all of which, when taken together, shall
constitute a single contract.  Delivery
of an executed counterpart of a signature page of this Amendment by
facsimile or other electronic imaging shall be as effective as delivery of a
manually executed counterpart of this Amendment.

 

SECTION 9.  Severability.  Any provision of this Amendment held to be
invalid, illegal or unenforceable in any jurisdiction shall, as to such
jurisdiction, be ineffective to the extent of such invalidity, illegality or
unenforceability without affecting the validity, legality and enforceability of
the remaining provisions hereof; and the invalidity of a particular provision
in a particular jurisdiction shall not invalidate such provision in any other
jurisdiction.

 

SECTION 10.  Headings.  The Section headings used herein are for
convenience of reference only, are not part of this Amendment and shall not
affect the construction of, or be taken into consideration in interpreting,
this Amendment.

 

SECTION 11.  Administrative Agent’s
Expenses.  Without
limiting the Borrower’s obligations under the Credit Agreement, the Borrower
agrees to reimburse the Administrative Agent for its reasonable and documented
out-of-pocket expenses in connection with this Amendment, including the
reasonable fees, charges and disbursements of Cravath, Swaine & Moore
LLP, counsel for the Administrative Agent. All fees shall be payable in
immediately available funds and shall not be refundable.

 

4

 

IN WITNESS WHEREOF, the
parties hereto have caused this Amendment to be duly executed by their
respective authorized officers as of the date first above written.

 

 

	
   

  	
  CEPHALON, INC.,

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Wilhelmus Groenhuysen

  
	
   

  	
   

  	
  Name: Wilhelmus
  Groenhuysen 

  
	
   

  	
   

  	
  Title: EVP and Chief
  Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JPMORGAN CHASE BANK, N.A., individually and as Administrative Agent,

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ James A. Knight

  
	
   

  	
   

  	
  Name: James A. Knight 

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

SIGNATURE PAGE TO

FIFTH AMENDMENT TO

CEPHALON, INC. CREDIT AGREEMENT

 

 

	
   

  	
  BANK OF AMERICA, N.A.

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Yinghua Zhang

  
	
   

  	
   

  	
  Name: Yinghua Zhang 

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

	
   

  	
  DEUTSCHE BANK AG NEW YORK BRANCH

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ Heidi Sandquist

  
	
   

  	
   

  	
  Name: Heidi Sandquist 

  
	
   

  	
   

  	
  Title: Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ Ming K. Chu

  
	
   

  	
   

  	
  Name: Ming K. Chu 

  
	
   

  	
   

  	
  Title: Vice President

  

 

 

	
   

  	
  WACHOVIA BANK, N.A.

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ Eric M. Del Viscio

  
	
   

  	
   

  	
  Name: Eric M. Del Viscio 

  
	
   

  	
   

  	
  Title: Senior Vice
  President

  

 

 

	
   

  	
  BARCLAYS BANK PLC

  
	
   

  	
   

  
	
   

  	
  by

  
	
   

  	
   

  	
  /s/ David Barton

  
	
   

  	
   

  	
  Name: David Barton 

  
	
   

  	
   

  	
  Title: Director

  

 

 

	
   

  	
  U.S. BANK, N.A.

  
	
   

  	
   

  
	
   

  	
  by

  	
   

  
	
   

  	
   

  	
  /s/ Jennifer Hwang

  
	
   

  	
   

  	
  Name: Jennifer Hwang 

  
	
   

  	
   

  	
  Title: Vice PresidentExhibit 10.1

 

EXECUTION VERSION

 

 

CREDIT
AND SECURITY AGREEMENT

 

dated as of
March 18, 2010,

 

among

 

FIVE
STAR QUALITY CARE, INC.,

as Borrower,

 

and

 

THE
OTHER GUARANTORS PARTY HERETO,

as Guarantors,

 

THE
LENDERS PARTY HERETO

 

and

 

JEFFERIES
FINANCE LLC,

 

as Arranger,

Administrative Agent and Collateral Agent

 

and

 

JEFFERIES
GROUP INC.

as Issuing Bank

 

 

 

TABLE
OF CONTENTS

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE I

  	
  DEFINITIONS

  	
   

  	
  1

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 1.01                                          Defined Terms

  	
   

  	
  1

  
	
  Section 1.02                                          Terms Defined in the UCC

  	
   

  	
  30

  
	
  Section 1.03                                          Classification of Loans and Borrowings

  	
   

  	
  30

  
	
  Section 1.04                                          Terms Generally

  	
   

  	
  30

  
	
  Section 1.05                                          Accounting Terms; GAAP

  	
   

  	
  30

  
	
  Section 1.06                                          Rounding

  	
   

  	
  31

  
	
  Section 1.07                                          Resolution of Drafting Ambiguities

  	
   

  	
  31

  
	
   

  	
   

  	
   

  
	
  ARTICLE II

  	
  THE CREDITS

  	
   

  	
  31

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 2.01                                          Commitments

  	
   

  	
  31

  
	
  Section 2.02                                          Loans

  	
   

  	
  31

  
	
  Section 2.03                                          Borrowing Procedure

  	
   

  	
  32

  
	
  Section 2.04                                          Evidence of Debt; Repayment of Loans

  	
   

  	
  33

  
	
  Section 2.05                                          Fees

  	
   

  	
  34

  
	
  Section 2.06                                          Interest on Loans

  	
   

  	
  35

  
	
  Section 2.07                                          Termination and Reduction of
  Commitments

  	
   

  	
  35

  
	
  Section 2.08                                          Interest Elections

  	
   

  	
  36

  
	
  Section 2.09                                          Optional and Mandatory Prepayments of
  Loans

  	
   

  	
  37

  
	
  Section 2.10                                          Alternate Rate of Interest

  	
   

  	
  38

  
	
  Section 2.11                                          Increased Costs; Change in Legality

  	
   

  	
  38

  
	
  Section 2.12                                          Breakage Payments

  	
   

  	
  40

  
	
  Section 2.13                                          Payments Generally; Pro Rata Treatment;
  Sharing of Setoffs

  	
   

  	
  40

  
	
  Section 2.14                                          Taxes

  	
   

  	
  42

  
	
  Section 2.15                                          Mitigation Obligations; Replacement of
  Lenders

  	
   

  	
  43

  
	
  Section 2.16                                          Letters of Credit. (a)  General

  	
   

  	
  46

  
	
  Section 2.17                                          Determination of Borrowing Base

  	
   

  	
  51

  
	
  Section 2.18                                          Increase of the Revolving Commitments

  	
   

  	
  51

  
	
   

  	
   

  	
   

  
	
  ARTICLE III

  	
  REPRESENTATIONS AND
  WARRANTIES

  	
   

  	
  51

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 3.01                                          Representations and Warranties

  	
   

  	
  51

  
	
  Section 3.02                                          Survival of Representations and
  Warranties, Etc.

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  ARTICLE IV

  	
  CONDITIONS TO CREDIT
  EXTENSIONS

  	
   

  	
  58

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 4.01                                          Conditions to Initial Credit Extension

  	
   

  	
  58

  
	
  Section 4.02                                          Conditions to All Credit Extensions

  	
   

  	
  61

  
	
   

  	
   

  	
   

  
	
  ARTICLE V

  	
  AFFIRMATIVE COVENANTS

  	
   

  	
  62

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.01                                          Reporting

  	
   

  	
  62

  
	
  Section 5.02                                          Preservation of Existence and Similar
  Matters

  	
   

  	
  65

  
	
  Section 5.03                                          Compliance with Applicable Law

  	
   

  	
  65

  
	
  Section 5.04                                          Maintenance of Property

  	
   

  	
  65

  
	
  Section 5.05                                          Conduct of Business

  	
   

  	
  65

  
	
  Section 5.06                                          Insurance

  	
   

  	
  66

  
	
  Section 5.07                                          Payment of Taxes and Claims

  	
   

  	
  66

  
	
  Section 5.08                                          Visits and Inspections

  	
   

  	
  66

  
	
  Section 5.09                                          Use of Proceeds

  	
   

  	
  66

  
	
  Section 5.10                                          Environmental Matters

  	
   

  	
  66

  

 

i

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 5.11                                          Books and Records

  	
   

  	
  67

  
	
  Section 5.12                                          Further Assurances

  	
   

  	
  67

  
	
  Section 5.13                                          New Subsidiaries/Guarantors; Release of
  Guarantors

  	
   

  	
  67

  
	
  Section 5.14                                          Collection Accounts

  	
   

  	
  68

  
	
  Section 5.15                                          Account Covenants

  	
   

  	
  69

  
	
  Section 5.16                                          Exchange Listing

  	
   

  	
  70

  
	
  Section 5.17                                          New Leases

  	
   

  	
  70

  
	
  Section 5.18                                          Zero Balance

  	
   

  	
  70

  
	
  Section 5.19                                          Performance and Compliance With
  Contracts and Credit and Collection Policy

  	
   

  	
  70

  
	
   

  	
   

  	
   

  
	
  ARTICLE VI

  	
  NEGATIVE COVENANTS

  	
   

  	
  70

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 6.01                                          Financial Covenants

  	
   

  	
  70

  
	
  Section 6.02                                          Restricted Payments

  	
   

  	
  71

  
	
  Section 6.03                                          Indebtedness

  	
   

  	
  71

  
	
  Section 6.04                                          Liens; Negative Pledges; Other Matters

  	
   

  	
  72

  
	
  Section 6.05                                          Merger, Consolidation, Sales of Assets
  and Other Arrangements

  	
   

  	
  73

  
	
  Section 6.06                                          Fiscal Year

  	
   

  	
  75

  
	
  Section 6.07                                          Modifications of Organizational
  Documents and Shared Services Agreement

  	
   

  	
  75

  
	
  Section 6.08                                          Transactions with Affiliates

  	
   

  	
  75

  
	
  Section 6.09                                          ERISA Exemptions

  	
   

  	
  75

  
	
  Section 6.10                                          Deposit Accounts

  	
   

  	
  75

  
	
  Section 6.11                                          Collection of Accounts, Etc.

  	
   

  	
  76

  
	
  Section 6.12                                          Prepayment of Indebtedness

  	
   

  	
  76

  
	
   

  	
   

  	
   

  
	
  ARTICLE VII

  	
  GUARANTEE

  	
   

  	
  77

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 7.01                                          The Guarantee

  	
   

  	
  77

  
	
  Section 7.02                                          Obligations Unconditional

  	
   

  	
  77

  
	
  Section 7.03                                          Reinstatement

  	
   

  	
  78

  
	
  Section 7.04                                          Subrogation; Subordination

  	
   

  	
  78

  
	
  Section 7.05                                          Remedies

  	
   

  	
  78

  
	
  Section 7.06                                          Instrument for the Payment of Money

  	
   

  	
  79

  
	
  Section 7.07                                          Continuing Guarantee

  	
   

  	
  79

  
	
  Section 7.08                                          General Limitation on Guarantee Obligations

  	
   

  	
  79

  
	
  Section 7.09                                          Release of Guarantors

  	
   

  	
  79

  
	
  Section 7.10                                          Right of Contribution

  	
   

  	
  79

  
	
   

  	
   

  	
   

  
	
  ARTICLE VIII

  	
  SECURITY AND ACCOUNTS

  	
   

  	
  80

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.01                                          Grant of Security Interest

  	
   

  	
  80

  
	
  Section 8.02                                          Endorsement; Notices

  	
   

  	
  81

  
	
  Section 8.03                                          Preservation of Collateral and
  Perfection of Security Interests

  	
   

  	
  82

  
	
  Section 8.04                                          Loss of Value of Collateral

  	
   

  	
  82

  
	
  Section 8.05                                          Special Collateral

  	
   

  	
  82

  
	
  Section 8.06                                          Remittance of Proceeds to Lender

  	
   

  	
  82

  
	
  Section 8.07                                          Safekeeping of Collateral

  	
   

  	
  82

  
	
  Section 8.08                                          State of Incorporation; Name

  	
   

  	
  82

  
	
  Section 8.09                                          Continuing Lien

  	
   

  	
  83

  

 

ii

 

TABLE
OF CONTENTS

(continued)

 

	
   

  	
   

  	
   

  	
  Page

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 8.10                                          Assignment of Security Interests

  	
   

  	
  83

  
	
  Section 8.11                                          Possession; Sale of Collateral

  	
   

  	
  83

  
	
  Section 8.12                                          Servicing

  	
   

  	
  85

  
	
  Section 8.13                                          Payment Mechanics, Etc.

  	
   

  	
  86

  
	
   

  	
   

  	
   

  
	
  ARTICLE IX

  	
  EVENTS OF DEFAULT

  	
   

  	
  87

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 9.01                                          Events of Default

  	
   

  	
  87

  
	
  Section 9.02                                          Remedies Upon Event of Default

  	
   

  	
  91

  
	
  Section 9.03                                          Remedies Upon Default

  	
   

  	
  92

  
	
  Section 9.04                                          Performance by Agents

  	
   

  	
  92

  
	
  Section 9.05                                          Rights Cumulative

  	
   

  	
  92

  
	
   

  	
   

  	
   

  
	
  ARTICLE X

  	
  COLLATERAL ACCOUNT;
  APPLICATION OF COLLATERAL PROCEEDS

  	
   

  	
  92

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 10.01                                    Collateral Account

  	
   

  	
  92

  
	
  Section 10.02                                    Application of Proceeds

  	
   

  	
  93

  
	
   

  	
   

  	
   

  
	
  ARTICLE XI

  	
  THE ADMINISTRATIVE
  AGENT AND THE COLLATERAL AGENT

  	
   

  	
  94

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 11.01                                    Appointment

  	
   

  	
  94

  
	
  Section 11.02                                    Agent in Its Individual Capacity

  	
   

  	
  94

  
	
  Section 11.03                                    Exculpatory Provisions

  	
   

  	
  95

  
	
  Section 11.04                                    Reliance by Agent

  	
   

  	
  95

  
	
  Section 11.05                                    Delegation of Duties

  	
   

  	
  96

  
	
  Section 11.06                                    Successor Agent

  	
   

  	
  96

  
	
  Section 11.07                                    Non-Reliance on Agent and Other Lenders

  	
   

  	
  96

  
	
  Section 11.08                                    [Intentionally Deleted]

  	
   

  	
  96

  
	
  Section 11.09                                    Indemnification

  	
   

  	
  97

  
	
   

  	
   

  	
   

  
	
  ARTICLE XII

  	
  MISCELLANEOUS

  	
   

  	
  97

  
	
   

  	
   

  	
   

  	
   

  
	
  Section 12.01                                    Notices

  	
   

  	
  97

  
	
  Section 12.02                                    Waivers; Amendment

  	
   

  	
  99

  
	
  Section 12.03                                    Expenses; Indemnity; Damage Waiver

  	
   

  	
  101

  
	
  Section 12.04                                    Successors and Assigns

  	
   

  	
  103

  
	
  Section 12.05                                    Survival of Agreement

  	
   

  	
  107

  
	
  Section 12.06                                    Counterparts; Integration;
  Effectiveness

  	
   

  	
  107

  
	
  Section 12.07                                    Severability

  	
   

  	
  107

  
	
  Section 12.08                                    Right of Setoff

  	
   

  	
  107

  
	
  Section 12.09                                    Governing Law; Jurisdiction; Consent to
  Service of Process

  	
   

  	
  108

  
	
  Section 12.10                                    Waiver of Jury Trial

  	
   

  	
  108

  
	
  Section 12.11                                    Headings; No Adverse Interpretation of
  Other Agreements

  	
   

  	
  108

  
	
  Section 12.12                                    Confidentiality

  	
   

  	
  109

  
	
  Section 12.13                                    Interest Rate Limitation

  	
   

  	
  109

  
	
  Section 12.14                                    Assignment and Acceptance

  	
   

  	
  109

  
	
  Section 12.15                                    Obligations Absolute

  	
   

  	
  110

  
	
  Section 12.16                                    Waiver of Defenses; Absence of
  Fiduciary Duties

  	
   

  	
  110

  
	
  Section 12.17                                    USA Patriot Act

  	
   

  	
  110

  

 

iii

 

TABLE
OF CONTENTS

(continued)

 

	
  ANNEXES

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Annex I                                                                                                           Initial Lenders and Commitments

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  SCHEDULES

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Schedule 1.01(a)                                                              Existing Affected Properties

  	
   

  	
   

  
	
  Schedule 1.01(c)                                                              Guarantors

  	
   

  	
   

  
	
  Schedule 1.01(d)                                                             Material Provider

  	
   

  	
   

  
	
  Schedule 1.01(f)                                                                Released Guarantors

  	
   

  	
   

  
	
  Schedule 1.01(g)                                                             Relevant Existing Provider

  	
   

  	
   

  
	
  Schedule 3.01(b)                                                             Subsidiaries; Ownership Structure

  	
   

  	
   

  
	
  Schedule 3.01(f)                                                                Leases

  	
   

  	
   

  
	
  Schedule 3.01(g)                                                             Existing Indebtedness

  	
   

  	
   

  
	
  Schedule 3.01(h)                                                             Litigation

  	
   

  	
   

  
	
  Schedule 3.01(cc)                                                        Deposit Accounts

  	
   

  	
   

  
	
  Schedule 4.01(m)                                                           Uses of Closing Date Credit Extensions

  	
   

  	
   

  
	
  Schedule 6.03(g)                                                             Permitted Indebtedness

  	
   

  	
   

  
	
  Schedule 6.04(a)                                                              Permitted Liens

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  EXHIBITS

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
  Exhibit A                                                                                                    Accession Agreement

  	
   

  	
   

  
	
  Exhibit B                                                                                                      Assignment and Acceptance Agreement

  	
   

  	
   

  
	
  Exhibit C                                                                                                      Borrowing Request

  	
   

  	
   

  
	
  Exhibit D                                                                                                     Borrowing Base Certificate

  	
   

  	
   

  
	
  Exhibit E                                                                                                       Compliance Certificate

  	
   

  	
   

  
	
  Exhibit F                                                                                                       [Intentionally Deleted]

  	
   

  	
   

  
	
  Exhibit G                                                                                                      Interest Election Request

  	
   

  	
   

  
	
  Exhibit H                                                                                                     LC Request

  	
   

  	
   

  
	
  Exhibit I                                                                                                          Revolving Note

  	
   

  	
   

  
	
  Exhibit J                                                                                                         [Intentionally Deleted]

  	
   

  	
   

  
	
  Exhibit K                                                                                                     [Intentionally Deleted]

  	
   

  	
   

  
	
  Exhibit L                                                                                                       Non-Bank Certificate

  	
   

  	
   

  
	
  Exhibit M                                                                                                  Solvency Certificate

  	
   

  	
   

  

 

iv

 

CREDIT AND SECURITY AGREEMENT

 

This
CREDIT AND SECURITY AGREEMENT (this “Agreement”)
dated as of March 18, 2010, among FIVE STAR QUALITY CARE, INC., a Maryland
corporation (“Borrower”), the
Guarantors (such term and each other capitalized term used but not defined
herein having the meaning given to it in Article I), the Lenders, Jefferies
Finance LLC, as lead arranger (in such capacity, the “Arranger”), as administrative agent for the
Lenders (in such capacity, the “Administrative
Agent”) and as collateral agent for the Secured Parties (in such
capacity, the “Collateral Agent”)
and Jefferies Group Inc., as issuing bank (in such capacity, the “Issuing Bank”) for the Lenders.

 

WITNESSETH:

 

WHEREAS,
Borrower has requested the Lenders to extend credit in the form of Revolving
Loans at any time and from time to time prior to the Revolving Maturity Date,
in an aggregate principal amount at any time outstanding not in excess of
$35,000,000;

 

WHEREAS,
Borrower has requested the Issuing Bank to issue letters of credit, in
an aggregate face amount at any time outstanding not in excess of $10,000,000,
to support payment obligations incurred by Borrower and its Subsidiaries;

 

WHEREAS, each Guarantor acknowledges that it will
receive direct and indirect benefits from the Lender making such financial
accommodations available to the Borrower under this Agreement and, accordingly,
each Guarantor is willing to guarantee the Borrower’s obligations to the Lender
on the terms and conditions contained herein; and

 

WHEREAS, each Guarantor’s execution and delivery of
this Agreement is a condition to the Lender making, and continuing to make,
such financial accommodations to the Borrower.

 

NOW, THEREFORE, in consideration of the mutual
covenants and agreements set forth herein and in the other Loan Documents, the
receipt and adequacy
of which are hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE
I

DEFINITIONS

 

Section 1.01                            Defined Terms. 
As used in this Agreement, the following terms shall have the meanings
specified below:

 

“ABR” when used in reference to any Loan or
Borrowing, is used when such Loan comprising such Borrowing is, or the Loans
comprising such Borrowing are, bearing interest at a rate determined by
reference to the Alternate Base Rate in accordance with the provisions of Article II.

 

“ABR Borrowing” shall mean a Borrowing
comprised of ABR Loans.

 

“ABR Loan” shall mean any ABR Revolving
Loan.

 

“ABR Revolving Loan” shall mean any
Revolving Loan bearing interest at a rate determined by reference to the
Alternate Base Rate in accordance with the provisions of Article II.

 

 

“Accession Agreement” shall mean an Accession Agreement
substantially in the form of Exhibit A.

 

“Account Control Agreement” shall mean: (a) the
Depositary Agreement with respect to the Primary Borrower Account and, if
applicable, certain Provider Accounts; (b) a Government Depositary
Agreement with respect to Provider Accounts; and (d) a control agreement
in form acceptable to the Administrative Agent in its sole discretion with
respect to any other deposit account.

 

“Account Debtor” shall mean any Person that is obligated on
or under an Account.

 

“Accounts” shall mean all present and future “accounts” and
“payment intangibles” (as each such term is defined in the UCC) and in any
event shall include any and all Health-Care-Insurance Receivables and
Government Receivables.

 

“Adjusted LIBOR Rate” shall mean, with
respect to any Eurodollar Borrowing for any Interest Period, the greater of
(a)(i) an interest rate per annum (rounded upward, if necessary, to the
next 1/100th of 1%) determined by the Administrative Agent to be equal to the
LIBOR Rate for such Eurodollar Borrowing in effect for such Interest Period
divided by (ii) 1 minus
the Statutory Reserves (if any) for such Eurodollar Borrowing for such Interest
Period and (b) 2.00%.

 

“Administrative Agent” shall have the
meaning assigned to such term in the preamble hereto and includes each other
Person appointed as the successor administrative agent pursuant to Article XI.

 

“Administrative Agent Fees” shall have the
meaning assigned to such term in Section 2.05(b).

 

“Administrative Questionnaire” shall mean an
Administrative Questionnaire in the form supplied from time to time by the
Administrative Agent.

 

“Advances” shall have the meaning assigned
to such term in the UBS Credit-Line Agreement.

 

“Advisors” shall mean legal counsel
(including local, foreign and in-house counsel), auditors, accountants,
consultants, appraisers, engineers or other advisors.

 

“Affected Account” means an Account of a Relevant Existing
Provider or a Released Guarantor that is generated by, and only by, the
operation of an Affected Property by such Relevant Existing Provider or
Released Guarantor, as applicable.

 

“Affected Property” shall mean (i) each
of the Properties listed on Schedule 1.01(a) attached hereto that
are encumbered by mortgages in favor of the SNH Lender to secure the SNH
Financing and (ii) any Property that, after the date hereof, is encumbered
by a mortgage securing Nonrecourse Indebtedness permitted under Section 6.03(c).

 

“Affiliate” shall mean, when used with respect to a specified
Person, another Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common Control with
the Person specified; provided, however,
that, for purposes of Section 6.08, the term “Affiliate” shall also
include (i) any Person that directly or indirectly owns more than 10% of
any class of Equity Interests of the Person specified or (ii) any Person
that is an officer or director of the Person specified.  For purposes of this Agreement, the Borrower
and its Subsidiaries (including the Borrower) shall not be deemed to be
Affiliates of SNH and its Subsidiaries so long as each of the board of
directors of the Borrower and the board of trustees of SNH has at least one
independent director who does not serve as both a director of the Borrower and
a trustee of SNH.  The term “independent
director” has the 

 

2

 

meaning given such term
under the listing requirements of the New York Stock Exchange, in the case of
SNH, and the American Stock Exchange, in the case of the Borrower.

 

“Agents”
shall mean the Arranger, the Administrative Agent and the Collateral Agent; and “Agent” shall mean any of them.

 

“Agreement” shall have the meaning assigned
to such term in the preamble hereto.

 

“Alternate Base Rate” shall mean, for any
day, a rate per annum (rounded upward, if necessary, to the next 1/100th of 1%)
equal to the greatest of (a) the Base Rate in effect on such day,
(b) the Federal Funds Effective Rate in effect on such day plus 0.50% and (c) the one month
Adjusted LIBOR Rate in effect on such day plus
1.00%.  If the Administrative Agent shall
have determined (which determination shall be conclusive absent manifest error)
that it is unable to ascertain the Federal Funds Effective Rate for any reason,
including the inability or failure of the Administrative Agent to obtain
sufficient quotations in accordance with the terms of the definition thereof,
the Alternate Base Rate shall be determined without regard to clause (b) of
the preceding sentence until the circumstances giving rise to such inability no
longer exist.  Any change in the
Alternate Base Rate due to a change in the Base Rate or the Federal Funds
Effective Rate shall be effective on the effective date of such change in the
Base Rate or the Federal Funds Effective Rate, respectively.

 

“Applicable Law” shall mean all applicable provisions of
constitutions, statutes, rules, regulations and orders of all governmental
bodies and all orders and decrees of all courts, tribunals and arbitrators.

 

“Applicable Margin” shall mean
(i) 3.00% for ABR Revolving Loans and (ii) 4.00% for Eurodollar
Revolving Loans.

 

“Approved Amount” shall have the meaning
assigned to such term in the UBS Credit-Line Agreement.

 

“Approved Fund” shall mean any Person (other
than a natural Person) that is (or will be) engaged in making, purchasing,
holding or investing in bank and other commercial loans and similar extensions
of credit in the ordinary course of its business and that is administered or
managed by (a) a Lender, (b) an Affiliate of a Lender or (c) an
entity or an Affiliate of an entity that administers or manages a Lender.

 

“Arranger” shall have the meaning assigned
to such term in the preamble hereto.

 

“Assignment and Acceptance” shall mean an
assignment and acceptance entered into by a Lender and an assignee (with the
consent of any party whose consent is required pursuant to Section 12.04(b)),
and accepted by the Administrative Agent, substantially in the form of Exhibit B,
or such other form as shall be approved by the Administrative Agent.

 

“Attributable Indebtedness” shall mean, on any date,
(a) in respect of any capital lease of any Person, the capitalized amount
thereof that would appear on a balance sheet of such Person prepared as of such
date in accordance with GAAP, and (b) in respect of any Synthetic Lease
Obligation, the capitalized amount of the remaining lease payments under the
relevant lease that would appear on a balance sheet of such Person prepared as
of such date in accordance with GAAP if such lease were accounted for as a
capital lease.

 

3

 

“Base Rate” shall mean, for any day, the
U.S. Prime Lending rate as published in The Wall Street Journal, each change in
the Base Rate shall be effective on the date such change is effective.  The prime rate is not necessarily the lowest
rate charged by any financial institution to its customers.

 

“Benefit Arrangement” shall mean at any time an employee
benefit plan within the meaning of Section 3(3) of ERISA which is not
a Plan or a Multiemployer Plan and which is maintained or otherwise contributed
to by any member of the ERISA Group.

 

“Board” shall mean the Board of Governors of
the Federal Reserve System of the United States.

 

“Board of Directors” shall mean, with
respect to any Person, (a) in the case of any corporation, the board of
directors of such Person, (b) in the case of any limited liability
company, the board of managers or board of directors, as applicable, of such Person,
or if such limited liability company does not have a board of managers or board
of directors, the functional equivalent of the foregoing, (c) in the case
of any partnership, the board of directors or board of managers, as applicable,
of the general partner of such Person and (d) in any other case, the
functional equivalent of the foregoing.

 

“Borrower” shall have the meaning assigned to such term in
the preamble hereto.

 

“Borrowing” shall mean Loans of the same
Type, made, converted or continued on the same date and, in the case of
Eurodollar Revolving Loans, as to which a single Interest Period is in effect.

 

“Borrowing Base” shall mean an amount equal to 85% of the
amount Eligible Accounts minus
customary and appropriate reserves as determined by the Administrative Agent
from time to time in accordance with Section 2.17.

 

“Borrowing Base Certificate” shall mean a
borrowing base certificate prepared by the chief financial officer or chief
accounting officer of the Borrower substantially in the form of Exhibit D
or such other form as shall be approved by the Administrative Agent.

 

“Borrowing Request” shall mean a request by
Borrower in accordance with the terms of Section 2.03 and
substantially in the form of Exhibit C, or such other form as shall
be approved by the Administrative Agent.

 

“Business Day” shall mean any day other than
a Saturday, Sunday or other day on which banks in New York City are authorized
or required by law to close; provided,
however, that when used in connection with a Eurodollar Revolving
Loan, the term “Business Day” shall also exclude any day on which banks are not
open for dealings in Dollar deposits in the London interbank market.

 

“Capital Expenditures” shall mean, for any period, the
greater of (a) an amount equal to $500 per annum per bed for a skilled
nursing facility, plus $150 per unit for any Senior Housing Asset (other
than a skilled nursing facility) or (b) the actual amount of capital
expenditures required to be funded by Borrower and its Subsidiaries, on a
consolidated basis, under the terms of any lease or operating agreement to
which it is a party or by which it or its assets is bound; provided, however, in the case of a Senior
Housing Asset leased by Borrower or a Subsidiary from SNH or a Subsidiary of
SNH, to the extent the applicable Lease obligates the landlord thereunder to
fund capital expenditures with respect to such Senior Housing Asset and such
landlord has actually funded such Capital Expenditures, then the amount of
Capital Expenditures for such Senior Housing Asset shall be $0 for purposes of
this definition.

 

“Capitalized Lease Obligation” shall mean an obligation under
a lease that is required to be capitalized for financial reporting purposes in
accordance with GAAP.  The amount of a
Capitalized 

 

4

 

Lease Obligation is the capitalized amount of such
obligation as would be required to be reflected on a balance sheet prepared in
accordance with GAAP as of the applicable date.

 

“Capital Requirements” shall mean, as to any Person, any
matter, directly or indirectly, (a) regarding capital adequacy, capital
ratios, capital requirements, the calculation of such Person’s capital or
similar matters, or (b) affecting the amount of capital required to be obtained
or maintained by such Person or any Person controlling such Person (including
any direct or indirect holding company), or the manner in which such Person or
any Person controlling such Person (including any direct or indirect holding
company), allocates capital to any of its contingent liabilities (including
letters of credit), advances, acceptances, commitments, assets or liabilities.

 

“Cash Equivalents” shall mean, as to any
Person, (a) securities issued, or directly, unconditionally and fully
guaranteed or insured, by the United States or any agency or instrumentality
thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than one year from the date of acquisition by such
Person, (b) time deposits and certificates of deposit of any Lender or any
commercial bank having, or which is the principal banking subsidiary of a bank
holding company organized under the laws of the United States, any state
thereof or the District of Columbia having, capital and surplus aggregating in
excess of $500,000,000 and a rating of “A” (or such other similar equivalent
rating) or higher by at least one nationally recognized statistical rating
organization (as defined in Rule 436 under the Securities Act) with
maturities of not more than one year from the date of acquisition by such
Person, (c) repurchase obligations with a term of not more than
30 days for underlying securities of the types described in
clause (a) above entered into with any Person meeting the
qualifications specified in clause (b) above, which repurchase
obligations are secured by a valid perfected security interest in the
underlying securities, (d) commercial paper issued by any Person
incorporated in the United States rated at least A-1 or the equivalent thereof
by Standard & Poor’s Rating Service or at least P-1 or the equivalent
thereof by Moody’s Investors Service Inc., and in each case maturing not more
than one year after the date of acquisition by such Person, and (e) investments
in money market funds at least 95% of whose assets are comprised of securities
of the types described in clauses (a) through (d) above.

 

“Cash Collateralized” shall mean, with respect to any Letter
of Credit, as of any date, that Borrower shall have deposited in the LC
Sub-Account, in the name of the Collateral Agent and for the benefit of the
Revolving Lenders, an amount in cash equal to 105% of the LC Exposure as of
such date plus any accrued and unpaid interest thereon.  “Cash Collateralize”
shall have the correlative meaning.

 

“Cash Interest Expense” shall mean, for any
period, the total Interest Expense for such period minus all non-cash items constituting Interest Expense.

 

“CERCLA” shall mean the Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended, 42
U.S.C. § 9601 et seq.

 

“CHAMPUS” shall mean the Civilian Health and Medical Program
of the Uniformed Service, a program of medical benefits covering former and
active members of the uniformed services and certain of their dependents,
financed and administered by the United States Departments of Defense, Health
and Human Services and Transportation and established pursuant to 10 USC
§§ 1071-1106, and all regulations promulgated thereunder including without
limitation (a) all federal statutes (whether set forth in 10 USC
§§ 1071-1106 or elsewhere) affecting CHAMPUS; and (b) all rules,
regulations (including 32 CFR 199), manuals, orders and administrative,
reimbursement and other guidelines of all Governmental Entities (including,
without limitation, the Department of Health and Human Services, the Department
of Defense, the Department of Transportation, the Assistant Secretary of
Defense (Health Affairs), and the Office of CHAMPUS, or any Person or entity
succeeding to the functions of any of the foregoing) 

 

5

 

 

promulgated pursuant to or in connection with any of
the foregoing (whether or not having the force of law) in each case as may be
amended, supplemented or otherwise modified from time to time.

 

“Change in Law” shall mean (a) the
adoption of, or taking effect of, any law, treaty, order, rule or
regulation after the date of this Agreement, (b) any change in any law,
treaty, order, rule or regulation or in the interpretation or application
thereof by any Governmental Authority after the date of this Agreement or
(c) compliance by any Lender or Issuing Bank (or, for purposes of Section 2.12(b),
by any lending office of such Lender or by such Lender’s or Issuing Bank’s
holding company, if any) with any request, guideline or directive (whether or
not having the force of law) of any Governmental Authority made or issued after
the date of this Agreement.

 

“Charges” shall have the meaning assigned to
such term in Section 12.13.

 

“Claims” shall have the meaning assigned to
such term in Section 12.03(b).

 

“Closing Date” shall mean March 18, 2010.

 

“CMS” shall mean the Centers for Medicare and Medicaid
Services of the United States Department of Health and Human Services.

 

“Code” shall mean the Internal Revenue Code
of 1986.

 

“Collateral” shall mean any real or personal property of any
of the Loan Parties, now owned or hereafter acquired, upon which a Lien is
purported to be created by this Agreement or any Security Document.

 

“Collateral Account” shall mean one or more
collateral accounts or sub-accounts established and maintained from time to
time by the Collateral Agent for the benefit of the Secured Parties, in
accordance with the provisions of Section 10.01.

 

“Collateral Agent” shall have the meaning
assigned to such term in the preamble hereto.

 

“Commitment” shall mean such Lender’s
Revolving Commitment.

 

“Commitment Fee” shall have the meaning
assigned to such term in Section 2.05(a).

 

“Commitment Letter” shall mean the
Commitment Letter, dated January 21, 2010, between Borrower and Jefferies
Finance LLC.

 

“Communications” shall have the meaning
assigned to such term in Section 12.01(d).

 

“Companies” shall mean Borrower and its
Subsidiaries; and “Company” shall
mean any one of them.

 

“Compliance Certificate” shall mean a
certificate of a Financial Officer of Borrower substantially in the form of Exhibit E.

 

“Concentration Account” shall mean
(i) account number 2000027-339804 maintained by and under the control of
the Collateral Agent at Wachovia Bank, N.A. or (ii) account number
1135638907 maintained under the control of the Collateral Agent at Citizens
Bank, N.A., or such other account under the Control of the Collateral Agent at
another financial institution acceptable to the Collateral Agent.

 

6

 

“Contingent Obligation”
shall mean, as to any Person, any obligation, agreement, understanding or
arrangement of such Person guaranteeing or intended to guarantee any
Indebtedness, leases, dividends or other obligations (“primary obligations”) of any other Person
(the “primary obligor”) in any
manner, whether directly or indirectly, including any obligation, agreement,
understanding or arrangement of such Person, whether or not contingent,
(a) to purchase any such primary obligation or any property constituting
direct or indirect security therefor, (b) to advance or supply funds
(i) for the purchase or payment of any such primary obligation or
(ii) to maintain working capital or equity capital of the primary obligor
or otherwise to maintain the net worth, net equity, liquidity, level of income,
cash flow or solvency of the primary obligor, (c) to purchase or lease
property, securities or services primarily for the purpose of assuring the
primary obligor of any such primary obligation of the ability of the primary
obligor to make payment of such primary obligation, (d) with respect to
bankers’ acceptances, letters of credit and similar credit arrangements, until
a reimbursement or equivalent obligation arises (which reimbursement obligation
shall constitute a primary obligation), or (e) otherwise to assure or hold
harmless the primary obligor of any such primary obligation against loss (in
whole or in part) in respect thereof; provided,
however, that the term
“Contingent Obligation” shall not include endorsements of instruments for
deposit or collection in the ordinary course of business or any product
warranties given in the ordinary course of business.  The amount of any Contingent Obligation shall
be deemed to be an amount equal to the stated or determinable amount of the
primary obligation, or portion thereof, in respect of which such Contingent
Obligation is made (or, if less, the maximum amount of such primary obligation
for which such Person may be liable, whether singly or jointly, pursuant to the
terms of the instrument, agreements or other documents or, if applicable,
unwritten agreement, evidencing such Contingent Obligation) or, if not stated
or determinable, the maximum reasonably anticipated liability in respect
thereof (assuming such Person is required to perform thereunder) as determined
by such Person in good faith.

 

“Control” shall mean the possession,
directly or indirectly, of the power to direct or cause the direction of the
management or policies of a Person, whether through the ability to exercise
voting power, by contract or otherwise, and the terms “Controlling” and “Controlled” shall have meanings correlative
thereto.

 

“Convertible Senior Notes” shall mean those
certain convertible senior notes issued by Borrower pursuant to that certain
Indenture to be dated on or about October 18, 2006 by and among Borrower,
the Convertible Senior Note Guarantors and U.S. Bank National Association, as
trustee.

 

“Convertible Senior Note Guarantors” shall
mean, initially, 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 and FS Tenant Pool IV Trust, and any other Subsidiary of
Borrower that guaranties the Convertible Senior Notes and that is also a
Guarantor.

 

“Credit and Collection Policy” shall mean those receivables
credit and collection policies and practices of the Providers in effect on the
Closing Date, as modified from time to time in accordance with the terms
hereof.

 

“Credit Event” shall mean any of the following:  (a) the making (or deemed making) of any
Loan, (b) the conversion of a Loan and (c) the issuance of a Letter
of Credit.

 

“Credit Extension” shall mean, as the
context may require, (a) the making of a Loan by a Lender or (b) the
issuance of any Letter of Credit, or the extension of the expiry date or
renewal, or any amendment or other modification to increase the amount, of any
existing Letter of Credit, by the Issuing Bank.

 

7

 

“Debt Issuance” shall mean the incurrence by
any Company of any Indebtedness after the Closing Date (other than as permitted
by Section 6.03).

 

“Debt Service Coverage Ratio” shall mean, as
of any date of determination, for the four consecutive fiscal quarters most
recently ending prior to such date of determination, the ratio of
(a) EBITDA for such four consecutive fiscal quarter period to
(ii) Debt Service Expense for such four consecutive fiscal quarter period.

 

“Debt Service Expense” shall mean, for any
period, the aggregate amount of regularly scheduled principal payments of all
Funded Debt made or to be made by Borrower or its Subsidiaries during such
period (and for the avoidance of doubt, excluding the repayment of any loans
under the UBS Credit-Line Agreement out of the proceeds from the purchase of
any collateral thereunder by UBS Bank USA) and all Cash Interest Expense for
such period, in each case as determined on a consolidated basis by GAAP.

 

“Default” shall mean any event, occurrence
or condition which is, or upon notice, lapse of time or both would constitute,
an Event of Default.

 

“Default Excess” shall have the meaning assigned to such term
in Section 2.15(c).

 

“Default Period” shall have the meaning assigned to such term
in Section 2.15(c).

 

“Default Rate” shall have the meaning assigned to such term
in Section 2.06(c).

 

“Defaulted Account” shall mean an Account (a) as to
which the Account Debtor therefor or any other Person obligated thereon has
taken any action, or suffered any event to occur, of the type described in Section 9.01.(f) or
(g) or (b) which, consistent with the Credit and Collection Policy,
would be written off the applicable Provider’s books as uncollectible;
provided, however, that an Account as to which the Account Debtor therefor has
suffered a temporary governmental shutdown or delay shall not be a “Defaulted
Account”.

 

“Defaulted Loan” shall have the meaning assigned to such term
in Section 2.15(c).

 

“Defaulting Lender” shall have the meaning assigned to such
term in Section 2.15(c).

 

“Defaulting Period” shall have the meaning assigned to such
term in Section 2.15(c).

 

“Depositary Agreement” shall mean one or more Depositary
Account Agreements among Borrower, the Providers, the Collateral Agent and the
applicable depositary bank, in a form as may be acceptable to the
Administrative Agent.

 

“Derivatives Contract” shall mean any and all rate swap transactions, basis
swaps, credit derivative transactions, forward rate transactions, commodity
swaps, commodity options, forward commodity contracts, equity or equity index
swaps or options, bond or bond price or bond index swaps or options or forward
bond or forward bond price or forward bond index transactions, interest rate
options, forward foreign exchange transactions, cap transactions, floor
transactions, collar transactions, currency swap transactions, cross-currency
rate swap transactions, currency options, spot contracts, or any other similar
transactions or any combination of any of the foregoing (including any options
to enter into any of the foregoing), whether or not any such transaction is
governed by or subject to any master agreement. 
Not in limitation of the foregoing, the term “Derivatives Contract”
includes any and all transactions of any kind, and the related confirmations,
which are subject to the terms and conditions of, or governed by, any form of
master agreement published by the International Swaps and Derivatives
Association, Inc., 

 

8

 

any International Foreign Exchange Master Agreement,
or any other master agreement, including any such obligations or liabilities
under any such master agreement.

 

“Derivatives Termination Value” shall mean, in respect of any
one or more Derivatives Contracts, after taking into account the effect of any
legally enforceable netting agreement relating to such Derivatives Contracts,
(a) for any date on or after the date such Derivatives Contracts have been
closed out and termination value(s) determined in accordance therewith,
such termination value(s), and (b) for any date prior to the date
referenced in clause (a) the amount(s) determined as the
mark-to-market value(s) for such Derivatives Contracts, as determined
based upon one or more mid-market or other readily available quotations
provided by any recognized dealer in such Derivatives Contracts (which may
include any Lender).

 

“Disqualified
Capital Stock” shall mean any Equity Interest which, by its terms
(or by the terms of any security or instrument into which it is convertible or
for which it is exchangeable or exercisable), or upon the happening of any
event, (a) matures (excluding any maturity as the result of an optional
redemption by the issuer thereof) or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or is redeemable at the option of the
holder thereof, in whole or in part, on or prior to the first anniversary of
the Revolving Maturity Date, (b) is convertible into or exchangeable or
exercisable (unless at the sole option of the issuer thereof) for (i) debt
securities or other indebtedness or (ii) any Equity Interests referred to
in (a) above, in each case at any time on or prior to the first
anniversary of the Revolving Maturity Date, or (c) contains any repurchase
or payment obligation which may come into effect prior to the first anniversary
of the Revolving Maturity Date.

 

“Dividends” shall mean, for any given period and without
duplication, all Restricted Payments accrued or paid (and in the case of
Restricted Payments paid, which were not accrued during a prior period) during
such period on Equity Interests issued by Borrower or a Subsidiary.  Dividends shall not include dividends or
distributions paid or payable (a) solely in Equity Interests (other than
Mandatorily Redeemable Stock) payable to holders of such class of Equity
Interests; or (b) to Borrower or a Subsidiary.

 

“Dollars” or “$” shall mean lawful money of the United States.

 

“EBITDA” shall mean, with respect to
Borrower and its consolidated Subsidiaries for any period (without
duplication): (A) 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
non-cash losses, and (v) extraordinary or non-recurring cash losses or
charges in aggregate amount since the Closing Date not to exceed $4,000,000 and
not to exceed in the aggregate $2,000,000 during any period of four consecutive
fiscal quarters, minus (B) (i) extraordinary or non-recurring
non-cash gains and (ii) extraordinary or non-recurring cash gains in
excess in the aggregate amount since the Closing Date of $4,000,000 or in
excess in the aggregate of $2,000,000 during any period of four consecutive
fiscal quarters.  If 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 6.01, EBITDA for the relevant period
shall be calculated for such purposes on a Pro Forma Basis.  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 Xl of 

 

9

 

Regulation S-X or (b) are reasonably consistent
with the purposes of Regulation S-X as determined in good faith by Borrower and
agreed to by the Administrative Agent.

 

“EBITDAR” shall mean, with respect to Borrower
and its consolidated Subsidiaries for any period (without duplication), EBITDA
for such period plus Rental Expense for such period.

 

“Eligible Accounts” shall mean Accounts of
Borrower and each Provider other than the following Accounts:

 

(a)           Accounts which do
not arise out of the delivery of Goods or services by a Provider to a Patient;

 

(b)           Accounts (other than
Unbilled Receivables) which have not been billed by the Provider with respect
thereto or with respect to which the Provider with respect thereto has not
delivered to the Account Debtor in respect thereof supporting claim documents
with respect to such Account as have been requested by such Account Debtor;

 

(c)           Accounts that arise
other than in the ordinary course of business of any Provider;

 

(d)           Healthcare
Receivables which are not subject to a Patient Consent Form executed by
the Patient (or any other Person legally empowered to act on behalf of such
Patient);

 

(e)           Accounts the
obligations of the Account Debtor under which have been Guaranteed by any other
Person, are supported by any letter of credit or are secured by a Lien on the
assets of such guarantor or Account Debtor unless such Guarantee, letter of
credit or Lien has been validly assigned to the Collateral Agent and no Person
(other than the Collateral Agent) has any Lien on such Guarantee, letter of
credit or Lien;

 

(f)            Accounts that are
outstanding for more than 90 days
after the original invoice date of the original invoice related thereto or, in
the case of Unbilled Receivables, 150 days after the most recent date the
services or Goods giving rise to such Account were provided to the Patient with
respect to such Account;

 

(g)           Accounts of an
Account Debtor that is located outside the United States;

 

(h)           Accounts that are
the subject of any setoff or counterclaim (except, in the case of Government
Receivables, for statutory rights of Governmental Authorities that are not
pending or threatened), or are in dispute, by the Account Debtor or with
respect to which there are proceedings or audits currently pending or, to the
knowledge of the Loan Parties, threatened, by the Account Debtor with respect
to any Provider’s operations, including, specifically, its billing practices;

 

(i)            Accounts in which
Lender does not, for any reason, have a first priority, perfected and
enforceable Lien (subject to Applicable Laws restricting the enforceability
against a Governmental Authority of the assignment of Accounts arising under
Medicare and Medicaid);

 

(j)            Accounts which are
subject to any Liens other than Permitted Liens;

 

(k)           Accounts as to which
Borrower or a Provider is not able to bring suit or otherwise enforce its
remedies against the Account Debtor through judicial process other than as a
result of the Applicable Laws restricting the enforceability against a
Governmental Authority of the assignment of Accounts arising under Medicare and
Medicaid;

 

10

 

(l)            any Account that is
not a true and correct statement of bona fide debt incurred in the amount of
the Account and that is not disputed by the applicable Account Debtor;

 

(m)          Accounts as to which
any of the representations or warranties with respect to such Accounts
contained in any of the Loan Documents or Provider Documents are not true;

 

(n)           any Account to the
extent such Account is evidenced by a judgment, Instrument or Chattel Paper;

 

(o)           Accounts of any
Account Debtor which (i) is subject to a case under the Bankruptcy Code of
1978, as amended, or other federal bankruptcy laws (as now or hereafter in
effect); (ii) has filed a petition seeking to take advantage of any other
Applicable Laws, domestic or foreign, relating to bankruptcy, insolvency,
reorganization, winding-up, or composition or adjustment of debts;
(iii) has applied for, consented to, or with respect to which, a receiver,
custodian, trustee, or liquidator to be, or has been appointed of itself or of
a substantial part of its property, domestic or foreign;
(iv) has made a general assignment for the benefit of creditors;
(v) has made a conveyance fraudulent as to creditors under any Applicable
Law; or (vi) has taken any corporate or partnership action for the purpose
of effecting any of the foregoing;

 

(p)           Accounts of any
Account Debtor that is an Affiliate of Borrower, any Subsidiary or any
Provider;

 

(q)           Accounts arising out
of workers’ compensation or personal injury claims;

 

(r)            Accounts the
Account Debtor of which is a Sanctioned Person or Sanctioned Entity;

 

(s)           Accounts originated
by, or acquired from, a Provider that is not a Loan Party, and any Affected
Account;

 

(t)            Defaulted Accounts;  or

 

(u)           Accounts of
Providers that are not Material Providers to the extent such Accounts exceed
10% of all Eligible Accounts.

 

“Employee Benefit Plan” shall mean any
“employee benefit plan” as defined in Section 3(3) of ERISA which is
or was maintained or contributed to by any Company or any of its ERISA
Affiliates.

 

“Environment” shall mean any surface or
subsurface physical medium or natural resource, including air, land, soil,
surface waters, ground waters, stream and river sediments, biota and any indoor
area, surface or physical medium.

 

“Environmental Claim” shall mean any claim,
notice, demand, Order, action, suit, proceeding, or other communication
alleging or asserting liability or obligations under Environmental Law,
including liability or obligation for investigation, assessment, remediation,
removal, cleanup, response, corrective action, monitoring, post-remedial or
post-closure studies, investigations, operations and maintenance, injury,
damage, destruction or loss to natural resources, personal injury, wrongful
death, property damage, fines, penalties or other costs resulting from, related
to or arising out of (i) the presence, Release or threatened Release of
Hazardous Material in, on, into or from the Environment at any location or
(ii) any violation of or non-compliance with Environmental Law, and shall
include any claim, notice, demand, Order, action, suit or proceeding seeking
damages (including the costs of remediation), contribution, 

 

11

 

indemnification, cost recovery, penalties, fines,
indemnities, compensation or injunctive relief resulting from, related to or
arising out of the presence, Release or threatened Release of Hazardous
Material or alleged injury or threat of injury to health, safety or the
Environment.

 

“Environmental Law” shall mean any and all
applicable current and future Legal Requirements relating to health, safety or
the Environment, the Release or threatened Release of Hazardous Material,
natural resources or natural resource damages, or occupational safety or
health.

 

“Environmental Permit” shall mean any
permit, license, approval, consent, registration, notification, exemption or
other authorization required by or from a Governmental Authority under any
Environmental Law.

 

“EOB” shall mean the explanation of benefit from an Obligor
that identifies the services rendered on account of the Account specified
therein.

 

“Equity Interest” shall mean, with respect
to any Person, any and all shares, interests, rights to purchase, warrants,
options, participations or other equivalents, including membership interests
(however designated, whether voting or nonvoting), of equity of such Person,
including, if such Person is a partnership, partnership interests (whether
general or limited), or if such Person is a limited liability company,
membership interests and any other interest or participation that confers on a
Person the right to receive a share of the profits and losses of, or
distributions of property of, such partnership, whether outstanding on the date
hereof or issued on or after the Closing Date, but excluding debt securities
convertible or exchangeable into such equity.

 

“ERISA” shall mean the Employee Retirement Income Security
Act of 1974, as in effect from time to time.

 

“ERISA Affiliate” shall mean, with respect
to any Person, any trade or business (whether or not incorporated) that,
together with such Person, is treated as a single employer under
Section 414(b) or (c) of the Code, or solely for purposes of
Section 302 of ERISA and Section 412 of the Code, is treated as a
single employer under Section 414 of the Code.  Any former ERISA Affiliate of a Person or any
of its Subsidiaries shall continue to be considered an ERISA Affiliate of such
Person or such Subsidiary within the meaning of this definition with respect to
the period such entity was an ERISA Affiliate of such Person or such Subsidiary
and with respect to liabilities arising after such period for which such Person
or such Subsidiary could reasonably be expected to be liable under the Code or
ERISA, but in no event for more than six years after such period if no such
liability has been asserted against such Person or such Subsidiary; provided, however,
that such Person or such Subsidiary shall continue to be an ERISA Affiliate of
such Person or such Subsidiary after the expiration of the six-year period
solely with respect to any liability asserted against such Person or such
Subsidiary prior to the expiration of such six-year period.

 

“ERISA Group” shall mean Borrower, any Subsidiary and all
members of a controlled group of corporations and all trades or businesses
(whether or not incorporated) under common control which, together with
Borrower or any Subsidiary, are treated as a single employer under Section 414
of the Internal Revenue Code.

 

“Eurodollar Borrowing” shall mean a
Borrowing comprised of Eurodollar Revolving Loans.

 

“Eurodollar Revolving Borrowing” shall mean
a Borrowing comprised of Eurodollar Revolving Loans.

 

12

 

“Eurodollar Revolving Loan” shall mean any
Revolving Loan bearing interest at a rate determined by reference to the
Adjusted LIBOR Rate.

 

“Event of Default” shall have the meaning
assigned to such term in Article IX, and shall include any Default.

 

“Exchange Act” has the meaning set forth in Section 9.01(m)(i).

 

“Excluded Subsidiary” shall mean (a) any Subsidiary
(i) holding title to assets which are or are to become collateral for any
Secured Indebtedness of such Subsidiary and (ii) which is prohibited from
Guarantying the Indebtedness of any other Person pursuant to (x) any
document, instrument or agreement evidencing such Secured Indebtedness or
(y) a provision of such Subsidiary’s organizational documents which
provision was included in such Subsidiary’s organizational documents as a
condition to the extension of such Secured Indebtedness and (b) the
Insurance Subsidiaries.

 

“Excluded Taxes” shall mean, with respect to
the Administrative Agent, any Lender, the Issuing Bank or any other recipient
of any payment to be made by or on account of any obligation of Borrower
hereunder, (a) income or franchise taxes imposed on (or measured by) its
net income by the United States, or by the jurisdiction under the laws of which
such recipient is organized or in which its principal office is located or, in
the case of any Lender, in which its applicable lending office is located, and
(b) in the case of a Foreign Lender (other than an assignee pursuant to a
request by Borrower under Section 2.15), any withholding tax that
is imposed on amounts payable to such Foreign Lender at the time such Foreign
Lender becomes a party to this Agreement (or designates a new lending office)
or is attributable to such Foreign Lender’s failure or inability (other than as
a result of a Change in Law) to comply with Section 2.14(e), except
to the extent that such Foreign Lender (or its assignor, if any) was entitled,
at the time of designation of a new lending office (or assignment), to receive
additional amounts from Borrower with respect to such withholding tax pursuant
to Section 2.14(a) (it being understood and agreed, for the
avoidance of doubt, that any withholding tax imposed on a Foreign Lender as a
result of a Change in Law occurring after the time such Foreign Lender became a
party to this Agreement shall not be an Excluded Tax).

 

“Executive Order” shall mean Executive Order
No. 13224 on Terrorist Financing, effective September 24, 2001.

 

“Existing Credit Agreement” shall mean the
Credit and Security Agreement dated as of May 9, 2005, between Borrower
and Wachovia Bank, National Association, as amended.

 

“Fair Market Value” shall mean, with respect to (a) a
security listed on a national securities exchange or the NASDAQ National
Market, the price of such security as reported on such exchange or market by
any widely recognized reporting method customarily relied upon by financial
institutions and (b) with respect to any other property, the price which
could be negotiated in an arm’s-length free market transaction, for cash,
between a willing seller and a willing buyer, neither of which is under
pressure or compulsion to complete the transaction.

 

“Federal Funds Effective Rate” shall mean,
for any day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System of the United States
arranged by federal funds brokers, as published on the next succeeding Business
Day by the Federal Reserve Bank of New York, or, if such rate is not so
published for any day that is a Business Day, the average (rounded upwards, if
necessary to the next 1/100th of 1%) of the quotations for the day for such
transactions received by the Administrative Agent from three federal funds
brokers of recognized standing selected by it.

 

13

 

“Fee Letter” shall mean the confidential Fee
Letter, dated January 21, 2010, between Borrower and Jefferies Finance
LLC.

 

“Fees” shall mean the Commitment Fees, the
Administrative Agent Fees, the LC Participation Fees, the Fronting Fees and the
other fees referred to in Section 2.05(d).

 

“Financial Officer” of any Person shall mean
the chief financial officer, principal accounting officer, treasurer or
controller of such Person.

 

“Fixed Charge
Coverage Ratio”  shall mean, for the fiscal quarter most
recently ending prior to the date of determination, the ratio of
(a) EBITDAR for such fiscal quarter to (b) Fixed Charges for such
fiscal quarter.

 

“Fixed Charges” shall mean, for any period, the
aggregate amount of the following of Borrower and its Subsidiaries determined
on a consolidated basis for such period: (a) interest expense,
(b) all regularly scheduled principal payments made with respect to
Indebtedness of Borrower and its Subsidiaries during such period,
(c) Dividends, (d) Capital Expenditures and (e) Rental Expense.

 

“Foreign Lender” shall mean any Lender that
is not, for United States federal income tax purposes, (a) a citizen or
resident of the United States, (b) a corporation or entity treated as a
corporation created or organized in or under the laws of the United States, or
any political subdivision thereof, (c) an estate whose income is subject
to U.S. federal income taxation regardless of its source or (d) a trust if
a court within the United States is able to exercise primary supervision over
the administration of such trust and one or more United States Persons have the
authority to control all substantial decisions of such trust.

 

“Fronting Fee” shall have the meaning
assigned to such term in Section 2.05(c).

 

“Funded Debt” means, with respect to
Borrower and its Subsidiaries as of the date of determination thereof and as
determined on a consolidated basis in accordance with GAAP, all Indebtedness
for borrowed money.

 

“Funding Default” shall have the meaning assigned to such
term in Section 2.15(c).

 

“GAAP” shall mean generally accepted
accounting principles in the United States applied on a consistent basis.

 

“Government Lockbox Account” shall mean (a) each of the
accounts identified on Schedule 3.01(cc) as a Government Lockbox Account
listed on Schedule 3.01(cc) established to deposit all cash collections,
wire transfers, electronic funds transfers and other cash proceeds of Provider
Accounts from the applicable Governmental Authority, including collections received
by wire transfer directly from applicable the Governmental Authority and
(b) each other account established as a Government Lockbox Account
pursuant to Section 5.14(b).

 

“Government Receivables” shall mean, collectively, any and
all Accounts owing by any Governmental Authority and shall in any event include
all (a) Medicare Accounts or (b) Medicaid Accounts.

 

“Governmental Approvals” shall mean all authorizations,
consents, approvals, licenses and exemptions of, registrations and filings
with, and reports to, all Governmental Authorities.

 

14

 

“Governmental Authority” shall mean any
federal, state, local or foreign (whether civil, criminal, military or
otherwise) court, central bank or governmental agency, tribunal, authority,
instrumentality or regulatory body or any subdivision thereof or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers of or pertaining to government (including any
supra-national bodies such as the European Union or the European Central Bank).

 

“Governmental
Entities” means any nation or government, any state or other
political subdivision thereof, any agency, authority, instrumentality,
regulatory body, court, administrative tribunal, central bank or other entity
exercising executive, legislative, judicial, taxing, regulatory or
administrative powers or functions of or pertaining to government.

 

“Granting Lender” shall have the meaning
assigned to such term in Section 12.04(h).

 

“Guaranteed Obligations” shall have the
meaning assigned to such term in Section 7.01.

 

“Guarantees” shall mean the guarantees
issued pursuant to Article VII by the Guarantors.

 

“Guarantors” shall mean each Subsidiary
listed on Schedule 1.01(c), and each other Subsidiary of any Loan Party
that is or becomes a party to this Agreement and the Security Documents
pursuant to Section 5.13.

 

“Hazardous Materials” shall mean all or any of the following:
(a) substances that are defined or listed in, or otherwise classified
pursuant to, any applicable Environmental Laws as “hazardous substances”,
“hazardous materials”, “hazardous wastes”, “toxic substances” or any other
formulation intended to define, list or classify substances by reason of
deleterious properties such as ignitability, corrosivity, reactivity,
carcinogenicity, reproductive toxicity, “TCLP” toxicity or “EP toxicity”;
(b) oil, petroleum or petroleum derived substances, natural gas, natural
gas liquids or synthetic gas and drilling fluids, produced waters and other
wastes associated with the exploration, development or production of crude oil,
natural gas or geothermal resources; (c) any flammable substances or
explosives or any radioactive materials; (d) asbestos in any form;
(e) toxic mold; and (f) electrical equipment which contains any oil
or dielectric fluid containing levels of polychlorinated biphenyls in excess of
fifty parts per million.

 

“Healthcare Laws” shall have the meaning set forth in Section 3.01(e).

 

“Healthcare Receivables” shall mean, collectively,
(a) all Government Receivables, (b) all Health-Care-Insurance
Receivables and (c) all other Accounts to the extent that the same arise
out of healthcare goods or services, excluding however any Accounts of which
the Account Debtor is not a Third Party Payor or a Patient arising out of goods
or services provided in connection with the operation of any independent living
apartments or congregate care community or assisted living community, or in
connection with pharmacy services.

 

“HIPAA” shall have the meaning set forth in Section 3.01(e).

 

“Indebtedness” shall mean, with respect to a
Person, at the time of computation thereof, all of the following (without
duplication):  (a) all obligations
of such Person in respect of money borrowed; (b) all obligations of such
Person, whether or not for money borrowed (1) represented by notes
payable, or drafts accepted, in each case representing extensions of credit,
(2) evidenced by bonds, debentures, notes or similar instruments, or
(3) constituting purchase money indebtedness, conditional sales contracts,
title retention debt instruments or other similar instruments, upon which
interest charges are customarily paid or that are issued or assumed as full or
partial payment for property or services rendered; 

 

15

 

 

(c) Capitalized Lease Obligations of such Person;
(d) all reimbursement obligations of such Person under any letters of
credit or acceptances (whether or not the same have been presented for
payment); (e) all obligations, contingent or otherwise, of such Person
under any synthetic lease, tax retention operating lease, off balance sheet
loan or similar off balance sheet financing arrangement if the transaction
giving rise to such obligation (1) is considered indebtedness for borrowed
money for tax purposes but is classified as an operating lease under GAAP and
(2) does not (and is not required pursuant to GAAP to) appear as a
liability on the balance sheet of such Person; (f) all obligations of such
Person to purchase, redeem, retire, defease or otherwise make any payment in
respect of any Mandatorily Redeemable Stock issued by such Person or any other
Person, valued at the greater of its voluntary or involuntary liquidation
preference plus accrued and unpaid dividends; (g) all obligations of such
Person in respect of any take out commitment or forward equity commitment
(excluding, in the case of Borrower and its Subsidiaries, any such obligation
that can be satisfied solely by the issuance of Equity Interests (other than
Mandatorily Redeemable Stock)); (h) all Indebtedness of other Persons
which such Person has Guaranteed or is otherwise recourse to such Person
(excluding guarantees required under Applicable Laws, or by any Governmental
Authority, as a condition to ownership or operation of Senior Housing Assets);
and (i) all Indebtedness of another Person secured by (or for which the
holder of such Indebtedness has an existing right, contingent or otherwise, to
be secured by) any Lien on property or assets owned by such Person, even though
such Person has not assumed or become liable for the payment of such
Indebtedness or other payment obligation, valued, in the case of any such
Indebtedness as to which recourse for the payment thereof is expressly limited
to the property or assets on which such Lien is granted, at the lesser of
(1) the stated or determinable amount of the Indebtedness that is so
secured or, if not stated or determinable, the maximum reasonably anticipated
liability in respect thereof (assuming such Person is required to perform
thereunder) and (2) the Fair Market Value of such property or assets.

 

“Indemnified Taxes” shall mean Taxes other
than Excluded Taxes.

 

“Indemnitee” shall have the meaning assigned
to such term in Section 12.03(b).

 

“Information” shall have the meaning
assigned to such term in Section 12.12.

 

“Insolvency Laws” shall mean the Bankruptcy
Code of the United States, and all other insolvency, bankruptcy, receivership,
liquidation, conservatorship, assignment for the benefit of creditors,
moratorium, rearrangement, reorganization, or similar Legal Requirements of the
United States or other applicable jurisdictions from time to time in effect and
affecting the rights of creditors generally.

 

“Insolvency Proceeding” shall mean (a) any case, action
or proceeding before any court or other Governmental Authority relating to
bankruptcy, reorganization, insolvency, liquidation, receivership, dissolution,
winding-up or relief of debtors, or (b) any general assignment for the
benefit of creditors, formal or informal moratorium, composition, marshaling of
assets for creditors or other, similar arrangement in respect of its creditors
generally or any substantial portion of its creditors, in each case, undertaken
under United States federal or state or non-United States Legal Requirements, including
the Bankruptcy Code of the United States.

 

“Insurance Subsidiary” shall mean any of Five Star
Insurance, Inc., Senior Living Insurance, Co., Ltd. and Affiliate
Insurers, Limited.

 

“Insurer” shall mean any Person (other than a Governmental
Authority) which in the ordinary course of its business or activities agrees to
pay for healthcare goods and services received by individuals, including
commercial insurance companies, nonprofit insurance companies (such as Blue
Cross, Blue Shield entities), employers or unions which self-insure for
employee or member health insurance, prepaid health care organizations,
preferred provider organizations and health maintenance organizations. 

 

16

 

“Insurer” includes insurance companies issuing health,
personal injury, workers’ compensation or other types of insurance but does not
include any individual guarantors.

 

“Intellectual Property” shall have the
meaning set forth in Section 3.01(s).

 

“Interest Election Request” shall mean a
request by Borrower to convert or continue a Revolving Borrowing in accordance
with Section 2.08(b), substantially in the form of Exhibit G.

 

“Interest Expense” shall mean, for any
period, the total consolidated interest expense of Borrower and its
Subsidiaries for such period determined on a consolidated basis in accordance
with GAAP plus, without
duplication:

 

(a)           imputed interest on
Capital Lease Obligations and Attributable Indebtedness of Borrower and its
Subsidiaries for such period;

 

(b)           commissions,
discounts and other fees and charges owed by Borrower or any of its
Subsidiaries with respect to letters of credit securing financial obligations,
bankers’ acceptance financing, receivables financings and similar credit
transactions for such period;

 

(c)           amortization of debt
issuance costs, debt discount or premium and other financing fees and expenses
incurred by Borrower or any of its Subsidiaries for such period;

 

(d)           cash contributions
to any employee stock ownership plan or similar trust made by Borrower or any
of its Subsidiaries to the extent such contributions are used by such plan or
trust to pay interest or fees to any Person (other than Borrower or any of its
Wholly Owned Subsidiaries) in connection with Indebtedness incurred by such
plan or trust for such period;

 

(e)           all interest paid or
payable with respect to discontinued operations of Borrower or any of its
Subsidiaries for such period;

 

(f)            the interest
portion of any payment obligations of Borrower or any of its Subsidiaries for
such period deferred for payment at any future time, whether or not such future
payment is subject to the occurrence of any contingency, and includes any and
all payments representing the purchase price and any assumptions of
Indebtedness and/or contingent obligations, “earn-outs” and other agreements to
make any payment the amount of which is, or the terms of payment of which are,
in any respect subject to or contingent upon the revenues, income, cash flow or
profits (or the like) of any Person or business; and

 

(g)           all interest on any
Indebtedness of Borrower or any of its Subsidiaries of the type described in
clause (h) or (i) of the definition of “Indebtedness” for such
period.

 

“Interest Payment Date” shall mean
(a) with respect to any ABR Loan, the last Business Day of each calendar
month to occur during any period in which such Loan is outstanding,
(b) with respect to any Eurodollar Revolving Loan, the last day of the
Interest Period applicable to the Borrowing of which such Loan is a part and,
in the case of a Eurodollar Revolving Loan with an Interest Period of more than
three months’ duration, each day prior to the last day of such Interest Period
that occurs at intervals of three months’ duration after the first day of such
Interest Period, and (c) with respect to any Revolving Loan, the Revolving
Maturity Date (or such earlier date on which the Revolving Commitments are
terminated) and, after such maturity (or termination as the case may be), on
each date on which demand for payment is made.

 

17

 

“Interest Period” shall mean, with respect
to any Eurodollar Borrowing, the period commencing on the date of such
Borrowing and ending on the numerically corresponding day in the calendar month
that is one, two, three or six months thereafter, as Borrower may elect; provided that (a) if any Interest
Period would end on a day other than a Business Day, such Interest Period shall
be extended to the next succeeding Business Day unless such next succeeding
Business Day would fall in the next calendar month, in which case such Interest
Period shall end on the next preceding Business Day, and (b) any Interest
Period that commences on the last Business Day of a calendar month (or on a day
for which there is no numerically corresponding day in the last calendar month
of such Interest Period) shall end on the last Business Day of the last
calendar month of such Interest Period. 
For purposes hereof, the date of a Borrowing initially shall be the date
on which such Borrowing is made and thereafter shall be the effective date of
the most recent conversion or continuation of such Borrowing.

 

“Internal Revenue Code” shall mean the Internal Revenue Code
of 1986, as amended.

 

“ISP” shall mean, with respect to any Letter
of Credit, the ‘International Standby Practices 1998’ (or ‘ISP 98’) published
by the Institute of International Banking Law & Practice, Inc.
(or such later version thereof as may be in effect at the time of issuance of
such Letter of Credit).

 

“Issuing Bank” shall mean, as the context
may require, (a) Jefferies Group Inc. (directly or indirectly through its
Affiliates, through The Bank of New York directly or indirectly through its
Affiliates or through any other party acceptable to Jefferies Group Inc.), with
respect to Letters of Credit issued by it; (b) any other Lender that may
become an Issuing Bank pursuant to Sections 2.16(j) and (k) with
respect to Letters of Credit issued by such Lender; or (c) collectively,
all of the foregoing.

 

“Junior Claims” shall have the meaning set
forth in Section 7.04.

 

“LC Commitment” shall mean the commitment of
the Issuing Bank to issue Letters of Credit pursuant to Section 2.16;
provided that at no time shall
the LC Commitment exceed the Revolving Commitment.  The amount of the LC Commitment shall be
$10,000,000 on the Closing Date.

 

“LC Disbursement” shall mean a payment or
disbursement made by the Issuing Bank pursuant to a Letter of Credit.

 

“LC Exposure” shall mean, as at any date of
determination, the sum of (a) the aggregate amount available to be drawn
under all outstanding Letters of Credit at such time plus (b) the aggregate principal amount of all
Reimbursement Obligations outstanding at such time.  The LC Exposure of any Revolving Lender at
any time shall mean its Pro Rata Percentage of the aggregate LC Exposure at
such time.  For all purposes of this
Agreement and the other Loan Documents, if on any date of determination a
Letter of Credit has expired by its terms but any amount may still be drawn
thereunder by reason of the operation of Rule 3.14 of the ISP (or any
other equivalent applicable rule with respect to force majeure events),
such Letter of Credit shall be deemed to be “outstanding” in the amount so
remaining available to be drawn.

 

“LC Participation Fee” shall have the
meaning assigned to such term in Section 2.05(c).

 

“LC Request” shall mean a request by
Borrower in accordance with the terms of Section 2.16(b) and
substantially in the form of Exhibit H, or such other form as shall
be approved by the Issuing Bank.

 

“LC Sub-Account” shall have the meaning
assigned to such term in Section 10.01(d).

 

18

 

“Lease” shall mean any lease pursuant to which a Loan Party
leases a Senior Housing Asset from any other Person.

 

“Legal Requirements” shall mean, as to any
Person, the Organizational Documents of such Person, and any treaty, law
(including the common law), statute, ordinance, code, rule, regulation,
guidelines, license, permit requirement, Order or determination of an
arbitrator or a court or other Governmental Authority, and the interpretation
or administration thereof, in each case applicable to or binding upon such
Person or any of its property or to which such Person or any of its property is
subject.

 

“Lenders” shall mean (a) the financial
institutions and other Persons party hereto as “Lenders” on the date hereof,
and (b) each financial institutions or other Person that becomes a party
hereto pursuant to an Assignment and Acceptance, other than, in each case, any
such financial institution or Person that has ceased to be a party hereto
pursuant to an Assignment and Acceptance.

 

“Letter of Credit” shall mean any Standby
Letter of Credit issued or to be issued by an Issuing Bank for the account of
Borrower or one of its Subsidiaries pursuant to Section 2.16.

 

“Letter of Credit Documents” shall mean, with respect to any
Letter of Credit, collectively, any application therefor, any certificate or
other document presented in connection with a drawing under such Letter of
Credit and any other agreement, instrument or other document governing or
providing for (a) the rights and obligations of the parties concerned or
at risk with respect to such Letter of Credit or (b) any collateral
security for any of such obligations.

 

“Letter of Credit Expiration Date” shall
mean the date which is one Business Day prior to the Revolving Maturity Date.

 

“LIBOR Rate” shall mean, with respect to any
Eurodollar Borrowing for any Interest Period therefor, the rate per annum equal
to the arithmetic mean (rounded to the nearest 1/100th of 1%) of the offered
rates for deposits in Dollars with a term comparable to such Interest Period
that appears on Reuters Screen LIBOR01 (or such other page as may replace
such page on such service for the purpose of displaying the rates at which
Dollar deposits are offered by leading banks in the London interbank deposit
market as designated by the Administrative Agent from time to time) at
approximately 11:00 a.m., London, England time, on the second full Business
Day preceding the first day of such Interest Period; provided, however,
that (i) if no comparable term for an Interest Period is available, the
LIBOR Rate shall be determined using the weighted average of the offered rates
for the two terms most nearly corresponding to such Interest Period and
(ii) if Reuters Screen LIBOR01 shall at any time no longer exist, “LIBOR Rate” shall mean, with respect to
each day during each Interest Period pertaining to Eurodollar Borrowings
comprising part of the same Borrowing, the rate per annum equal to the rate at
which the Administrative Agent is offered deposits in Dollars at approximately
11:00 a.m., London, England time, two Business Days prior to the first day
of such Interest Period in the London interbank market for delivery on the
first day of such Interest Period for the number of days comprised therein and
in an amount comparable to its portion of the amount of such Eurodollar
Borrowing to be outstanding during such Interest Period.  “Reuters Screen LIBOR01”
shall mean the display designated on the Reuters 3000 Xtra Page (or such
other page as may replace such page on such service for the purpose
of displaying the rates at which Dollar deposits are offered by leading banks
in the London interbank deposit market).

 

“Lien” as applied to the property of any Person shall
mean:  (a) any security interest,
encumbrance, mortgage, deed to secure debt, deed of trust, assignment of leases
and rents, pledge, lien, charge or lease constituting a Capitalized Lease
Obligation, conditional sale or other title retention agreement, or other
security title or encumbrance of any kind in respect of any property of such
Person, or upon the income, rents or profits therefrom; (b) any
arrangement, express or implied, under which any 

 

19

 

property of such Person is transferred, sequestered or
otherwise identified for the purpose of subjecting the same to the payment of
Indebtedness or performance of any other obligation in priority to the payment
of the general, unsecured creditors of such Person; (c) the filing of any
financing statement under the Uniform Commercial Code or its equivalent in any
jurisdiction, other than any precautionary filing not otherwise constituting or
giving rise to a Lien; and (d) any agreement by such Person to grant, give
or otherwise convey any of the foregoing.

 

“Loan Documents” shall mean this Agreement,
each Letters of Credit Document, the Notes (if any), the Security Documents,
each Accession Agreement and, except for purposes of Section 12.02(b),
the Fee Letter.

 

“Loan Parties” shall mean Borrower and the
Guarantors.

 

“Loans” shall mean a Revolving Loan.

 

“Mandatorily Redeemable Stock” shall mean, with respect to
any Person, any Equity Interest of such Person which by the terms of such
Equity Interest (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable), upon the happening of any
event or otherwise (a) matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise (other than an Equity Interest to the
extent redeemable in exchange for common stock or other equivalent common
Equity Interests), (b) is convertible into or exchangeable or exercisable
for Indebtedness or Mandatorily Redeemable Stock, or (c) is redeemable at
the option of the holder thereof, in whole or in part (other than an Equity
Interest which is redeemable solely in exchange for common stock or other
equivalent common Equity Interests), in each case on or prior to the Revolving
Maturity Date.

 

“Material Adverse Effect” shall mean a materially adverse
effect on (a) the business, assets, liabilities, condition (financial or
otherwise), results of operations or business prospects of (i) the
Borrower, (ii) the Providers that are Loan Parties taken as a whole or
(iii) the Borrower and its Subsidiaries taken as a whole, (b) the
ability of the Borrower or any other Loan Party to perform its obligations
under any Loan Document to which it is a party, (c) the validity or enforceability
of any of the Loan Documents, (d) the rights and remedies of the
Administrative Agent, the Collateral Agent, the Issuing Bank and/or any Lender
under any of the Loan Documents or (e) the timely payment of the principal
of or interest on the Loans or other amounts payable in connection therewith or
the timely payment of the Reimbursement Obligations.

 

“Material Provider” shall mean each of the Providers set
forth on Schedule 1.01(d).

 

“Material Subsidiary” shall mean any Subsidiary to which 5%
or more of EBITDA during any fiscal quarter of the Borrower is, directly or
indirectly, attributable.

 

“Maximum Rate” shall have the meaning
assigned to such term in Section 12.13.

 

“Medicaid” shall mean, collectively, the health care
assistance program established by Title XIX of the Social Security Act (42
U.S.C. §§ 1396 et seq.) and any statutes succeeding thereto, and all
laws, rules, regulations, manuals, orders, guidelines or requirements
pertaining to such program including (a) all federal statutes (whether set
forth in Title XIX of the Social Security Act or elsewhere) affecting such
program; (b) all state statutes and plans for medical assistance enacted
in connection with such program and federal rules and regulations
promulgated in connection with such program; and (c) all applicable
provisions of all rules, regulations, manuals, orders and administrative,
reimbursement, guidelines and requirements of all government authorities
promulgated in connection with such program 

 

20

 

(whether or not having the force of law), in each case
as the same may be amended, supplemented or otherwise modified from time to
time.

 

“Medicare” shall mean, collectively, the health insurance
program for the aged and disabled established by Title XVIII of the Social
Security Act (42 U.S.C. §§ 1395 et seq.) and any statutes succeeding
thereto, and all laws, rules, regulations, manuals, orders or guidelines
pertaining to such program including (a) all federal statutes (whether set
forth in Title XVIII of the Social Security Act or elsewhere) affecting
such program; and (b) all applicable provisions of all rules, regulations,
manuals, orders and administrative, reimbursement, guidelines and requirements
of all governmental authorities promulgated in connected with such program
(whether or not having the force of law), in each case as the same may be
amended, supplemented or otherwise modified from time to time.

 

“Misdirected Payment” shall mean any form of payment in
respect of an Account of a Provider made by an Account Debtor in a manner other
than as provided in the notice sent to such Account Debtor or other than as
provided in Section 8.13, including, in the case of a check
received by a Provider with respect to a payment made by an Account Debtor that
is not a Governmental Authority, the failure to deposit such check in the
Primary Borrower Account within one Business Day of receipt of such check.

 

“Monthly Report” shall mean a report prepared by the chief
financial officer or chief accounting officer of the Borrower regarding the
Accounts of Borrower and the Guarantors setting for the agings of such Accounts
and such other information as the Administrative Agent may reasonably request,
all in form and detail reasonably satisfactory to the Administrative Agent.

 

“Multiemployer Plan” shall mean at any time a multiemployer
plan within the meaning of Section 4001(a)(3) of ERISA to which any
member of the ERISA Group is then making or accruing an obligation to make
contributions or has within the preceding five plan years made contributions,
including for these purposes any Person which ceased to be a member of the
ERISA Group during such five year period.

 

“Negative Pledge” shall mean a provision of any agreement
(other than this Agreement or any other Loan Document) that prohibits or limits
the creation or assumption of any Lien on any assets of a Person or entitles
another Person to obtain or claim the benefit of a Lien on any assets of such
Person; provided, however, that
an agreement that establishes a maximum ratio of unsecured debt to unencumbered
assets, or of secured debt to total assets, or that otherwise conditions a
Person’s ability to encumber its assets upon the maintenance of one or more
specified ratios that limit such Person’s ability to encumber its assets but
that do not generally prohibit the encumbrance of its assets, or the
encumbrance of specific assets or that limits the encumbrance of specific
assets or pools or assets in combination with other assets or pools of assets,
shall not constitute a Negative Pledge for purposes of this Agreement.

 

“New Operator” shall mean, for each Affected
Property, the wholly owned, single purpose subsidiary of the Borrower to which
the Relevant Existing Provider or Released Guarantor that operates such
Affected Property will, on or after the consummation of the SNH Financing, or
may, on or after the consummation of any subsequent financing permitted under Section 6.03(c),
transfer all of such Person’s licenses, permits and other operating assets
relating to such Affected Property.

 

“New Tenant” shall mean FVE FM
Financing, Inc., a wholly owned Subsidiary of the Borrower to whom the New
Landlord has leased the Affected Properties described on Schedule 1.01(a) in
connection with the SNH Financing.

 

“Nonrecourse
Indebtedness” shall mean, with respect to a Person, Indebtedness for borrowed money
in respect of which recourse for payment (except for customary exceptions for fraud, 

 

21

 

misapplication of funds,
environmental indemnities, and other similar exceptions to recourse liability
(but not exceptions relating to bankruptcy, insolvency, receivership or other
similar events)) is
contractually limited to specific assets of such Person encumbered by a Lien
securing such Indebtedness.

 

“Notes” shall mean any notes evidencing the
Revolving Loans issued pursuant to Section 2.04(e), if any,
substantially in the form of Exhibit I.

 

“Obligations” shall mean (a) all
obligations of Borrower and the other Loan Parties from time to time arising
under or in respect of the due and punctual payment of (i) the principal
of and premium, if any, and interest (including interest accruing during the
pendency of any Insolvency Proceeding, regardless of whether allowed or
allowable in such Insolvency Proceeding) on the Loans, when and as due, whether
at maturity, by acceleration, upon one or more dates set for prepayment or
otherwise, (ii) each payment required to be made by Borrower and the other
Loan Parties under this Agreement in respect of any Letter of Credit, when and
as due, including payments in respect of Reimbursement Obligations, interest
thereon and obligations to provide cash collateral and (iii) all other
monetary obligations, including fees, costs, expenses and indemnities, whether
primary, secondary, direct, contingent, fixed or otherwise (including monetary
obligations incurred during the pendency of any Insolvency Proceeding,
regardless of whether allowed or allowable in such Insolvency Proceeding), of
Borrower and the other Loan Parties under this Agreement and the other Loan
Documents, and (b) the due and punctual performance of all covenants,
agreements, obligations and liabilities of Borrower and the other Loan Parties
under or pursuant to this Agreement and the other Loan Documents, in each case,
whether direct or indirect (including those acquired by assumption), absolute
or contingent, due or to become due, now existing or hereafter arising.

 

“OFAC” shall mean The United States
Department of the Treasury Office of Foreign Assets Control.

 

“Officers’ Certificate” shall mean a
certificate executed by (a) the chairman of the Board of Directors (if an
officer), the chief executive officer or the president and (b) one of the
Financial Officers, each in his or her official (and not individual) capacity.

 

“Order” shall mean any judgment, decree,
verdict, order, consent order, consent decree, writ, declaration or injunction.

 

“Organizational Documents” shall mean, with
respect to any Person, (a) in the case of any corporation, the certificate
of incorporation or deed of incorporation and by-laws (or similar documents) of
such Person, (b) in the case of any limited liability company, the
certificate or articles of formation or organization and operating agreement or
memorandum and articles of association (or similar constitutive documents) of
such Person, (c) in the case of any limited partnership, the certificate
of formation and limited partnership agreement (or similar constitutive
documents) of such Person (and, where applicable, the equityholders or
shareholders registry of such Person), (d) in the case of any general
partnership, the partnership agreement (or similar constitutive document) of
such Person, (e) in any other case, the functional equivalent of the
foregoing, and (f) any shareholder, voting trust or similar agreement
between or among any holders of Equity Interests of such Person.

 

“Other Taxes” shall mean any and all present
or future stamp or documentary taxes or any other excise or property taxes,
charges (including fees and expenses to the extent incurred with respect to any
such taxes or charges) or similar levies (including interest, fines, penalties
and additions with respect to any of the foregoing) arising from any payment
made or required to be made under any Loan Document or from the execution,
delivery or enforcement of, or otherwise with respect to, any Loan Document.

 

22

 

“Participant” shall have the meaning
assigned to such term in Section 12.04(e).

 

“Participant Register” shall have the meaning assigned to
such term in Section 12.04(e).

 

“Patient” shall mean any natural Person to whom Goods or
services giving rise to an Account are provided by a Provider.

 

“Patient Consent Form” shall mean a consent form sufficient
under Applicable Law to permit the applicable Provider to disclose to the
Collateral Agent information regarding the patient which information is
necessary to permit the Collateral Agent to collect any Account owing in respect
of such patient.

 

“Patriot Act”
shall mean the Uniting and Strengthening America by Providing Appropriate Tools
Required to Intercept and Obstruct Terrorism Act of 2001, Public Law 107-56.

 

“PBGC” shall mean the Pension Benefit
Guaranty Corporation referred to and defined in ERISA.

 

“Pension Plan” shall mean any Employee
Benefit Plan (other than a Multiemployer Plan) subject to the provisions of
Title IV of ERISA or Section 412 of the Code or Section 302 of
ERISA which is maintained or contributed to by any Company or any of its ERISA
Affiliates or with respect to which any Company could incur liability
(including under Section 4069 of ERISA).

 

“Permitted LC Debt”
shall mean Indebtedness of the Borrower, any Subsidiary or other Loan Party in
respect of letters of credit (other than a Letter of Credit) so long as the
outstanding amount of such Indebtedness does not exceed $11,000,000 in the
aggregate.

 

“Permitted Liens” shall mean, as to any Person,
(a) Liens securing taxes, assessments and other charges or levies imposed
by any Governmental Authority (excluding any Lien imposed pursuant to any of
the provisions of ERISA or pursuant to any Environmental Laws) or the claims of
materialmen, mechanics, carriers, warehousemen or landlords for labor, materials,
supplies or rentals incurred in the ordinary course of business, which
(i) are not at the time required to be paid or discharged under
Section 8.6. or (ii) if such Lien is the responsibility of a
financially responsible tenant, operator, mortgagor or manager to discharge;
(b) Liens consisting of deposits or pledges made, in the ordinary course
of business, in connection with, or to secure payment of, obligations under
workers’ compensation, unemployment insurance or similar Applicable Laws; (c) Liens
consisting of encumbrances in the nature of zoning restrictions, easements, and
rights or restrictions of record on the use of real property, which do not
materially detract from the value of such property or impair the use thereof in
the business of such Person; (d)  Liens in favor of the Collateral Agent,
for the benefit of the Secured Parties; (e) deposits to secure trade
contracts (other than for Indebtedness), statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business; (f) the interests of tenants,
subtenants, operators or managers of Properties; (g) Liens required under
Applicable Law, or by any Governmental Authority, as a condition to ownership
or operation of Senior Housing Assets; (h) Liens which are also secured by
restricted cash or Cash Equivalents of equal or greater value; and (i) the
Liens created by the SASAs executed and delivered by each Relevant Existing
Provider, each Released Guarantor and each New Operator.

 

“Person” shall mean any natural Person,
corporation, business trust, joint venture, trust, association, company
(whether limited in liability or otherwise), partnership (whether limited in
liability or otherwise) or Governmental Authority, or any other entity, in any
case, whether acting in a personal, fiduciary or other capacity.

 

23

 

“Plan” shall mean at any time an employee pension benefit
plan (other than a Multiemployer Plan) which is covered by Title IV of
ERISA or subject to the minimum funding standards under Section 412 of the
Internal Revenue Code and either (a) is maintained, or contributed to, by
any member of the ERISA Group for employees of any member of the ERISA Group or
(b) has at any time within the preceding five years been maintained, or
contributed to, by any Person which was at such time a member of the ERISA
Group for employees of any Person which was at such time a member of the ERISA
Group.

 

“Platform” shall have the meaning assigned to such term in Section 12.01(d).

 

“Preferred Stock” shall mean, with respect to any Person,
Equity Interests in such Person which are entitled to preference or priority
over any other Equity Interest in such Person in respect of the payment of
dividends or distribution of assets upon liquidation or both.

 

“Preferred Stock Issuance” shall mean the
issuance or sale by any Company of any Preferred Stock after the Closing Date.

 

“Premises” shall have the meaning assigned
thereto in the applicable Mortgage.

 

“Primary Borrower Account” shall mean each of the accounts
identified on Schedule 3.01(cc) as Primary Borrower Accounts,
established by the Borrower to deposit all cash collections, wire transfers,
electronic funds transfers and other cash Proceeds of Accounts (other than
Proceeds from Affected Accounts) from non-Governmental Authorities, including
collections received by wire transfer directly from non-Governmental
Authorities and any successor account established pursuant to Section 5.14(b).

 

“Pro Forma Basis”
shall mean, with respect to compliance with any test or covenant hereunder,
compliance with such covenant or test after giving effect to any and all
acquisitions, asset sales and Indebtedness or other liabilities incurred in
connection therewith as if such acquisition, asset sale or incurrence of
Indebtedness had been consummated or incurred as of the beginning of such
period.  For purposes of this definition,
if any Indebtedness to be so incurred bears interest at a floating rate and is
being given pro forma effect, the interest on such Indebtedness will be
calculated as if the rate in effect on the date of incurrence had been the
applicable rate for the entire period.

 

“Pro Rata Percentage” of any Revolving
Lender at any time shall mean the percentage of the total Revolving Commitments
of all Revolving Lenders represented by such Lender’s Revolving Commitment.

 

“Property” shall mean any parcel of real property and related
personal property, either owned or leased by the Borrower, any Provider or any other
Subsidiary.

 

“Provider” shall mean each Guarantor that operates a Senior
Housing Asset and that is identified as one of the “Providers” on Schedule
3.01(b) or identified as a “Provider” in an Accession Agreement, as
applicable.

 

“Provider Account(s)” shall mean the Government Lockbox
Accounts.

 

“Register” shall have the meaning assigned
to such term in Section 12.04(c).

 

“Regulation D” shall mean Regulation D
of the Board as from time to time in effect and all official rulings and
interpretations thereunder or thereof.

 

24

 

“Regulation S-X” shall mean Regulation S-X
promulgated under the Securities Act as from time to time in effect and all
official rulings and interpretations thereunder or thereof..

 

“Regulation T” shall mean Regulation T
of the Board as from time to time in effect and all official rulings and
interpretations thereunder or thereof.

 

“Regulation U” shall mean Regulation U
of the Board as from time to time in effect and all official rulings and
interpretations thereunder or thereof.

 

“Reimbursement Obligations” shall mean
Borrower’s obligations under Section 2.16(e) to reimburse LC
Disbursements.

 

“Related Person” shall mean, with respect to
any Person, (a) each Affiliate of such Person and each of the officers,
directors, partners, trustees, employees, affiliates, shareholders, Advisors,
agents, attorneys-in-fact and Controlling Persons of each of the foregoing, and
(b) if such Person is an Agent, each other Person designated, nominated or
otherwise mandated by or assisting such Agent pursuant to Section 11.05
or any comparable provision of any Loan Document.

 

“Release” shall mean any spilling, leaking,
seepage, pumping, pouring, emitting, emptying, discharging, injecting,
escaping, leaching, dumping, disposing, depositing, dispersing, emanating or
migrating of any Hazardous Materials in, into, onto, from or through the
Environment or any real property.

 

“Released Guarantors” shall mean
(i) each Provider listed on Schedule 1.01(f) attached hereto
and (ii) any Provider designated by the Borrower to the Administrative
Agent after the date hereof that incurs Non-Recourse Indebtedness permitted
under Section 6.03(c).

 

“Relevant Existing Provider” shall mean
(i) each Provider listed on Schedule 1.01(g) attached hereto
and (ii) any Provider designated by the Borrower to the Administrative
Agent after the date hereof that incurs Non-Recourse Indebtedness permitted
under Section 6.03(c).

 

“Rental Expense” shall mean, with respect to Borrower and its
Subsidiaries for any period, the sum of (a) lease, rental and all other
payments made in respect of or in connection with the use of property (whether
real, personal or mixed) by Borrower and its Subsidiaries with respect to such
period other than payments with respect to Capitalized Lease Obligations and
(b) (x) the pro forma impact of additional rental expense incurred in
connection with capital expenditures by Borrower and its Subsidiaries in
respect of Senior Housing Assets leased from SNH or a Subsidiary of SNH, which
capital expenditures have been funded or reimbursed by SNH or its Subsidiaries
and (y) an amount equal to (x) the product of (1) the weighted
daily average during such period of additional rental expense incurred in
connection with capital expenditures by Borrower and its Subsidiaries in
respect of Senior Housing Assets leased from SNH or a Subsidiary of SNH, which
capital expenditures have not yet been funded or reimbursed by SNH or its
Subsidiaries, multiplied by (2) 8.0%, multiplied by (3) the number of
days in the period, divided by (y) 360. 
If Borrower or any Subsidiary has incurred additional rental expense
during the relevant period for determining EBITDAR or Fixed Charges, clause
(b)(x) of this definition of Rental Expense for the relevant period shall
be calculated for such purposes after giving pro forma effect to such
additional rental expense had occurred on the first day of the relevant period
for determining Rental Expense.

 

“Required Lenders”
shall mean, at any date of determination, Lenders having Loans, LC Exposure and
unused Revolving Commitments representing more than 50% of the sum of all Loans
outstanding, LC Exposure and unused Revolving Commitment at such time.

 

25

 

 

“Responsible Officer” shall mean, with respect to any Person,
the chief executive officer, the chief financial officer or treasurer of such
Person.

 

“Restricted Payment” shall mean (a) any dividend or
other distribution, direct or indirect, on account of any Equity Interest of
Borrower or any Subsidiary now or hereafter outstanding, except a dividend
payable solely in Equity Interests of identical class to the holders of that
class; (b) any redemption, conversion, exchange, retirement, sinking fund or
similar payment, purchase or other acquisition for value, direct or indirect,
of any Equity Interest of Borrower or any Subsidiary now or hereafter
outstanding; and (c) any payment made to retire, or to obtain the
surrender of, any outstanding warrants, options or other rights to acquire any
Equity Interests of Borrower or any Subsidiary now or hereafter outstanding.

 

“Revolving Availability Period” shall mean
the period from and including the Closing Date to but excluding the earlier of
(a) the Business Day preceding the Revolving Maturity Date and
(b) the date of termination of the Revolving Commitments.

 

“Revolving Borrowing” shall mean a Borrowing
comprised of Revolving Loans.

 

“Revolving Commitment” shall mean, with
respect to each Lender, the commitment, if any, of such Lender to make
Revolving Loans hereunder up to the amount set forth on Annex I or
on Schedule 1 to the Assignment and Acceptance pursuant to which
such Lender assumed its Revolving Commitment, as applicable, as the same may be
(a) reduced from time to time pursuant to Section 2.07 and
(b) reduced or increased from time to time pursuant to assignments by or
to such Lender pursuant to Section 12.04.  The aggregate principal amount of the
Lenders’ Revolving Commitments on the Closing Date is $35,000,000.

 

“Revolving Exposure” shall mean, with
respect to any Lender at any time, the aggregate principal amount at such time
of all outstanding Revolving Loans of such Lender, plus the aggregate amount at such time of such Lender’s LC
Exposure.

 

“Revolving Lender” shall mean a Lender with
a Revolving Commitment.

 

“Revolving Loan” shall mean a Loan made by
the Lenders to Borrower pursuant to Section 2.01.  Each Revolving Loan shall either be an ABR
Revolving Loan or a Eurodollar Revolving Loan.

 

“Revolving Maturity Date” shall mean March 18, 2013, or, if such date is
not a Business Day, the first Business Day thereafter.

 

“Sanctioned Entity” shall mean (a) an agency of the
government of, (b) an organization directly or indirectly controlled by,
or (c) a Person resident in, in each case, a country that is subject to a
sanctions program identified on the list maintained by the OFAC and published
from time to time, as such program may be applicable to such agency,
organization or Person.

 

“Sanctioned Person” shall mean a Person named on the list of
“Specially Designated Nationals” or “Blocked Persons”, or any successor list,
maintained by the OFAC as published from time to time.

 

“SASA” means
each subordination, assignment and security agreement relating to the SNH
Financing and executed by a Relevant Existing Provider, a Released Guarantor or
a New Operator for each Affected Property listed on Schedule 1.01(a) that
such Person operates.

 

26

 

“Secured Indebtedness” shall mean, with
respect to a Person as of any date of determination, the aggregate principal
amount of all Indebtedness of such Person outstanding at such date and that is
secured in any manner by any Lien.

 

“Secured Parties” shall mean, collectively,
with respect to the Obligations, the Administrative Agent, the Collateral
Agent, each other Agent and the Lenders.

 

“Securities Act” shall mean the Securities
Act of 1933.

 

“Securities Filings” has the meaning set
forth in Section 5.01(d)(ii).

 

“Security Documents” shall mean this Agreement, each Account
Control Agreement, each collateral assignment of leases referred to in Section 4.01(b)(iv) or
Section 5.17 and any other security agreement, financing statement,
or other document, instrument or agreement creating, evidencing or perfecting
the Collateral Agent’s Liens, for the benefit of the Secured Parties, in any of
the Collateral.

 

“Senior Housing Asset” shall mean any one or more of the
following:  (a) senior residences,
(b) independent living facilities, (c) congregate communities,
(d) assisted living facilities, (e) nursing homes,
(f) hospitals, (g) pharmacies and (h) other Property primarily
used for senior citizen residences or health care services, together with other
improvements incidental thereto.

 

“Shared Services Agreement” shall mean that certain Amended
and Restated Business Management and Shared Services Agreement dated as of
January 4, 2010 by and between the Borrower and Reit Management &
Research LLC.

 

“SNH” shall mean Senior Housing Properties Trust, a Maryland
real estate investment trust.

 

“SNH Credit Agreement” shall mean that certain Master
Credit Facility Agreement dated as of August 4, 2009 by and among the SNH
Lender and SNH FM Financing LLC, as borrower, as amended from time to time.

 

“SNH Financing” shall mean that certain Term
Loans made by the SNH Lender in the original principal amount of $512,934,000
pursuant to the SNH Credit Agreement.

 

“SNH Lender” shall mean Citibank, N.A., and its successors
and assigns.

 

“SNH Loan Documents” shall mean the SNH
Credit Agreement, each SASA, each mortgage encumbering an Affected Property
listed in Schedule 1.01(a) and each other agreement, document and
instrument executed and delivered in connection therewith, each as amended from
time to time in accordance with Section 6.07.

 

“Solvency Certificate” shall have the meaning assigned to
such term in Section 4.01(i).

 

“Solvent” shall mean, when used with respect to any Person,
that (a) the fair value and the fair salable value of its assets (excluding
any Indebtedness due from any affiliate of such Person) are each in excess of
the fair valuation of its total liabilities (including all contingent
liabilities computed at the amount
which, in light of all the facts and circumstances existing at such time,
represents the amount that could reasonably be expected to become an actual and
matured liability); (b) such Person is able to pay its debts or
other obligations in the ordinary course as they mature; and (c) such
Person has capital not unreasonably small to carry on its business and all
business in which it proposes to be engaged.

 

27

 

“SPC” shall have the meaning assigned to
such term in Section 12.04(h).

 

“SPC Debt” shall mean indebtedness incurred by a Trust which
limits such Trust’s business to that of a “special purpose entity” or that
otherwise is intended to make such Trust a “bankruptcy remote” entity.

 

“Standby Letter of Credit” shall mean any
letter of credit or similar instrument issued pursuant to this Agreement in the
ordinary course of Borrower’s and its Wholly Owned Subsidiaries’ businesses to
support (i) obligations of Borrower or any of its Wholly Owned
Subsidiaries with respect to workers compensation, surety bonds and other similar
statutory obligations and (ii) such other obligations of Borrower or any
of its Wholly Subsidiaries as are reasonably acceptable to the Issuing Lender
and otherwise permitted to exist pursuant to the terms of this Agreement (other
than obligations in respect of (x) any other Indebtedness or other
obligations that are subordinated in right of payment to the Obligations and
(y) any Equity Interests).

 

“Stated Amount” shall mean the amount available to be drawn
by a beneficiary under a Letter of Credit from time to time, as such amount may
be increased or reduced from time to time in accordance with the terms of such
Letter of Credit.

 

“Statutory Reserves” shall mean, for any day
during any Interest Period for any Eurodollar Borrowing, the average maximum
rate at which reserves (including any marginal, supplemental or emergency
reserves) are required to be maintained, during such Interest Period under
regulations issued from time to time (including Regulation D (the “Reserve Regulations”) by member banks of the United States Federal Reserve System in
New York City with deposits exceeding one billion Dollars against Eurocurrency
funding liabilities (currently referred to as “Eurocurrency liabilities” (as
such term is used in Regulation D)). 
Eurodollar Borrowings shall be deemed to constitute Eurodollar
liabilities and to be subject to such reserve requirements without benefit of
or credit for proration, exceptions or offsets which may be available from time
to time to any Lender under the Reserve Regulations.

 

“Subsidiary” shall mean, with respect to any
Person (the “parent”) at any date,
(i) any Person the accounts of which would be consolidated with those of
the parent in the parent’s consolidated financial statements if such financial
statements were prepared in accordance with GAAP as of such date, (ii) any
other corporation, limited liability company, association or other business
entity of which securities or other ownership interests representing more than
50% of the voting power of all Equity Interests entitled (without regard to the
occurrence of any contingency) to vote in the election of the Board of
Directors thereof are, as of such date, owned, controlled or held by the parent
and/or one or more subsidiaries of the parent, (iii) any partnership (a) the
sole general partner or the managing general partner of which is the parent
and/or one or more subsidiaries of the parent or (b) the only general
partners of which are the parent and/or one or more subsidiaries of the parent
and (iv) any other Person that is otherwise Controlled by the parent
and/or one or more subsidiaries of the parent. 
Unless the context requires otherwise, “Subsidiary” refers to a Subsidiary of Borrower.

 

“Supermajority Lenders” shall mean, at any
date of determination, Lenders having Loans, LC Exposure and unused Revolving
Commitments representing more than 66 and 2/3% of the sum of all Loans
outstanding, LC Exposure and unused Revolving Commitment at such time.

 

“Synthetic Lease Obligations” shall mean,
with respect to any Person, all obligations, contingent or otherwise, of such
Person under any synthetic lease, tax retention operating lease, off balance
sheet loan or similar off balance sheet financing arrangement if the
transaction giving rise to such obligation (1) is considered indebtedness
for borrowed money for tax purposes but is classified as an 

 

28

 

operating lease under GAAP and (2) does not (and is not required
pursuant to GAAP to) appear as a liability on the balance sheet of such Person.

 

“Tax Returns” shall mean all returns,
statements, filings, attachments and other documents or certifications filed or
required to be filed in respect of Taxes.

 

“Taxes” shall mean (i) any and all
present or future taxes, duties, levies, imposts, assessments, fees,
deductions, withholdings or other similar charges, whether computed on a
separate, consolidated, unitary, combined or other basis and any and all
liabilities (including interest, fines, penalties or additions with respect to
any of the foregoing) with respect to the foregoing, and (ii) any
transferee, successor, joint and several, contractual or other liability
(including liability pursuant to Treasury Regulation § 1.1502-6 (or any
similar provision of state, local or non-U.S. law)) in respect of any item
described in clause (i).

 

“Third Party Payor” shall mean any Governmental Authority,
insurance company, health maintenance organization, preferred provider
organization or similar entity that is obligated to make payments with respect
to an Account.

 

“Third Party Payors’ Programs” shall have the meaning set
forth in Section 3.01(w).

 

“Transactions” shall mean, collectively, the
transactions to occur pursuant to, or contemplated by, the Loan Documents,
including (a) the execution, delivery and performance of the Loan
Documents and the initial Credit Extensions hereunder, (b) the termination
of the Existing Credit Agreement and (c) the payment of all fees, costs
and expenses to be paid on or prior to the Closing Date owing in connection
with the foregoing.

 

“Transferred Guarantor” shall have the
meaning assigned to such term in Section 7.09.

 

“Trust” shall mean any of FS Leisure Park Tenant Trust, FS
Lafayette Tenant Trust, FS Lexington Tenant Trust, FS Tenant Pool I Trust, FS
Tenant Pool II Trust, FS Tenant Pool III Trust and FS Tenant Pool IV Trust.

 

“Type” shall mean, when used in reference to
any Loan or Borrowing, a reference to whether the rate of interest on such
Loan, or on the Loans comprising such Borrowing, is determined on the basis of
Adjusted LIBOR Rate or the Alternate Base Rate.

 

“Unbilled Receivable” shall mean an Account in respect of
which the goods have been shipped, or the services rendered, to the relevant
customer or patient, and rights to payment therefor have accrued, but the
invoice has not been rendered to the applicable Account Debtor.

 

“UBS Credit-Line
Agreement” shall mean the Credit Line Account Application and
Agreement and the various addenda thereto, each executed on or about
December 22, 2009 by Borrower and accepted by UBS Bank USA.

 

“UBS Credit-Line Availability” shall mean,
as of any date of determination, the Approved Amount minus the aggregate principal amount of Advances outstanding
as of such date of determination.

 

“UCC” shall mean the Uniform Commercial Code
as in effect from time to time (except as otherwise specified) in any
applicable state or jurisdiction.

 

“United States” and “U.S.” shall mean the United States of
America.

 

29

 

“Unsecured Indebtedness” shall mean, with
respect to a Person as of any date of determination, the aggregate principal
amount of all Indebtedness of such Person outstanding at such date that is not
Secured Indebtedness.

 

“Wholly Owned Subsidiary” shall mean, with
respect to any Person, (a) any corporation 100% of whose capital stock
(other than directors’ qualifying shares to the extent required under
applicable Legal Requirements) is at the time owned by such Person and/or one
or more Wholly Owned Subsidiaries of such Person and (b) any partnership,
association, joint venture, limited liability company or other entity in which
such Person and/or one or more Wholly Owned Subsidiaries of such Person have a
100% equity interest (other than directors’ qualifying shares to the extent required
under applicable Legal Requirements) at such time.

 

Section 1.02                            Terms Defined in the UCC. All other terms contained in this
Agreement (which are not specifically defined in this Agreement) shall have the
meanings set forth in the UCC to the extent the same are used or defined
therein, specifically including, but not limited to the following: Chattel
Paper, Deposit Account, Health-Care-Insurance Receivable, Goods, Investment
Property, Instrument, Letter-of-Credit Rights, Money, Obligor, Proceeds, Securities
Account, Supporting Obligation and Tangible Chattel Paper.

 

Section 1.03                            Classification of Loans
and Borrowings.  For purposes of this Agreement, Loans may be
classified and referred to by Type (e.g.,
a “Eurodollar Revolving Loan”). 
Borrowings also may be classified and referred to by Type (e.g., a “Eurodollar Revolving Borrowing”).

 

Section 1.04                            Terms Generally. 
The definitions of terms herein shall apply equally to the singular and
plural forms of the terms defined. 
Whenever the context may require, any pronoun shall include the
corresponding masculine, feminine and neuter forms.  The words “include,” “includes” and
“including” shall be deemed to be followed by the phrase “without limitation”.  The phrase “Material Adverse Effect” shall be
deemed to be followed by the phrase “, individually or in the aggregate”.  The words “asset” and “property” shall be
construed to have the same meaning and effect. 
The word “will” shall be construed to have the same meaning and effect
as the word “shall.”  Unless the context
requires otherwise (a) any definition of or reference to any Loan
Document, agreement, instrument or other document herein shall be construed as
referring to such agreement, instrument or other document as from time to time
amended, supplemented or otherwise modified (subject to any restrictions on
such amendments, supplements or modifications set forth in any Loan Document),
(b) any reference herein to any Person shall be construed to include such
Person’s successors and assigns, (c) the words “herein,” “hereof” and
“hereunder,” and words of similar import, shall be construed to refer to this
Agreement in its entirety and not to any particular provision hereof, and
(d) all references herein to Articles, Sections, Exhibits and Schedules
shall be construed to refer to Articles and Sections of, and Exhibits and
Schedules to, this Agreement, unless otherwise indicated and (e) any
reference to any law or regulation shall (i) include all statutory and
regulatory provisions consolidating, amending, replacing or interpreting or
supplementing such law or regulation, and (ii) unless otherwise specified,
refer to such law or regulation as amended, modified or supplemented from time
to time.  This Section 1.03
shall apply, mutatis mutandis, to
all Loan Documents.

 

Section 1.05                            Accounting Terms; GAAP. 
Except as otherwise expressly provided herein, all financial statements
to be delivered pursuant to this Agreement shall be prepared in accordance with
GAAP as in effect from time to time and all terms of an accounting or financial
nature shall be construed and interpreted in accordance with GAAP, as in effect
on the date hereof.  If at any time any
change in GAAP would affect the computation of any financial ratio set forth in
any Loan Document, and Borrower or the Required Lenders shall so request, the
Administrative Agent and Borrower shall negotiate in good faith to amend such
ratio or requirement to preserve the original intent thereof in light of such
change in 

 

30

 

GAAP (subject to approval by the Required Lenders and Borrower); provided that, until so amended, such ratio or requirement
shall continue to be computed in accordance with GAAP prior to such change
therein, and Borrower shall provide to the Administrative Agent and the Lenders
within five days after delivery of each certificate or financial report
required hereunder that is affected thereby a written statement of a Financial
Officer of Borrower setting forth in reasonable detail the differences (including
any differences that would affect any calculations relating to the financial
covenants as set forth in Section 6.01) that would have resulted if
such financial statements had been prepared without giving effect to such
change.

 

Section 1.06                            Rounding. 
Any financial ratios required to be satisfied in order for a specific
action to be permitted under this Agreement shall be calculated by dividing the
appropriate component by the other component, carrying the result to one place
more than the number of places by which such ratio is expressed herein and
rounding the result up or down to the nearest number (with a rounding-up if
there is no nearest number).

 

Section 1.07                            Resolution of Drafting
Ambiguities.  Each Loan Party acknowledges and agrees that it
was represented by counsel in connection with the execution and delivery of the
Loan Documents to which it is a party, that it and its counsel reviewed and
participated in the preparation and negotiation hereof or thereof and that any
rule of construction to the effect that ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation hereof
or thereof.

 

ARTICLE
II

THE CREDITS

 

Section 2.01                            Commitments. 
Subject to the terms and conditions and relying upon the representations
and warranties herein set forth, each Lender agrees, severally and not jointly
to make Revolving Loans to Borrower, at any time and from time to time after
the Closing Date until the earlier of the Revolving Maturity Date and the
termination of the Revolving Commitment of such Lender in accordance with the
terms hereof, in an aggregate principal amount at any time outstanding that
will not result in (a) such Lender’s Revolving Exposure at such time
exceeding such Lender’s Revolving Commitment at such time or (b) the sum
of the total Revolving Exposures at such time exceeding the lesser of
(i) the total Revolving Commitments at such time and (ii) the
Borrowing Base at such time.

 

Within
the limits set forth above and subject to the terms, conditions and limitations
set forth herein, Borrower may borrow, pay or prepay and reborrow Revolving
Loans.

 

Section 2.02                            Loans. 
(a)  Each Loan shall be made as part of a Borrowing consisting of
Loans made by the Lenders ratably in accordance with their applicable
Commitments; provided that the
failure of any Lender to make any Loan shall not in itself relieve any other
Lender of its obligation to lend hereunder (it being understood, however, that
no Lender shall be responsible for the failure of any other Lender to make any
Loan required to be made by such other Lender). 
Except for Loans deemed made pursuant to Section 2.16(e)(ii),
(x) any Borrowing shall be in an aggregate principal amount that is
(i) an integral multiple of $500,000 and not less than $1,000,000 or
(ii) equal to the remaining available balance of the applicable
Commitments.

 

(b)                                 Subject to Sections 2.11 and 2.12,
each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Revolving
Loans as Borrower may request pursuant to Section 2.03.  Each Lender may at its option make any
Eurodollar Revolving Loan by causing any domestic or foreign branch of such
Lender to make such Loan; provided
that any exercise of such option shall not affect the obligation of such Lender
to make such Loan and Borrower to repay such Loan in accordance with the terms
of this Agreement.  Borrowings of more
than one Type may be outstanding at the same time; 

 

31

 

provided that Borrower shall not be entitled to
request any Borrowing that, if made, would result in more than six Eurodollar
Borrowings outstanding hereunder at any one time.  For purposes of the foregoing, Borrowings
having different Interest Periods, regardless of whether they commence on the
same date, shall be considered separate Borrowings.

 

(c)                                  Except with respect to Loans made
pursuant to Section 2.16(e)(ii), each Lender shall make each Loan
to be made by it hereunder on the proposed date thereof by wire transfer of
immediately available funds to such account in New York City as the
Administrative Agent may designate from time to time not later than
10:00 a.m., New York City time, and the Administrative Agent shall
promptly credit the amounts so received to an account as directed by Borrower
in the applicable Borrowing Request maintained with the Administrative Agent
or, if a Borrowing shall not occur on such date because any condition precedent
herein specified shall not have been met, return the amounts so received to the
respective Lenders within two Business Days.

 

(d)                                 Unless the Administrative Agent shall
have received written notice from a Lender prior to the date of any Borrowing
that such Lender will not make available to the Administrative Agent such
Lender’s portion of such Borrowing, the Administrative Agent may assume that
such Lender has made such portion available to the Administrative Agent on the
date of such Borrowing in accordance with Section 2.02(c), and the
Administrative Agent may, in reliance upon such assumption, make available to
Borrower on such date a corresponding amount. 
If the Administrative Agent shall have so made funds available, then, to
the extent that such Lender shall not have made such portion available to the
Administrative Agent, each of such Lender and Borrower severally agrees to
repay to the Administrative Agent forthwith on demand such corresponding amount
together with interest thereon, for each day from the date such amount is made
available to Borrower until the date such amount is repaid to the
Administrative Agent at (i) in the case of such Lender, the greater of the
Federal Funds Effective Rate and a rate determined by the Administrative Agent
in accordance with banking industry rules or practices on interbank
compensation, and (ii) in the case of Borrower, the interest rate
applicable at the time to ABR Loans.  If
such Lender shall repay to the Administrative Agent such corresponding amount,
such amount shall constitute such Lender’s Loan as part of such Borrowing for
purposes of this Agreement, and Borrower’s obligation to repay the
Administrative Agent such corresponding amount pursuant to this Section 2.02(d) shall
cease.

 

(e)                                  Notwithstanding any other provision of
this Agreement, Borrower shall not be entitled to request, or to elect to
convert or continue, any Borrowing if the Interest Period requested with
respect thereto would end after the Revolving Maturity Date.

 

Section 2.03                            Borrowing Procedure. 
To request a Revolving Borrowing, Borrower shall deliver, by hand
delivery or telecopy (or transmit by other electronic transmission, if
arrangements for doing so have been approved in writing by the Administrative
Agent), a duly completed and executed Borrowing Request to the Administrative
Agent (i) in the case of a Eurodollar Borrowing, not later than 11:00 a.m.,
New York City time, three Business Days before the date of the proposed
Borrowing or (ii) in the case of an ABR Borrowing, not later than
9:00 a.m., New York City time, on the date of the proposed Borrowing.  Each Borrowing Request shall be irrevocable
and shall specify the following information in compliance with Section 2.02:

 

(a)                                  the aggregate amount of such Borrowing;

 

(b)                                 the date of such Borrowing, which shall
be a Business Day;

 

(c)                                  whether such Borrowing is to be an ABR
Borrowing or a Eurodollar Borrowing;

 

32

 

(d)                                 in the case of a Eurodollar Borrowing,
the initial Interest Period to be applicable thereto;

 

(e)                                  the location and number of Borrower’s
account to which funds are to be disbursed, which shall comply with the
requirements of Section 2.02(c); and

 

(f)                                    that the conditions set forth in Sections
4.02(b), (c) and (d) are satisfied as of the date
of the notice.

 

If no
election as to the Type of Borrowing is specified, then the requested Borrowing
shall be an ABR Borrowing.  If no
Interest Period is specified with respect to any requested Eurodollar Revolving
Borrowing, then Borrower shall be deemed to have selected an Interest Period of
one month’s duration.  Promptly following
receipt of a Borrowing Request in accordance with this Section 2.03,
the Administrative Agent shall advise each Lender of the details thereof and of
the amount of such Lender’s Loan to be made as part of the requested Borrowing.

 

Section 2.04                            Evidence of Debt;
Repayment of Loans.  (a)  Borrower hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Revolving Lender, the then unpaid principal amount of each Revolving Loan
of such Revolving Lender on the Revolving Maturity Date.

 

(b)                                 Each Lender shall maintain in accordance
with its usual practice an account or accounts evidencing the indebtedness of
Borrower to such Lender resulting from each Loan made by such Lender from time
to time, including the amounts of principal and interest payable and paid to
such Lender from time to time under this Agreement.

 

(c)                                  The Administrative Agent shall maintain
accounts in which it will record (i) the amount of each Loan made
hereunder, the Type thereof and the Interest Period applicable thereto,
(ii) the amount of any principal or interest due and payable or to become
due and payable from Borrower to each Lender hereunder, and (iii) the
amount of any sum received by the Administrative Agent hereunder for the
account of the Lenders and each Lender’s share thereof.

 

(d)                                 The entries made in the accounts
maintained pursuant to Sections 2.04(b) and (c) shall
be prima facie evidence of the
existence and amounts of the obligations therein recorded; provided that the failure of any Lender or
the Administrative Agent to maintain such accounts or any error therein shall
not in any manner affect the obligations of Borrower and the other Loan Parties
to pay, and perform, the Obligations in accordance with the Loan
Documents.  In the event of any conflict
between the accounts and records maintained by any Lender and the accounts and
records of the Administrative Agent in respect of such entries, the accounts
and records of the Administrative Agent shall control in the absence of
manifest error.

 

(e)                                  Any Lender by written notice to Borrower
(with a copy to the Administrative Agent) may request that Loans made by it be
evidenced by a promissory note.  In such
event, Borrower shall promptly (and, in all events, within five Business Days
of receipt of such request) prepare, execute and deliver to such Lender a
promissory note payable to the order of such Lender (or, if requested by such
Lender, to such Lender and its registered assigns) in the form of Exhibit I,
as the case may be.  Thereafter, the
Loans evidenced by such promissory note and interest thereon shall at all times
(including after assignment pursuant to Section 12.04) be
represented by one or more promissory notes in such form payable to the order
of the payee named therein (or, if such promissory note is a registered note,
to such payee and its registered assigns).

 

33

 

Section 2.05                            Fees.

 

(a)                                  Commitment Fee. 
Borrower agrees to pay to the Administrative Agent for the account of
each Lender a commitment fee (a “Commitment
Fee”) equal to 0.50% per annum of the average daily unused amount of
each Revolving Commitment of such Lender during the period from and including
the date hereof to but excluding the date on which such Revolving Commitment
terminates.  Accrued Commitment Fees
shall be payable in arrears (A) on the last Business Day of March, June,
September and December of each year, commencing on the first such
date to occur after the date hereof, and (B) on the date on which such
Commitment terminates.  Commitment Fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).  For purposes of computing
Commitment Fees, a Revolving Commitment of a Lender shall be deemed to be used
to the extent of the outstanding Revolving Loans and LC Exposure of such
Lender.

 

(b)                                 Administrative Agent Fees. 
Borrower agrees to pay to the Administrative Agent, for its own account,
the administrative fees set forth in the Fee Letter and such other fees payable
in the amounts and at the times separately agreed upon between Borrower and the
Administrative Agent (the “Administrative
Agent Fees”).

 

(c)                                  LC and Fronting Fees. 
Borrower agrees to pay to (i) the Administrative Agent for the
account of each Revolving Lender a participation fee (“LC Participation Fee”) with respect to its
participations in Letters of Credit, which shall accrue at a rate per annum
equal to the Applicable Margin from time to time used to determine the interest
rate on Eurodollar Revolving Loans pursuant to Section 2.06 on the
average daily amount of such Lender’s LC Exposure (excluding any portion
thereof attributable to Reimbursement Obligations) during the period from and
including the Closing Date to but excluding the later of the date on which such
Lender’s Revolving Commitment terminates and the date on which such Lender
ceases to have any LC Exposure, and (ii) the Issuing Bank a fronting fee
(“Fronting Fee”), which shall
accrue at the rate of 0.25% per annum (or such lesser rate per annum as the
Issuing Bank may from time to time agree) on the average daily amount of the LC
Exposure (excluding any portion thereof attributable to Reimbursement
Obligations) during the period from and including the Closing Date to but
excluding the later of the date of termination of the Revolving Commitments and
the date on which there ceases to be any LC Exposure, as well as the Issuing
Bank’s customary fees with respect to the issuance, amendment, renewal or
extension of any Letter of Credit or processing of drawings thereunder.  Accrued LC Participation Fees and Fronting
Fees shall be payable in arrears (i) on the last Business Day of March,
June, September and December of each year, commencing on the first
such date to occur after the Closing Date, and (ii) on the date on which
the Revolving Commitments terminate.  Any
such fees accruing after the date on which the Revolving Commitments terminate
shall be payable on demand.  Any other
fees payable to the Issuing Bank pursuant to this Section 2.05(c) shall
be payable within five Business Days after demand therefor.  All LC Participation Fees and Fronting Fees
shall be computed on the basis of a year of 360 days and shall be payable for
the actual number of days elapsed (including the first day but excluding the
last day).

 

(d)                                 Other Fees.  Borrower
agrees to pay the Agents, for their own account, fees payable in the amounts
and at the times separately agreed upon between Borrower and the applicable
Agents.

 

(e)                                  Payment of Fees. 
All Fees shall be paid on the dates due, in immediately available funds
in Dollars, to the Administrative Agent for distribution, if and as
appropriate, among the Lenders, except that Borrower shall pay (i) the
Fronting Fees directly to the Issuing Bank, and (ii) the Fees provided
under Section 2.05(d) directly to the Agents.  Once paid, none of the Fees shall be
refundable under any circumstances.

 

34

 

Section 2.06                            Interest on Loans. 
(a)  Subject to the provisions of Section 2.06(c), the
Loans comprising each ABR Borrowing shall bear interest at a rate per annum
equal to the Alternate Base Rate plus the Applicable Margin in effect from time
to time.

 

(b)                                 Subject to the provisions of Section 2.06(c),
the Loans comprising each Eurodollar Borrowing shall bear interest at a rate
per annum equal to the Adjusted LIBOR Rate for the Interest Period in effect
for such Borrowing plus the Applicable Margin in effect from time to time.

 

(c)                                  Notwithstanding the foregoing, during an
Event of Default, all Obligations shall, bear interest, after as well as before
judgment, at a per annum rate equal to 4.0% plus the rate applicable to ABR
Revolving Loans as provided in Section 2.06(a) (in either
case, the “Default Rate”).

 

(d)                                 Accrued interest on each Loan shall be
payable in arrears on each Interest Payment Date for such Loan; provided that (i) interest accrued
pursuant to Section 2.06(c) (including interest on past due
interest) and all interest accrued but unpaid on or after the Revolving
Maturity Date shall be payable on demand, (ii) in the event of any
repayment or prepayment of any Loan (other than a prepayment of an ABR
Revolving Loan), accrued interest on the principal amount repaid or prepaid
shall be payable on the date of such repayment or prepayment and (iii) in
the event of any conversion of any Eurodollar Revolving Loan prior to the end
of the current Interest Period therefor, accrued interest on such Loan shall be
payable on the effective date of such conversion.

 

(e)                                  All interest hereunder shall be computed
on the basis of a year of 360 days, except that interest computed by reference
to the Alternate Base Rate shall be computed on the basis of a year of 365 days
(or 366 days in a leap year), and in each case shall be payable for the actual
number of days elapsed (including the first day but excluding the last day); provided that any Loan that is repaid on the same day on
which it is made shall, subject to Section 2.13, bear interest for
one day.  The applicable Alternate Base
Rate or Adjusted LIBOR Rate shall be determined by the Administrative Agent in
accordance with the provisions of this Agreement and such determination shall
be conclusive absent manifest error. 
Interest hereunder shall be due and payable in accordance with the terms
hereof before and after judgment, and before and after the commencement of any
Insolvency Proceeding.

 

Section 2.07                            Termination and Reduction
of Commitments.  (a)  The Revolving Commitments and the
LC Commitment shall automatically terminate on the Revolving Maturity Date.

 

(b)                                 At its option, Borrower may at any time
terminate, or from time to time permanently reduce, the Commitments; provided that (i) each reduction of
the Commitments shall be in an amount that is an integral multiple of $500,000
and not less than $1,000,000 and (ii) the Revolving Commitments shall not
be terminated or reduced if, after giving effect to any concurrent prepayment
of the Revolving Loans in accordance with Section 2.09, the
aggregate amount of Revolving Exposures would exceed the aggregate amount of
Revolving Commitments.

 

(c)                                  Borrower shall notify the Administrative
Agent in writing of any election to terminate or reduce the Commitments under Section 2.07(b) at
least five Business Days prior to the effective date of such termination or
reduction (which effective date shall be a Business Day), specifying such
election and the effective date thereof. 
Promptly following receipt of any such notice, the Administrative Agent
shall advise the Lenders of the contents thereof.  Each notice delivered by Borrower pursuant to
this Section 2.07 shall be irrevocable.  Any termination or reduction of the shall be
permanent.  Each reduction of the
Commitments shall be made ratably among the Lenders in accordance with their
respective Commitments.

 

35

 

Section 2.08                            Interest Elections. 
(a)  Each Revolving Borrowing initially shall be of the Type
specified in the applicable Borrowing Request and, in the case of a Eurodollar
Borrowing, shall have an initial Interest Period as specified in such Borrowing
Request.  Thereafter, Borrower may elect
to convert such Borrowing to a different Type or to continue such Borrowing
and, in the case of a Eurodollar Borrowing, may elect Interest Periods
therefor, all as provided in this Section 2.08.  Borrower may elect different options with
respect to different portions of the affected Borrowing, in which case each
such portion shall be allocated ratably among the Lenders holding the Loans
comprising such Borrowing, and the Loans comprising each such portion shall be
considered a separate Borrowing. 
Notwithstanding anything to the contrary Borrower shall not be entitled
to request any conversion or continuation that, if made, would result in more
than six Eurodollar Borrowings outstanding hereunder at any one time.

 

(b)                                 To make an election pursuant to this Section 2.08,
Borrower shall deliver, by hand delivery or telecopy, a duly completed and
executed Interest Election Request to the Administrative Agent not later than
the time that a Borrowing Request would be required under Section 2.03
if Borrower were requesting a Revolving Borrowing of the Type resulting from
such election to be made on the effective date of such election.  Each Interest Election Request shall be
irrevocable.

 

(c)                                  Each Interest Election Request shall
specify the following information in compliance with Section 2.02:

 

(i)                                     the Borrowing to which such Interest
Election Request applies and, if different options are being elected with
respect to different portions thereof, or if outstanding Borrowings are being
combined, allocation to each resulting Borrowing (in which case the information
to be specified pursuant to clauses (iii) and (iv) below shall be
specified for each resulting Borrowing);

 

(ii)                                  the effective date of the election made
pursuant to such Interest Election Request, which shall be a Business Day;

 

(iii)                               whether the resulting Borrowing is to be
an ABR Borrowing or a Eurodollar Borrowing; and

 

(iv)                              if the resulting Borrowing is a
Eurodollar Borrowing, the Interest Period to be applicable thereto after giving
effect to such election, which shall be a period contemplated by the definition
of the term “Interest Period”.

 

If any
such Interest Election Request requests a Eurodollar Borrowing but does not
specify an Interest Period, then Borrower shall be deemed to have selected an
Interest Period of one month’s duration.

 

(d)                                 Promptly following receipt of an Interest
Election Request, the Administrative Agent shall advise each Lender of the
details thereof and of such Lender’s portion of each resulting Borrowing.

 

(e)                                  If an Interest Election Request with
respect to a Eurodollar Borrowing is not timely delivered prior to the end of
the Interest Period applicable thereto, then, unless such Borrowing is repaid
as provided herein, at the end of such Interest Period such Borrowing shall be
converted to an ABR Borrowing. 
Notwithstanding any contrary provision hereof, if an Event of Default
has occurred and is continuing, the Administrative Agent or the Required Lenders
may require, by notice to Borrower, that (i) no outstanding Borrowing may
be converted to or continued as a Eurodollar Borrowing and (ii) unless 

 

36

 

repaid, each Eurodollar Borrowing shall be converted to an ABR
Borrowing at the end of the Interest Period applicable thereto.

 

Section 2.09                            Optional and Mandatory
Prepayments of Loans.  (a)  Optional
Prepayments.  Borrower shall have the
right at any time and from time to time to prepay any Borrowing, in whole or in
part, subject to the requirements of this Section 2.09; provided that each partial prepayment
shall be in an amount that is an integral multiple of $500,000 and not less
than $1,000,000 (or, if less, the full amount of such Borrowing).

 

(b)                                 Revolving Loan Prepayments. 
(i)  In the event of the termination of all the Revolving
Commitments, Borrower shall, on the date of such termination, repay or prepay
all its outstanding Revolving Borrowings and either (A) replace all
outstanding Letters of Credit or (B) Cash Collateralize all outstanding
Letters of Credit in accordance with the procedures set forth in Section 2.16(i).

 

(ii)                                  In the event of any partial reduction of
the Revolving Commitments, then (x) at or prior to the effective date of
such reduction, the Administrative Agent shall notify Borrower and the
Revolving Lenders of the sum of the Revolving Exposures after giving effect
thereto and (y) if the sum of the Revolving Exposures would exceed the
aggregate amount of Revolving Commitments after giving effect to such reduction,
then Borrower shall, on the date of such reduction, first, repay or prepay Revolving Borrowings and second, replace outstanding Letters of
Credit or Cash Collateralize outstanding Letters of Credit in accordance with
the procedures set forth in Section 2.16(i) in an aggregate
amount sufficient to eliminate such excess.

 

(iii)                               In the event that the sum of all Lenders’
Revolving Exposures exceeds the lesser of (A) the Revolving Commitments
then in effect and (B) the Borrowing Base then in effect, Borrower shall,
without notice or demand, immediately first,
repay or prepay Revolving Borrowings, and second,
replace outstanding Letters of Credit or Cash Collateralize outstanding Letters
of Credit in accordance with the procedures set forth in Section 2.16(i) in
an aggregate amount sufficient to eliminate such excess.

 

(iv)                              In the event that the aggregate LC
Exposure exceeds the LC Commitment then in effect, Borrower shall, without
notice or demand, immediately replace outstanding Letters of Credit or Cash
Collateralize outstanding Letters of Credit in accordance with the procedures
set forth in Section 2.16(i) in an aggregate amount sufficient
to eliminate such excess.

 

(c)                                  Application of Prepayments.

 

(i)                                     Amounts to be applied pursuant to this Section 2.09
to the prepayment of Revolving Loans shall be applied, as applicable, first to
reduce outstanding ABR Revolving Loans. 
Any amounts remaining after each such application shall be applied to
prepay Eurodollar Revolving Loans.

 

(ii)                                  Notice of Prepayment. 
Borrower shall notify the Administrative Agent by written notice of any
prepayment hereunder (i) in the case of prepayment of a Eurodollar
Borrowing, not later than 11:00 a.m., New York City time, three Business
Days before the date of prepayment and (ii) in the case of prepayment of
an ABR Borrowing, not later than 11:00 a.m., New York City time, one
Business Day before the date of prepayment. 
Each such notice shall be irrevocable. 
Each such notice shall specify the prepayment date, the principal amount
of each Borrowing or portion thereof to be prepaid and, in the case of a
mandatory prepayment, a 

 

37

 

reasonably
detailed calculation of the amount of such prepayment.  Promptly following receipt of any such
notice, the Administrative Agent shall advise the Lenders of the contents
thereof.  Such notice to the Lenders may
be by electronic communication.  Each
partial prepayment of any Borrowing shall be in an amount that would be
permitted in the case of a Borrowing of the same Type as provided in Section 2.02,
except as necessary to apply fully the required amount of a mandatory
prepayment.  Each prepayment of a
Borrowing shall be applied ratably to the Loans included in the prepaid
Borrowing and otherwise in accordance with this Section 2.09.  Prepayments shall be accompanied by accrued
interest to the extent required by Section 2.06.

 

Section 2.10                            Alternate Rate of Interest. 
If prior to the commencement of any Interest Period for a Eurodollar
Borrowing:

 

(a)                                  the Administrative Agent determines
(which determination shall be final and conclusive absent manifest error) that
adequate and reasonable means do not exist for ascertaining the Adjusted LIBOR
Rate for such Interest Period; or

 

(b)                                 the Administrative Agent is advised in
writing by the Required Lenders that the Adjusted LIBOR Rate for such Interest
Period will not adequately and fairly reflect the cost to such Lenders of
making or maintaining their Loans included in such Borrowing for such Interest
Period;

 

then the Administrative Agent shall give written notice thereof to
Borrower and the Lenders as promptly as practicable thereafter and, until the
Administrative Agent notifies Borrower and the Lenders that the circumstances
giving rise to such notice no longer exist, (i) any Interest Election
Request that requests the conversion of any Borrowing to, or continuation of
any Borrowing as, a Eurodollar Borrowing shall be ineffective and (ii) if
any Borrowing Request requests a Eurodollar Borrowing, such Borrowing shall be
made as an ABR Borrowing.

 

Section 2.11                            Increased Costs; Change in
Legality.  (a)  If any Change in Law shall:

 

(i)                                     impose, modify or deem applicable any
reserve, special deposit, compulsory loan, insurance charge or similar
requirement against property of, deposits with or for the account of, or credit
extended by or participated in by, any Lender (except any such reserve
requirement reflected in the Adjusted LIBOR Rate) or the Issuing Bank; or

 

(ii)                                  impose on any Lender or the Issuing Bank
or the London interbank market any other condition, cost or expense affecting
this Agreement or Eurodollar Revolving Loans made by such Lender or any Letter
of Credit or participation therein;

 

and the result of any of the foregoing shall be to increase the cost to
such Lender of making or maintaining any Eurodollar Revolving Loan (or of
maintaining its obligation to make any such Loan) or to increase the cost to
such Lender, the Issuing Bank or such Lender’s or the Issuing Bank’s holding
company, if any, of participating in, issuing or maintaining any Letter of
Credit (or of maintaining its obligation to participate in or to issue any
Letter of Credit) or to reduce the amount of any sum received or receivable by
such Lender or the Issuing Bank hereunder (whether of principal, interest or
otherwise), then Borrower will pay to such Lender or the Issuing Bank, as the
case may be, such additional amount or amounts as will compensate such Lender
or the Issuing Bank, as the case may be, for such additional costs incurred or
reduction suffered, it being understood that, to the extent duplicative of the
provisions of Section 2.14, this Section 2.11 shall not
apply to Taxes; provided, that
(i) Borrower shall be under no obligation to compensate such Lender or the
Issuing Bank with respect to any period prior to the date that is 180 days
prior to the date on which such Lender or the Issuing Bank makes a claim
hereunder if such Lender or the Issuing Bank prior to such date knew or would
reasonably be expected to know of the 

 

38

 

circumstances giving rise to the claim hereunder or the fact that such
circumstances would result in the claim hereunder, and (ii) the foregoing
limitation shall not apply to any claims arising out of the retroactive
application of any Change in Law within such 180-day period.  The protection of this Section 2.11
shall be available to each Lender and the Issuing Bank regardless of any
possible contention of the invalidity or inapplicability of the Change in Law
that shall have occurred or been imposed.

 

(b)                                 If any Lender or the Issuing Bank
determines (in good faith, but in its sole absolute discretion) that any Change
in Law regarding Capital Requirements has or would have the effect of reducing
the rate of return on such Lender’s or the Issuing Bank’s capital or on the
capital of such Lender’s or the Issuing Bank’s holding company, if any, as a
consequence of this Agreement, the Commitments of such Lender or the Loans made
by, or participations in Letters of Credit, or the Letters of Credit issued by
the Issuing Bank, to a level below that which such Lender or the Issuing Bank
or such Lender’s or the Issuing Bank’s holding company could have achieved but
for such Change in Law (taking into consideration such Lender’s or the Issuing
Bank’s policies and the policies of such Lender’s or the Issuing Bank’s holding
company with respect to capital adequacy), then from time to time Borrower will
pay to such Lender or the Issuing Bank, as the case may be, such additional amount
or amounts as will compensate such Lender or the Issuing Bank or such Lender’s
or the Issuing Bank’s holding company, for any such reduction suffered.

 

(c)                                  A certificate of a Lender or the Issuing
Bank setting forth in reasonable detail the amount or amounts necessary to
compensate such Lender or the Issuing Bank or its holding company, as the case
may be, as specified in Sections 2.11(a) or (b) shall
be delivered to Borrower (with a copy to the Administrative Agent) and shall be
conclusive and binding absent manifest error. 
Borrower shall pay such Lender or the Issuing Bank, as the case may be,
the amount shown as due on any such certificate within ten Business Days after
receipt thereof.

 

(d)                                 Subject to the proviso contained in the
last sentence of Section 2.11(a), failure or delay on the part of
any Lender or the Issuing Bank to demand compensation pursuant to this Section 2.11
shall not constitute a waiver of such Lender’s or the Issuing Bank’s right to
demand such compensation.

 

(e)                                  Notwithstanding any other provision of
this Agreement, if any Change in Law shall make it unlawful for any Lender
to make or maintain any Eurodollar Revolving Loan or to give effect to its
obligations as contemplated hereby with respect to any Eurodollar Revolving Loan,
then, by written notice to Borrower and to the Administrative Agent:

 

(i)                                     such Lender may declare that Eurodollar
Revolving Loans will not thereafter (for the duration of such unlawfulness (as
determined in good faith by such Lender)) be made by such Lender hereunder (or
be continued for additional Interest Periods and ABR Loans will not thereafter
(for such duration) be converted into Eurodollar Revolving Loans), whereupon
any request for a Eurodollar Revolving Loan (or to convert an ABR Loan to a
Eurodollar Revolving Loan or to continue a Eurodollar Revolving Loan for an
additional Interest Period) shall, as to such Lender only, be deemed a request
for an ABR Loan (or a request to continue an ABR Loan as such for an additional
Interest Period or to convert a Eurodollar Revolving Loan into an ABR Loan, as
the case may be), unless such declaration shall be subsequently withdrawn by
such Lender by written notice to Borrower and to the Administrative Agent; and

 

(ii)                                  such Lender may require that all
outstanding Eurodollar Revolving Loans made by it be converted to ABR Loans, in
which event all such Eurodollar Revolving Loans shall be automatically
converted to ABR Loans as of the effective date of such notice as provided in Section 2.12(f).

 

39

 

In the event any Lender shall exercise its rights under clause
(i) or (ii) above, all payments and prepayments of principal that
would otherwise have been applied to repay the Eurodollar Revolving Loans that
would have been made by such Lender or the converted Eurodollar Revolving Loans
of such Lender shall instead be applied to repay the ABR Loans made by such
Lender in lieu of, or resulting from the conversion of, such Eurodollar
Revolving Loans.

 

(f)                                    For purposes of Section 2.11(e),
a notice to Borrower by any Lender shall be effective as to each Eurodollar
Revolving Loan made by such Lender, if lawful, on the last day of the Interest
Period then applicable to such Eurodollar Revolving Loan; in all other cases
such notice shall be effective on the date of receipt by Borrower.

 

Section 2.12                            Breakage Payments. 
In the event of (a) the payment or prepayment, whether optional or
mandatory, of any principal of any Eurodollar Revolving Loan earlier than the
last day of an Interest Period applicable thereto (including as a result of an
Event of Default), (b) the conversion of any Eurodollar Revolving Loan
earlier than the last day of the Interest Period applicable thereto,
(c) the failure to borrow, convert, continue or prepay any Revolving Loan
on the date specified in any notice delivered pursuant hereto or (d) the
assignment of any Eurodollar Revolving Loan earlier than the last day of the
Interest Period applicable thereto as a result of a request by Borrower
pursuant to Section 2.15, then, in any such event, Borrower shall
compensate each Lender for the loss, cost and expense attributable to such
event.  In the case of a Eurodollar
Revolving Loan, such loss, cost or expense to any Lender shall be deemed to
include an amount determined by such Lender to be the excess, if any, of
(i) the amount of interest that would have accrued on the principal amount
of such Loan had such event not occurred, at the Adjusted LIBOR Rate plus the
Applicable Margin (together with any interest payable at the Default Rate, if
then applicable) that would have been applicable to such Loan, for the period
from the date of such event to the last day of the then current Interest Period
therefor (or, in the case of a failure to borrow, convert or continue, for the
period that would have been the Interest Period for such Loan), over
(ii) the amount of interest that would accrue on such principal amount for
such period at the interest rate which such Lender would bid were it to bid, at
the commencement of such period, for Dollar deposits of a comparable amount and
period from other banks in the Eurodollar market.  A certificate of any Lender setting forth in
reasonable detail any amount or amounts that such Lender is entitled to receive
pursuant to this Section 2.12 shall be delivered to Borrower (with
a copy to the Administrative Agent) and shall be conclusive and binding absent
manifest error.  Borrower shall pay such
Lender the amount shown as due on any such certificate within three Business
Days after receipt thereof.

 

Section 2.13                            Payments Generally; Pro
Rata Treatment; Sharing of Setoffs.  (a) 
Borrower shall make each payment required to be made by it hereunder or under
any other Loan Document (whether of principal, interest, fees or Reimbursement
Obligations, or of amounts payable under Section 2.11, 2.12 or 2.14,
or otherwise) on or before the time expressly required hereunder or under such
other Loan Document for such payment (or, if no such time is expressly
required, prior to 1:00 p.m., New York City time), on the date when due,
in immediately available funds, without setoff, deduction or counterclaim.  Any amounts received after such time on any
date may, in the discretion of the Administrative Agent, be deemed to have been
received on the next succeeding Business Day for purposes of calculating
interest thereon.  All such payments
shall be made to the Administrative Agent at its offices at 520 Madison Avenue, New York, New York 10022
Attn:  Five Star Account Manager,
except payments to be made directly to the Issuing Bank as expressly provided
herein and except that payments pursuant to Sections 2.11, 2.12, 2.14
and 12.03 shall be made directly to the persons entitled thereto and
payments pursuant to other Loan Documents shall be made to the persons specified
therein.  The Administrative Agent shall
distribute any such payments received by it for the account of any other Person
to the appropriate recipient promptly following receipt thereof.  If any payment under any Loan Document shall
be due on a day that is not a Business Day, unless specified otherwise, the
date for payment shall be extended to the next succeeding Business Day, and, in
the case of any payment accruing 

 

40

 

interest, interest thereon shall be payable for the period of such
extension.  All payments under each Loan
Document shall be made in Dollars.

 

(b)                                 If at any time insufficient funds are
received by and available to the Administrative Agent to pay fully all amounts
of principal, Reimbursement Obligations, interest and fees then due hereunder,
such funds shall be applied (i) first,
towards payment of interest and fees then due hereunder, ratably among the
parties entitled thereto in accordance with the amounts of interest and fees
then due to such parties, and (ii) second,
towards payment of principal and Reimbursement Obligations then due hereunder,
ratably among the parties entitled thereto in accordance with the amounts of
principal and Reimbursement Obligations then due to such parties.

 

(c)                                  If any Lender shall, by exercising any
right of setoff or counterclaim (including pursuant to Section 12.08)
or otherwise (including by exercise of its rights under the Security
Documents), obtain payment in respect of any principal of or interest on any of
its Revolving Loans or participations in LC Disbursements resulting in such
Lender receiving payment of a greater proportion of the aggregate amount of its
Revolving Loans and participations in LC Disbursements and accrued interest
thereon than the proportion received by any other Lender, then the Lender
receiving such greater proportion shall purchase (for cash at face value)
participations in the Revolving Loans and participations in LC Disbursements of
other Lenders to the extent necessary so that the benefit of all such payments
shall be shared by the Lenders ratably in accordance with the aggregate amount
of principal of and accrued interest on their respective Revolving Loans and
participations in LC Disbursements; provided
that (i) if any such participations are purchased and all or any portion
of the payment giving rise thereto is recovered, such participations shall be
rescinded and the purchase price restored to the extent of such recovery,
without interest, and (ii) the provisions of this Section 2.12(c) shall
not be construed to apply to any payment made by Borrower pursuant to and in
accordance with the express terms of this Agreement or any payment obtained by
a Lender as consideration for the assignment of or sale of a participation in
any of its Revolving Loans or participations in LC Disbursements to any
assignee or participant, other than to any Company or any Affiliates thereof
(as to which the provisions of this Section 2.12(c) shall
apply).  Each Loan Party consents to the
foregoing and agrees, to the extent it may effectively do so under applicable
Legal Requirements, that any Lender acquiring a participation pursuant to the
foregoing arrangements may exercise against each Loan Party rights of setoff
and counterclaim with respect to such participation as fully as if such Lender
were a direct creditor of such Loan Party in the amount of such
participation.  If under applicable
Insolvency Law any Secured Party receives a secured claim in lieu of a setoff
or counterclaim to which this Section 2.12(c) applies, such
Secured Party shall to the extent practicable, exercise its rights in respect
of such secured claim in a manner consistent with the rights to which the
Secured Party is entitled under this Section 2.12(c) to share
in the benefits of the recovery of such secured claim.

 

(d)                                 Unless the Administrative Agent shall
have received written notice from Borrower prior to the date on which any
payment is due to the Administrative Agent for the account of the Lenders or
the Issuing Bank hereunder that Borrower will not make such payment, the
Administrative Agent may assume that Borrower has made such payment on such
date in accordance herewith and may, in reliance upon such assumption,
distribute to the Lenders or the Issuing Bank, as the case may be, the amount
due.  In such event, if Borrower has not
in fact made such payment, then each of the Lenders or the Issuing Bank, as the
case may be, severally agrees to repay to the Administrative Agent forthwith on
demand the amount so distributed to such Lender or the Issuing Bank with
interest thereon, for each day from and including the date such amount is
distributed to it to but excluding the date of payment to the Administrative
Agent, at the greater of the Federal Funds Effective Rate and a rate determined
by the Administrative Agent in accordance with banking industry rules or
practices on interbank compensation.

 

41

 

(e)                                  If any Lender shall fail to make any
payment required to be made by it pursuant to Section 2.02(c), 2.13(d),
2.16(d), 2.16(e) or 12.03(e), then the Administrative
Agent may, in its discretion (notwithstanding any contrary provision hereof),
apply any amounts thereafter received by the Administrative Agent for the
account of such Lender to satisfy such Lender’s obligations under such Sections
until all such unsatisfied obligations are fully paid.

 

Section 2.14                            Taxes. 
(a)  Any and all payments by or on account of any obligation of the
Loan Parties hereunder or under any other Loan Document shall be made without
setoff, counterclaim or other defense and free and clear of and without
deduction, reduction or withholding for any and all Indemnified Taxes or Other
Taxes; provided that if Borrower
shall be required by applicable Legal Requirements to deduct any Indemnified
Taxes or Other Taxes from such payments, then (i) the sum payable shall be
increased as necessary so that after making all required deductions (including
deductions, reductions or withholdings applicable to additional sums payable
under this Section 2.14) the Administrative Agent, any Lender or
the Issuing Bank, as the case may be, receives an amount equal to the sum it
would have received had no such deductions, reductions or withholdings been
made, (ii) Borrower shall make such deductions, reductions or withholdings
and (iii) Borrower shall timely pay the full amount deducted or withheld
to the relevant Governmental Authority in accordance with applicable Legal
Requirements.

 

(b)                                 In addition, Borrower shall timely pay
any Other Taxes to the relevant Governmental Authority in accordance with
applicable Legal Requirements.

 

(c)                                  Borrower shall indemnify the
Administrative Agent, each Lender and the Issuing Bank, within three Business
Days after written demand therefor, for the full amount of any Indemnified
Taxes or Other Taxes paid by the Administrative Agent, such Lender or the
Issuing Bank, as the case may be, on or with respect to any payment by or on
account of any obligation of Borrower hereunder or under any other Loan Document
(including Indemnified Taxes or Other Taxes imposed or asserted on or
attributable to amounts payable under this Section 2.14) and any
penalties, interest and expenses arising therefrom or with respect thereto,
whether or not such Indemnified Taxes or Other Taxes were correctly or legally
imposed or asserted by the relevant Governmental Authority.  A certificate as to the amount of such
payment or liability delivered to Borrower by a Lender or the Issuing Bank (in
each case, with a copy delivered concurrently to the Administrative Agent), or
by the Administrative Agent on its own behalf or on behalf of a Lender or the
Issuing Bank, shall be conclusive absent manifest error.

 

(d)                                 As soon as practicable after any payment
of Indemnified Taxes or Other Taxes and in any event within 30 days
following any such payment being due, by Borrower to a Governmental Authority,
Borrower shall deliver to the Administrative Agent the original or a certified
copy of a receipt issued by such Governmental Authority evidencing such
payment, a copy of the return reporting such payment or other evidence of such
payment reasonably satisfactory to the Administrative Agent.  If Borrower fails to pay any Indemnified
Taxes or Other Taxes when due to the appropriate Governmental Authority or
fails to remit to the Administrative Agent the required receipts or other
documentary evidence, Borrower shall indemnify the Administrative Agent, each
Lender and the Issuing Bank for any incremental Taxes or expenses that may
become payable by the Administrative Agent, such Lender or the Issuing Bank, as
the case may be, as a result of any such failure.

 

(e)                                  Any Foreign Lender that is entitled to an
exemption from or reduction of withholding tax under the law of the
jurisdiction in which Borrower is resident for tax purposes, or any treaty to
which such jurisdiction is a party, with respect to payments under this
Agreement shall deliver to Borrower (with a copy to the Administrative Agent),
at the time or times prescribed by applicable law, such properly completed and
executed documentation prescribed by applicable law or reasonably requested by
Borrower or the Administrative Agent as will permit such payments to be made
without withholding or at a reduced rate of withholding.  Each Foreign Lender shall (i) furnish
either (a) two 

 

42

 

accurate and complete originally executed U.S. Internal Revenue Service
Forms W-8BEN (or successor form) or (b) two accurate and complete
originally executed U.S. Internal Revenue Service Forms W-8ECI (or successor
form), certifying, in either case, to such Foreign Lender’s legal entitlement
to an exemption or reduction from U.S. federal withholding tax with respect to
all interest payments hereunder, and (ii) to the extent it may lawfully do
so at such times, upon reasonable request by Borrower or the Administrative
Agent, provide a new Form W-8BEN (or successor form) or Form W-8ECI
(or successor form) upon the expiration or obsolescence of any previously delivered
form to reconfirm any complete exemption from, or any entitlement to a
reduction in, U.S. federal withholding tax with respect to any interest payment
hereunder; provided that any
Foreign Lender that is not a “bank” within the meaning of
Section 881(c)(3)(A) of the Code shall also furnish a “Non-Bank
Certificate” in the form of Exhibit L if it is furnishing a
Form W-8BEN.

 

(f)                                    If the Administrative Agent or a Lender
(or an assignee) determines in its reasonable discretion that it has received a
refund of any Indemnified Taxes or Other Taxes as to which it has been
indemnified by Borrower or with respect to which Borrower has paid additional
amounts pursuant to this Section 2.14, it shall pay over such
refund to Borrower (but only to the extent of indemnity payments made, or
additional amounts paid, by Borrower under this Section 2.14 with
respect to the Indemnified Taxes or the Other Taxes giving rise to such
refund), net of all out-of-pocket expenses of the Administrative Agent or such
Lender (or assignee) and without interest (other than any interest paid by the
relevant Governmental Authority with respect to such refund); provided, however,
that if the Administrative Agent or such Lender (or assignee) is required to
repay all or a portion of such refund to the relevant Governmental Authority,
Borrower, upon the request of the Administrative Agent or such Lender (or
assignee), shall repay the amount paid over to Borrower that is required to be
repaid (plus any penalties, interest or other charges imposed by the relevant
Governmental Authority) to the Administrative Agent or such Lender (or
assignee) within ten Business Days after receipt of written notice that the
Administrative Agent or such Lender (or assignee) is required to repay such
refund (or a portion thereof) to such Governmental Authority.  Nothing contained in this Section 2.14(f) shall
require the Administrative Agent or any Lender (or assignee) to make available
its Tax Returns or any other information which it deems confidential or
privileged to Borrower or any other Person. 
Notwithstanding anything to the contrary, in no event will the
Administrative Agent or any Lender (or assignee) be required to pay any amount
to Borrower the payment of which would place the Administrative Agent or such
Lender (or assignee) in a less favorable net after-tax position than the
Administrative Agent or such Lender (or assignee) would have been in if the
additional amounts giving rise to such refund of any Indemnified Taxes or Other
Taxes had never been paid.

 

Section 2.15                            Mitigation Obligations;
Replacement of Lenders.  (a)  Mitigation
of Obligations.  If any Lender
requests compensation under Section 2.11(a) or (b), or
if Borrower is required to pay any additional amount to any Lender or any
Governmental Authority for the account of any Lender pursuant to Section 2.14,
then such Lender shall use reasonable efforts to designate a different lending
office for funding or booking its Loans hereunder or to assign its rights and
obligations hereunder to another of its offices, branches or affiliates, if, in
the reasonable judgment of such Lender, such designation or assignment
(i) would eliminate or reduce materially amounts payable pursuant to Section 2.11(a),
2.11(b) or 2.14, as the case may be, in the future,
(ii) would not subject such Lender to any unreimbursed cost or expense,
(iii) would not require such Lender to take any action inconsistent with
its internal policies or legal or regulatory restrictions, and (iv) would
not otherwise be disadvantageous to such Lender.  Borrower shall pay all reasonable costs and
expenses incurred by any Lender in connection with any such designation or
assignment.  A certificate setting forth
such costs and expenses submitted by such Lender to the Administrative Agent
shall be conclusive absent manifest error.

 

(b)                                 Replacement of Lenders. 
In the event (i) any Lender or the Issuing Bank delivers a
certificate requesting compensation pursuant to Section 2.11(a) or
(b), (ii) any Lender or the Issuing 

 

43

 

Bank delivers a notice described in Section 2.11(e),
(iii) Borrower is required to pay any additional amount to any Lender or
the Issuing Bank or any Governmental Authority on account of any Lender or the
Issuing Bank pursuant to Section 2.14, (iv) any Lender fails to consent to any amendment, waiver or other
modification of any Loan Document requested by Borrower that requires the
consent of 100% of the Lenders or 100% of all affected Lenders and, which, in
each case, has been consented to by all other Lenders or all other affected
Lenders, as the case may be, or (v) any Lender becomes a Defaulting
Lender (as defined below) or the Issuing Bank defaults in its obligations to
make Loans or issue Letters of Credit, as the case may be, or other extensions
of credit hereunder, Borrower may, at its sole expense and effort (including
with respect to the processing and recordation fee referred to in Section 12.04(b)),
upon notice to such Lender or the Issuing Bank and the Administrative Agent,
require such Lender or the Issuing Bank to transfer, assign and delegate,
without recourse (in accordance with and subject to the restrictions contained
in Section 12.04), all of its interests, rights and obligations
under this Agreement to an assignee which shall assume such assigned
obligations (which assignee may be another Lender, if a Lender accepts such
assignment); provided that
(w) except in the case of clause (iv) above if the effect of
such amendment, waiver or other modification of the applicable Loan Document
would cure any Default then ongoing, no Default shall have occurred and be
continuing, (x) such assignment shall not conflict with any applicable
Legal Requirement, (y) Borrower shall have received the prior written
consent of the Administrative Agent (and, if a Revolving Commitment is being
assigned, the prior written consent of the Issuing Bank), which consent shall
not unreasonably be withheld or delayed, and (z) Borrower or such assignee
shall have paid to the affected Lender or the Issuing Bank in immediately
available funds an amount equal to the sum of the principal of and interest and
any prepayment premium or penalty (if any) accrued to the date of such payment
on the outstanding Loans or LC Disbursements of such Lender or the Issuing
Bank, respectively, affected by such assignment plus all Fees and other amounts
owing to or accrued for the account of such Lender or such Issuing Bank
hereunder (including any amounts under Sections 2.11 and 2.12); provided further that, if prior to any
such transfer and assignment the circumstances or event that resulted in such
Lender’s or the Issuing Bank’s claim for compensation under Section 2.11(a) or
(b) or notice under Section 2.11(e) or the amounts
paid pursuant to Section 2.14, as the case may be, cease to cause
such Lender or the Issuing Bank to suffer increased costs or reductions in
amounts received or receivable or reduction in return on capital, or cease to
have the consequences specified in Section 2.11(e), or cease to
result in amounts being payable under Section 2.14, as the case may
be (including as a result of any action taken by such Lender or the Issuing
Bank pursuant to Section 2.15(a)), or if such Lender or the Issuing
Bank shall waive its right to claim further compensation under Section 2.11(a) or
(b) in respect of such circumstances or event or shall withdraw its
notice under Section 2.11(e) or shall waive its right to
further payments under Section 2.14 in respect of such
circumstances or event or shall consent to the proposed amendment, waiver,
consent or other modification, as the case may be, then such Lender or the
Issuing Bank shall not thereafter be required to make any such transfer and
assignment hereunder.  Each Lender and
the Issuing Bank hereby grants to the Administrative Agent an irrevocable power
of attorney (which power is coupled with an interest) to execute and deliver,
on behalf of such Lender and the Issuing Bank as assignor, any Assignment and
Acceptance necessary to effectuate any assignment of such Lender’s or the Issuing
Bank’s interests hereunder in the circumstances contemplated by this Section 2.15(b).

 

(c)                                  Defaulting Lenders. 
Anything contained herein to the contrary notwithstanding, in the event
that any Lender (a “Defaulting Lender”)
(i) fails to fund (a “Funding Default”) any portion of its loans or letter of
credit participations (a “Defaulted Loan”)
within three Business Days of the date required to be funded hereunder,
(ii) provides notification to the Borrower, the Administrative Agent or
the Issuing Bank in writing that such Lender does not intend to comply with its
funding obligations hereunder or (iii) becomes the subject of a bankruptcy
or insolvency proceeding, or has a receiver, conservator, trustee or custodian
appointed for it, or has a parent company that has become the subject of a
bankruptcy or insolvency proceeding, or has a receiver, conservator, trustee or
custodian appointed for it, then (i) during any Default Period (as defined
below) with respect to such Defaulting Lender, such 

 

44

 

Defaulting Lender shall be deemed not to be a “Lender”, and the amount
of such Defaulting Lender’s Revolving Commitment and Revolving Loans shall be
excluded for purposes of voting, and the calculation of voting, on any matters
(including the granting of any consents or waivers) with respect to any of the
Loan Documents, (ii) to the extent permitted by applicable Legal
Requirements, until such time as the Default Excess (as defined below) with
respect to such Defaulting Lender shall have been reduced to zero, (a) any
voluntary prepayment of the Loans pursuant to Section 2.09(a) shall,
if Borrower so directs at the time of making such voluntary prepayment, be
applied to the Loans of other Lenders in accordance with Section 2.09(a) as
if such Defaulting Lender had no Loans outstanding and the Revolving Exposure
of such Defaulting Lender were zero, and (b) any mandatory prepayment of
the Loans pursuant to Section 2.09 shall, if Borrower so directs at
the time of making such mandatory prepayment, be applied to the Loans of other
Lenders (but not to the Loans of such Defaulting Lender) in accordance with Section 2.09
as if such Defaulting Lender had funded all Defaulted Loans of such Defaulting
Lender, it being understood and agreed that borrower shall be entitled to
retain any portion of any mandatory prepayment of the Loans that is not paid to
such Defaulting Lender solely as a result of the operation of the provisions of
this clause (b), (iii) the amount of such Defaulting Lender’s
Revolving Commitment, Revolving Loans and LC Exposure shall be excluded for
purposes of calculating the commitment fee payable to Revolving Lenders
pursuant to Section 2.05(a) in respect of any day during any
Default Period with respect to such Defaulting Lender, and such Defaulting
Lender shall not be entitled to receive any commitment fee pursuant to Section 2.05(a) with
respect to such Defaulting Lender’s Revolving Commitment in respect of any
Default Period with respect to such Defaulting Lender, and (iv) the
Revolving Exposure of all Lenders as at any date of determination shall be
calculated as if such Defaulting lender had funded all Defaulted Loans of such
Defaulting Lender.

 

For purposes of this Agreement, (i) “Default
Period” means, with respect to any Defaulting Lender, the period
commencing on the date such Lender becomes a Defaulting Lender and ending on
the earliest of the following dates: 
(a) the date on which all Commitments are cancelled or terminated
and/or the Obligations are declared or become immediately due and payable,
(b) the date on which (1) the Default Excess with respect to such
Defaulting Lender shall have been reduced to zero (whether by the funding by
such Defaulting Lender of any Defaulted Loans of such Defaulting Lender or by
the non-pro rata application of any voluntary or mandatory prepayments of the
Loans in accordance with the terms hereof or any combination thereof) and
(2) such Defaulting Lender shall have delivered to Borrower and the
Administrative Agent a written reaffirmation of its intention to honor its
obligations under this Agreement with respect to its Commitment(s), and
(c) the date on which Borrower, the Administrative Agent and the Required
Lenders waive all Funding Defaults of such Defaulting Lender in writing, and
(ii) “Default Excess” shall mean, with
respect to any Defaulting Lender, (i) the excess, if any, of such
Defaulting Lender’s Pro Rata Percentage of the aggregate outstanding principal
amount of Loans of all Lenders (calculated as if all Defaulting Lenders
(including such Defaulting Lender) had funded all of their respective Defaulted
Loans) over the aggregate outstanding principal amount of Loans of such
Defaulting Lender plus (ii) the excess, if any, of such Defaulting
Lender’s Pro Rata Percentage of the aggregate unreimbursed LC Disbursements
(calculated as if all Defaulting Lenders (including such Defaulting Lender) had
made all payments in respect of their respective participations of unreimbursed
LC Disbursements) over the aggregate amount of payments made by such Defaulting
Lender in respect of unreimbursed LC Disbursements.

 

No amount of the Commitment of any Lender shall be increased or
otherwise affected, and, except as otherwise expressly provided in Section 2.15(c),
performance by Borrower of its obligations under this Agreement and the other
Loan Documents shall not be excused or otherwise modified, as a result of any
Funding Default or the operation of Section 2.15(c).  The rights and remedies against a Defaulting
Lender under Section 2.15(c) are in addition to other rights
and remedies that Borrower may have against such Defaulting Lender with respect
to any Funding Default and that the 

 

45

 

Administrative Agent or any Lender may have against
such Defaulting Lender with respect to any Funding Default.

 

Section 2.16                            Letters of Credit. (a)  General.  Subject to the terms and conditions set forth
herein, Borrower may request the Issuing Bank, and the Issuing Bank agrees, to
issue (or cause to be issued) Letters of Credit for its own account or the
account of a Wholly Owned Subsidiary in a form reasonably acceptable to the
Administrative Agent and the Issuing Bank, at any time and from time to time
during the Revolving Availability Period (provided
that Borrower shall be a co-applicant, and be jointly and severally liable,
with respect to each Letter of Credit issued for the account of a Wholly Owned
Subsidiary).  The Issuing Bank shall have
no obligation to issue, and Borrower shall not request the issuance of, any
Letter of Credit at any time if after giving effect to such issuance,
(i) the LC Exposure would exceed the LC Commitment at such time or
(ii) the total Revolving Exposure at such time would exceed the lesser of
(A) the total Revolving Commitments at such time and (B) the
Borrowing Base at such time.  In the
event of any inconsistency between the terms and conditions of this Agreement
and the terms and conditions of any form of letter of credit application or
other agreement submitted by Borrower to, or entered into by Borrower with, the
Issuing Bank relating to any Letter of Credit, the terms and conditions of this
Agreement shall control.

 

(b)                                 Request for Issuance, Amendment, Renewal,
Extension; Certain Conditions.  To request
the issuance of a Letter of Credit or the amendment, renewal or extension of an
outstanding Letter of Credit, Borrower shall hand deliver or telecopy (or
transmit by electronic communication, if arrangements for doing so have been
approved in writing by the Issuing Bank) an LC Request to the Issuing Bank and
the Administrative Agent not later than 11:00 a.m., New York City time, on
the third Business Day preceding the requested date of issuance, amendment,
renewal or extension (or such later date and time as is acceptable to the
Issuing Bank).

 

A request for an initial issuance of a Letter of Credit shall specify
in form and detail reasonably satisfactory to the Issuing Bank:

 

(i)                                     the proposed issuance date of the requested
Letter of Credit (which shall be a Business Day);

 

(ii)                                  the face amount thereof;

 

(iii)                               the expiry date thereof (which shall not
be later than the close of business on the Letter of Credit Expiration Date);

 

(iv)                              the name and address of the beneficiary
thereof;

 

(v)                                 whether the Letter of Credit is to be
issued for its own account or for the account of one of its Wholly Owned
Subsidiaries (provided that
Borrower shall be a co-applicant, and be jointly and severally liable, with
respect to each Letter of Credit issued for the account of a Wholly Owned
Subsidiary);

 

(vi)                              the documents to be presented by such
beneficiary in connection with any drawing thereunder;

 

(vii)                           the full text of any certificate to be
presented by such beneficiary in connection with any drawing thereunder; and

 

(viii)                        such other matters as the Issuing Bank
may require.

 

46

 

A request for an amendment, renewal or extension of any outstanding
Letter of Credit shall specify in form and detail reasonably satisfactory to
the Issuing Bank:

 

(i)                                     the Letter of Credit to be amended,
renewed or extended;

 

(ii)                                  the proposed date of amendment, renewal
or extension thereof (which shall be a Business Day);

 

(iii)                               the nature of the proposed amendment,
renewal or extension; and

 

(iv)                              such other matters as the Issuing Bank
may require.

 

If requested by the Issuing Bank, Borrower also shall submit a letter
of credit application on the Issuing Bank’s standard form in connection with
any request for a Letter of Credit.  A
Letter of Credit shall be issued, amended, renewed or extended only if (and,
upon issuance, amendment, renewal or extension of each Letter of Credit,
Borrower shall be deemed to represent and warrant that), after giving effect to
such issuance, amendment, renewal or extension, (i) the LC Exposure shall
not exceed the LC Commitment, (ii) the total Revolving Exposures shall not
exceed the total Revolving Commitments and (iii) the conditions set forth
in Article IV in respect of such issuance, amendment, renewal or
extension shall have been satisfied. 
Unless the Issuing Bank shall agree otherwise, no Letter of Credit shall
be in an initial amount less than $250,000.

 

(c)                                  Expiration Date. 
Each Letter of Credit shall expire at or prior to the close of business
on the earlier of (x) the date which is one year after the date of the
issuance of such Standby Letter of Credit (or, in the case of any renewal or
extension thereof, one year after such renewal or extension) and (y) the
Letter of Credit Expiration Date; provided that
this Section 2.16(c) shall not prevent any Issuing Bank from
agreeing that a Standby Letter of Credit will automatically be extended for one
or more successive periods not to exceed one year each (and, in any case, not
to extend beyond the Letter of Credit Expiration Date) unless each such Issuing
Bank elects not to extend for any such additional period.

 

(d)                                 Participations. 
By the issuance of a Letter of Credit (or an amendment to a Letter of
Credit increasing the amount thereof) and without any further action on the
part of the Issuing Bank or the Lenders, the Issuing Bank hereby irrevocably
grants to each Revolving Lender, and each Revolving Lender hereby acquires from
the Issuing Bank, a participation in such Letter of Credit equal to such
Revolving Lender’s Pro Rata Percentage of the aggregate amount available to be
drawn under such Letter of Credit.  In
consideration and in furtherance of the foregoing, each Revolving Lender hereby
absolutely and unconditionally agrees to pay to the Administrative Agent, for
the account of the Issuing Bank, such Revolving Lender’s Pro Rata Percentage of
each LC Disbursement made by the Issuing Bank and not reimbursed by Borrower on
the date due as provided in Section 2.16(e), or of any reimbursement
payment required to be refunded to Borrower for any reason.  Each Revolving Lender acknowledges and agrees
that its obligation to acquire participations pursuant to this Section 2.16(d) in
respect of Letters of Credit is absolute and unconditional and shall not be
affected by any circumstance whatsoever, including any amendment, renewal or
extension of any Letter of Credit or the occurrence and continuance of a
Default or reduction or termination of the Commitments, and that each such
payment shall be made without any offset, abatement, withholding or reduction
whatsoever (so long as such payment shall not cause such Lender’s Revolving
Exposure to exceed such Lender’s Revolving Commitment).

 

47

 

(e)                                  Reimbursement.

 

(i)                                     If the Issuing Bank shall make any LC
Disbursement in respect of a Letter of Credit, Borrower shall reimburse such LC
Disbursement by paying to the Issuing Bank an amount equal to such LC
Disbursement not later than 1:00 p.m., New York City time, on the date
that such LC Disbursement is made if Borrower shall have received notice of
such LC Disbursement prior to 11:00 a.m., New York City time, on such
date, or, if such notice has not been received by Borrower prior to such time on
such date, then not later than 1:00 p.m., New York City time, on the
Business Day immediately following the day that Borrower receives such notice; provided that Borrower may, subject to the
conditions to borrowing set forth herein, request in accordance with Section 2.03
that such payment be financed with ABR Revolving Loans in an equivalent amount
and, to the extent so financed, Borrower’s obligation to make such payment
shall be discharged and replaced by the resulting ABR Revolving Loans.

 

(ii)                                  If Borrower fails to make such payment
when due, or if the amount is not financed pursuant to the proviso to Section 2.16(e)(i),
the Issuing Bank shall notify the Administrative Agent and the Administrative
Agent shall notify each Revolving Lender of the applicable LC Disbursement, the
payment then due from Borrower in respect thereof and such Revolving Lender’s
Pro Rata Percentage thereof.  Each
Revolving Lender shall pay by wire transfer of immediately available funds to
the Administrative Agent not later than 12:00 p.m., New York City time, on
such date (or, if such Revolving Lender shall have received such notice later
than 12:00 p.m., New York City time, on any day, not later than
11:00 a.m., New York City time, on the immediately following Business Day),
an amount equal to such Revolving Lender’s Pro Rata Percentage of the
unreimbursed LC Disbursement in the same manner as provided in Section 2.02(c) with
respect to Revolving Loans made by such Revolving Lender, and the
Administrative Agent will promptly pay to the Issuing Bank the amounts so
received by it from the Revolving Lenders. 
The Administrative Agent will promptly pay to the Issuing Bank any
amounts received by it from Borrower pursuant to the above paragraph prior to
the time that any Revolving Lender makes any payment pursuant to the preceding
sentence and any such amounts received by the Administrative Agent from
Borrower thereafter will be promptly remitted by the Administrative Agent to
the Revolving Lenders that shall have made such payments and to the Issuing
Bank, as appropriate.

 

(iii)                               If any Revolving Lender shall not have
made its Pro Rata Percentage of such LC Disbursement available to the
Administrative Agent as provided above, each of Borrower and such Revolving
Lender severally agrees to pay interest on such amount, for each day from and
including the date such amount is required to be paid in accordance with the
foregoing to but excluding the date such amount is paid, to the Administrative
Agent for the account of the Issuing Bank at (i) in the case of Borrower,
the Default Rate and (ii) in the case of such Lender, at the greater of
the Federal Funds Effective Rate and a rate determined by the Administrative
Agent in accordance with banking industry rules or practices on interbank
compensation.

 

(f)                                    Obligations Absolute. 
The Reimbursement Obligation of Borrower as provided in Section 2.16(e) shall
be absolute, unconditional and irrevocable, and shall be paid and performed
strictly in accordance with the terms of this Agreement under any and all circumstances
whatsoever and irrespective of (i) any lack of validity or enforceability
of any Letter of Credit or this Agreement, or any term or provision therein;
(ii) any draft or other document presented under a Letter of Credit being
proved to be forged, fraudulent, invalid or insufficient in any respect or any
statement therein being untrue or inaccurate in any respect; (iii) payment
by the Issuing Bank under a Letter of Credit against presentation of a draft or
other document that fails to comply with the terms of such Letter of Credit;
(iv) any other event or circumstance whatsoever, whether or not similar to
any of the foregoing, that might, but for the provisions of this Section 2.16,
constitute a legal or equitable discharge of, or provide a right of setoff 

 

48

 

against, the obligations of Borrower hereunder; (v) the fact that
a Default shall have occurred and be continuing; (vi) any material adverse
change in the condition (financial or otherwise), results of operations,
assets, liabilities (contingent or otherwise), material agreements, properties,
solvency, business, management, prospects or value of any Company; or
(vii) any other fact, circumstance or event whatsoever.  None of the Agents, the Lenders, the Issuing
Bank or any of their Affiliates shall have any liability or responsibility by
reason of or in connection with the issuance or transfer of any Letter of
Credit or any payment or failure to make any payment thereunder (irrespective
of any of the circumstances referred to in the preceding sentence), or any
error, omission, interruption, loss or delay in transmission or delivery of any
draft, notice or other communication under or relating to any Letter of Credit
(including any document required to make a drawing thereunder), any error in
interpretation of technical terms or any consequence arising from causes beyond
the control of the Issuing Bank; provided
that the foregoing shall not be construed to excuse the Issuing Bank from
liability to Borrower to the extent of any direct damages (as opposed to
consequential, exemplary, special, punitive or other indirect damages, claims
in respect of which are hereby waived by Borrower to the extent permitted by
applicable Legal Requirements) suffered by Borrower that are caused by the
Issuing Bank’s failure to exercise care when determining whether drafts and
other documents presented under a Letter of Credit comply with the terms
thereof.  The parties hereto expressly
agree that, in the absence of gross negligence or willful misconduct on the
part of the Issuing Bank (as finally determined by a court of competent
jurisdiction) with respect to such a determination, the Issuing Bank shall be
deemed to have exercised care in each such determination.  In furtherance of the foregoing and without
limiting the generality thereof, the parties agree that, with respect to
documents presented which appear on their face to be in substantial compliance
with the terms of a Letter of Credit, the Issuing Bank may, in its sole
discretion, either accept and make payment upon such documents without
responsibility for further investigation, regardless of any notice or
information to the contrary, or refuse to accept and make payment upon such
documents if such documents are not in strict compliance with the terms of such
Letter of Credit.

 

(g)                                 Disbursement Procedures. 
The Issuing Bank shall, promptly following its receipt thereof, examine
all documents purporting to represent a demand for payment under a Letter of
Credit.  The Issuing Bank shall promptly
give written notice to the Administrative Agent and Borrower of such demand for
payment and whether the Issuing Bank has made or will make an LC Disbursement
thereunder; provided that any
failure to give or delay in giving such notice shall not relieve Borrower of
its Reimbursement Obligation to the Issuing Bank and the Revolving Lenders with
respect to any such LC Disbursement (other than with respect to the timing of
such Reimbursement Obligation set forth in Section 2.16(e)).

 

(h)                                 Interim Interest. 
If the Issuing Bank shall make any LC Disbursement, then, unless
Borrower shall reimburse such LC Disbursement in full on the date such LC
Disbursement is made, the unpaid amount thereof shall bear interest payable on
demand, for each day from and including the date such LC Disbursement is made
to but excluding the date that Borrower reimburses such LC Disbursement, at the
Default Rate.  Interest accrued pursuant
to this Section 2.16(h) shall be for the account of the
Issuing Bank, except that interest accrued on and after the date of payment by
any Revolving Lender pursuant to Section 2.16(e) to reimburse
the Issuing Bank shall be for the account of such Lender to the extent of such
payment.

 

(i)                                     Cash Collateralization. 
If any Event of Default shall occur and be continuing, on the Business
Day that Borrower receives notice from the Administrative Agent or the Required
Lenders (or, if the maturity of the Loans has been accelerated, Revolving
Lenders with LC Exposure representing greater than 50% of the total LC
Exposure) demanding the deposit of cash collateral pursuant to this Section 2.16(i),
Borrower shall deposit in the LC Sub-Account, in the name of the Collateral
Agent and for the benefit of the Revolving Lenders, an amount in cash equal to
105% of the LC Exposure as of such date plus any accrued and unpaid interest
thereon; provided that the
obligation to deposit such cash 

 

49

 

collateral shall become effective immediately, and such deposit shall
become immediately due and payable, without demand or other notice of any kind,
upon the occurrence of any Event of Default with respect to Borrower described
in Section 9.01(f) or (g).  Funds in the LC Sub-Account shall be applied
by the Collateral Agent to reimburse the Issuing Bank for LC Disbursements for
which it has not been reimbursed and, to the extent not so applied, shall be
held for the satisfaction of outstanding Reimbursement Obligations or, if the
maturity of the Loans has been accelerated (but subject to the consent of
Revolving Lenders with LC Exposure representing greater than 50% of the total
LC Exposure), be applied to satisfy other Obligations of Borrower in accordance
with Article X.  If Borrower
is required to provide an amount of cash collateral hereunder as a result of
the occurrence of an Event of Default, such amount plus any accrued interest with respect to such amounts (to
the extent not applied as aforesaid) shall, in accordance with Article X,
be returned to Borrower within ten Business Days after all Events of Default
have been cured or waived.

 

(j)                                     Additional Issuing Banks. 
Borrower may, at any time and from time to time, designate one or more
additional Revolving Lenders to act as an issuing bank under the terms of this
Agreement, with the consent of each of the Administrative Agent (which consent
shall not be unreasonably withheld), the Issuing Bank (which consent shall not
be unreasonably withheld) and such Revolving Lender(s).  Any Revolving Lender designated as an issuing
bank pursuant to this Section 2.16(j) shall be deemed (in
addition to being a Revolving Lender) to be the Issuing Bank with respect to
Letters of Credit issued or to be issued by such Revolving Lender, and all
references herein and in the other Loan Documents to the term “Issuing Bank”
shall, with respect to such Letters of Credit, be deemed to refer to such
Revolving Lender in its capacity as Issuing Bank, as the context shall require.

 

(k)                                  Resignation or Removal of the Issuing
Bank.  The Issuing Bank may resign as Issuing Bank
hereunder at any time upon at least 30 days’ prior written notice to the
Lenders, the Administrative Agent and Borrower. 
The Issuing Bank may be replaced at any time by written agreement among
Borrower, the Administrative Agent and the successor Issuing Bank.  The Administrative Agent shall notify the
Lenders of any such replacement of the Issuing Bank or any such additional
Issuing Bank.  At the time any such
resignation or replacement shall become effective, Borrower shall pay all
unpaid fees accrued for the account of the replaced Issuing Bank pursuant to Section 2.05(c).  From and after the effective date of any such
resignation or replacement or addition, as applicable, (i) the successor
or additional Issuing Bank shall have all the rights and obligations of the
Issuing Bank under this Agreement with respect to Letters of Credit to be
issued by it thereafter and (ii) references herein and in the other Loan
Documents to the term “Issuing Bank” shall be deemed to refer to such successor
or such addition or to any previous Issuing Bank, or to such successor or such
addition and all previous Issuing Banks, as the context shall require.  After the resignation or replacement of an
Issuing Bank hereunder, the replaced Issuing Bank shall remain a party hereto
and shall continue to have all the rights and obligations of an Issuing Bank
under this Agreement with respect to Letters of Credit issued by it prior to
such resignation or replacement, but shall not be required to issue additional
Letters of Credit.  If at any time there
is more than one Issuing Bank hereunder, Borrower may, in its discretion,
select which Issuing Bank is to issue any particular Letter of Credit.

 

(l)                                     Other.  The Issuing
Bank shall be under no obligation to issue any Letter of Credit if:

 

(i)                                     any Order of any Governmental Authority
or arbitrator shall by its terms purport to enjoin or restrain the Issuing Bank
from issuing such Letter of Credit, or any Legal Requirement applicable to the
Issuing Bank or any request or directive (whether or not having the force of
law) from any Governmental Authority with jurisdiction over the Issuing Bank
shall prohibit, or request that the Issuing Bank refrain from, the issuance of
letters of credit generally or such Letter of Credit in particular or shall
impose upon the Issuing Bank with respect to such 

 

50

 

Letter of Credit
any restriction, reserve or capital requirement (for which the Issuing Bank is
not otherwise compensated hereunder) not in effect on the Closing Date, or
shall impose upon the Issuing Bank any unreimbursed loss, cost or expense which
was not applicable on the Closing Date and which the Issuing Bank deems
material to it; or

 

(ii)                                  the issuance of such Letter of Credit
would violate one or more policies of general application of the Issuing Bank.

 

The Issuing Bank shall be under no obligation to amend any Letter of
Credit if (A) the Issuing Bank would have no obligation at such time to
issue such Letter of Credit in its amended form under the terms hereof, or
(B) the beneficiary of such Letter of Credit does not accept the proposed
amendment to such Letter of Credit.

 

Section 2.17                            Determination of
Borrowing Base.

 

Initially,
the Borrowing Base shall be the amount set forth as such in the Borrowing Base
Certificate delivered under Section 4.01(b)(vii).  Thereafter, the Borrowing Base shall be the
amount set forth as such in the Borrowing Base Certificate most recently
delivered under Section 5.01(d)(xiii).  The Administrative Agent shall have the right
to establish, modify or eliminate reserves against Eligible Accounts from time
to time in its commercially reasonable credit judgment.  In addition, the Administrative Agent
reserves the right, at any time and from time to time after the Closing Date,
to adjust any of the applicable criteria and to establish new criteria with
respect to Eligible Accounts and to adjust the advance rate set forth in the
definition of Borrowing Base, in its commercially reasonable credit judgment
based solely upon changes in the credit quality of the Borrower, subject to the
approval of Supermajority Lenders in the case of adjustments or new criteria or
changes in the advance rate that have the effect of making more credit available.

 

ARTICLE
III

REPRESENTATIONS AND WARRANTIES

 

Each
Loan Party represents and warrants to the Administrative Agent, the Collateral
Agent, the Issuing Bank and each of the Lenders that:

 

Section 3.01                            Representations and
Warranties.

 

(a)                                  Organization; Power; Qualification. 
Each of Borrower and the other Loan Parties is a corporation,
partnership or other legal entity, duly organized or formed, validly existing
and in good standing under the jurisdiction of its incorporation or formation,
has the power and authority to own or lease its respective properties and to
carry on its respective business as now being and hereafter proposed to be
conducted and is duly qualified and is in good standing as a foreign
corporation, partnership or other legal entity, and authorized to do business,
in each jurisdiction in which the character of its properties or the nature of
its business requires such qualification or authorization and where the failure
to be so qualified or authorized could reasonably be expected to have, in each
instance, a Material Adverse Effect.

 

(b)                                 Ownership Structure. 
As of the Closing Date, Schedule 3.01(b) is a complete and
correct list of all Subsidiaries of Borrower setting forth for each such
Subsidiary, (i) the jurisdiction of organization of such Subsidiary,
(ii) each Person holding any Equity Interests in such Subsidiary,
(iii) the nature of the Equity Interests held by each such Person,
(iv) the percentage of ownership of such Subsidiary represented by such
Equity Interests and (v) whether such Subsidiary is a Provider, a Material
Subsidiary and/or an Excluded Subsidiary. 
Except as disclosed in such Schedule, as of the Closing Date 

 

51

 

(x) each of Borrower and its Subsidiaries owns, free and clear of
all Liens (other than Permitted Liens), and has the unencumbered right to vote,
all outstanding Equity Interests in each Person shown to be held by it on such
Schedule, (y) all of the issued and outstanding capital stock of each such
Person organized as a corporation is validly issued, fully paid and
nonassessable and (z) there are no outstanding subscriptions, options,
warrants, commitments, preemptive rights or agreements of any kind for the
issuance, sale, registration or voting of, or outstanding securities
convertible into, any additional shares of capital stock of any class, or
partnership or other ownership interests of any type in, any such Person.

 

(c)                                  Authorization of Agreement, Etc. 
Borrower has the right and power, and has taken all necessary action to
authorize it, to borrow and obtain other extensions of credit hereunder.  Each of Borrower and each other Loan Party
has the right and power, and has taken all necessary action to authorize it, to
execute, deliver and perform each of the Loan Documents to which it is a party
in accordance with their respective terms and to consummate the transactions
contemplated hereby and thereby.  The
Loan Documents to which Borrower or any other Loan Party is a party have been
duly executed and delivered by the duly authorized officers of such Person and
each is a legal, valid and binding obligation of such Person enforceable
against such Person in accordance with its respective terms except as the same
may be limited by bankruptcy, insolvency, and other similar laws affecting the
rights of creditors generally and the availability of equitable remedies for
the enforcement of certain obligations (other than the payment of principal)
contained herein or therein and as may be limited by equitable principles
generally. The provisions and the Security Documents create legal and valid
Liens in all of the Collateral in favor of the Lender and when all proper
filings and other actions necessary to perfect such Liens have been completed,
will constitute a perfected and continuing Lien on all of the Collateral,
having priority over all other Liens on such Collateral, enforceable against
Borrower, the other Loan Parties and any other Person.

 

(d)                                 Compliance of Loan Documents with Laws,
Etc.  The execution, delivery and performance of
each Loan Document to which any Loan Party is a party in accordance with its
respective terms and the borrowings and other extensions of credit hereunder do
not and will not, by the passage of time, the giving of notice, or both:  (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.

 

(e)                                  Compliance with Law; Governmental
Approvals.  Each of Borrower, each Subsidiary, each other
Loan Party and each Provider is in compliance with all Applicable Laws except
for noncompliances which could not, individually or in the aggregate, reasonably
be expected to cause a Default or Event of Default or have a Material Adverse
Effect.  Neither Borrower, any Provider,
any Subsidiary or any other Loan Party is in violation in any material respect
of any Applicable Laws relating to Medicare and Medicaid and those relating to
the quality and adequacy of medical care, distribution of pharmaceuticals, rate
setting, equipment, personnel, operating policies, additions to facilities and
services and fee splitting and Borrower, each Provider, each Subsidiary and
each other Loan Party and each of their respective Properties and, to each of
such Person’s knowledge, each of such Person’s licensed employees and
contractors (other than contracted agencies) in the exercise of their
respective duties on behalf of such Person or any such Properties, is in
material compliance with all Applicable Laws, including without limitation
(i) Section 1128B(b) of the Social Security Act, as amended, 42
U.S.C. Section 1320a-7(b) (Criminal Penalties Involving Medicare or
State Health Care Programs), commonly referred to as the “Federal Anti-Kickback
Statute”; (ii) the Social Security Act, as amended, Section 1877, 42
U.S.C. Section 1395nn (Prohibition Against Certain Referrals), commonly
referred to as the “Stark Statute”; (iii) 31 U.S.C. §§ 3729-3733
(prohibitions against submission of false or fraudulent claims, 

 

52

 

including the False Claims Act); (iv) 42 U.S.C. § 1320d-6 (prohibition against the wrongful disclosure of
individually identifiable health information under the Health Insurance
Portability and Accountability Act (as the same may be amended, restated,
replaced, supplemented or other modified, “HIPAA”)); and
(v) 45 C.F.R., Parts 160, 162, and 164 (the HIPAA privacy regulations,
transaction standards regulations, and, as of the April 21, 2005
compliance date, the security regulations) (collectively, “Healthcare
Laws”).  Each of Borrower,
each Provider, each Subsidiary and each other Loan Party has received all
Governmental Approvals required under Applicable Laws and has all permits,
licenses, accreditations, certifications, authorizations, approvals, consents
and agreements of all Insurers, accreditation agencies and any other Person
(including without limitation, with respect to any Provider with Healthcare
Receivables, accreditation by the appropriate Governmental Entities and
industry accreditation agencies and accreditation and certifications as a
provider of healthcare services eligible to receive payment and compensation and
to participate under Medicare, Medicaid, CHAMPUS/Champva, Blue Cross/Blue
Shield and other equivalent programs), necessary or required for it (i) to
own the assets (including Accounts) that it now owns and to carry on its
business as now conducted, except, in each case, where the failure to do so
could not reasonably be expected to have a Material Adverse Effect and
(ii) with respect to Properties and businesses that participate in
Medicare and/or Medicaid, to receive reimbursement under Medicare and Medicaid.  Each of Borrower and each other Loan Party
has, or has the right to use, such provider identification numbers and
licenses, if any, necessary to generate the Accounts.  There exist no material restrictions,
deficiencies, required plans of correction actions or other such material
remedial measures with respect to applicable federal and state Medicare and
Medicaid certifications or licensure surveys with respect to Borrower or any
other Loan Party. Each Property of each Loan Party is in compliance in all
material respects with all requirements for participation in Medicare and
Medicaid, including, without limitation, the Medicare and Medicaid Patient
Protection Act of 1987 and each such Property is in conformance in all material
respects with all insurance, reimbursement and cost reporting requirements
under Medicare and Medicaid.

 

(f)                                    Title to Properties; Liens. 
Each of Borrower, each other Loan Party and each other Subsidiary has
good, marketable and legal title to, or a valid leasehold interest in, its
respective assets.  As of the Closing
Date, there are no Liens against any assets of Borrower, any Subsidiary or any
other Loan Party except for Liens permitted in Section 6.04.  As of the Closing Date, Schedule 3.01(f) sets
forth all Leases.

 

(g)                                 Existing Indebtedness.  Schedule
3.01(g) is, as of the Closing Date, a complete and correct listing of
all Indebtedness of Borrower, each other Loan Party and each Subsidiary other
than (i) Indebtedness owed by a Loan Party to another Loan Party and
(ii) Indebtedness owed by or to a Loan Party to or by a Subsidiary that is
not a Loan Party having an outstanding principal balance of less than
$1,000,000.  As of the Closing Date,
Borrower, each Subsidiary and each other Loan Party have performed and are in
compliance with all of the terms of such Indebtedness and all instruments and
agreements relating thereto, and no default or event of default, or event or
condition which with the giving of notice, the lapse of time, or both, would
constitute such a default or event of default, exists with respect to any such
Indebtedness.  None of the Trusts is
obligated in respect of any SPC Debt.

 

(h)                                 Litigation.  Except as set
forth on Schedule 3.01(h), there are no actions, suits, investigations
or proceedings pending (nor, to the knowledge of Borrower, any Subsidiary or
any other Loan Party, are there any actions, suits or proceedings threatened,
nor to the knowledge of Borrower, any Subsidiary or any other Loan Party is
there any basis therefor) against or in any other way relating adversely to or
affecting Borrower, any Subsidiary, any other Loan Party or any Provider or any
of its respective property in any court or before any arbitrator of any kind or
before or by any other Governmental Authority which could reasonably be
expected to have a Material Adverse Effect or which purports to affect the
legality, validity or enforceability of this Agreement or any other Loan
Document, 

 

53

 

and neither Borrower nor any Provider is currently the subject of, or
has any present intention of commencing, an insolvency proceeding or petition
in bankruptcy.

 

(i)                                     Taxes.  All federal,
state and other material tax returns of Borrower, any Subsidiary or any other
Loan Party required by Applicable Law to be filed have been duly filed, and all
federal, state and other taxes, assessments and other governmental charges or
levies upon Borrower, any Subsidiary and each other Loan Party and its
respective properties, income, profits and assets which are due and payable
have been paid, except any such nonpayment which is at the time permitted under
Section 5.07.

 

(j)                                     Financial Statements. 
Borrower has furnished to the Lender copies of the audited consolidated
balance sheet of Borrower and its consolidated Subsidiaries for the fiscal year
ending December 31, 2008, and the related audited consolidated statements
of operations, cash flows and shareholders’ equity for the fiscal year ending
on such dates, with the opinion thereon of Ernst & Young LLP.  Such financial statements (including in each
case related schedules and notes) are complete and correct and present fairly,
in accordance with GAAP consistently applied throughout the periods involved,
the consolidated financial position of Borrower and its consolidated
Subsidiaries, as applicable, as at their respective dates and the results of
operations and the cash flow for such periods.

 

(k)                                  No Material Adverse Change. 
Since December 31, 2008, there has been no material adverse change
in the business, assets, liabilities, financial condition, results of
operations, business or prospects of Borrower and its Subsidiaries taken as a
whole.  Each of Borrower, the
Subsidiaries and the other Loan Parties is Solvent.

 

(l)                                     ERISA.  Each member
of the ERISA Group is in compliance with its obligations under the minimum
funding standards of ERISA and the Internal Revenue Code with respect to each
Plan and is in compliance with the presently applicable provisions of ERISA and
the Internal Revenue Code with respect to each Plan, except in each case for
noncompliances which could not reasonably be expected to have a Material
Adverse Effect.  As of the Closing Date,
no member of the ERISA Group has (i) sought a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code in respect
of any Plan, (ii) failed to make any contribution or payment to any Plan
or Multiemployer Plan or in respect of any Benefit Arrangement, or made any
amendment to any Plan or Benefit Arrangement, which has resulted or could
result in the imposition of a Lien or the posting of a bond or other security
under ERISA or the Internal Revenue Code or (iii) incurred any liability
under Title IV of ERISA other than a liability to the PBGC for premiums
under Section 4007 of ERISA.

 

(m)                               Not Plan Assets; No Prohibited
Transaction.  None of the assets of Borrower, any
Subsidiary or any other Loan Party constitute “plan assets” within the meaning
of ERISA, the Internal Revenue Code and the respective regulations promulgated
thereunder.  The execution, delivery and
performance of this Agreement and the other Loan Documents, and the borrowing
and repayment of amounts hereunder, do not and will not constitute “prohibited
transactions” under ERISA or the Internal Revenue Code.

 

(n)                                 Absence of Defaults. 
Neither Borrower, any Subsidiary nor any other Loan Party is in default
under its organizational documents, and no event has occurred, which has not
been remedied, cured or waived, which, in any such case:  (i) constitutes a Default or an Event of
Default; or (ii) constitutes, or which with the passage of time, the
giving of notice, a determination of materiality, the satisfaction of any
condition, or any combination of the foregoing, would constitute, a default or
event of default by Borrower, any Subsidiary or any other Loan Party under any
agreement (other than this Agreement) or judgment, decree or order to which
Borrower or any Subsidiary or other Loan Party is a party or by which Borrower
or any Subsidiary or other Loan Party or any of their respective properties 

 

54

 

may be bound where such default or event of default could, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect.

 

(o)                                 Environmental Laws. 
Each of Borrower, the Subsidiaries and the other Loan Parties has
obtained all Governmental Approvals which are required under Environmental Laws
and is in compliance with all terms and conditions of such Governmental
Approvals which the failure to obtain or to comply with could reasonably be
expected to have a Material Adverse Effect.

 

(p)                                 Investment Company. 
Neither Borrower, any Subsidiary nor any other Loan Party is (i) an
“investment company” or a company “controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940, as amended, or
(ii) subject to any other Applicable Law which purports to regulate or
restrict its ability to borrow money or to consummate the transactions
contemplated by this Agreement or to perform its obligations under any Loan
Document to which it is a party.

 

(q)                                 Margin Stock. 
Neither Borrower, any Subsidiary nor any other Loan Party is engaged
principally, or as one of its important activities, in the business of
extending credit for the purpose, whether immediate, incidental or ultimate, of
buying or carrying “margin stock” within the meaning of Regulation U of
the Board of Governors of the Federal Reserve System.

 

(r)                                    Affiliate Transactions. 
Except as permitted by Section 6.08, neither Borrower, any
Subsidiary nor any other Loan Party is a party to or bound by any agreement or
arrangement (whether oral or written) to which any Affiliate of Borrower, any
Subsidiary or any other Loan Party is a party.

 

(s)                                  Intellectual Property. 
Each of Borrower, each other Loan Party and each other Subsidiary owns
or has the right to use, under valid license agreements or otherwise, all
material patents, licenses, franchises, trademarks, trademark rights, trade
names, trade name rights, trade secrets and copyrights (collectively, “Intellectual Property”) necessary to the
conduct of its businesses as now conducted and as contemplated by the Loan
Documents, without known conflict with any patent, license, franchise,
trademark, trade secret, trade name, copyright, or other proprietary right of
any other Person.

 

(t)                                    Business.  As of the
Closing Date, Borrower and the Subsidiaries and any other Loan Parties (other
than Borrower) are substantially engaged in the business of operating (either
directly or through management contracts with third parties) Senior Housing
Assets, together with other business activities incidental thereto.  The Insurance Subsidiaries are engaged only
in the business of providing insurance services to Borrower and its
Subsidiaries.

 

(u)                                 Broker’s Fees. 
No broker’s or finder’s fee, commission or similar compensation will be
payable with respect to the transactions contemplated hereby.  No other similar fees or commissions will be
payable by any Loan Party for any other services rendered to Borrower or any
Subsidiary ancillary to the transactions contemplated hereby.

 

(v)                                 Accuracy and Completeness of Information. 
No written information, report or other papers or data (excluding
financial projections and other forward looking statements) furnished to the
Lender by, on behalf of, or at the direction of, Borrower, any Subsidiary or
any other Loan Party in connection with or relating in any way to this
Agreement, contained any untrue statement of a fact material to the
creditworthiness of Borrower, any Subsidiary or any other Loan Party or omitted
to state a material fact necessary in order to make such statements contained
therein, in light of the circumstances under which they were made, not
misleading.  All financial statements
furnished to the Administrative Agent, the Collateral Agent, the Issuing Bank
and/or any of the Lenders by, on behalf of, or at the direction of, Borrower,
any Subsidiary or any other Loan Party in connection with or relating in any
way 

 

55

 

to this Agreement, present fairly, in accordance with
GAAP consistently applied throughout the periods involved, the financial
position of the Persons involved as at the date thereof and the results of
operations for such periods (subject to, as to unaudited statements, the
absence of footnotes).  All financial
projections and other forward looking statements prepared by or on behalf of
Borrower, any Subsidiary or any other Loan Party that have been or may
hereafter be made available to the Administrative Agent, the Collateral Agent,
the Issuing Bank and/or any of the Lenders were or will be prepared based upon
assumptions that such Loan Party in good faith considered reasonable at such
time.  As of the Closing Date, no fact is
known to Borrower which has had, or may in the future have (so far as Borrower
can reasonably foresee), a Material Adverse Effect which has not been set forth
in the financial statements referred to in Section 3.01(j) or
in such information, reports or other papers or data or otherwise disclosed in
writing to the Administrative Agent.

 

(w)                               Participation in Programs. 
As of the Closing Date, there is no pending or threatened revocation,
suspension, termination, probation, restriction, limitation, or nonrenewal
affecting any of Borrower or any other Loan Party or any Property of a Loan
Party or any participation or provider agreement with any Third Party Payor
(such programs, the “Third Party Payors’
Programs”) to which any Loan Party presently is subject.  Each of Borrower and the other Loan Parties
has timely filed or caused to be timely filed, all cost reports and other
reports of every kind whatsoever required by any Applicable Law.  To the extent applicable, all Medicaid,
Medicare, and private insurance costs reports and financial reports submitted
by such Person are and will be materially accurate and complete and have not
been and will not be misleading in any material respects, and except as
otherwise disclosed, no cost reports for any facility remain “open” or
unsettled.  None of Borrower or any other
Loan Party is currently the subject of any proceeding by any Governmental
Authority, and no notice of any violation has been received from a Governmental
Authority that could, directly or indirectly, or with the passage of time, reasonably
be expected to:  (i) have a material
adverse impact on Borrower’s or any other Loan Party’s ability to accept and/or
retain patients or result in the imposition of a fine, a sanction, a lower rate
certification or a lower reimbursement rate for services rendered to eligible
patients; (ii) modify, limit or annul or result in the transfer,
suspension, revocation or imposition of probationary use of such Person’s
licenses; or (iii) alter any of such Person’s continued participation, to
the extent applicable, in the Medicaid or Medicare programs or any other of the
Third Party Payors’ Programs, or any successor programs thereto, at current
rate certifications.

 

(x)                                   Maintenance of Records. 
Each of Borrower, the Subsidiaries, the Providers and the other Loan
Parties has maintained in all records as required by the applicable Healthcare
Laws and, to the knowledge of each Loan Party, there are no presently existing
circumstances which would result or likely would result in material violations
of the Healthcare Laws.

 

(y)                                 Third Party Reimbursement.  If Borrower or any other Loan
Party is or has been audited by Medicare, Medicaid or similar governmental
Third Party Payors, to the knowledge of the Loan Parties, (a) none of such
audits provides for adjustments in reimbursable costs or asserts claims for
reimbursement or repayment by such Person of costs and/or payments theretofore
made by such governmental Third Party Payor that, if adversely determined,
individually or in the aggregate, could reasonably be expected to result in
material claims against such Person and (b) none of such Persons has had
requests or assertions of claims for reimbursement or repayment by it of costs
and/or payments heretofore made by any other Third Party Payor that, if
adversely determined, individually or in the aggregate, could reasonably be
expected to result in material claims against such Person.

 

(z)                                   Accounts.

 

(i)                                     Such Accounts which are at any time
included in the Borrowing Base or which are reflected on Borrower’s or any
other Loan Party’s financial statements delivered to the 

 

56

 

Administrative
Agent and the Lenders are genuine, in all respects what they purport to be,
have not been reduced to any judgment, are evidenced by an executed original
agreement, contract or document, and represent bona fide transactions completed
in accordance with the terms and conditions of any related document.

 

(ii)                                  The Accounts have not been sold or
pledged to any Person other than the Collateral Agent, for the benefit of the
Secured Parties.

 

(iii)                               Except as disclosed to the Collateral
Agent from time to time in writing, neither Borrower, any Subsidiary or any
other Loan Party has any knowledge of any fact or circumstance which could
reasonably be expected to impair the validity or collectibility of any of the
Accounts included in the Borrowing Base that in the aggregate are material in
amount.

 

(iv)                              With respect to any Healthcare Receivable
included in the Borrowing Base, (1) the care or Goods described therein
have been provided and was or were necessary for the Patient, (2) to the
extent applicable, all billing complies with Applicable Laws, including without
limitation, all Applicable Laws of Medicare and Medicaid, and (3) there
are no disputes, proceedings or audits currently pending or, to the knowledge
of the Loan Parties, threatened, involving any Third Party Payors with respect
to any Provider’s operations, including specifically its billing practices,
with an amount in controversy, with respect to all such disputes, proceedings
or audits, which could reasonably be expected to have a Material Adverse
Effect.

 

(v)                                 The Account Debtor primarily liable for
the payment of each Account is the Account Debtor for such Account as set forth
on the Monthly Report most recently delivered to the Administrative Agent and
the Lenders.

 

(vi)                              The fees charged for the Goods and
services giving rise to each Healthcare Receivable are consistent with the
usual, customary and reasonable fees charged by other medical providers for the
same or similar goods and services in the related Provider’s community and the
community in which the Patient resides.

 

(vii)                           The insurance policy underlying any
Healthcare Receivable or in respect to which such Account arose was in full
force and effect and applicable to the Patient at the time the Goods or
services under which such Account arose were provided to the Patient.

 

(viii)                        As of the Closing Date, at least 90% of
all Eligible Accounts (determined without regard to clause (u) of the
definition of Eligible Accounts) were originated by the Material Providers.

 

(aa)                            HIPAA Privacy Issues. 
Any disclosures to the Administrative Agent and the Lenders of
Borrower’s, any Subsidiary’s, any other Loan Party’s or any Provider’s
“Protected Health Information” under HIPAA for auditing and inspection
activities pursuant to this Agreement are allowed as “Health Care Operations”
under the HIPAA “Privacy Rule.”

 

(bb)                          Foreign Assets Control. 
None of Borrower, any Subsidiary or, to the knowledge of Borrower, any
Affiliate of Borrower:  (i) is a
Sanctioned Person, (ii) has more than 10% of its assets in Sanctioned
Entities, or (iii) derives more than 10% of its operating income from
investments in, or transactions with, Sanctioned Persons or Sanctioned
Entities.

 

(cc)                            Deposit Accounts. 
As of the Closing Date, Schedule 3.01(cc) is a complete list of
all deposit accounts and lockboxes maintained by Borrower or any Provider,
including without 

 

57

 

limitation, the Primary Borrower Account, the Government Lockbox
Accounts and each disbursement account, setting forth for each such deposit
account, the name of the depositary bank, the Loan Party in who name such
account is maintained and the account number. 
No direction is in effect directing an Account Debtor of any Provider to
remit payments on Accounts other than to the Primary Borrower Account or the
Provider Accounts except for certain other deposit accounts described in Section 5.14(vi) with
respect to which Borrower shall have delivered to the Collateral Agent a fully
executed Account Control Agreement to the extent required by such Section.

 

(dd)                          Notice of Revocation. 
Neither Borrower nor any Provider has been notified by any Insurer,
Governmental Authority, accreditation agency or any other Person, during the
immediately preceding 2-year period, that such party has rescinded or not
renewed, or is reasonably likely to rescind or not renew, any material permit,
license, accreditation, certification, authorization, approval, consent or
agreement granted to it or to which it is a party.

 

Section 3.02                            Survival of
Representations and Warranties, Etc.

 

All
statements contained in any certificate, financial statement, document,
instrument or agreement delivered by or on behalf of Borrower, any Subsidiary
or any other Loan Party to the Administrative Agent, the Collateral Agent, the
Issuing Bank and/or any of the Lenders pursuant to or in connection with this
Agreement or any of the other Loan Documents (including, but not limited to,
any such statement made in or in connection with any amendment thereto or any
statement contained in any certificate, financial statement or other instrument
delivered by or on behalf of Borrower, any Subsidiary or any other Loan Party
prior to the Closing Date and delivered to the Administrative Agent, the
Collateral Agent, the Issuing Bank and/or any of the Lenders in connection with
the underwriting or closing of the transactions contemplated hereby) shall
constitute representations and warranties made by Borrower to the
Administrative Agent, the Collateral Agent, the Issuing Bank and/or any of the
Lenders under this Agreement.  All
representations and warranties made under this Agreement and the other Loan
Documents shall be deemed to be made at and as of the Closing Date, and the
date of the occurrence of any Credit Event, except to the extent that such
representations and warranties expressly relate solely to an earlier date (in
which case such representations and warranties shall have been true and
accurate on and as of such earlier date) and except for changes in factual
circumstances not prohibited hereunder. 
All such representations and warranties shall survive the effectiveness
of this Agreement, the execution and delivery of the Loan Documents and the
making of the Loans and the issuance of the Letters of Credit.

 

ARTICLE
IV

CONDITIONS TO CREDIT EXTENSIONS

 

Section 4.01                            Conditions to Initial
Credit Extension.  The obligation of each Lender and, if
applicable, each Issuing Bank to fund the initial Credit Extension requested to
be made by it shall be subject to the prior or concurrent satisfaction of each
of the conditions precedent set forth in this Section 4.01.

 

(a)                                  Loan Documents. 
All legal matters incident to this Agreement, the Credit Extensions
hereunder and the other Loan Documents shall be satisfactory to the Lenders, to
the Issuing Bank and to the Administrative Agent and there shall have been
delivered to the Administrative Agent a properly executed counterpart of each
of the Loan Documents.

 

(b)                                 Ancillary Documents. 
The Administrative Agent shall have received each of the following, in
form and substance satisfactory to the Administrative Agent and the Lenders:

 

58

 

(i)                                     the Depositary Agreements executed by
Borrower, the Providers, the Lender and the relevant depositary banks;

 

(ii)                                  [Intentionally Deleted];

 

(iii)                               a Compliance Certificate calculated as of
December 31, 2009;

 

(iv)                              a collateral assignment with respect to all
Leases under which SNH or one of its Subsidiaries is lessor, and a Loan Party
is a lessee or sublessee (but excluding any Lease of any Affected Property
listed on Schedule 1.01(a)) each in form and substance reasonably
satisfactory to the Lender;

 

(v)                                 copies of each of the Leases with SNH or
any Subsidiary of SNH in effect as of the Closing Date, certified as correct
and complete by a senior officer of Borrower;

 

(vi)                              a Monthly Report and Borrowing Base
Certificate, each calculated as of February 28, 2010;  and

 

(vii)                           such other documents, agreements and
instruments as the Administrative Agent, the Collateral Agent, the Issuing Bank
and/or any Lender may reasonably request.

 

(c)                                  Corporate Documents. 
The Administrative Agent shall have received:

 

(i)                                     a certificate of the secretary or
assistant secretary of each Loan Party dated the Closing Date, certifying
(A) that attached thereto is a true and complete copy of each
Organizational Document of such Loan Party certified (to the extent applicable)
as of a recent date by the Secretary of State of the state of its organization,
(B) that attached thereto is a true and complete copy of resolutions duly
adopted by the Board of Directors of such Loan Party authorizing the execution,
delivery and performance of the Loan Documents to which such Person is a party
and, in the case of Borrower, the Credit Extensions hereunder, and that such
resolutions have not been modified, rescinded or amended and are in full force
and effect and (C) as to the incumbency and specimen signature of each
officer executing any Loan Document or any other document delivered in
connection herewith on behalf of such Loan Party (together with a certificate
of another officer as to the incumbency and specimen signature of the secretary
or assistant secretary executing the certificate required by this
clause (i));

 

(ii)                                  a certificate as to the good standing of
each Loan Party as of a recent date, from such Secretary of State; and

 

(iii)                               such other documents, instruments or
certificates as the Lenders, the Issuing Bank or the Administrative Agent may
reasonably request.

 

(d)                                 Officers’ Certificate. 
The Administrative Agent shall have received a certificate, dated the
Closing Date and signed by the chief executive officer and the chief financial
officer of Borrower, confirming compliance with the conditions precedent set
forth in this Section 4.01 and Sections 4.02(b), (c) and
(d).

 

(e)                                  Termination of Existing Credit Agreement. 
The Existing Credit Agreement shall have been terminated and Indebtedness
thereunder shall have been paid in full to the satisfaction of the Lenders with
all liens in favor of the existing lenders being unconditionally released; the
Administrative Agent shall have received a “pay-off” letter in form and
substance reasonably satisfactory to the 

 

59

 

Administrative Agent with respect thereto; and the Administrative Agent
shall have received from any Person holding any Lien securing any such
Indebtedness, such UCC (or equivalent) termination statements, mortgage
releases, releases of assignments of leases and rents, releases of security
interests in Intellectual Property and other instruments, in each case in
proper form for recording or filing, as the Administrative Agent shall have
reasonably requested to release and terminate of record the Liens securing such
Indebtedness.

 

(f)                                    Opinions of Counsel. 
The Administrative Agent shall have received, on behalf of itself, the
other Agents, the Arranger, the Lenders and the Issuing Bank, opinions of
counsel for the Loan Parties, in form and substance satisfactory to the Agents
and the Lenders, (i) dated the Closing Date and (ii) addressed to the
Agents, the Issuing Bank and the Lenders.

 

(g)                                 Solvency Certificate. 
The Administrative Agent shall have received a solvency certificate (a “Solvency Certificate”) in the form of Exhibit M,
dated the Closing Date and signed by the chief financial officer of Borrower.

 

(h)                                 Legal Requirements. 
The Lenders shall be satisfied that each Company, and the Transactions
shall be in full compliance with all material Legal Requirements, including
Regulation T, Regulation U and Regulation X, and shall have
received satisfactory evidence of such compliance reasonably requested by them.

 

(i)                                     Litigation.  There shall
not exist any claim, action, suit, investigation, litigation or proceeding
pending or threatened by or before any court, or any governmental,
administrative or regulatory agency or authority, domestic or foreign, that, in
the opinion of the Administrative Agent or any Lender (a) has had, or
could reasonably be expected to result in, a Material Adverse Effect,
(b) calls into question in any material respect the projections or any of
the material assumptions on which the projections were prepared, or (c) the
ability of any Company to perform its obligations under the Loan Documents, or
the ability of the parties to consummate the financings contemplated hereby or
the other Transactions.

 

(j)                                     Sources and Uses. 
The uses of the Credit Extensions requested on the Closing Date (if any)
shall be as set forth in Schedule 4.01(m).

 

(k)                                  Fees.  The Arranger
and Administrative Agent shall have received all Fees and other amounts due and
payable on or prior to the Closing Date, including, to the extent invoiced,
reimbursement or payment of all out-of-pocket expenses (including the premiums,
survey charges and recording taxes and fees and the legal fees and expenses of
Jones Day, special counsel to the Administrative Agent and Arranger, and the
fees and expenses of any local counsel, foreign counsel, appraisers,
consultants and other advisors) required to be reimbursed or paid by the Loan
Parties hereunder or under any other Loan Document.

 

(l)                                     Personal Property Requirements. 
The Collateral Agent shall have received:

 

(i)                                     all other certificates, agreements,
including control agreements, or instruments necessary to perfect the
Collateral Agent’s security interest in all Chattel Paper and all Deposit
Accounts of each Loan Party constituting Collateral;

 

(ii)                                  UCC financing statements in appropriate
form for filing under the UCC and such other documents under applicable Legal
Requirements in each jurisdiction as may be necessary or appropriate or, in the
opinion of the Collateral Agent, desirable to perfect the Liens created, or
purported to be created, by the Security Documents;

 

60

 

(iii)                               certified copies, each as of a recent
date, of the UCC searches of Borrower and the other Loan Parties in their
respective jurisdictions of organization and locations of the chief executive
office (as applicable) and such other searches that the Collateral Agent deems
necessary or appropriate; and

 

(iv)                              evidence reasonably acceptable to the
Collateral Agent of payment or arrangements for payment by the Loan Parties of
all applicable filing or recording taxes, fees, charges, costs and expenses
required for the filing or recording of the Security Documents.

 

(m)                               Insurance.  The
Administrative Agent shall have received a copy of, or a certificate as to
coverage under, the insurance policies required by Section 5.06 and
the applicable provisions of the Security Documents, each of which shall be
endorsed or otherwise amended to include a “standard” or “New York” lender’s
loss payable or mortgagee endorsement (as applicable) and shall name the
Collateral Agent, on behalf of the Secured Parties, as additional insured, in
form and substance satisfactory to the Administrative Agent and the Collateral
Agent.

 

(n)                                 Bank Regulatory Documentation. 
The Administrative Agent and the Lenders shall have received, in form
and substance satisfactory to them, all documentation and other information
required by bank regulatory authorities or reasonably requested by the
Administrative Agent or any Lender under or in respect of applicable
anti-terrorism laws or “know-your-customer” Legal Requirements, including the
Executive Order.

 

Section 4.02                            Conditions to All Credit
Extensions.  The obligation of each Lender and each
Issuing Bank to make any Credit Extension (including the initial Credit
Extension) shall be subject to, and to the satisfaction of, each of the
conditions precedent set forth below.

 

(a)                                  Notice.  The
Administrative Agent shall have received a Borrowing Request as required by Section 2.03
(or such notice shall have been deemed given in accordance with Section 2.03)
if Loans are being requested or, in the case of the issuance, amendment,
extension or renewal of a Letter of Credit, the Issuing Bank and the
Administrative Agent shall have received a notice requesting the issuance,
amendment, extension or renewal of such Letter of Credit as required by Section 2.16(b).

 

(b)                                 No Default.  Borrower and
each other Loan Party shall be in compliance in all material respects with all
the terms and provisions set forth herein and in each other Loan Document on
its part to be observed or performed, and, at the time of and immediately after
giving effect to such Credit Extension and the application of the proceeds
thereof, no Default shall have occurred and be continuing on such date.

 

(c)                                  Representations and Warranties. 
Each of the representations and warranties made by any Loan Party set
forth in Article III or in any other Loan Document shall be true
and correct in all material respects on and as of the date of such Credit
Extension with the same effect as though made on and as of such date, except to
the extent such representations and warranties expressly relate to an earlier
date (in which case such representations and warranties shall be true and
correct in all material respects on and as of such earlier date); provided that any representation and warranty that is
qualified as to “materiality”, “Material Adverse Effect” or similar language
shall be true and correct (after giving effect to any qualification therein) in
all respects on such respective dates.

 

(d)                                 No Legal Bar. 
No Order of any Governmental Authority shall purport to restrain
(i) any Lender from making any Loans to be made by it or (ii) the
Issuing Bank from issuing any Letters of Credit to be issued by it.  No injunction or other restraining Order
shall have been issued, shall be pending or noticed with respect to any action,
suit or proceeding seeking to enjoin or otherwise prevent 

 

61

 

the consummation of, or to recover any damages or obtain relief as a
result of, the transactions contemplated by this Agreement or the making of
Loans or the issuance of Letters of Credit hereunder.

 

Each
of the delivery of a Borrowing Request or notice requesting the issuance,
amendment, extension or renewal of a Letter of Credit and the acceptance by
Borrower of the proceeds of such Credit Extension shall constitute a
representation and warranty by Borrower and each other Loan Party that on the
date of such Credit Extension (both immediately before and after giving effect
to such Credit Extension and the application of the proceeds thereof) the
conditions contained in this Section 4.02 have been satisfied.  Borrower shall provide such information
(including calculations in reasonable detail of the covenants in Section 6.01)
as the Administrative Agent may reasonably request to confirm that the
conditions in this Section 4.02 have been satisfied.

 

ARTICLE
V

AFFIRMATIVE COVENANTS

 

Each
Loan Party warrants, covenants and agrees with the Administrative Agent, the
Collateral Agent, the Issuing Bank and each Lender that so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest and premium (if any) on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document shall have
been paid in full and all Letters of Credit have been canceled or have expired
and all amounts drawn thereunder have been reimbursed in full, each Loan Party
will, and will cause each of its Subsidiaries to, comply with the following
covenants:

 

Section 5.01                            Reporting.

 

(a)                                  Quarterly Financial Statements. As soon as available and in any event
within 45 days after the close of each of the first, second and third
fiscal quarters of Borrower, Borrower shall deliver to the Administrative Agent
and each Lender the unaudited consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such period and the related unaudited
consolidated statements of income, shareholders’ equity and cash flows of
Borrower and its Subsidiaries for such period, setting forth in each case in
comparative form the figures as of the end of and for the corresponding periods
of the previous fiscal year, all of which shall be certified by the chief
executive officer or chief financial officer of Borrower, in his or her
opinion, to present fairly, in accordance with GAAP and in all material
respects, the consolidated financial position of Borrower and its Subsidiaries
as at the date thereof and the results of operations for such period (subject
to normal year-end audit adjustments and absence of footnotes).

 

(b)                                 Year-End Statements. As soon as available and in any event
when the same is required to be filed with the Securities and Exchange Commission
(but in no event later than 90 days after the end of each fiscal year of
Borrower), Borrower shall deliver to the Administrative Agent and each Lender a
copy of the annual report of Borrower (including without limitation, for the
fiscal year ending December 31, 2009), which shall include, without
limitation, the audited consolidated balance sheet of Borrower and its
Subsidiaries as at the end of such fiscal year and the related audited
consolidated statements of income, shareholders’ equity and cash flows of
Borrower and its Subsidiaries for such fiscal year (which shall not contain any
going concern or other qualification), setting forth in comparative form the
figures as at the end of and for the previous fiscal year, all of which shall
be certified by Ernst & Young LLP or other independent certified
public accountants of recognized national standing reasonably acceptable to the
Lender, whose certificate shall be unqualified and who shall have authorized
Borrower to deliver such financial statements and certification thereof to the
Administrative Agent and each Lender pursuant to this Agreement.

 

62

 

(c)                                  Compliance Certificate.  At
the time financial statements are furnished pursuant to Sections 5.01(a) and
(b), and within five Business Days of the Administrative Agent’s
reasonable request with respect to any other fiscal period, Borrower shall
deliver to the Administrative Agent a Compliance Certificate executed by the
chief financial officer of Borrower:  (a) setting
forth in reasonable detail as at the end of such quarterly accounting period,
fiscal year, or other fiscal period, as the case may be, the calculations
required to establish whether or not Borrower was in compliance with the
covenants contained in Section 6.01. (including without limitation,
for the fiscal year ending December 31, 2009) and (b) stating that,
to the best of his or her knowledge, information and belief after due inquiry,
no Default or Event of Default exists, or, if such is not the case, specifying
such Default or Event of Default and its nature, when it occurred, whether it
is continuing and the steps being taken by Borrower with respect to such event,
condition or failure.  Together with each
Compliance Certificate delivered with the financial statements furnished
pursuant to Section 5.01(b), Borrower shall also provide a certificate of
independent certified public accountants stating that, to their knowledge, no
Default or Event of Default has occurred as of the end of the fiscal year
covered by such financial statements, or if a Default or Event of Default has
occurred, a statement of the nature thereof.

 

(d)                                 Other Information. Borrower shall deliver to the
Administrative Agent each of the following:

 

(i)                                     Management Reports. 
Promptly upon receipt thereof, copies of all management reports, if any,
submitted to Borrower or its Board of Directors by its independent public
accountants;

 

(ii)                                  Securities Filings. 
Within five Business Days of the filing thereof, notice of the
filing of all registration statements (excluding any registration statements on
Form S-8 or its equivalent), reports on Forms 10-K, 10-Q and 8-K (or their
equivalents) and all other periodic reports which Borrower, any Subsidiary or
any other Loan Party shall file with the Securities and Exchange Commission (or
any Governmental Authority substituted therefor) or any national securities
exchange (collectively, “Securities Filings”);

 

(iii)                               Shareholder Information. 
If not otherwise available in a Securities Filing, promptly upon the
mailing thereof to the shareholders of Borrower generally, copies of all
financial statements, reports and proxy statements so mailed and promptly upon
the issuance thereof copies of all press releases issued by Borrower, any
Subsidiary or any other Loan Party;

 

(iv)                              ERISA.  If and when
any member of the ERISA Group (i) gives or is required to give notice to
the PBGC of any “reportable event” (as defined in Section 4043 of ERISA)
with respect to any Plan which might constitute grounds for a termination of
such Plan under Title IV of ERISA, or knows that the plan administrator of
any Plan has given or is required to give notice of any such reportable event,
a copy of the notice of such reportable event given or required to be given to the
PBGC; (ii) receives notice of complete or partial withdrawal liability
under Title IV of ERISA or notice that any Multiemployer Plan is in
reorganization, is insolvent or has been terminated, a copy of such notice;
(iii) receives notice from the PBGC under Title IV of ERISA of an
intent to terminate, impose liability (other than for premiums under
Section 4007 of ERISA) in respect of, or appoint a trustee to administer
any Plan, a copy of such notice; (iv) applies for a waiver of the minimum
funding standard under Section 412 of the Internal Revenue Code, a copy of
such application; (v) gives notice of intent to terminate any Plan under
Section 4041(c) of ERISA, a copy of such notice and other information
filed with the PBGC; (vi) gives notice of withdrawal from any Plan
pursuant to Section 4063 of ERISA, a copy of such notice; or
(vii) fails to make any payment or contribution to any Plan or
Multiemployer Plan or in respect of any Benefit Arrangement or makes any
amendment to any Plan or Benefit 

 

63

 

Arrangement which
has resulted or could result in the imposition of a Lien or the posting of a
bond or other security, a certificate of the chief financial officer of
Borrower setting forth details as to such occurrence and the action, if any,
which Borrower or applicable member of the ERISA Group is required or proposes
to take;

 

(v)                                 Litigation.  To the extent
Borrower, any Subsidiary or any other Loan Party is aware of the same, prompt
notice of the commencement of any proceeding or investigation by or before any
Governmental Authority and any action or proceeding in any court or other
tribunal or before any arbitrator against or in any other way relating
adversely to, or adversely affecting, Borrower or any Subsidiary or any of
their respective properties, assets or businesses which could reasonably be
expected to have a Material Adverse Effect, and prompt notice of the receipt of
notice that any United States income tax returns of Borrower or any of its
Subsidiaries are being audited;

 

(vi)                              Modification of Organizational Documents. 
A copy of any amendment to the organizational documents of Borrower
within 15 Business Days after the effectiveness thereof;

 

(vii)                           Change of Management or Financial
Condition.  Prompt notice of any change in the senior
management of Borrower and any event which has had or could reasonably be
expected to have a Material Adverse Effect;

 

(viii)                        Default. Notice of the occurrence of any Default or Event of
Default promptly upon a Responsible Officer of Borrower obtaining knowledge
thereof;

 

(ix)                                Judgments.  Prompt notice
of any order, judgment or decree in excess of $5,000,000 having been entered
against Borrower, any Subsidiary or any other Loan Party or any of their
respective properties or assets;

 

(x)                                   Notice of Violations of Law. 
Prompt notice if Borrower, any Subsidiary or any other Loan Party shall
receive any notification from any Governmental Authority alleging a violation
of any Applicable Law or any inquiry which, in either case, could reasonably be
expected to have a Material Adverse Effect;

 

(xi)                                New Subsidiaries. 
Prompt notice of any Person becoming a Material Subsidiary;

 

(xii)                             Material Asset Sales. 
Prompt notice of the sale, transfer or other disposition of any material
assets of Borrower, any Subsidiary or any other Loan Party to any Person other
than Borrower, any Subsidiary or any other Loan Party;

 

(xiii)                          Borrowing Base Certificate and Monthly
Report.  Within 15 days after the end of each
calendar month, or while a Default or Event of Default exists, more frequently
as the Administrative Agent may request, the Monthly Report together with a
Borrowing Base Certificate based upon reconciliations and adjustments reflected
in such Monthly Report all of which shall be certified by the chief executive
officer or chief financial officer of Borrower; provided, however, in the event that Borrower shall, at any
time, fail to comply with the covenants contained in Section 6.01,
Borrower shall deliver the foregoing information and reports daily;

 

64

 

(xiv)                         Operating Plan. 
Not later than 30 days after the commencement of each fiscal year,
a consolidated operating plan (together with a statement in reasonable detail
of the assumptions on which such plan is based) of Borrower and its
Subsidiaries, and which shall, in each case, include budgets for the
prospective year in reasonable detail acceptable to the Administrative Agent
and will integrate operating profit and cash flow projections, capital
expenditures, and facilities plans;

 

(xv)                            Governmental Offsets. 
Promptly, and in no event later than three Business Days following the
earlier of actual knowledge or receipt of notification from a Governmental
Authority, estimates of amounts of Accounts generated which are subject to
offset by Governmental Authorities in any material amount;

 

(xvi)                         Cost-Report Settlement Estimates. 
At the time of each Monthly Report, internally prepared cost-report
settlement estimates with respect to Governmental Authorities; and

 

(xvii)                      Other Information. 
From time to time and promptly upon each request, such data,
certificates, reports, statements, opinions of counsel, documents or further
information regarding the business, assets, liabilities, financial condition, results
of operations or business prospects of Borrower or any of its Subsidiaries as
the Lender may reasonably request.

 

Section 5.02                            Preservation of
Existence and Similar Matters.

 

Except
as otherwise permitted under Section 6.05, Borrower shall, and shall
cause each Subsidiary, each other Loan Party and each Provider to, preserve and
maintain its respective existence, rights, franchises, licenses and privileges
in the jurisdiction of its incorporation or formation and qualify and remain
qualified and authorized to do business in each jurisdiction in which the
character of its properties or the nature of its business requires such
qualification and authorization and where the failure to be so authorized and
qualified could reasonably be expected to have a Material Adverse Effect.

 

Section 5.03                            Compliance with
Applicable Law.

 

Borrower
shall, and shall cause each Subsidiary, each other Loan Party and each Provider
to, comply with all Applicable Laws, including the obtaining of all
Governmental Approvals, the failure with which to comply could reasonably be
expected to have a Material Adverse Effect.

 

Section 5.04                            Maintenance of Property.

 

In
addition to the requirements of any of the other Loan Documents, Borrower
shall, and shall cause each Provider, each Subsidiary and each other Loan Party
to, (a) protect and preserve all of its material properties and maintain
in good repair, working order and condition all tangible properties, ordinary
wear and tear excepted, and (b)  make or cause to be made all needed and
appropriate repairs, renewals, replacements and additions to such properties,
so that the business carried on in connection therewith may be properly and
advantageously conducted at all times.

 

Section 5.05                            Conduct of Business.

 

Borrower
shall, and shall cause the Providers, the Subsidiaries and the other Loan
Parties to, carry on their respective businesses as described in Section 3.01(t).

 

65

 

Section 5.06                            Insurance.

 

In
addition to the requirements of any of the other Loan Documents, Borrower
shall, and shall cause each Subsidiary, each other Loan Party and each Provider
to, maintain insurance as described in the Annual Report on Form 10-K of Borrower
for the year ended December 31, 2008 and otherwise maintain insurance with
financially sound and reputable insurance companies against such risks and in
such amounts as is customarily maintained by Persons engaged in similar
businesses, as may be required by Applicable Law or as may be reasonably
requested by the Administrative Agent, and from time to time deliver to the
Administrative Agent upon its request a detailed list, together with copies of
all policies of the insurance then in effect, stating the names of the
insurance companies, the amounts and rates of the insurance, the dates of the
expiration thereof and the properties and risks covered thereby.

 

Section 5.07                            Payment of Taxes and
Claims.

 

Borrower
shall, and shall cause each Subsidiary, each other Loan Party and each Provider
to, pay and discharge when due (a) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or upon any
properties belonging to it, and (b) all lawful claims of materialmen,
mechanics, carriers, warehousemen and landlords for labor, materials, supplies
and rentals which, if unpaid, might become a Lien on any properties of such
Person; provided, however, that
this Section shall not require the payment or discharge of any such tax,
assessment, charge, levy or claim which is being contested in good faith by
appropriate proceedings which operate to suspend the collection thereof and for
which adequate reserves have been established on the books of Borrower, such
Subsidiary, such other Loan Party or such Provider, as applicable, in
accordance with GAAP.

 

Section 5.08                            Visits and Inspections.

 

Borrower
shall, and shall cause the each Subsidiary, each other Loan Party and each
Provider to, permit representatives or agents of the Administrative Agent or
any Lender (i) twice during each fiscal year of Borrower, after reasonable
prior notice, during normal business hours and at the expense of Borrower and
(ii) if an Event of Default shall be in existence, as often as may be
reasonably requested, after reasonable prior notice and at the expense of
Borrower to:  (a) visit and inspect
all properties of Borrower, such Provider or such Subsidiary to the extent any
such right to visit or inspect is within the control of such Person;
(b) inspect and make extracts from their respective books and records,
including but not limited to management letters prepared by independent
accountants; and (c) discuss with its officers and employees, and its
independent accountants, its business, properties, condition (financial or
otherwise), results of operations and performance (subject in the case of any
of the foregoing to compliance by the parties with rules applicable to
“Protected Heath Information” under HIPAA).

 

Section 5.09                            Use of Proceeds.

 

Borrower
shall use the proceeds of the Loans and the Letters of Credit for working
capital and general corporate purposes (including, without limitation, property
acquisition) only.  No part of the
proceeds of any Loan or Letter of Credit will be used (a) for the purpose
of buying or carrying “margin stock” within the meaning of Regulation U or
to extend credit to others for the purpose of purchasing or carrying any such
margin stock or (b) to fund any operations in, finance any investments or
activities in, or make any payments to, a Sanctioned Person or Sanctioned
Entity.

 

Section 5.10                            Environmental Matters.

 

Borrower
shall, and shall cause the Subsidiaries, the other Loan Parties and the
Providers to, comply with all Environmental Laws the failure with which to comply
could reasonably be expected to have a Material Adverse Effect.  Borrower shall, and shall cause the
Subsidiaries the other Loan Parties 

 

66

 

and the Providers to, take promptly all actions necessary to prevent
the imposition of any Liens on any of their respective properties arising out
of or related to any Environmental Laws.

 

Section 5.11                            Books and Records.

 

Borrower
shall, and shall cause each Subsidiary, each other Loan Party and each Provider
to, maintain books and records pertaining to its respective business operations
in such detail, form and scope as is consistent with good business practice and
in accordance with GAAP.  Borrower shall,
and shall cause each Provider to, maintain and implement administrative and
operating procedures (including, without limitation, an ability to recreate
records evidencing Accounts and related contracts in the event of the
destruction of the originals thereof), and keep and maintain all documents,
books, records and other information reasonably necessary or advisable for
collecting all Accounts (including, without limitation, records adequate to
permit the daily identification of each Account and all Collections of and
adjustments to each existing Account).

 

Section 5.12                            Further Assurances.

 

Borrower
shall, at Borrower’s cost and expense and upon request of the Administrative
Agent, the Collateral Agent, the Issuing Bank or any Lender, execute and
deliver or cause to be executed and delivered, to the Administrative Agent, the
Collateral Agent, the Issuing Bank or any Lender, as applicable, such further
instruments, documents and certificates, and do and cause to be done such
further acts that may be reasonably necessary or advisable in the reasonable
opinion of the Administrative Agent, the Collateral Agent, the Issuing Bank or
any Lender, as applicable, to (a) carry out more effectively the purposes
of this Agreement and the other Loan Documents, (b) to subject to valid
and perfected Liens on any of the Collateral, (c) to establish and
maintain the validity and effectiveness of this Agreement and any other Loan
Agreement and the validity, perfection and priority of the Liens intended to be
created thereby and (d) to better assure, convey, grant, assign, transfer and
confirm unto Lender the rights now or hereafter intended to be granted to them
under this Agreement and any other Loan Agreement.  In furtherance of the foregoing, to the
maximum extent permitted by applicable law, Borrower (i) authorizes the
Administrative Agent or the Collateral Agent to execute any such agreements,
instruments or other documents in Borrower’s name and to file such instruments,
agreements or other documents in any appropriate filing office and
(ii) authorizes the Administrative Agent or the Collateral Agent to file
any continuation statement or amendment with respect thereto, in any
appropriate filing office.

 

Section 5.13                            New
Subsidiaries/Guarantors; Release of Guarantors.

 

(a)                                  Requirement to Become Guarantor. 
Within 30 days of any Person becoming a Material Subsidiary or a
Provider (in each case, other than an Excluded Subsidiary) after the Closing
Date, or within 45 days of the end of any fiscal quarter, if during such
fiscal quarter more than 5% of EBITDA (excluding EBITDA attributable to
Excluded Subsidiaries) is attributable, directly or indirectly, to Subsidiaries
which are not Guarantors and which are not Excluded Subsidiaries, Borrower
shall deliver, or cause to be delivered, to the Lender each of the following
items, each in form and substance satisfactory to the Lender:

 

(i)                                     an Accession Agreement executed by such
Material Subsidiary, such Provider or such Subsidiaries as may be required so
that at least 95% of EBITDA (excluding EBITDA attributable to Excluded
Subsidiaries) for the fiscal quarter most recently ended is attributable,
directly or indirectly, to Guarantors;

 

67

 

(ii)                                  the items that would have been delivered
under Section 4.01(b)(iv), Section 4.01(c), Section 4.01(h) and
Section 4.01(o) if such Person or Persons had been a Guarantor
on the Closing Date;

 

(iii)                               Account Control Agreements to the extent
required to be delivered under Section 5.14 or to remain in
compliance with Section 6.10; and

 

(iv)                              Such other documents, agreements and
instruments as the Administrative Agent, the Collateral Agent, the Issuing Bank
and/or any Lender may reasonably request.

 

Promptly (and in any event within 30 days) upon any Excluded
Subsidiary ceasing to be subject to the restriction which prevented it from
becoming a Guarantor on the Closing Date or delivering an Accession Agreement
pursuant to this Section, as the case may be, Borrower shall cause such
Subsidiary to comply with the provisions of this Section.

 

(b)                                 Other Guarantors. 
Borrower may, at its option and upon at least 10-days’ prior written
notice to the Administrative Agent and the Lenders, cause any Subsidiary that
is not already a Guarantor to become a Guarantor by executing and delivering to
the Administrative Agent and the Lenders the items required to be delivered
under the immediately preceding subsection (a).

 

(c)                                  Release of a Guarantor. 
Borrower may request in writing that the Administrative Agent, on behalf
of the Secured Parties, release, and upon receipt of such request the
Administrative Agent shall release, a Guarantor hereunder so long as:  (i) such Guarantor is no longer, or
simultaneously with its release hereunder will no longer be, required to be a
“Guarantor” under the immediately preceding subsection (a); (ii) no
Default or Event of Default shall then be in existence or would occur as a
result of such release; and (iii) the Administrative Agent shall have
received such written request at least 10 days prior to the requested date
of release.  Delivery by Borrower to the
Administrative Agent of any such request shall constitute a representation by
Borrower that the matters set forth in the preceding sentence (both as of the
date of the giving of such request and as of the date of the effectiveness of
such release) are true and correct with respect to such request.  Upon the effectiveness of any such release,
Borrower and such Guarantor are each authorized to file any UCC amendments
terminating any financing statements filed by the Collateral Agent to perfect
its Lien in the Collateral of such Guarantor granted under any of the Security
Documents.  The Administrative Agent and
the Collateral Agent each agrees to execute and deliver to Borrower or such
Guarantor, at Borrower’s sole cost and expense, such documents or instruments
of termination or release as Borrower or such Guarantor may reasonably request
to evidence such release, including without limitation, documents terminating
the application of any Account Control Agreement or other Loan Document to the
extent applicable to such Guarantor.

 

Section 5.14                            Collection Accounts.

 

(a)                                  Generally.  Borrower
shall maintain, or cause to be maintained, the Primary Borrower Account, the
Provider Accounts and all other procedures for the sale, transfer, collection
and receipt of the Accounts or proceeds of the Accounts required or
contemplated by the Loan Documents.

 

(b)                                 Transition of Collection Accounts. 
Borrower agrees to take the following actions with respect to the
Primary Borrower Account and the Provider Accounts:

 

(i)                                     Primary Borrower Account. 
Borrower shall (x) establish a deposit account with Wachovia Bank,
National Association, any of its successors and any other financial institution
acceptable to the Administrative Agent (the “Depositary Bank”) which
shall serve as the Primary Borrower Account, (y) enter into a Depositary
Agreement with the Depositary Bank 

 

68

 

and (z) enter
into an Account Control Agreement with the Collateral Agent and the Depositary
Bank with respect to such Primary Borrower Account.

 

(ii)                                  Intentionally Deleted.

 

(iii)                               Intentionally Deleted.

 

(iv)                              Government Lockbox Accounts. 
Borrower shall cause each relevant Provider to (w) establish one or
more deposit accounts with the Lender which shall serve as the Government
Lockbox Accounts, (x) enter into Government Depositary Agreements with the
Lender with respect to such Government Lockbox Accounts, and (y) deliver
all notices required by Section 8.13(c) and revise its
invoices as required under Section 8.13(d).  Borrower shall cause each relevant Provider
to take all actions that may be necessary, or as the Administrative Agent or
the Collateral Agent may reasonably request, to ensure that all amounts from
time to time on deposit in a Government Lockbox Account are deposited into the
Concentration Account as required under the terms of this Agreement and the
other Loan Documents.

 

(v)                                 Concentration Account. 
Borrower shall, and shall cause each applicable Provider to,
(x) take all actions that may be necessary, or as the Administrative Agent
or the Collateral Agent may reasonably request, to ensure that all amounts on
deposit in the Primary Borrower Account and the Government Lockbox Account are
transferred at the close of each Business Day to the Concentration Account and
(y) enter into an Account Control Agreement with the Collateral Agent and
the bank holding the Concentration Account with respect to such Concentration
Account.

 

(vi)                              Other Accounts. 
Borrower shall, and shall cause each other relevant Loan Party to,
deliver to the Collateral Agent an Account Control Agreement with respect to
each other deposit account (other than (x) disbursement accounts and other
accounts excluded from Collateral under Section 8.01(b) and
subparagraph (iii) of the next to last paragraph of Section 8.01 and
(y) deposit accounts with a commercial bank that is not a party to a
Depositary Agreement provided that the collected balance does not exceed
$50,000 for any one deposit account or $100,000 in the aggregate for all such
deposit accounts) of any Loan Party not covered by the immediately preceding
clauses (i) through (iv), such Account Control Agreement to be executed by
the relevant Loan Parties and the financial institution with which such deposit
account is maintained.  Borrower shall,
and shall cause each other relevant Loan Party to, take all actions that may be
necessary, or as the Administrative Agent or the Collateral Agent may
reasonably request, to ensure that all amounts on deposit in each such other
deposit account are transferred at the close of each Business Day to the
Concentration Account.

 

(vii)                           Bank Charges. 
Borrower agrees that it shall remain liable for any fees and charges in
effect from time to time and charged by any bank which maintains any Primary
Borrower Account or Provider Account, and that none of the Administrative
Agent, the Collateral Agent or any other Secured Party shall have any liability
therefor.

 

Section 5.15                            Account Covenants.

 

Borrower
shall, as to any Account included in the Borrowing Base and constituting more
than one percent thereof: 
(a) promptly upon Borrower’s learning thereof, inform the
Administrative Agent, in writing, of any material delay in Borrower’s
performance of Borrower’s obligations to any Account Debtor or of any assertion
of any claims, offsets or counterclaims by any Account Debtor with respect to
Accounts attributable to such Account Debtor; (b) promptly upon Borrower’s
learning thereof, furnish to 

 

69

 

and inform the Administrative Agent of all material adverse information
known to Borrower relating to the financial condition of any Account Debtor if
such information would render such Accounts no longer an Eligible Accounts; and
(c) notify the Administrative Agent of any amounts that are in dispute for
any reason which are due and owing from Account Debtors.

 

Section 5.16                            Exchange Listing.

 

Borrower
shall maintain at least one class of common shares of Borrower having trading
privileges on the New York Stock Exchange or the American Stock Exchange or
which is the subject of price quotations in the over-the-counter market as
reported by the National Association of Securities Dealers Automated Quotation
System.

 

Section 5.17                            New Leases.

 

Within
30 days of any Loan Party entering into any Lease with SNH or a Subsidiary
thereof, Borrower shall, or shall cause such Loan Party to, execute and deliver
to the Collateral Agent a collateral assignment of such Lease, such collateral
assignment to be in form and substance reasonably satisfactory to the
Collateral Agent.  Notwithstanding the
foregoing, a Relevant Existing Provider shall not be required to execute and
deliver a collateral assignment of a Lease of an Affected Property entered into
by such Relevant Existing Provider and the landlord under such Lease.

 

Section 5.18                            Zero Balance.

 

Borrower
shall cause the outstanding principal balance of the Loans to be $0 for at
least 15 consecutive days during each consecutive 12 month period following the
Closing Date.

 

Section 5.19                            Performance and
Compliance With Contracts and Credit and Collection Policy.

 

Each
of Borrower and each Provider will, at its expense, timely and fully perform
and comply with all material provisions, covenants and other promises required
to be observed by it under the contracts and other documents related to the
Accounts of such Loan Party, and timely and fully comply in all material
respects with the Credit and Collection Policy in regard to each Account of
such Loan Party and the related contract.

 

ARTICLE
VI

NEGATIVE COVENANTS

 

Each
Loan Party warrants, covenants and agrees with the Administrative Agent, the
Collateral Agent, the Issuing Bank and each Lender that, so long as this
Agreement shall remain in effect and until the Commitments have been terminated
and the principal of and interest and premium (if any) on each Loan, all Fees
and all other expenses or amounts payable under any Loan Document have been
paid in full and all Letters of Credit have been canceled or have expired or
have been Cash Collateralized and all amounts drawn thereunder have been
reimbursed in full, no Loan Party will, nor will they cause or permit any
Subsidiaries to, comply with the following covenants:

 

Section 6.01                            Financial Covenants.

 

Borrower
shall not permit:

 

70

 

(a)                                  Senior Secured Leverage Ratio. 
The ratio of (i)  Secured Indebtedness of Borrower and its
Subsidiaries to (ii) EBITDA for the four consecutive fiscal quarters most
recently ended prior to the date of determination, to exceed 4.25 to 1.00 at
any time.

 

(b)                                 Fixed Charge Coverage Ratio. 
The Fixed Charge Coverage Ratio to be less than 1.05 to 1.0 at any time
that the UBS Credit-Line Availability plus
unrestricted Cash is less than $10,000,000.

 

(c)                                  Debt Service Coverage Ratio.  The Debt Service Coverage Ratio to be less than 1.35
to 1.00 at any time.

 

Section 6.02                            Restricted Payments.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to, make any
Restricted Payments to any Person other than to Borrower or any Loan Party if,
at the time of and after giving effect to such Restricted Payment (i) a
Default or Event of Default shall exist or be continuing, and or (ii) the
aggregate of (A) the lesser of the Revolving Commitments and the Borrowing
Base at such time minus the Revolving Loan Exposure plus (B) the aggregate
amount of unrestricted Cash of the Loan Parties is less than $2,000,000.

 

Section 6.03                            Indebtedness.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to, create,
incur, assume or suffer to exist any Indebtedness, other than the following:

 

(a)                                  (i) Indebtedness of any Loan Party
under the Loan Documents and (ii) Unsecured Indebtedness of Borrower and
its Subsidiaries not to exceed $75,000,000;

 

(b)                                 Indebtedness existing on the Closing Date
and described on Schedule 6.03(g);

 

(c)                                  Indebtedness of Borrower or any
Subsidiary secured by Liens permitted under clauses (iii), (iv) and
(vi) of Section 6.04(a) and Nonrecourse Indebtedness of
Borrower or any Subsidiary secured by Liens permitted under
clause (v) of Section 6.04(a);

 

(d)                                 Indebtedness of Borrower or any
Subsidiary the payment of which, and Liens securing such Indebtedness, if any,
(i) in the case of subordinated notes issued in connection with (x) a
registered public offering or (y) a 144A offering, are subordinated to the
Obligations upon terms customary at such time in the public U.S. high-yield
bond market; (ii) in the case of subordinated convertible notes issued in
connection with (x) a registered public offering or (y) a 144A
offering, are subordinated to the Obligations upon terms customary at such time
in the public U.S. convertible debt market, or (iii) in any other case,
are subordinated to the Obligations upon terms and conditions reasonably satisfactory
to the Administrative Agent;

 

(e)                                  Indebtedness owed by any Loan Party to
any other Loan Party and Indebtedness owing by a Subsidiary which is not a Loan
Party to any Loan Party or any Subsidiary that is not a Loan Party;

 

(f)                                    Permitted LC Debt;  and

 

(g)                                 The SNH Financing.

 

71

 

Notwithstanding the foregoing (i) none of the Trusts shall incur
any SPC Debt and (ii) Borrower shall not, and shall not permit any
Subsidiary or any other Loan Party to, incur, assume, or otherwise become
obligated in respect of any Indebtedness after the Closing Date if immediately
prior to the assumption, incurring or becoming obligated in respect thereof, or
immediately thereafter and after giving effect thereto, a Default or Event of
Default is or would be in existence, including without limitation, a Default or
Event of Default resulting from a violation of any of the covenants contained
in Section 6.01.

 

Section 6.04                            Liens; Negative Pledges;
Other Matters.

 

(a)                                  Borrower shall not, and shall not permit
any Subsidiary or other Loan Party to, create, assume, incur or permit to exist
any Lien upon any of its properties, assets, income or profits of any character
whether now owned or hereafter acquired other than:

 

(i)                                     Permitted Liens;

 

(ii)                                  Liens in existence as of the Closing Date
and set forth on Schedule 6.04(a);

 

(iii)                               any Lien (x) existing on any asset
of any Person at the time such Person becomes a Subsidiary, (y) existing
on any asset of any Person at the time such Person is merged with or into
Borrower, any other Loan Party or any other Subsidiary of Borrower or
(z) existing on any asset prior to the acquisition thereof by Borrower,
any other Loan Party or any other Subsidiary; provided
that any such Lien was not created in the contemplation of any of the foregoing
and any such Lien secures only those obligations which it secures on the date
that such Person becomes a Subsidiary or the date of such merger or the date of
such acquisition and any such Lien does not attach to any other assets of
Borrower, any other Loan Party or any other Subsidiary;

 

(iv)                              renewals or replacements of any Lien
referred to in the immediately preceding clauses (ii) and (iii); provided, that any such renewal or
replacement Lien attaches only to the assets originally encumbered the Lien
being replaced or renewed;

 

(v)                                 any Lien securing Nonrecourse
Indebtedness incurred by Borrower, any other Loan Party or any other Subsidiary
and attaching only to assets (other than assets that at the time of the granting
of such Lien (and after giving effect to any release effected in accordance
with Section 8.01) do not constitute Collateral) owned or leased by
Borrower, any other Loan Party or any other Subsidiary;

 

(vi)                              any Lien securing Indebtedness owing by Borrower,
any other Loan Party or any other Subsidiary to SNH or any Subsidiary of SNH
and which Lien attaches only to assets (other than the Collateral) owned or
leased by Borrower, any other Loan Party or any other Subsidiary; and

 

(vii)                           any Lien securing the obligations of a
Loan Party or other Subsidiary under any Lease (including any sublease entered
into among Loan Parties in connection therewith) to pay rent and other amounts
not constituting Indebtedness under such Lease or sublease or any guaranty of
such lease or sublease which Lien attaches only to assets (other than the
Collateral) owned or leased by such Loan Party or such other Subsidiary.

 

72

 

Notwithstanding the foregoing, Borrower shall not, and shall not permit
any Subsidiary or other Loan Party to, create, assume, incur or permit to exist
any Lien on any of its Collateral other than Permitted Liens.

 

(b)                                 Borrower shall not, and shall not permit
any Subsidiary or other Loan Party to, enter into, assume or otherwise be bound
by any Negative Pledge except for a Negative Pledge contained in (x) any
agreement (i) evidencing Indebtedness which Borrower, such Subsidiary or
such other Loan Party may create, incur, assume, or permit or suffer to exist
under Section 6.03; and (ii) which Indebtedness is either
(A) unsecured Indebtedness permitted under Section 6.03(d) and
the terms of such Indebtedness contain prohibitions on the creation of Liens
customary in the public U.S. high-yield bond market or public U.S. convertible
debt market, as applicable, which prohibitions, however, do not prohibit
Borrower, any Subsidiary or any other Loan Party from granting Liens in any of
its respective assets to secure the Obligations or Guaranteed Obligations, as
applicable, or (B) Indebtedness secured by a Lien permitted to exist
hereunder and the terms of such Indebtedness prohibit the creation of any other
Lien on only the property securing such Indebtedness as of the date such
agreement was entered into, (y) any Leases with (i) SNH or any of its
Subsidiaries (including any sublease entered into among Loan Parties in
connection therewith), (ii) Health Care Property Investors or any of its
Subsidiaries in effect as of the Closing Date or (z) any Lease (including
any sublease entered into among Loan Parties in connection therewith) of a
Property acquired after the Closing Date which Lease existed at the time of
such acquisition and was not amended in anticipation of such acquisition.

 

(c)                                  Borrower shall not, and shall not permit
any Subsidiary or other Loan Party to, create or otherwise cause or suffer to
exist or become effective any consensual encumbrance or restriction of any kind
(excluding those contained in any Lease with SNH or any of its Subsidiaries or
in any sublease entered into among Loan Parties in connection with any such
Lease) on the ability of any Subsidiary (other than an Excluded Subsidiary)
to:  (i) pay dividends or make any
other distribution on any of such Subsidiary’s capital stock or other equity
interests owned by Borrower or any Subsidiary; (ii) pay any Indebtedness
owed to Borrower or any Subsidiary; (iii) make loans or advances to
Borrower or any Subsidiary; or (iv) transfer any of its property or assets
to Borrower or any Subsidiary.

 

Section 6.05                            Merger, Consolidation,
Sales of Assets and Other Arrangements.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to:  (i) enter into any transaction of merger
or consolidation; (ii) liquidate, wind up or dissolve itself (or suffer
any liquidation or dissolution); or (iii) convey, sell, lease, sublease,
transfer or otherwise dispose of, in one transaction or a series of
transactions, all or substantially all of its assets, whether now owned or
hereafter acquired; provided, however,
that:

 

(a)                                  Borrower or any Subsidiary may sell,
lease or sublease, transfer or dispose of assets to, any other Loan Parties and
any Subsidiary which is not a Loan Party may sell, lease or sublease, transfer
or dispose of assets to, any Subsidiary;

 

(b)                                 Borrower and any Subsidiary may enter
into an arrangement with any Person
providing for the leasing by Borrower or such Subsidiary of any asset that has
been or is to be sold or transferred by Borrower or such Subsidiary to such
Person with the intention of taking back a lease of such property, so long as
any Indebtedness incurred and any Lien granted by Borrower or such Subsidiary
are permitted to be incurred and granted under this Agreement;

 

(c)                                  Subject to compliance with Section 8.03,
a Person may merge with and into Borrower or a Subsidiary so long as
(i) if Borrower or another Loan Party is a party to such merger, Borrower
or such other Loan Party is the survivor of such merger, (ii) if the
survivor of such merger 

 

73

 

would not otherwise be a Loan Party, such survivor shall become a
Guarantor if required under Section 5.13 at the time of the
effectiveness of such merger, (iii) immediately prior to such merger, and
immediately thereafter and after giving effect thereto, no Default or Event of
Default is or would be in existence, and (iv) Borrower shall have given
the Administrative Agent at least 30 Business Days’ prior written notice of
such merger (except that such prior notice shall not be required in the case of
the merger of a Subsidiary with and into a Loan Party but Borrower shall give
the Administrative Agent notice of any such merger promptly following the
effectiveness of such merger);

 

(d)                                 Subject to compliance with Section 8.03,
a Wholly Owned Subsidiary of Borrower may liquidate, wind up or dissolve itself
(or suffer any liquidation or dissolution) so long as (i) if the
liquidating or dissolving Subsidiary is a Loan Party, any and all assets of
such Subsidiary are transferred to a Loan Party or such Person that shall
become a Guarantor if required under Section 5.13 at the time of
the effectiveness of such transfer, (iii) immediately prior to such
liquidation or dissolution, and immediately thereafter and after giving effect
thereto, no Default or Event of Default is or would be in existence, and
(iv) if the liquidating or dissolving Subsidiary is a Loan Party, Borrower
shall give the Lender notice of any such liquidation or dissolution promptly
following the effectiveness thereof; and

 

(e)                                  The conveyance, sale, lease, transfer or
other disposition of any assets by the Borrower or any Subsidiary to any Person
other than the Borrower or a Subsidiary, to the extent such disposition is not
otherwise permitted under this Section 6.05; provided that (i) any
such disposition of such assets pursuant to this paragraph (e) must be for
no less than the fair market value of such assets at the time of such
disposition, (ii) immediately prior to such disposition, and immediately
thereafter and after giving effect thereto, no Default or Event of Default is
or would be in existence (which shall include written demonstration from the
Borrower of pro-forma compliance with the financial covenants set forth in Section 6.01,
including without limitation, compliance with Section 6.01(b), if
immediately prior to such disposition, and immediately thereafter and after
giving effect thereto, the UBS Credit-Line Availability plus unrestricted Cash is less than
$10,000,000), (iii) the Borrower shall have given the Administrative Agent
at least 30 Business Days’ prior written notice of such disposition,
(iv) such disposition of assets pursuant to this paragraph (e) occurs
when no Loans or Letters of Credit are outstanding at the time of such
disposition and (v) if any Loans or Letters of Credit are outstanding at
the time of such disposition, both prior and after giving effect to such
disposition, the aggregate fair market value of all dispositions of assets made
pursuant to this paragraph (e) at any time that a Loan or Letter of Credit
was outstanding does not exceed the lesser of (x) 5% of EBITDA (for the
four consecutive fiscal quarters most recently ended prior to the date of
determination) and (y) 5% of the total tangible assets of Borrower and the
Guarantors as determined in accordance with GAAP (measured as of the last day
of the most recently ended fiscal quarter).

 

(f)                                    To the extent any Collateral is disposed
of as expressly permitted by this Section 6.05 to any Person other
than the Borrower or any other Loan Party, such Collateral shall be sold free
and clear of the Liens created by the Loan Documents, and the Administrative
Agent or the Collateral Agent, as applicable, shall be authorized to take any
actions deemed appropriate in order to effect the foregoing.

 

Notwithstanding the foregoing, no Loan Party shall sell, transfer or
otherwise convey any of its right, title or interest in, to or under any of the
Collateral (other than Collateral that was released in accordance with
Section 8.01 hereof) of such Loan Party; provided,
however, that each Relevant Existing Provider and each Released
Guarantor may transfer to the New Operators such Relevant Existing Provider’s
and such Released Guarantor’s licenses, permits and other operating assets that
relate to, and only relate to, each Affected Property that such Relevant
Existing Provider or such Released Guarantor operates.

 

74

 

Section 6.06                            Fiscal Year.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to, change
its fiscal year from that in effect as of the Closing Date.

 

Section 6.07                            Modifications of
Organizational Documents and Shared Services Agreement.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to, amend,
supplement, restate or otherwise modify its articles or certificate of
incorporation, by-laws, operating agreement, declaration of trust, partnership
agreement or other applicable organizational document if such amendment,
supplement, restatement or other modification could reasonably be expected to
have a Material Adverse Effect. Notwithstanding the foregoing, no Trust shall
amend the provisions of its declaration of trust relating to SPC Debt. Borrower
shall not amend, supplement, restate or otherwise modify the Shared Services
Agreement if such amendment, supplement, restatement or other modification
could reasonably be expected to have a Material Adverse Effect. Borrower shall
not, and shall not permit any Subsidiary or other Loan Party to, amend,
supplement, restate or otherwise modify any of the SNH Loan Documents if
(a) a Relevant Existing Provider is in any way obligated under the SNH
Loan Documents and (b) such amendment, supplement, restatement or other
modification is materially adverse to the rights and interests of the Lender
hereunder.

 

Section 6.08                            Transactions with
Affiliates.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to, permit
to exist or enter into, any transaction (including the purchase, sale, lease or
exchange of any property or the rendering of any service) with any Affiliate,
except as explicitly permitted hereunder and except for transactions in the
ordinary course of and pursuant to the reasonable requirements of the business
of Borrower or any Subsidiary and upon fair and reasonable terms which are no
less favorable to Borrower or such Subsidiary than would be obtained in a
comparable arm’s length transaction with a Person that is not an Affiliate.

 

Section 6.09                            ERISA Exemptions.

 

Borrower
shall not, and shall not permit any Subsidiary or other Loan Party to, permit
any of its respective assets to become or be deemed to be “plan assets” within
the meaning of ERISA, the Internal Revenue Code and the respective regulations
promulgated thereunder.

 

Section 6.10                            Deposit Accounts.

 

(a)                                  Deposit Accounts and Lockboxes for
Account Collections.  Borrower shall not, and shall not permit
Provider to, establish any lockbox or deposit account into which any Proceeds
of Accounts (other than Proceeds from Affected Accounts) will be deposited, or
cause or permit to be deposited, any cash, checks, drafts or similar items
representing Proceeds of Accounts (other than Proceeds from Affected Accounts)
in any lockbox or deposit accounts, other than the Provider Accounts and the
Primary Borrower Account or direct or permit any Account Debtor to remit
payments on the Accounts (other than Affected Accounts) other than to the
applicable Provider Account or the Primary Borrower Account. Except as
otherwise expressly permitted under Section 5.14, the Primary
Borrower Account and Provider Accounts shall be subject to an Account Control
Agreement at all times.  Notwithstanding
the foregoing, the Relevant Existing Providers and the Released Guarantors may
deposit and may cause to be deposited the proceeds of Affected Accounts, and
only of Affected Accounts, into lockboxes or deposit accounts other than the
Provider Accounts or the Primary Borrower Account.

 

75

 

(b)           Deposit Accounts and Lockboxes for Other
Purposes.  Borrower shall not, and shall not permit any
other Loan Party to, deposit, or cause or permit to be deposited, any cash,
checks, drafts or similar items in any other deposit accounts not covered by the
immediately preceding subsection (a) except as otherwise expressly
permitted under Section 5.14 or those with respect to which
Borrower shall have delivered to the Collateral Agent a fully executed Account
Control Agreement.  Until so deposited
all such payments shall be held in trust by Borrower for the Collateral
Agent  and shall not be commingled with
any other funds or property of any Person.

 

(c)           Change in Payment Instructions; Transfers
to Primary Borrower Account.  Borrower
shall not, and shall not permit any Provider to, terminate the Primary Borrower
Account or any Provider Account, or make any change or replacement in the
instructions contained in any invoice, notice or otherwise, or regarding
payments with respect to Accounts (other than Affected Accounts) to be made to
any Provider Account or the Primary Borrower Account, except with prior express
written consent of the Administrative Agent. 
In addition, Borrower and each Provider each hereby agrees that except
as expressly provided otherwise in this Agreement or any applicable Account
Control Agreement, (a) amounts from time to time credited to any deposit
account (other than the Concentration Account, the disbursement accounts and
other accounts excluded from Collateral under Section 8.01(b) and
subparagraph (iii) of the next to last paragraph of Section 8.01) of
Borrower or such Provider shall not be withdrawn for any purpose other than to
be transferred to the Primary Borrower Account and (b) Borrower and each
Provider shall transfer the balance in each such deposit account to the Primary
Borrower Account no less frequently than daily. 
Collateral Agent and Administrative Agent may exercise rights of control
and direct the disposition of funds under any applicable Account Control
Agreement only if an Event of Default has occurred and is continuing.

 

Section 6.11         Collection of Accounts, Etc.

 

(a)           Waivers of Account Terms. 
Borrower shall not, and shall not permit any Material Provider to,
amend, waive or otherwise permit or agree to any deviation from the terms or
conditions of any Account of such Loan Party except in accordance with the
Credit and Collection Policy.

 

(b)           Change in Credit and Collection Policy. 
Borrower will not, and will not permit any Provider to, make any
material change in the Credit and Collection Policy that would be adverse to
the Administrative Agent, the Collateral Agent, the Issuing Bank or any Lender
without the prior written consent of such adversely affected Person; provided, however, while a Default or
Event of Default exists, Borrower will not, and will not Permit any Provider
to, make any change in the Credit and Collection Policy.

 

(c)           Impairment of Collection. 
Borrower shall not, and shall not permit any Provider or other
Subsidiary to, do anything to impede or interfere, or suffer or permit any
other Person to impede or interfere in any material respect, with the
collection by Borrower or any other Person designated by Borrower on its
behalf, of the Accounts of the Loan Parties.

 

Section 6.12         Prepayment of Indebtedness.

 

Borrower
shall not, and shall not permit any other Loan Party or other Subsidiary to,
directly or indirectly, at any time prepay, defease, purchase, redeem any
Indebtedness while an Event of Default exists; provided,
however, that nothing in this subsection shall prohibit payment of
non-cash interest “in-kind” thereunder.

 

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ARTICLE
VII

GUARANTEE

 

Section 7.01         The Guarantee.  The
Guarantors hereby, jointly and severally, guarantee, as primary obligors and
not as sureties, to each Secured Party and their respective successors and
assigns, the prompt payment and performance in full when due (whether at stated
maturity, by required prepayment, declaration, demand, by acceleration or
otherwise) of the principal of and interest (including any interest, fees,
costs or charges that would accrue but for the provisions of the Title 11
of the United States Code after any bankruptcy or insolvency petition under
Title 11 of the United States Code) on the Loans made by the Lenders to,
and the Notes held by each Lender of, Borrower, and all other Obligations from
time to time owing to the Secured Parties by any Loan Party in each case
strictly in accordance with the terms thereof (such obligations being herein
collectively called the “Guaranteed
Obligations”).  The Guarantors
hereby jointly and severally agree that if Borrower or other
Guarantor(s) shall fail to pay in full when due (whether at stated
maturity, by acceleration or otherwise) any of the Guaranteed Obligations, the
Guarantors will promptly pay the same in cash, without any demand or notice
whatsoever, and that in the case of any extension of time of payment or renewal
of any of the Guaranteed Obligations, the same will be promptly paid in full when
due (whether at extended maturity, by acceleration or otherwise) in accordance
with the terms of such extension or renewal.

 

Section 7.02         Obligations Unconditional. 
The obligations of the Guarantors under Section 7.01 shall
constitute a guaranty of payment and performance and not of collection and to
the fullest extent permitted by applicable Legal Requirements, are absolute,
irrevocable and unconditional, joint and several, irrespective of the value,
genuineness, validity, regularity or enforceability of the Guaranteed
Obligations under this Agreement, the Notes, if any, or any other agreement or
instrument referred to herein or therein, or any substitution, release or
exchange of any other guarantee of or security for any of the Guaranteed
Obligations, and, irrespective of any other circumstance whatsoever that might
otherwise constitute a legal or equitable discharge or defense of a surety or
Guarantor (except for payment in full of the Guaranteed Obligations).  Without limiting the generality of the foregoing,
it is agreed that the occurrence of any one or more of the following shall not
alter or impair the liability of the Guarantors hereunder which shall remain
absolute, irrevocable and unconditional under any and all circumstances as
described above:

 

(a)           at any time or from time to time, without
notice to the Guarantors, the time for any performance of or compliance with
any of the Guaranteed Obligations shall be extended, or such performance or
compliance shall be waived;

 

(b)           any of the acts mentioned in any of the
provisions of this Agreement or the Notes, if any, or any other agreement or
instrument referred to herein or therein shall be done or omitted;

 

(c)           the maturity of any of the Guaranteed
Obligations shall be accelerated, or any of the Guaranteed Obligations shall be
amended in any respect, or any right under the Loan Documents or any other
agreement or instrument referred to herein or therein shall be amended or
waived in any respect or any other guarantee of any of the Guaranteed Obligations
or any security therefor shall be released or exchanged in whole or in part or
otherwise dealt with;

 

(d)           any Lien or security interest granted to,
or in favor of, any Secured Party as security for any of the Guaranteed
Obligations shall fail to be valid, perfected or to have the priority required
under the Loan Documents; or

 

(e)           the release of any other Guarantor
pursuant to Section 7.09.

 

77

 

The
Guarantors hereby expressly waive diligence, presentment, demand of payment,
protest and all notices whatsoever, and any requirement that any Secured Party
exhaust any right, power or remedy or proceed against Borrower or any Guarantor
under this Agreement or the Notes, if any, or any other agreement or instrument
referred to herein or therein, or against any other Person under any other
guarantee of, or security for, any of the Guaranteed Obligations.  The Guarantors waive any and all notice of
the creation, renewal, extension, waiver, termination or accrual of any of the
Guaranteed Obligations and notice of or proof of reliance by any Secured Party
upon this Guarantee or acceptance of this Guarantee, and the Guaranteed
Obligations, and any of them, shall conclusively be deemed to have been
created, contracted or incurred in reliance upon this Guarantee, and all
dealings between Borrower and the Secured Parties shall likewise be
conclusively presumed to have been had or consummated in reliance upon this
Guarantee.  This Guarantee shall be
construed as a continuing, absolute, irrevocable and unconditional guarantee of
payment and performance without regard to any right of offset with respect to
the Guaranteed Obligations at any time or from time to time held by the Secured
Parties, and the obligations and liabilities of the Guarantors hereunder shall
not be conditioned or contingent upon the pursuit by the Secured Parties or any
other Person at any time of any right or remedy against Borrower or against any
other Person which may be or become liable in respect of all or any part of the
Guaranteed Obligations or against any collateral security or guarantee therefor
or right of offset with respect thereto. 
This Guarantee shall remain in full force and effect and be binding in
accordance with and to the extent of its terms upon the Guarantors and their
respective successors and assigns, and shall inure to the benefit of the
Secured Parties, and their respective successors and assigns, notwithstanding
that from time to time during the term of this Agreement there may be no
Guaranteed Obligations outstanding.

 

Section 7.03         Reinstatement.  The
obligations of the Guarantors under this Article VII shall be
automatically reinstated if and to the extent that for any reason any payment
by or on behalf of Borrower or other Loan Party in respect of the Guaranteed
Obligations is rescinded or must be otherwise restored by any holder of any of
the Guaranteed Obligations, whether as a result of any proceedings in
bankruptcy or reorganization or otherwise.

 

Section 7.04         Subrogation; Subordination. 
Each Guarantor hereby agrees that until the indefeasible payment and
satisfaction in full in cash of all Guaranteed Obligations and the expiration
and termination of the Commitments of the Lenders under this Agreement it shall
waive any claim and shall not exercise any right or remedy, direct or indirect,
arising by reason of any performance by it of its guarantee in Section 7.01,
whether by subrogation or otherwise, against Borrower or any other Guarantor of
any of the Guaranteed Obligations or any security for any of the Guaranteed
Obligations. Each Guarantor hereby expressly covenants and agrees for the
benefit of the Administrative Agent, the Collateral Agent, the Issuing Bank and
each of the Lenders that all obligations and liabilities of any other Loan
Party to such Guarantor of whatever description, including without limitation,
all intercompany receivables (collectively, the “Junior Claims”) shall be subordinate and junior in right of
payment to all Guaranteed Obligations. 
If an Event of Default shall exist, then no Guarantor shall accept any
direct or indirect payment (in cash, property, securities by setoff or
otherwise) from any other Loan Party on account of or in any manner in respect
of any Junior Claim until all of the Guaranteed Obligations have been
indefeasibly paid in full.

 

Section 7.05         Remedies.  The
Guarantors jointly and severally agree that, as between the Guarantors and the
Lenders, the obligations of Borrower under this Agreement and other Loan
Documents may be declared to be forthwith due and payable as provided in Article IX
(and shall be deemed to have become automatically due and payable in the
circumstances provided in Article IX) for purposes of Section 7.01,
notwithstanding any stay, injunction or other prohibition preventing such
declaration (or such obligations from becoming automatically due and payable)
as against Borrower and that, in the event of such declaration (or such
obligations being deemed to have become automatically due 

 

78

 

and payable), such obligations (whether or not due and
payable by Borrower) shall forthwith become due and payable by the Guarantors
for purposes of Section 7.01.

 

Section 7.06         Instrument for the Payment of Money. 
Each Guarantor hereby acknowledges that the guarantee in this Article VII
constitutes an instrument for the payment of money, and consents and agrees
that any Lender or Agent, at its sole option, in the event of a dispute by such
Guarantor in the payment of any moneys due hereunder, shall have the right to
bring a motion-action under New York CPLR Section 3213.

 

Section 7.07         Continuing Guarantee. 
The guarantee in this Article VII is a continuing guarantee
of payment and performance, and shall apply to all Guaranteed Obligations
whenever arising.

 

Section 7.08         General Limitation on Guarantee Obligations. 
In any action or proceeding involving any state corporate limited
partnership or limited liability company law, or any applicable state, federal
or foreign bankruptcy, insolvency, reorganization or other Legal Requirement
affecting the rights of creditors generally, if the obligations of any
Guarantor under Section 7.01 would otherwise be held or determined
to be void, voidable, invalid or unenforceable, or subordinated to the claims
of any other creditors, on account of the amount of its liability under Section 7.01,
then, notwithstanding any other provision to the contrary, the amount of such
liability shall, without any further action by such Guarantor, any Loan Party
or any other Person, be automatically limited and reduced to the highest amount
(after giving effect to the rights of subrogation and contribution established
in Sections 7.04 and 7.10, respectively) that is valid and
enforceable, not void or voidable and not subordinated to the claims of other
creditors as determined in such action or proceeding.

 

Section 7.09         Release of Guarantors. 
If, in compliance with the terms and provisions of the Loan Documents,
(i) all of the Equity Interests or (ii) all or substantially all of
the property of any Guarantor are sold or otherwise transferred (a “Transferred Guarantor”) to a Person or
persons (other than any Company or any Affiliate thereof), such Transferred
Guarantor shall, upon the consummation of such sale or transfer, be released
from its obligations under this Agreement (including under Section 12.03)
and its obligations to pledge and grant any Collateral owned by it pursuant to
any Security Document and, in the case of the sale of all of the Equity
Interests of the Transferred Guarantor, the pledge of such Equity Interests to
the Collateral Agent pursuant to the Security Documents shall be released, and,
so long as Borrower shall have previously provided the Collateral Agent and the
Administrative Agent such certifications or documents the Collateral Agent
and/or the Administrative Agent as shall reasonably request, the Collateral
Agent shall take such actions as are necessary to effect each release described
in this Section 7.09 in accordance with the relevant provisions of
the Security Documents.

 

Section 7.10         Right of Contribution. 
Each Guarantor hereby agrees that to the extent that a Guarantor shall
have paid more than its proportionate share of any payment made hereunder, such
Guarantor shall be entitled to seek and receive contribution from and against
any other Guarantor hereunder which has not paid its proportionate share of
such payment.  Each Guarantor’s right of
contribution shall be subject to the terms and conditions of Section 7.04.  The provisions of this Section 7.10
shall in no respect limit the obligations and liabilities of any Guarantor to
the Administrative Agent, the Issuing Bank and the Lenders, and each Guarantor
shall remain liable to the Administrative Agent, the Issuing Bank and the
Lenders for the full amount guaranteed by such Guarantor hereunder.

 

79

 

ARTICLE
VIII

SECURITY AND ACCOUNTS

 

Section 8.01         Grant of Security Interest.

 

To
secure the prompt payment and performance of all of the Obligations, in the
case of Borrower and all of the Guaranteed Obligations, in the case of each
Guarantor, Borrower and each Guarantor hereby collaterally assigns and pledges
to the Collateral Agent, for the benefit of the Secured Parties, and grants to
the Collateral Agent, for the benefit of the Secured Parties, a continuing
security interest in, all of such Loan Party’s right, title and interest in, to
and under all of the following property:

 

(a)           all Accounts of such Loan Party;

 

(b)           all Deposit Accounts and Securities
Accounts of such Loan Party, including without limitation the Primary Borrower
Account and the Provider Accounts but excluding (i) all disbursement
accounts, (ii) all security deposit accounts and cash collateral accounts
established for the benefit of third parties in the ordinary course of business
(and not, in any event securing Funded Debt) and (iii) deposit accounts
established to secure any Permitted LC Debt;

 

(c)           all Chattel Paper of such Loan Party;

 

(d)           all Leases under which SNH or one of its
Subsidiaries is lessor, and a Loan Party is a lessee or sublessee (but
excluding any Lease of any Affected Property listed on Schedule 1.01(a));

 

(e)           all Supporting Obligations relating to
any of the foregoing;

 

(f)            all books and records pertaining to any
of the foregoing (including without limitation, customer lists, credit files,
computer programs, printouts and other computer materials and records); and

 

(g)           all accessions to, substitutions for, and
all replacements, products and Proceeds of the foregoing (including without
limitation, proceeds of insurance policies insuring any of the foregoing).

 

Notwithstanding the foregoing:

 

(i)            the collateral assignment and pledge to
the Collateral Agent, for the benefit of the Secured Parties, of, and the grant
to the Collateral Agent, for the benefit of the Secured Parties, of a security
interest in any Government Lockbox Account shall only be to the maximum extent
permitted by Applicable Law;

 

(ii)           no account, instrument, chattel paper or
other obligation or property of any kind due from, owed by, or belonging to, a
Sanctioned Person or Sanctioned Entity, and no lease in which the lessee is a
Sanctioned Person or Sanctioned Entity, shall be Collateral under this
Agreement or any other Loan Document and no security interest or other Lien is
granted to the Lender therein; and

 

(iii)          no collateral assignment, pledge or
security interest is intended to be made or granted in the following property
of any Relevant Existing Provider, and the Collateral Agent and the Secured
Parties hereby disclaim any collateral assignment, pledge or security interest
in the following property of such Relevant Existing Provider (the “Relevant
Released Collateral”):

 

(A)          all Affected Accounts;

 

80

 

(B)           any deposit account into which revenue generated by,
and only by, the operation of an Affected Property by the Relevant Existing
Provider is deposited;

 

(C)           all Chattel Paper of such Relevant Existing Provider
but only to the extent generated by, and only by, the operation of an Affected
Property by such Relevant Existing Provider;

 

(D)          all Supporting Obligations relating to any of the
foregoing;

 

(E)           all books and records pertaining to any of the
foregoing (including without limitation, customer lists, credit files, computer
programs, printouts and other computer materials and records);

 

(F)           all Leases entered into by any Relevant Existing
Provider with respect to, and only to, an Affected Property; and

 

(G)           all accessions to, substitutions for, and all
replacements, products and proceeds of the foregoing (including without
limitation, proceeds of insurance policies insuring any of the foregoing).

 

Each of the Lenders, the Collateral Agent and the
Administrative Agent agree that, upon written request by Borrower to the
Administrative Agent, on behalf of the Secured Parties, the Collateral Agent
shall release its Lien on (i) any Collateral that is sold, lease,
transferred or otherwise disposed of in accordance with the terms and
provisions of this Agreement or (ii) any Relevant Released Collateral so
long as no Default or Event of Default shall exist at the time of the request
for any such release and after giving effect thereto.  Delivery by Borrower to the Administrative
Agent of any such request shall constitute a representation by Borrower that
the matters set forth in the preceding sentence (both as of the date of the
giving of such request and as of the date of the effectiveness of such release)
are true and correct with respect to such request.  Upon the effectiveness of any such release,
Borrower and such Guarantor are each authorized to file any UCC amendments
terminating any financing statements filed by the Collateral Agent to perfect
its Lien in the Collateral of Borrower or such Guarantor granted under any of
the Security Documents.  The
Administrative Agent and the Collateral Agent each agrees to execute and
deliver to Borrower or such Guarantor, at Borrower’s sole cost and expense,
such documents or instruments of termination or release as Borrower or such
Guarantor may reasonably request to evidence such release, including without
limitation, documents terminating the application of any Account Control
Agreement or other Loan Document to the extent applicable to Borrower or such
Guarantor.

 

Section 8.02         Endorsement; Notices.

 

Each
of Borrower and the Guarantors authorizes the Collateral Agent (to the maximum
extent permitted by Applicable Law with respect to any Government Receivable)
to endorse, in such Loan Party’s name, any item, however received by the
Collateral Agent, representing payment on or other Proceeds of any of the
Collateral of such Loan Party and, while an Event of Default exists, to notify
any Third Party Payor (other than Governmental Authorities) to make payments on
the Accounts of such Loan Party directly to the Collateral Agent.

 

81

 

Section 8.03         Preservation of Collateral and Perfection of
Security Interests.

 

Each
of Borrower and the Guarantors hereby authorizes, and shall, as required,
execute and deliver to the Lender, concurrently with the execution of this
Agreement and at any time hereafter, all financing statements or other
documents (and pay the cost of filing or recording the same in all public
offices deemed necessary by the Collateral Agent), as the Collateral Agent may
request, in a form satisfactory to the Collateral Agent (subject to any
Applicable Laws with respect to Government Receivables) to perfect and keep
perfected the Lien in the Collateral granted by such Loan Party to the
Collateral Agent, and otherwise to protect and preserve the Collateral of such
Loan Party and the Collateral Agent’s Lien therein.  The Collateral Agent is hereby irrevocably
authorized to file (and sign on behalf of such Loan Party, if necessary) UCC or
effective financing statements on the Collateral of such Loan Party at the time
of this Agreement or from time to time and any continuation statement or
amendment with respect thereto, in any appropriate filing office.

 

Section 8.04         Loss of Value of Collateral.

 

Borrower
shall immediately notify the Collateral Agent of any material loss or material
decrease in the value of the Collateral.

 

Section 8.05         Special Collateral.

 

Promptly
upon receipt by Borrower or any Guarantor thereof, such Loan Party shall
deliver or cause to be delivered to the Collateral Agent, with such
endorsements and assignments as are necessary to vest title and possession in
the Collateral Agent, all Chattel Paper, which such Loan Party now owns or
which such Loan Party may at any time acquire. 
Borrower and each Guarantor shall promptly mark all copies of such
Chattel Paper to show that they are subject to the Collateral Agent’s Lien.

 

Section 8.06         Remittance of Proceeds to Lender.

 

In the
event any Proceeds of any Collateral of Borrower or a Guarantor shall come into
the possession of such Loan Party, such Loan Party shall receive, as the sole
and exclusive property of the Collateral Agent, and as trustee for the
Collateral Agent, all monies, checks, notes, drafts and all other payments for
and/or other Proceeds of such Collateral, and no later than the first Business
Day following receipt, such Loan Party shall remit the same (or cause the same
to be remitted), in kind, as provided in Section 8.13(b) and
otherwise in any Loan Document, to the Primary Borrower Account.

 

Section 8.07         Safekeeping of Collateral.

 

To the
maximum extent permitted by Applicable Law, the Collateral Agent shall not be
responsible for:  (a) the
safekeeping of the Collateral of Borrower or any Guarantor (provided that the
Collateral Agent deals with such Collateral in the same manner as the
Collateral Agent deals with similar property for its own account); (b) any
loss or damage to such Collateral; (c) any diminution in the value of such
Collateral; or (d) any act or default of any other Person relating to such
Collateral.  All risk of loss, damage,
destruction or diminution in value of such Collateral shall be borne by
Borrower and the Guarantors.

 

Section 8.08         State of Incorporation; Name.

 

The
exact legal names of Borrower and the Guarantors as of the Closing Date are set
forth on the signature pages of this Agreement or in the case of a
Subsidiary that becomes a Guarantor after the Closing Date is set forth on the
signature page to the applicable Accession Agreement.  The principal place of business and chief
executive office of Borrower and each Guarantor and the office where Borrower
and each Guarantor keeps its records concerning the Collateral is, and has been
since its 

 

82

 

respective date of formation, 400 Centre Street,
Newton, Massachusetts 02458.  Borrower or
a Guarantor may change such offices, its name or state of incorporation (if
otherwise permitted hereunder), only upon at least 30-days’ prior written
notice to the Collateral Agent, and only after all actions reasonably necessary
to protect and perfect the Collateral Agent’s interest in the Collateral of
such Loan Party have been taken and completed.

 

Section 8.09         Continuing Lien.

 

It is
the intent of the parties hereto that (a) this Agreement shall constitute
a continuing agreement as to any and all future, as well as existing
transactions, between or among Borrower, the Guarantors and the Collateral
Agent under or in connection with the Loan Documents, and (b) the security
interests provided for herein shall attach to after-acquired as well as
existing Collateral of Borrower or a Guarantor.

 

Section 8.10         Assignment of Security Interests.

 

The
Collateral Agent may transfer to any other Person all or any part of the liens
and security interests granted hereby, and all, or any part of the Collateral
of Borrower and the Guarantors which may be in the Collateral Agent’s
possession while an Event of Default exists or, if to a successor, at any
time.  Upon such transfer, the transferee
shall be vested with all the rights and powers of the Collateral Agent
hereunder with respect to such of the Collateral of Borrower and the Guarantors
as is so transferred but, with respect to any of such Collateral not so
transferred, the Collateral Agent shall retain all of its rights and powers
(whether given to it in this Agreement, or otherwise).

 

Section 8.11         Possession; Sale of Collateral.

 

(a)           In addition to the rights and remedies
contained in this Section and Section 9.02, while an
Event of Default exists, the Collateral Agent may, at the request of the
Required Lenders and upon written notice to Borrower, terminate performance by
Borrower or any of Borrower’s agents, as the case may be, of any or all of the
Primary Servicer Responsibilities.

 

(b)           In addition to the rights and remedies
contained in this Section and in Section 9.02, while an
Event of Default exists, the Collateral Agent may (subject to any Applicable
Laws with respect to Government Receivables): 
(i) require Borrower or any Guarantor to assemble any tangible
assets that comprise part of the Collateral of such Loan Party and make them
available to the Collateral Agent at any place or places reasonably designated
by the Collateral Agent; (ii) to the extent permitted by Applicable Law,
with or without notice or demand for performance and without liability for
trespass, subject to the rights of landlords, if any, enter any premises where
any of the Collateral of such Loan Party may be located and peaceably take
possession of the same, and may demand and receive such possession from any
Person who has possession thereof, and may take such measures as the Collateral
Agent may deem necessary or proper for the care or protection thereof
(including without limitation, the right to remove all or any portion of the
Collateral of such Loan Party); and (iii) with or without taking such
possession may sell or cause to be sold, in one or more sales or parcels, for
cash, on credit or for future delivery, without assumption of any credit risk,
all or any portion of such Collateral, at public or private sale or at any
broker’s board or any securities exchange, without demand of performance or
notice of intention to sell or of time or place of sale, except at least 10
Business Days’ written notice to such Loan Party of the time and place of such
sale or sales (and such other notices as may be required by Applicable Law, if
any, and which cannot be waived), which such Loan Party hereby expressly
acknowledges is commercially reasonable. 
The Collateral Agent shall have no obligation to clean-up or otherwise
prepare any Collateral for such sale. 
Each purchaser at any such sale shall hold the property sold absolutely,
free from any claim or right on the part of such Loan Party, and such Loan
Party hereby waives (to the fullest extent permitted by Applicable Law) all
rights of redemption, stay and appraisal that 

 

83

 

such Loan Party now have or may at any time in the future
have under any Applicable Law now existing or hereafter enacted.  At any such sale, the Collateral, or portion
thereof, to be sold may be sold in one lot as an entirety or in separate
parcels, as the Collateral Agent may (in its sole and absolute discretion)
determine.  The Collateral Agent shall
not be obligated to make any sale of any such Collateral if it shall determine
not to do so, regardless of the fact that notice of sale of such Collateral
shall have been given.  The Collateral
Agent may, without notice or publication, adjourn any such public or private
sale or cause the same to be adjourned from time to time by announcement at the
time and place fixed for sale, and such sale may, without further notice, be
made at the time and place to which the same was so adjourned.  The Collateral Agent may comply with any
Applicable Law in connection with a disposition of the Collateral and
compliance will not be considered adversely to affect the commercial reasonableness
of any disposition of any such Collateral. 
In case any such sale of all or any part of the Collateral of Borrower
or any Guarantor is made on credit or for future delivery, the Collateral so
sold may be retained by the Collateral Agent until the sale price is paid by
the purchaser or purchasers thereof.  The
Collateral Agent shall not incur any liability for the failure to collect or
realize upon any or all of the Collateral of such Loan Party or for any delay
in doing so and, in case of any such failure, shall not be under any obligation
to take any action with respect thereto; provided, such Collateral may be sold
again upon like notice.  If any
Collateral of such Loan Party is sold upon credit, such Loan Party will be
credited only with payments actually made by the purchaser, received by the
Collateral Agent and applied to the Obligations in accordance with this
Agreement.  In the event the purchasers
fail to pay for any such Collateral, the Collateral Agent may resell such
Collateral.  At any public sale made
pursuant to this Agreement (or to the extent permitted by Applicable Law at any
private sale), the Collateral Agent may bid for or purchase, free from any
right of redemption, stay or appraisal and all rights of marshalling, the
Collateral and any other security for the Obligations or otherwise on the part
of Borrower or any Guarantor (all said rights being also hereby waived and
released by such Loan Party to the fullest extent permitted by Applicable Law),
and may make payment on account thereof by using any claim then due and payable
to the Collateral Agent from Borrower or any Guarantor as a credit against the
purchase price, and the Collateral Agent may, upon compliance with the terms of
sale, hold, retain and dispose of such property without further accountability
to Borrower or any Guarantor therefor. 
For purposes of this Agreement, in connection with the exercise of any
remedies, a written agreement to purchase the Collateral or any portion thereof
shall be treated as a sale thereof; the Collateral Agent shall be free to carry
out such sale pursuant to such agreement, and neither Borrower nor any
Guarantor shall be entitled to the return of such Collateral or any portion
thereof subject thereto, notwithstanding the fact that after the Collateral
Agent shall have entered into such an agreement, all Defaults or Event of
Defaults shall have been remedied and all Obligations shall have been paid in
full.  As an alternative to exercising
the power of sale herein conferred upon it, in connection with the exercise of
any remedies, the Collateral Agent may proceed by a suit or suits at law or in
equity to foreclose this Agreement and to sell the Collateral or any portion
thereof pursuant to a judgment or decree of a court or courts having competent
jurisdiction or pursuant to a proceeding by a court-appointed receiver.  In any action hereunder, the Collateral Agent
shall be entitled to the appointment of a receiver without notice, to peaceably
take possession of all or any portion of such Collateral and to exercise such
powers as the court shall confer upon the receiver.  Notwithstanding the foregoing, if an Event of
Default shall exist, the Collateral Agent shall be entitled to apply, without
notice to Borrower or any Guarantor, any cash or cash items constituting
Collateral in its possession to payment of the Obligations.

 

(c)           Each of Borrower and the Guarantors
agrees that notwithstanding anything to the contrary contained in this
Agreement, such Loan Party shall remain liable under each contract or other
agreement giving rise to Accounts and all other contracts or agreements
constituting part of the Collateral of such Loan Party and the Collateral Agent
shall not have any obligation or liability in respect thereof.

 

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Section 8.12         Servicing.

 

(a)           Appointment. 
Each Guarantor hereby appoints Borrower as its agent for the
administration and servicing obligations set forth in the immediately following
subsection (b) with respect to all of such Guarantor’s Accounts (the
“Primary Servicer Responsibilities”),
and Borrower hereby accepts such appointment and agrees to perform the Primary
Servicer Responsibilities on behalf of such Guarantors; provided, however, that such appointment
shall not release any Guarantor from any of its duties, responsibilities,
liabilities and obligations resulting or arising under any of the Loan
Documents to which such Guarantor is a party. Each of Borrower and such
Guarantors hereby acknowledges that Borrower’s appointment pursuant to this
Section is expressly limited by and subject to the Lender’s rights under Section 8.11(a).

 

(b)           Primary Servicer Responsibilities. 
Each Guarantor shall be responsible for the following administration and
servicing obligations which shall be performed by Borrower on behalf of the
Guarantors until such time as the Lender shall exercise its rights under Section 8.11(a):

 

(i)            Servicing Standards and Activities. 
Borrower agrees to administer and service the Accounts of the Guarantors
(w) to the extent consistent with the standards set forth in the
immediately following clauses (ii), with the same care that it exercises
in administering and servicing similar receivables for its own account,
(x) within the parameters of services set forth in such clause, as such
parameters may be modified by mutual written agreement of the Guarantors and
Borrower, (y) in compliance at all times with Applicable Law and with the
agreements, covenants, objectives, policies and procedures set forth in the
Loan Documents, and (z) in accordance with industry standards for
servicing receivables of the type in question unless such standards conflict
with the procedures set forth in the immediately following clauses (ii),
in which case the provisions of such clause shall control. Borrower shall
establish and maintain electronic data processing services for monitoring,
administering and collecting such Accounts in accordance with the foregoing
standards.

 

(ii)           Parameters of Primary Servicing. 
The Primary Servicer Responsibilities shall be performed within the
following parameters:

 

(w)          Except as otherwise provided in any Loan Document,
Borrower shall have full power and authority to take all actions that it may
deem necessary or desirable, consistent in all material respects with its
existing policies and procedures with respect to the administration and
servicing of accounts receivable, in connection with the administration and
servicing of the Guarantors’ Accounts. Without limiting the generality of the
foregoing, Borrower shall, in the performance of its servicing obligations
hereunder, act in accordance with all legal requirements and subject to the
terms and conditions of the Loan Documents.

 

(x)            Borrower shall not change in any material respect its
existing policies and procedures with respect to the administration and
servicing of accounts receivable (including, without limitation, the amount and
timing of write-offs) without the prior written consent of the Collateral
Agent.

 

(y)           Borrower will be responsible for monitoring and
collecting the Guarantors’ Accounts, including, without limitation, contacting
Account Debtors that have not made payment on their respective Accounts within
the customary time period for such Account Debtor, and resubmitting any claim
rejected by an Account Debtor due to incomplete information.

 

85

 

(z)            Notwithstanding anything to the contrary contained
herein, Borrower may not amend, waive or otherwise permit or agree to any
deviation from the terms or conditions of any Account of a Material Provider in
any material respect (except in accordance with its Credit and Collection
Policy) without the prior consent of the Collateral Agent.

 

Section 8.13         Payment Mechanics, Etc.

 

(a)           Notices to Non-Governmental Authorities. 
Each Provider has prepared, executed and delivered to each
non-Governmental Authority who is currently an Account Debtor, and each
Provider shall prepare, execute and deliver to each non-Governmental Authority
who is or is expected to become an Account Debtor (in each case, other than
with respect to Affected Accounts), a notice to non-Governmental Authorities
addressed to each such non-Governmental Authority, which notice did or shall
state that all checks and EOB’s from such non-Governmental Authority in respect
of Accounts shall be sent to the applicable Provider for immediate deposit in
the Primary Borrower Account and all wire transfers from such non-Governmental
Authority on account of Accounts shall be wired directly into the Primary
Borrower Account.

 

(b)           Invoices to Non-Governmental Authorities. 
Each Provider covenants and agrees that, on and after the Closing Date,
all invoices (and, if provided by such Provider, return envelopes) to be sent
to non-Governmental Authorities shall set forth only the address of the
applicable Provider as a return address for payment of Accounts and delivery of
EOB’s, and only the Primary Borrower Account with respect to wire transfers for
payment of Accounts (in each case, other than with respect to Affected
Accounts).  Each Provider hereby further
covenants and agrees to cause each check received by such Provider to be
deposited in the Primary Borrower Account no later than one Business Day
following receipt. Each Provider hereby further covenants and agrees to
instruct and notify each of the members of its accounting and collections staff
to provide identical information in communications with non-Governmental
Authorities with respect to payment of Accounts, wire transfers and EOB’s
(except for Affected Accounts).

 

(c)           Notices to Governmental Authorities. 
Each Provider has prepared, executed and delivered to each Governmental
Authority (or its fiscal intermediary) who is currently an Account Debtor, and
each Provider shall prepare, execute and deliver to each Governmental Authority
(or its fiscal intermediary) who is or is expected to become an Account Debtor
(in each case, other than with respect to Affected Accounts), notices to
Governmental Authorities, which notices did or shall provide that all payments
in respect of the applicable Accounts shall be wired directly into the
applicable Provider Account.

 

(d)           Invoices to Governmental Authorities. 
Each Provider covenants and agrees that, on and after the Closing Date,
all invoices to be sent to Governmental Authorities (and, if provided by such
Provider, return envelopes) shall set forth only the applicable Provider
Account with respect to wire transfers for payment of Accounts (in each case,
other than with respect to Affected Accounts). 
Each Provider further covenants and agrees to instruct and notify each
of the members of its accounting and collections staff to provide identical
information in communications with Governmental Authorities with respect to
wire transfers (except for Affected Accounts).

 

(e)           Government Lockboxes, Etc. 
The Providers shall maintain the Provider Accounts solely and exclusively
for the receipt of payments on account of Accounts from Governmental
Authorities. The Providers and Borrower shall take all actions necessary to
ensure that no payments from any Person other than a Governmental Authority
shall be deposited in any Provider Account.

 

86

 

(f)            Misdirected Payments; EOB’s. 
If any Provider receives an EOB or a Misdirected Payment in the form of
a check, such Provider shall immediately send or deposit such Misdirected Payment,
in the form received by such Provider, by hand or overnight delivery service to
the Primary Borrower Account or the applicable Provider Account, as the case
may be, together with the EOB and the envelope in which such payment was
received. In the event that any Provider receives a Misdirected Payment in the
form of cash or wire transfer, such Provider shall immediately wire transfer
the amount of such Misdirected Payment directly to the Primary Borrower
Account. All Misdirected Payments and EOB’s shall be sent promptly upon receipt
thereof, and in no event later than the close of business, on the first
Business Day after receipt thereof.

 

(g)           Notices regarding Misdirected Payments. 
Each Provider hereby agrees and consents to Borrower taking such actions
as are reasonably necessary to ensure that future payments from the Account
Debtor of a Misdirected Payment shall be made in accordance with the notice
previously delivered to such Account Debtor, or, if no notice was provided, in
accordance with the applicable provisions of this Section, including, without
limitation, to the maximum extent permitted by Applicable Law,
(i) Borrower, its assigns or designees, or the Collateral Agent executing
on such Provider’s behalf and delivering to such Account Debtor a new notice,
and (ii) Borrower, its assigns or designees, or the Collateral Agent
contacting such Account Debtor by telephone to confirm the instructions
previously set forth in the notice to such Account Debtor. Upon Borrower’s
request, such Provider shall promptly (and in any event, within two Business
Days from such request) take such similar actions as Borrower may request.

 

ARTICLE
IX

EVENTS OF DEFAULT

 

Section 9.01         Events of Default.

 

Each
of the following shall constitute an event of default (each, an “Event of Default”) under this Agreement,
whatever the reason for such event and whether it shall be voluntary or
involuntary or be effected by operation of Applicable Law or pursuant to any
judgment or order of any Governmental Authority:

 

(a)           Default in Payment of Principal. 
Borrower shall fail to pay when due (whether upon demand, at maturity,
by reason of acceleration or otherwise) the principal of any of the Loans or
any Reimbursement Obligation.

 

(b)           Default in Payment of Interest and Other
Obligations.  Borrower shall fail to pay when due any
interest on any of the Loans or any of the other payment Obligations (other
than Obligations described in clause (a) immediately above) owing by
Borrower under this Agreement or any other Loan Document, or any other Loan
Party shall fail to pay when due any payment Obligation owing by such other
Loan Party under any Loan Document to which it is a party, and such failure
shall continue for a period of three Business Days.

 

(c)           Default in Performance. 
(i) Borrower shall fail to perform or observe any term, covenant,
condition or agreement contained in any of Article VI, Article VIII
or Sections 5.01(d)(vii), 5.01(d)(viii), 5.01(d)(xiii), 5.14,
5.15, or 5.18 or (ii) Borrower, any Subsidiary or any other
Loan Party shall fail to perform or observe any term, covenant, condition or
agreement contained in this Agreement or any other Loan Document to which it is
a party and not otherwise mentioned in this Section and in the case of
this clause (ii) only such failure shall continue for a period of
30 days after the earlier of (x) the date upon which a Responsible
Officer of Borrower or such other Loan Party obtains knowledge of such 

 

87

 

failure or (y) the date upon which Borrower has
received written notice of such failure from the Administrative Agent and the
Lenders.

 

(d)           Misrepresentations. 
Any written statement, representation or warranty made or deemed made by
or on behalf of Borrower, any Subsidiary, any other Loan Party or any Provider
under this Agreement or under any other Loan Document, or any amendment hereto
or thereto, or in any other writing or statement at any time furnished or made
or deemed made by or on behalf of Borrower, any Subsidiary, any other Loan Party
or any Provider to the Administrative Agent, the Collateral Agent, the Issuing
Bank or any Lender, shall at any time prove to have been incorrect or
misleading, in light of the circumstances in which made or deemed made, in any
material respect when furnished or made or deemed made.

 

(e)           Indebtedness Cross-Default; Derivatives Contracts.

 

(i)            Borrower, any Subsidiary or any other
Loan Party shall fail to pay when due and payable the principal of, or interest
on, any Indebtedness (other than the Loans and Reimbursement Obligations)
having an aggregate outstanding principal amount greater than or equal to
(A) $2,500,000 in the case of Indebtedness that is not Nonrecourse
Indebtedness or (B) $5,000,000 in the case of Indebtedness that is Nonrecourse
Indebtedness (any such Indebtedness being “Material Indebtedness”); or

 

(ii)           (x) the maturity of any Material
Indebtedness shall have been accelerated in accordance with the provisions of
any indenture, contract or instrument evidencing, providing for the creation of
or otherwise concerning such Material Indebtedness or (y) any Material
Indebtedness shall have been required to be prepaid or repurchased prior to the
stated maturity thereof; or

 

(iii)          any other event shall have occurred and
be continuing which, with or without the passage of time, the giving of notice,
or both, would permit any holder or holders of Material Indebtedness, any
trustee or agent acting on behalf of such holder or holders or any other
Person, to accelerate the maturity of any such Material Indebtedness or require
any such Material Indebtedness to be prepaid or repurchased prior to its stated
maturity; or

 

(iv)          there occurs under any Derivatives
Contract an Early Termination Date (as defined in such Derivatives Contract)
resulting from (A) any event of default under such Derivatives Contract as
to which any Loan Party is the Defaulting Party (as defined in such Derivatives
Contract) or (B) any Termination Event (as so defined) under such
Derivatives Contract as to which any Loan Party is an Affected Party (as so
defined) and, in either event, the Derivatives Termination Value owed by any
Loan Party as a result thereof is $2,500,000 or more.

 

(f)            Voluntary Bankruptcy Proceeding. 
Borrower, any Subsidiary or any other Loan Party (other than a
Subsidiary that, together with all other Subsidiaries then subject to a
bankruptcy proceeding or other proceeding or condition described in this
subsection or the immediately following subsection, does not account for more
than 5% of EBITDA for the then most recently ended fiscal year) shall:  (i) commence a voluntary case under the
Bankruptcy Code of 1978, as amended, or other federal bankruptcy laws (as now
or hereafter in effect); (ii) file a petition seeking to take advantage of
any other Applicable Laws, domestic or foreign, relating to bankruptcy,
insolvency, reorganization, winding-up, or composition or adjustment of debts;
(iii) consent to, or fail to contest in a timely and appropriate manner,
any petition filed against it in an involuntary case under such bankruptcy laws
or other Applicable Laws or consent to any proceeding or action described in
the immediately following subsection; (iv) apply for or consent to, or
fail to contest in a timely and appropriate manner, the appointment of, or the
taking of 

 

88

 

possession by, a receiver, custodian, trustee, or
liquidator of itself or of a substantial part of its property, domestic or
foreign; (v) admit in writing its inability to pay its debts as they become
due; (vi) make a general assignment for the benefit of creditors;
(vii) make a conveyance fraudulent as to creditors under any Applicable
Law; or (viii) take any corporate or partnership action for the purpose of
effecting any of the foregoing.

 

(g)           Involuntary Bankruptcy Proceeding. 
A case or other proceeding shall be commenced against Borrower, any
Subsidiary or any other Loan Party (other than a Subsidiary that, together with
all other Subsidiaries then subject to a bankruptcy proceeding or other proceeding
or condition described in this subsection or the immediately following
subsection, does not account for more than 5% of EBITDA for the then most
recently ended fiscal year) in any court of competent jurisdiction seeking:  (i) relief under the Bankruptcy Code of
1978, as amended, or other federal bankruptcy laws (as now or hereafter in
effect) or under any other Applicable Laws, domestic or foreign, relating to
bankruptcy, insolvency, reorganization, winding-up, or composition or
adjustment of debts; or (ii) the appointment of a trustee, receiver,
custodian, liquidator or the like of such Person, or of all or any substantial
part of the assets, domestic or foreign, of such Person, and such case or
proceeding shall continue undismissed or unstayed for a period of
60 consecutive calendar days, or an order granting the remedy or other
relief requested in such case or proceeding against Borrower or such other Loan
Party (including, but not limited to, an order for relief under such Bankruptcy
Code or such other federal bankruptcy laws) shall be entered.

 

(h)           Litigation; Enforceability. 
Borrower, any Subsidiary or any other Loan Party shall disavow, revoke
or terminate (or attempt to terminate) any Loan Document to which it is a party
or shall otherwise challenge or contest in any action, suit or proceeding in
any court or before any Governmental Authority the validity or enforceability
of this Agreement, any Note or any other Loan Document or this Agreement, any
Note, the Guaranty or any other Loan Document shall cease to be in full force
and effect (except as a result of the express terms thereof)  or shall cease to create perfected security interests in
favor of the Lender in the Collateral subject or purported to be subject
thereto, subject to no other Liens other than Permitted Liens, or such
Collateral shall be transferred to any Person, except as expressly permitted
hereunder or under any Loan Documents, without the prior written consent of the
Administrative Agent.

 

(i)            Judgment.  A judgment or
order for the payment of money or for an injunction shall be entered against
Borrower, any Subsidiary or any other Loan Party, by any court or other
tribunal and (i) such judgment or order shall continue for a period of
30 days without being paid, stayed or dismissed through appropriate
appellate proceedings and (ii) either (A) the amount of such judgment
or order (x) for which insurance has not been acknowledged in writing by
the applicable insurance carrier (or the amount as to which the insurer has
denied liability) or (y) not otherwise subject to indemnification or
reimbursement on reasonable terms and conditions by Persons reasonably likely
to honor such indemnification or reimbursement obligations, exceeds,
individually or together with all other such outstanding judgments or orders
entered against Borrower, such Subsidiaries and such other Loan Parties,
$2,500,000 or (B) in the case of an injunction or other non-monetary
judgment, such judgment could reasonably be expected to have a Material Adverse
Effect.

 

(j)            Attachment.  A warrant,
writ of attachment, execution or similar process shall be issued against any
property of Borrower, any Subsidiary or any other Loan Party which exceeds,
individually or together with all other such warrants, writs, executions and
processes, $2,500,000 in amount and such warrant, writ, execution or process
shall not be discharged, vacated, stayed or bonded for a period of
30 days; provided, however,
that if a bond has been issued in favor of the claimant or other Person
obtaining such warrant, writ, execution or process, the issuer of such bond
shall execute a waiver or subordination agreement in form and substance
satisfactory to the Lender pursuant to which the issuer 

 

89

 

of such bond subordinates its right of reimbursement,
contribution or subrogation to the Obligations and waives or subordinates any
Lien it may have on the assets of any Loan Party.

 

(k)           ERISA.  Any member of
the ERISA Group shall fail to pay when due an amount or amounts aggregating in
excess of $2,500,000 which it shall have become liable to pay under
Title IV of ERISA; or notice of intent to terminate a Plan or Plans having
aggregate Unfunded Liabilities in excess of $2,500,000 shall be filed under
Title IV of ERISA by any member of the ERISA Group, any plan administrator
or any combination of the foregoing; or the PBGC shall institute proceedings
under Title IV of ERISA to terminate, to impose liability (other than for
premiums under Section 4007 of ERISA) in respect of, or to cause a trustee
to be appointed to administer, any Plan or Plans having aggregate Unfunded
Liabilities in excess of $2,500,000; or a condition shall exist by reason of
which the PBGC would be entitled to obtain a decree adjudicating that any such
Plan must be terminated; or there shall occur a complete or partial withdrawal
from, or a default, within the meaning of Section 4219(c)(5) of
ERISA, with respect to, one or more Multiemployer Plans which could cause one
or more members of the ERISA Group to incur a current payment obligation in
excess of $2,500,000.

 

(l)            Loan Documents. 
An Event of Default (as defined therein) shall occur under any of the
other Loan Documents.

 

(m)          Change of Control/Change in Management.

 

(i)            Any “Person” or “group” (as such terms
are used in Sections 13(d) and 14(d) of the Securities Exchange Act
of 1934, as amended (the “Exchange Act”)),
is or becomes the “beneficial owner” (as defined in Rules 13d-3 and 13d-5
under the Exchange Act, except that a Person will be deemed to have “beneficial
ownership” of all securities that such Person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 9.8% of the total voting power of the then
outstanding voting stock of Borrower; or

 

(ii)           During any period of 12 consecutive
months ending after the Closing Date, individuals who at the beginning of any
such 12-month period constituted the Board of Directors of Borrower (together
with any new directors whose election by such Board or whose nomination for
election by the shareholders of Borrower was approved by a vote of a majority
of the directors then still in office who were either directors at the
beginning of such period or whose election or nomination for election was
previously so approved but excluding any director whose initial nomination for,
or assumption of office as, a director occurs as a result of an actual or
threatened solicitation of proxies or consents for the election or removal of
one or more directors by any Person or group other than a solicitation for the
election of one or more directors by or on behalf of the Board of Directors)
cease for any reason to constitute a majority of the Board of Directors of
Borrower then in office; or

 

(iii)          The Shared Services Agreement shall
terminate or expire; or

 

(iv)          Borrower, or any Subsidiary or other Loan
Party enters into any transaction of merger or consolidation not otherwise
permitted hereunder or conveys, sells, leases, subleases, transfers or
otherwise disposes of, in one transaction or a series of transactions, all or
substantially all of its assets, whether now owned or hereafter acquired; or

 

(v)           Borrower shall cease to own or control,
directly or indirectly, 100% of the outstanding Equity Interests of each other
Loan Party.

 

90

 

(n)           Termination of Licenses. 
The termination of Borrower’s, any Subsidiary’s, any Loan Party’s or any
Provider’s, or the filing of any judicial or administrative proceedings that
could reasonably be expected to materially and adversely affect any such
Person’s, operating license granted by any Governmental Authority or right to
receive Medicaid or Medicare payments which, in either case, could reasonably be
expected to have a Material Adverse Effect.

 

(o)           Revocation Order. 
Borrower, any Provider or any other Loan Party attempts to revoke,
terminate or otherwise alter any order (whether or not revocable) established
under the Depositary Agreement, any Government Depositary Agreement, Control
Agreement or other Account Control Agreement regarding the transfer of funds on
deposit in the Primary Borrower Account, Provider Account or other deposit
account subject to an Account Control Agreement, without the prior written
consent of the Lender.

 

(p)           Overpayments. 
As of any date of determination, any Provider is found to have been
overpaid by any Governmental Authority by an amount equal to 10% or more of the
Eligible Accounts as of such date during any period covered by any audit
conducted by the CMS or any state Governmental Authority and such overpayment
is not repaid, or reserved for in a manner reasonably acceptable to the Lender,
within 30 days of the earlier of receipt of notice or knowledge thereof by
such Provider or any Loan Party.

 

Section 9.02         Remedies Upon Event of Default.

 

Upon
the occurrence of an Event of Default the following provisions shall apply:

 

(a)           Acceleration; Termination of Facilities.

 

(i)            Automatic.  Upon the
occurrence of an Event of Default specified in Section 9.01(f) or
(g), the Commitment shall immediately and automatically terminate and
the principal of, and all accrued interest on, the Loans, an amount equal to
the Stated Amount of all Letters of Credit outstanding as of the date of the
occurrence of such Event of Default for deposit into the Collateral Account
pursuant to Section 10.01, and all of the other Obligations shall
become immediately and automatically due and payable without presentment,
demand, protest, or other notice of any kind, all of which are expressly waived
by Borrower.

 

(ii)           Optional.  If any other
Event of Default shall exist, the Administrative Agent may, and at the request
of the Required Lenders shall, terminate the Commitment and/or declare the
principal of, and accrued interest on, the Loans, an amount equal to the Stated
Amount of all Letters of Credit outstanding as of the date of the occurrence of
such Event of Default for deposit into the Collateral Account pursuant to Section 10.01,
and all of the other Obligations to be immediately due and payable, whereupon
the same shall immediately become due and payable without presentment, demand,
protest or other notice of any kind, all of which are expressly waived by
Borrower.

 

(b)           Loan Documents. 
The Administrative Agent may, and at the request of the Required Lenders
shall, exercise any and all of its rights under any and all of the other Loan
Documents.

 

(c)           Applicable Law. 
The Administrative Agent may, and at the request of the Required Lenders
shall, exercise all other rights and remedies it may have under any Applicable
Law.

 

(d)           Appointment of Receiver. 
To the extent permitted by Applicable Law, the Administrative Agent
shall be entitled to the appointment of a receiver for the assets and
properties of 

 

91

 

Borrower, the Subsidiaries and the other Loan Parties,
without notice of any kind whatsoever and without regard to the adequacy of any
security for the Obligations or the solvency of any party bound for its
payment, to take possession of all or any portion of the business operations of
Borrower and its Subsidiaries and to exercise such power as the court shall
confer upon such receiver.

 

Section 9.03         Remedies Upon Default.

 

Upon
the occurrence of a Default specified in Section 9.01(g), the
Commitment shall immediately and automatically terminate and the principal of
the Loans and Reimbursement Obligations then outstanding, together with accrued
interest thereon and any unpaid accrued Fees and all other liabilities of the
Loan Parties accrued hereunder and under any other Loan Document, shall
automatically become due and payable, without presentment, demand, protest or
any other notice of any kind, all of which are hereby expressly waived by the
Loan Parties, anything contained herein or in any other Loan Document or
otherwise to the contrary notwithstanding.

 

Section 9.04         Performance by Agents.

 

If
Borrower or any Guarantor shall fail to perform any covenant, duty or agreement
contained in any of the Loan Documents, the Administrative Agent and/or the
Collateral Agent may, after notice to such Loan Party, perform or attempt to
perform such covenant, duty or agreement on behalf of such Loan Party after the
expiration of any cure or grace periods set forth herein.  In such event, such Loan Party shall, at the
request of the Administrative Agent and/or the Collateral Agent, promptly pay
any amount reasonably expended by the Administrative Agent and/or the
Collateral Agent in such performance or attempted performance to the
Administrative Agent and/or the Collateral Agent, together with interest
thereon at the applicable Default Rate from the date of such expenditure until
paid.  Notwithstanding the foregoing,
neither the Administrative Agent nor the Collateral Agent shall have any
liability or responsibility whatsoever for the performance of any obligation of
Borrower, any Guarantor or any other Loan Party under this Agreement or any
other Loan Document.

 

Section 9.05         Rights Cumulative.

 

The
rights and remedies of the Administrative Agent, the Collateral Agent, the
Issuing Bank and the Lenders under this Agreement and each of the other Loan
Documents shall be cumulative and not exclusive of any rights or remedies which
it may otherwise have under Applicable Law. 
In exercising its rights and remedies, the Administrative Agent, the
Collateral Agent, the Issuing Bank and the Lenders may be selective and no
failure or delay by the Administrative Agent, the Collateral Agent, the Issuing
Bank and the Lenders in exercising any right shall operate as a waiver of it,
nor shall any single or partial exercise of any power or right preclude its
other or further exercise or the exercise of any other power or right.

 

ARTICLE
X

COLLATERAL ACCOUNT; APPLICATION OF COLLATERAL PROCEEDS

 

Section 10.01       Collateral Account. 
(a)  The Collateral Agent is hereby authorized to establish and
maintain at its office (or, at the Collateral Agent’s discretion, at the office
of its designee from time to time) at 520 Madison Ave. New York, New York 10022,
in the name of the Collateral Agent and pursuant to one or more Account Control
Agreements, one or more restricted deposit accounts designated “Five Star
Quality Care, Inc. Collateral Account” (or such other substantially
similar designation as shall be determined by the Collateral Agent in its
discretion from time to time).  Each Loan
Party shall deposit into the Collateral Account from time to time any cash that
such Loan Party is required to pledge as additional collateral security
hereunder pursuant to the Loan Documents.

 

92

 

(b)           The balance from time to time in the
Collateral Account shall constitute part of the Collateral and shall not
constitute payment of the Obligations until applied as hereinafter
provided.  So long as no Event of Default
has occurred and is continuing or will result therefrom, the Collateral Agent
shall within ten Business Days of receiving a request from the applicable Loan
Party for release of cash proceeds with respect to the LC Sub Account, remit
such net cash proceeds on deposit in the LC Sub Account to or upon the order of
such Loan Party (x) at such time as all Letters of Credit shall have been
terminated and all of the liabilities in respect of the Letters of Credit have
been paid in full or (y) otherwise in accordance with Section 2.16(i).  At any time following the occurrence and
during the continuance of an Event of Default, the Collateral Agent may (and,
if instructed by the Required Lenders as specified herein, shall) in its (or
their) discretion apply or cause to be applied (subject to collection) the
balance from time to time outstanding in such restricted deposit account to the
credit of the Collateral Account to the payment of the Obligations in the
manner specified in Section 10.02 subject, however, in the case of
amounts deposited in the LC Sub-Account, to the provisions of Section 2.16(i).  The Loan Parties shall have no right to
withdraw, transfer or otherwise receive any funds deposited in the Collateral
Account except to the extent specifically provided herein.

 

(c)           Amounts on deposit in the Collateral
Account shall be invested and reinvested from time to time in Cash Equivalents
as the applicable Loan Party (or, after the occurrence and during the
continuance of an Event of Default, the Collateral Agent) shall determine, by
written instruction to the Collateral Agent, or if no such instructions are
given, then as the Collateral Agent, in its sole discretion, shall determine,
which Cash Equivalents shall be held in the name and be under the control of
the Collateral Agent (or any sub-agent); provided
that at any time after the occurrence and during the continuance of an Event of
Default, the Collateral Agent may (and, if instructed by the Required Lenders
as specified herein, shall) in its (or their) discretion at any time and from
time to time elect to liquidate any such Cash Equivalents and to apply or cause
to be applied the proceeds thereof to the payment of the Obligations in the
manner specified in Section 10.02 subject, however, in the case of
amounts deposited in the LC Sub-Account, to the provisions of Section 2.16(i).

 

(d)           Amounts deposited into the Collateral
Account as cover for liabilities in respect of Letters of Credit under any
provision of this Agreement requiring such cover shall be held by the
Administrative Agent in a separate sub-account designated as the “LC
Sub-Account” (the “LC Sub-Account”)
and, subject to Section 2.16(i), all amounts held in the LC
Sub-Account shall constitute collateral security to be initially applied in
accordance with Section 2.16(i).

 

Section 10.02       Application of Proceeds. 
The proceeds received by the Collateral Agent in respect of any sale of,
collection from or other realization upon all or any part of the Collateral
pursuant to the exercise by the Collateral Agent of its remedies shall be
applied, in full or in part, together with any other sums then held by the
Collateral Agent pursuant to this Agreement or any other Loan Document,
promptly by the Collateral Agent as follows:

 

(a)           First, to the indefeasible payment in full in
cash of all costs and expenses, fees, commissions and taxes of such sale,
collection or other realization (including compensation to the Collateral Agent
and its agents and counsel, and all expenses, liabilities and advances made or
incurred by the Collateral Agent in connection therewith and all amounts for
which the Collateral Agent is entitled to indemnification pursuant to the
provisions of any Loan Document), together with interest on each such amount at
the highest rate then in effect under this Agreement from and after the date
such amount is due, owing or unpaid until paid in full;

 

(b)           Second, to the indefeasible payment in full in
cash of all other reasonable costs and expenses of such sale, collection or
other realization (including compensation to the other Secured Parties and
their agents and counsel and all costs, liabilities and advances made or
incurred by the other 

 

93

 

Secured Parties in connection therewith), together
with interest on each such amount at the highest rate then in effect under this
Agreement from and after the date such amount is due, owing or unpaid until
paid in full;

 

(c)           Third, without duplication of amounts applied
pursuant to clauses (a) and (b) above, to the indefeasible payment in
full in cash, pro rata, of
interest and other amounts constituting Obligations (other than principal,
Reimbursement Obligations and obligations to Cash Collateralize Letters of Credit)
in each case equally and ratably in accordance with the respective amounts
thereof then due and owing (it being agreed that, for purposes of applying this
clause (c), all interest and all other amounts described herein will be
deemed payable in accordance with this Agreement regardless of whether such
claims are allowed in any proceeding described in Section 9.01(f) or
(g));

 

(d)           Fourth, to the indefeasible payment in full in
cash, pro rata, of the principal
amount of the Obligations (including Reimbursement Obligations and obligations
to Cash Collateralize Letters of Credit);

 

(e)           Fifth, to the indefeasible payment in full in
cash of the remaining Obligations then due and owing, pro rata; and

 

(f)            Sixth, the balance, if any, to the Person
lawfully entitled thereto (including the applicable Loan Party or its
successors or assigns) or as a court of competent jurisdiction may direct.

 

In the
event that any such proceeds are insufficient to pay in full the items
described in clauses (a) through (e) of this Section 10.02,
the Loan Parties shall remain liable, jointly and severally, for any
deficiency.

 

ARTICLE
XI

THE ADMINISTRATIVE AGENT AND THE COLLATERAL AGENT

 

Section 11.01       Appointment.  (a) 
Each Lender and the Issuing Bank hereby irrevocably designates and appoints
each of the Administrative Agent and the Collateral Agent as an agent of such
Lender under this Agreement and the other Loan Documents.  Each Lender irrevocably authorizes each
Agent, in such capacity, through its agents or employees, to take such actions
on its behalf under the provisions of this Agreement and the other Loan
Documents and to exercise such powers and perform such duties as are delegated
to such Agent by the terms of this Agreement and the other Loan Documents,
together with such actions and powers as are reasonably incidental
thereto.  The provisions of this Article X  are solely for the benefit of the Agents,
the Lenders and the Issuing Bank, and no Loan Party shall have rights as a
third party beneficiary of any such provisions.

 

(b)           Each Lender irrevocably appoints each
other Lender as its agent and bailee for the purpose of perfecting Liens
(whether pursuant to Section 8-301(a)(2) of the UCC or otherwise),
for the benefit of the Secured Parties, in assets in which, in accordance with
the UCC or any other applicable Legal Requirement a security interest can be
perfected by possession or control. 
Should any Lender (other than the Collateral Agent) obtain possession or
control of any such Collateral, such Lender shall notify the Collateral Agent
thereof, and, promptly following the Collateral Agent’s request therefor, shall
deliver such Collateral to the Collateral Agent or otherwise deal with such
Collateral in accordance with the Collateral Agent’s instructions.

 

Section 11.02       Agent in Its Individual Capacity. 
Each Person serving as an Agent hereunder shall have the same rights and
powers in its capacity as a Lender as any other Lender and may exercise the
same as though it were not an Agent, and such Person and its Affiliates may
accept deposits from, 

 

94

 

lend money to, act as financial advisor or in any
other advisory capacity for, and generally engage in any kind of business with,
any Company or Affiliate thereof as if it were not an Agent hereunder and
without duty to account therefor to the Lenders or the Issuing Bank.

 

Section 11.03       Exculpatory Provisions. 
No Agent shall have any duties or obligations except those expressly set
forth in the Loan Documents.  Without
limiting the generality of the foregoing, (a) no Agent shall be subject to
any fiduciary or other implied duties, regardless of whether a Default has
occurred and is continuing, (b) no Agent shall have any duty to take any
discretionary action or exercise any discretionary powers, except discretionary
rights and powers expressly contemplated by the Loan Documents that such Agent
is required to exercise in writing by the Required Lenders (or such other
number or percentage of the Lenders as shall be necessary under the
circumstances as provided in Section 12.02); provided that no Agent shall be required
to take any action that, in its opinion or the opinion of its counsel, may
expose such Agent to liability or that is contrary to any Loan Document or
applicable Legal Requirements, and (c) except as expressly set forth in
the Loan Documents, no Agent shall have any duty to disclose or shall be liable
for the failure to disclose, any information relating to any Company or any of
its Affiliates that is communicated to or obtained by the Person serving as
such Agent or any of its Affiliates in any capacity.  No Agent shall be liable for any action taken
or not taken by it with the consent or at the request of the Required Lenders
(or such other number or percentage of the Lenders as shall be necessary, or as
any Agent shall believe in good faith shall be necessary, under the
circumstances as provided in Section 12.02).  No Agent shall be deemed to have knowledge of
any Default unless and until written notice thereof is given to such Agent by
Borrower, a Lender, or the Issuing Bank, and no Agent shall be responsible for
or have any duty to ascertain or inquire into (i) any statement, warranty
or representation made in or in connection with any Loan Document,
(ii) the contents of any certificate, report or other document delivered
hereunder or thereunder or in connection herewith or therewith, (iii) the
performance or observance of any of the covenants, agreements or other terms or
conditions set forth in any Loan Document or the occurrence of any Default,
(iv) the validity, enforceability, effectiveness or genuineness of any
Loan Document or any other agreement, instrument or document or (v) the
satisfaction of any condition set forth in Article IV or elsewhere
in any Loan Document.  Without limiting
the generality of the foregoing, the use of the term “agent” in this Agreement
with reference to the Administrative Agent or the Collateral Agent is not
intended to connote any fiduciary or other implied (or express) obligations
arising under agency doctrine of any applicable law.  Instead, such term is used merely as a matter
of market custom and is intended to create or reflect only an administrative
relationship between independent contracting parties. Each party to this
Agreement acknowledges and agrees that the Administrative Agent may from time
to time use one or more outside service providers for the tracking of all UCC
financing statements (and/or other collateral related filings and registrations
from time to time) required to be filed or recorded pursuant to the Loan
Documents and the notification to the Administrative Agent, of, among other
things, the upcoming lapse or expiration thereof, and that each of such service
providers will be deemed to be acting at the request and on behalf of Borrower
and the other Loan Parties.  No Agent
shall be liable for any action taken or not taken by any such service provider.

 

Section 11.04       Reliance by Agent. 
Each Agent shall be entitled to rely upon, and shall not incur any
liability for relying upon, any notice, request, certificate, consent,
statement, instrument, document or other writing (including any electronic
message, internet or intranet website posting or other distribution) believed
by it to be genuine and to have been signed, sent, or otherwise authenticated
by a proper Person.  Each Agent also may
rely upon any statement made to it orally and believed by it to be made by a
proper Person, and shall not incur any liability for relying thereon.  In determining compliance with any condition
hereunder to the making of a Loan, or the issuance of a Letter of Credit, that
by its terms must be fulfilled to the satisfaction of a Lender or the Issuing
Bank, each Agent may presume that such condition is satisfactory to such Lender
or the Issuing Bank unless each Agent shall have received written notice to the
contrary from such Lender or the Issuing Bank prior to the making of such Loan
or the issuance of such Letter of Credit. 
Each Agent may consult with legal counsel (who may be counsel 

 

95

 

for Borrower), independent accountants and other
advisors selected by it, and shall not be liable for any action taken or not
taken by it in accordance with the advice of any such counsel, accountants or
advisors.

 

Section 11.05       Delegation of Duties. 
Each Agent may perform any and all of its duties and exercise its rights
and powers by or through, or delegate any and all such rights and powers to,
any one or more sub-agents appointed by such Agent.  Each Agent and any such sub-agent may perform
any and all of its duties and exercise its rights and powers by or through
their respective Affiliates.  The
exculpatory provisions of the preceding paragraphs shall apply to any such
sub-agent and to the Affiliates of each Agent and any such sub-agent, and shall
apply, without limiting the foregoing, to their respective activities in
connection with the syndication of the credit facilities provided herein as
well as activities as Agent.

 

Section 11.06       Successor Agent.  Each Agent
may resign as such at any time upon at least 10 days’ prior notice to the
Lenders, the Issuing Bank and Borrower. 
Upon any such resignation, the Required Lenders shall have the right, in
consultation with Borrower, to appoint a successor Agent from among the
Lenders.  If no successor shall have been
so appointed by the Required Lenders and shall have accepted such appointment
within 10 days after the retiring Agent gives notice of its resignation,
then the retiring Agent may, on behalf of the Lenders and the Issuing Bank,
appoint a successor Agent, which successor shall be a commercial banking
institution organized under the laws of the United States (or any State
thereof) or a United States branch or agency of a commercial banking
institution or a commercial trust company organized under the laws of the
United States (or any State thereof); provided
that if such retiring Agent is unable to find a commercial banking institution
that is willing to accept such appointment and which meets the qualifications
set forth above, the retiring Agent’s resignation shall nevertheless thereupon
become effective and the retiring (or retired) Agent shall be discharged from
its duties and obligations under the Loan Documents, and the Lenders shall
assume and perform all of the duties of the Agent under the Loan Documents
until such time, if any, as the Required Lenders appoint a successor Agent.

 

Upon
the acceptance of its appointment as an Agent hereunder by a successor, such
successor shall succeed to and become vested with all the rights, powers,
privileges and duties of the retiring Agent, and the retiring (or retired)
Agent shall be discharged from its duties and obligations under the Loan
Documents.  The fees payable by Borrower
to a successor Agent shall be the same as those payable to its predecessor unless
otherwise agreed between Borrower and such successor.  After an Agent’s resignation hereunder, the
provisions of this Article XI, Section 12.03 and Sections
12.08 to 12.10 shall continue in effect for the benefit of such
retiring Agent, its sub-agents and their respective Affiliates in respect of
any actions taken or omitted to be taken by any of them while it was acting as
Agent.

 

Section 11.07       Non-Reliance on Agent and Other Lenders. 
Each Lender and the Issuing Bank acknowledges that it has, independently
and without reliance upon any Agent or any other Lender or any of their
respective Affiliates and based on such documents and information as it has
deemed appropriate, made its own credit analysis and decision to enter into
this Agreement.  Each Lender further
represents and warrants that it has reviewed each document made available to it
on the Platform in connection with this Agreement and has acknowledged and
accepted the terms and conditions applicable to the recipients thereof
(including any such terms and conditions set forth, or otherwise maintained, on
the Platform with respect thereto).  Each
Lender and the Issuing Bank also acknowledges that it will, independently and
without reliance upon any Agent or any other Lender or any of their respective
Affiliates and based on such documents and information as it shall from time to
time deem appropriate, continue to make its own decisions in taking or not
taking action under or based upon this Agreement, any other Loan Document or
related agreement or any document furnished hereunder or thereunder.

 

Section 11.08       [Intentionally Deleted]

 

96

 

Section 11.09       Indemnification.  The Lenders
severally agree to indemnify each Agent in its capacity as such and each of its
Related Persons (to the extent not reimbursed by Borrower or the Guarantors and
without limiting the obligation of Borrower or the Guarantors to do so),
ratably according to their respective outstanding Loans and Commitments in
effect on the date on which indemnification is sought under this Section 11.09
(or, if indemnification is sought after the date upon which all Commitments
shall have terminated and the Loans and Reimbursement Obligations shall have
been paid in full, ratably in accordance with such outstanding Loans and
Commitments as in effect immediately prior to such date), from and against any
and all liabilities, obligations, losses, damages, fines, penalties, actions,
claims, suits, litigations, investigations, inquiries or proceedings, costs,
expenses or disbursements of any kind whatsoever that may at any time (whether
before or after the payment of the Loans and Reimbursement Obligations) be
imposed on, incurred by or asserted against such Agent or Related Person in any
way relating to or arising out of, the Commitments, this Agreement, any of the
other Loan Documents or any documents contemplated by or referred to herein or
therein, the Transactions or any of the other transactions contemplated hereby
or thereby or any action taken or omitted by such Agent or Related Person under
or in connection with any of the foregoing (IN
ALL CASES, WHETHER OR NOT CAUSED OR ARISING, IN WHOLE OR IN PART, OUT OF THE
COMPARATIVE, CONTRIBUTORY OR SOLE NEGLIGENCE OF ANY AGENT OR RELATED PERSON);
provided that no Lender shall be
liable for the payment of any portion of such liabilities, obligations, losses,
damages, penalties, actions, claims, suits, litigations, investigations,
inquiries or proceedings, costs, expenses or disbursements that are found by a
final and nonappealable judgment of a court of competent jurisdiction to have
directly resulted solely and directly from such Agent’s or Related Party’s, as
the case may be, gross negligence or willful misconduct.  The agreements in this Section 11.09
shall survive the payment of the Loans and all other amounts payable hereunder.

 

ARTICLE
XII

MISCELLANEOUS

 

Section 12.01       Notices.  (a)  Generally.  Notices and other communications provided for
herein shall, except as provided in Section 12.01(b), be in writing
and shall be delivered by hand or overnight courier service, mailed by
certified or registered mail or sent by telecopy, as follows:

 

(i)            if to any Loan Party, to Borrower at:

 

Five Star Quality Care, Inc.

400 Centre Street

Newton, Massachusetts 02458

Attention:  Bruce J. Mackey, Jr., Treasurer

Telecopy No.:  (617) 969-5730

 

(ii)           if to the Administrative Agent or the
Collateral Agent, to it at:

 

Jefferies Finance LLC

520 Madison Avenue

New York, New York  10022

Attention:  Account Officer — Five Star Quality Care, Inc.

Telecopy No.:  (212) 284-3444

 

(iii)          if to a Lender, to it at its address (or
telecopy number) set forth on Annex I or in the Assignment and
Acceptance pursuant to which such Lender shall have become a party hereto; and

 

97

 

(iv)          if to the Issuing Bank, to it at:

 

Jefferies Group Inc.

520 Madison Avenue

New York, New York  10022

Attention:  Mark Sahler — Five Star Quality Care, Inc.

Telecopy No.:  (201) 761-4023

 

With a copy to:

 

Jefferies Finance LLC

520 Madison Avenue

New York, New York  10022

Attention:  Account Officer — Five Star Quality Care, Inc.

Telecopy No.:  (212) 284-3444

 

All notices and other communications given to any party hereto in
accordance with the provisions of this Agreement shall be deemed to have been
given on the date of receipt if delivered by hand or overnight courier service
or sent by telecopy or by certified or registered mail, in each case delivered,
sent or mailed (properly addressed) to such party as provided in this Section 12.01(a) or
in accordance with the latest unrevoked direction from such party given in
accordance with this Section 12.01(a), and failure to deliver
courtesy copies of notices and other communications shall in no event affect
the validity or effectiveness of such notices and other communications.

 

Notices delivered through electronic communications to the extent
provided in Section 12.01(b) below, shall be effective as
provided in Section 12.01(b).

 

(b)           Electronic Communications. 
Notices and other communications to the Lenders and the Issuing Bank
hereunder may (subject to Section 12.01(d)) be delivered or
furnished by electronic communication (including e-mail and Internet or
intranet websites) pursuant to procedures approved by the Administrative Agent;
provided that the foregoing shall not
apply to notices to any Lender or the Issuing Bank pursuant to Article II
if such Lender or the Issuing Bank, as applicable, has notified the
Administrative Agent (in a manner set forth in Section 12.01(a))
that it is incapable of receiving notices under such Article by electronic
communication.  The Administrative Agent,
the Collateral Agent or Borrower may, in their respective sole discretion,
agree to accept notices and other communications to it hereunder by electronic
communications pursuant to procedures, respectively, approved by it (including
as set forth in Section 12.01(d)); provided
that approval of such procedures may be limited to particular notices or
communications.

 

Unless
the Administrative Agent otherwise prescribes, (i) notices and other
communications sent to an e-mail address shall be deemed received upon the
sender’s receipt of an acknowledgement from the intended recipient (including
by the “return receipt requested” function, as available, return e-mail or
other written acknowledgement); provided that
if such notice or other communication is not sent during the normal business
hours of the recipient, such notice or communication shall be deemed to have
been sent at the opening of business on the next business day for the
recipient, and (ii) notices or communications posted to an Internet or
intranet website shall be deemed received upon the deemed receipt by the
intended recipient at its e-mail address as described in the foregoing clause (i) of
notification that such notice or communication is available and identifying the
website address therefor.

 

98

 

(c)           Change of Address, etc. 
Any party hereto may change its address, telecopier number or e-mail
address for notices and other communications hereunder by notice to the other
parties hereto.

 

(d)           Posting.  Each Loan
Party hereby agrees that it will provide to the Administrative Agent all
information, documents and other materials that it is obligated to furnish to
the Administrative Agent pursuant to this Agreement and any other Loan
Document, including all notices, requests, financial statements, financial and
other reports, certificates and other information materials, but excluding any
such communication that (i) relates to a request for a new, or a
conversion of an existing, Borrowing or other extension of credit (including
any election of an interest rate or interest period relating thereto),
(ii) relates to the payment of any principal or other amount due under
this Agreement prior to the scheduled date therefor, (iii) provides notice
of any Default under this Agreement or (iv) is required to be delivered to
satisfy any condition precedent to the effectiveness of this Agreement and/or
any borrowing or other extension of credit hereunder (all such non-excluded
communications, collectively, the “Communications”),
by transmitting the Communications in an electronic/soft medium in a format
reasonably acceptable to the Administrative Agent at such e-mail address(es)
provided to Borrower by the Administrative Agent from time to time or in such
other form, including hard copy delivery thereof, as the Administrative Agent
shall require.  In addition, each Loan
Party agrees to continue to provide the Communications to the Administrative
Agent in the manner specified in this Agreement or any other Loan Document or
in such other form, including hard copy delivery thereof, as the Administrative
Agent shall require.  Nothing in this Section 12.01
shall prejudice the right of the Agents, any Lender, the Issuing Bank or any
Loan Party to give any notice or other communication pursuant to this Agreement
or any other Loan Document in any other manner specified in this Agreement or
any other Loan Document or as any such Agent shall require.

 

To the
extent consented to by the Administrative Agent in writing from time to time,
the Administrative Agent agrees that receipt of the Communications by the
Administrative Agent at its e-mail address(es) set forth above shall constitute
effective delivery of the Communications to the Administrative Agent for
purposes of the Loan Documents; provided that
Borrower shall also deliver to the Administrative Agent an executed original of
each Compliance Certificate required to be delivered hereunder.

 

Each
Loan Party further agrees that the Administrative Agent may make the
Communications available to the other Agents, the Lenders or the Issuing Bank
by posting the Communications on IntraLinks, SyndTrak or a substantially similar
electronic transmission system (the “Platform”).  The Platform is provided “as is” and “as
available.”  The Agents do not warrant
the accuracy or completeness of the Communications, or the adequacy of the
Platform and expressly disclaim liability for errors or omissions in the
communications.  No warranty of any kind,
express, implied or statutory, including, without limitation, any warranty of
merchantability, fitness for a particular purpose, non-infringement of third
party rights or freedom from viruses or other code defects, is made by any
Agent in connection with the Communications or the Platform.

 

Section 12.02       Waivers; Amendment. 
(a)  No failure or delay by any Agent, the Issuing Bank or any
Lender in exercising any right or power hereunder or under any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right or power, or any abandonment or discontinuance of
steps to enforce such a right or power, preclude any other or further exercise
thereof or the exercise of any other right or power.  The rights and remedies of each Agent, the
Issuing Bank and the Lenders hereunder and under the other Loan Documents are
cumulative and are not exclusive of any rights or remedies that they would
otherwise have.  No waiver of any
provision of any Loan Document or consent to any departure by any Loan Party
therefrom shall in any event be effective unless the same shall be permitted by
Section 12.02(b), and then such waiver or consent shall be
effective 

 

99

 

only in the specific instance and for the purpose for
which given.  Without limiting the
generality of the foregoing, the making of a Loan or issuance of a Letter of
Credit shall not be construed as a waiver of any Default, regardless of whether
any Agent, any Lender or the Issuing Bank may have had notice or knowledge of
such Default at the time.  No notice or
demand on Borrower or any other Loan Party in any case shall entitle Borrower
or any other Loan Party to any other or further notice or demand in similar or
other circumstances.

 

(b)           Subject to Section 12.02(c),
this Agreement nor any other Loan Document nor any provision hereof or thereof
may be waived, amended, supplemented or modified except, in the case of this
Agreement, pursuant to an agreement or agreements in writing entered into by
Borrower and the Required Lenders or, in the case of any other Loan Document,
pursuant to an agreement or agreements in writing entered into by the
Administrative Agent, the Collateral Agent (in the case of any Security
Document) and the Loan Party or Loan Parties that are parties thereto, in each
case with the written consent of the Required Lenders; provided that no such agreement shall:

 

(i)            increase the Commitment of any Lender
without the written consent of such Lender (it being understood that no
amendment, modification, termination, waiver or consent with respect to any
condition precedent, covenant or Default (or any definition used, respectively,
therein) shall constitute an increase in the Commitment of any Lender for
purposes of this clause (i));

 

(ii)           reduce the principal amount or premium,
if any, of any Loan or LC Disbursement or reduce the rate of interest thereon
(other than interest pursuant to Section 2.06(c)) , or reduce any
Fees payable hereunder, or change the form or currency of payment of any
Obligation, without the written consent of each Lender directly affected
thereby (it being understood that any amendment or modification to the
financial definitions in this Agreement shall not constitute a reduction in the
rate of interest for purposes of this clause (ii));

 

(iii)          postpone or extend the maturity of any
Loan, or the required date of payment of any Reimbursement Obligation, or any
date for the payment of any interest or fees payable hereunder, or reduce the
amount of, waive or excuse any such payment (other than a waiver of any
increase in the interest rate pursuant to Section 2.06(c)), or
postpone the scheduled date of expiration of any Commitment or postpone the
scheduled date of expiration of any Letter of Credit beyond the Letter of
Credit Expiration Date, without the written consent of each Lender directly
affected thereby;

 

(iv)          change Section 2.13(b) or
(c) or Section 10.02 in a manner that would alter the
order of or the pro rata sharing
of payments or setoffs required thereby, without the written consent of each
Lender;

 

(v)           change the percentage set forth in the
definition of “Required Lenders” or any other provision of any Loan Document (including
this Section 12.02) specifying the number or percentage of Lenders
required to waive, amend or modify any rights thereunder or make any
determination or grant any consent thereunder, without the written consent of
each Lender;

 

(vi)          release all or substantially all of the
Guarantors from their respective Guarantees (except as expressly provided in Article VII),
or limit their liability in respect of such Guarantees, without the written
consent of each Lender;

 

100

 

(vii)         except as expressly permitted in this
Agreement or any Security Document, release all or substantially all of the
Collateral from the Liens of the Security Documents or alter the relative
priorities of the Obligations entitled to the Liens of the Security Documents
(except in connection with securing additional Obligations equally and ratably
with the other Obligations), in each case without the written consent of each
Lender; or

 

(viii)        change Section 12.04(b) in
a manner which further restricts assignments thereunder without the written
consent of each Lender;

 

provided, further, that (1) no such agreement shall
amend, modify or otherwise affect the rights or duties of the Administrative
Agent, the Collateral Agent or the Issuing Bank without the prior written
consent of the Administrative Agent or the Issuing Bank, as the case may be and
(2) any waiver, amendment or modification of this Agreement prior to the
achievement of a successful syndication of the credit facilities provided herein
(as determined by the Arranger in its sole discretion) may not be effected
without the written consent of the Arranger. 
Notwithstanding the foregoing, any provision of this Agreement may be
amended by an agreement in writing entered into by Borrower, the Required
Lenders and the Administrative Agent (and, if their rights or obligations are
affected thereby, the Issuing Bank) if (x) by the terms of such agreement
the Commitment of each Lender not consenting to the amendment provided for
therein shall terminate upon the effectiveness of such amendment, (y) at
the time such amendment becomes effective, each Lender not consenting thereto
receives payment in full of the principal of, premium, if any, and interest
accrued on each Loan made by it and all other amounts owing to it or accrued
for its account under this Agreement, and (z) Section 2.16(b) is
complied with.

 

(c)           Without the consent of any other Person,
the applicable Loan Party or Loan Parties and the Administrative Agent and/or
Collateral Agent may (in its or their respective sole discretion, or shall, to
the extent required by any Loan Document) enter into any amendment or waiver of
any Loan Document, or enter into any new agreement or instrument, to effect the
granting, perfection, protection, expansion or enhancement of any security
interest in any Collateral or additional property to become Collateral for the
benefit of the Secured Parties, or as required by applicable Legal Requirements
to give effect to, or protect any security interest for the benefit of the
Secured Parties, in any property or assets so that the security interests
therein comply with applicable Legal Requirements.

 

Section 12.03       Expenses; Indemnity; Damage Waiver. 
(a)  The Loan Parties agree, jointly and severally, to pay, promptly
upon demand:

 

(i)            all reasonable costs and expenses
incurred by the Arranger, the Administrative Agent, the Collateral Agent and
the Issuing Bank, including the reasonable fees, charges and disbursements of
Advisors for the Arranger, the Administrative Agent, the Collateral Agent and
the Issuing Bank, in connection with the syndication of the Loans and
Commitments, the preparation, negotiation, execution and delivery of the Loan
Documents, the administration of the Credit Extensions and Commitments, the
perfection and maintenance of the Liens securing the Collateral and any actual
or proposed amendment, supplement or waiver of any of the Loan Documents
(whether or not the transactions contemplated hereby or thereby shall be
consummated);

 

(ii)           all costs and expenses incurred by the
Administrative Agent or the Collateral Agent, including the fees, charges and
disbursements of Advisors for the Administrative Agent and the Collateral
Agent, in connection with any action, claim, suit, litigation, investigation,
inquiry or proceeding affecting the Collateral or any part thereof, in which
action, claim, suit, litigation, investigation, inquiry or proceeding the
Administrative Agent or the Collateral Agent is made a party or participates or
in which the right to use the Collateral or 

 

101

 

any part thereof
is threatened, or in which it becomes necessary in the judgment of the
Administrative Agent or the Collateral Agent to defend or uphold the Liens
granted by the Security Documents (including any action, claim, suit,
litigation, investigation, inquiry or proceeding to establish or uphold the
compliance of the Collateral with any Legal Requirements);

 

(iii)          all costs and expenses incurred by the
Arranger, the Administrative Agent, the Collateral Agent, any other Agent, the
Issuing Bank or any Lender, including the fees, charges and disbursements of
Advisors for any of the foregoing, incurred in connection with the enforcement
or protection of its rights under the Loan Documents, including its rights
under this Section 12.03(a), or in connection with the Loans made
or Letters of Credit issued hereunder and the collection of the Obligations,
including all such costs and expenses incurred during any workout, restructuring
or negotiations in respect of the Obligations; and

 

(iv)          all Other Taxes in respect of the Loan
Documents.

 

(b)           The Loan Parties agree, jointly and
severally, to indemnify the Agents, each Lender, the Issuing Bank and each of
their respective Related Persons (each such Person being called an “Indemnitee”) against, and to hold each
Indemnitee harmless from, all reasonable out-of-pocket costs and any and all
losses, claims, damages, liabilities, fees, fines, penalties, actions,
judgments, suits and related expenses, including reasonable Advisors fees,
charges and disbursements (collectively, “Claims”),
incurred by, imposed on or asserted against any Indemnitee, directly or
indirectly, arising out of, in any way connected with, or as a result of
(i) the execution, delivery, performance, administration or enforcement of
the Loan Documents or any agreement or instrument contemplated thereby or the
performance by the parties thereto of their respective obligations thereunder,
(ii) any actual or proposed use of the proceeds of the Loans or issuance
of Letters of Credit, (iii) any claim, litigation, investigation or
proceeding relating to any of the foregoing, whether or not any Indemnitee is a
party thereto, (iv) any actual or alleged presence or Release or threatened
Release of Hazardous Materials, on, at, under or from any property owned,
leased or operated by any Company at any time, or any Environmental Claim or
threatened Environmental Claim related in any way to any Company, (v) any
past, present or future non-compliance with, or violation of, Environmental
Laws  or Environmental Permits applicable
to any Company, or any Company’s business, or any property presently or
formerly owned, leased, or operated by any Company or their predecessors in
interest, (vi) the environmental condition of any property owned, leased,
or operated by any Company at any time, or the applicability of any Legal
Requirements relating to such property, whether or not occasioned wholly or in
part by any condition, accident or event caused by any act or omission of any
Company, (vii) the imposition of any environmental Lien encumbering any
real property, (viii) the consummation of the Transactions and the other
transactions contemplated hereby (including the syndication of the credit facilities
provided herein) or (ix) any actual or prospective action, claim, suit,
litigation, investigation, inquiry or proceeding relating to any of the
foregoing, whether based on contract, tort or any other theory, whether brought
by a third party or by any Loan Party or otherwise, and regardless of whether
any Indemnitee is a party thereto; provided
that such indemnity shall not, as to any Indemnitee, be available to the extent
that such losses, claims, damages, liabilities or related expenses are determined
by a court of competent jurisdiction by final and nonappealable judgment to
have directly resulted solely from the gross negligence or willful misconduct
of such Indemnitee.

 

(c)           The Loan Parties agree, jointly and
severally, that, without the prior written consent of the Administrative Agent
and any affected Lender, which consent(s) will not be unreasonably
withheld, the Loan Parties will not enter into any settlement of a Claim in
respect of the subject matter of clauses (i) through (ix) of Section 12.03(b) unless
such settlement includes an explicit and unconditional release from the party
bringing such Claim of all Indemnitees.

 

102

 

(d)           The provisions of this Section 12.03
shall remain operative and in full force and effect regardless of the
expiration of the term of this Agreement, the consummation of the Transactions
and the other transactions contemplated hereby, the repayment of the Loans,
Reimbursement Obligations and any other Obligations, the release of any
Guarantor or of all or any portion of the Collateral, the expiration of the
Commitments, the expiration of any Letter of Credit, the invalidity or
unenforceability of any term or provision of this Agreement or any other Loan
Document, or any investigation made by or on behalf of the Agents, the Issuing
Bank or any Lender.  All amounts due
under this Section 11.03 shall be accompanied by reasonable
documentation with respect to any reimbursement, indemnification or other
amount requested.

 

(e)           To the extent that the Loan Parties fail
to indefeasibly pay any amount required to be paid by them to the Agents or the
Issuing Bank under Sections 12.03(a) or (b) in
accordance with Section 12.03(g), each Lender severally agrees to
pay to the Agents or the Issuing Bank, as the case may be, such Lender’s pro rata share (determined as of the time
that the applicable unreimbursed expense or indemnity payment is sought) of
such unpaid amount (such indemnity shall be effective whether or not the
related losses, claims, damages, liabilities and related expenses are incurred
or asserted by any party hereto or any third party); provided that the unreimbursed Claim was incurred by or
asserted against any of the Agents or the Issuing Bank in its capacity as
such.  For purposes of this Section 12.03(e),
a Lender’s “pro rata share” shall
be determined based upon its share of the sum of the total Revolving Exposure
and unused Commitments at the time.

 

(f)            To the fullest extent permitted by
applicable Legal Requirements, no Loan Party shall assert, and each Loan Party
hereby waives, any claim against any Indemnitee, on any theory of liability,
for special, indirect, exemplary, consequential, or punitive damages (including
any loss of profits, business or anticipated savings) arising out of, in
connection with, or as a result of, any Loan Document or any agreement or
instrument contemplated hereby or thereby, the Transactions, any Loan or Letter
of Credit or the use of the proceeds thereof. 
No Indemnitee shall be liable for any damages arising from the use by
unintended recipients of any information or other materials distributed by it
through telecommunications, electronic or other information transmission
systems in connection with the Loan Documents or the transactions contemplated
hereby or thereby.

 

(g)           All amounts due under this Section 12.03
shall be payable not later than 10 days after demand therefor.

 

Section 12.04       Successors and Assigns. 
(a)  The provisions of this Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns permitted hereby (including any Affiliate of the Issuing Bank that
issues any Letter of Credit), except that the Loan Parties may not assign or
otherwise transfer any of their respective rights or obligations hereunder
without the prior written consent of the Administrative Agent, the Collateral
Agent, the Issuing Bank and each Lender, which consent may be withheld in their
respective sole discretion (and any attempted assignment or transfer by any
Loan Party without such consent shall be null and void).  Nothing in this Agreement or any other Loan
Document, express or implied, shall be construed to confer upon any Person
(other than the parties hereto, their respective successors and assigns
permitted hereby (including any Affiliate of the Issuing Bank that issues any
Letter of Credit), Participants to the extent expressly provided in Section 12.04(e) and,
to the extent expressly contemplated hereby, the other Indemnitees) any legal
or equitable right, remedy or claim under or by reason of this Agreement or any
other Loan Document.

 

(b)           Any Lender shall have the right at any
time to assign to one or more assignees (other than any Company or any
Affiliate thereof or a natural Person) all or a portion of its rights and
obligations under this Agreement (including all or a portion of its Commitment
and the Loans at the time owing to it); provided
that:

 

103

 

(i)            except in the case of (A) an assignment
to a Lender, an Affiliate of a Lender or an Approved Fund, (B) any
assignment made in connection with the syndication of the Commitments and Loans
by the Arranger or (C) an assignment of the entire remaining amount of the
assigning Lender’s Commitment or Loans, the amount of the Revolving Commitment
or Revolving Loans of the assigning Lender subject to each such assignment
(determined as of the date the Assignment and Acceptance with respect to such
assignment is delivered to the Administrative Agent) shall not be less than $2,500,000;

 

(ii)           each partial assignment shall be made as
an assignment of a proportionate part of all of the assigning Lender’s rights
and obligations under this Agreement, except that this
clause (ii) shall not be construed to prohibit the assignment of a
proportionate part of all the assigning Lender’s rights and obligations in
respect of Commitments or Loans;

 

(iii)          the parties to each assignment shall
execute and deliver to the Administrative Agent an Assignment and Acceptance,
together with a processing and recordation fee of $3,500; provided that such fee shall not be
payable in the case of (A) an assignment by any Lender to an Approved Fund
of such Lender, (B) any assignment made in connection with the primary
syndication of the Commitments and Loans by the Arranger or (C) an
assignment settled through the Administrative Agent;

 

(iv)          the assignee, if it shall not be a
Lender, shall deliver to the Administrative Agent an Administrative
Questionnaire;

 

(v)           in the case of an assignment of all or a
portion of a Revolving Commitment or any Revolving Lender’s obligations in
respect of its LC Exposure, the Issuing Bank must give its prior written
consent to such assignment (which consent shall not be unreasonably withheld,
delayed or conditioned); and

 

(vi)          in the case of an assignment of all or a
portion of a Revolving Commitment, a Revolving Loan or any Revolving Lender’s
obligations in respect of its LC Exposure (except in the case of an assignment
to a Lender, an Affiliate of a Lender or an Approved Fund), Borrower must give
its prior written consent to such assignment (which consent shall not be
unreasonably withheld, delayed or conditioned).

 

Notwithstanding
the foregoing, if an Event of Default has occurred and is continuing (i) any
consent of Borrower otherwise required under this paragraph shall not be
required, and (ii) any consent of the Issuing Bank required under this Section 12.04(b) may
be withheld by such Person in its sole discretion.  Subject to acceptance and recording thereof
pursuant to Section 12.04(d), from and after the effective date
specified in each Assignment and Acceptance the assignee thereunder shall be a
party hereto and, to the extent of the interest assigned by such Assignment and
Acceptance, have the rights and obligations of a Lender under this Agreement (provided that any liability of Borrower to
such assignee under Section 2.11, 2.12 or 2.14 shall
be limited to the amount, if any, that would have been payable thereunder by
Borrower in the absence of such assignment, except to the extent any such
amounts are attributable to a Change in Law occurring after the date of such
assignment), and the assigning Lender thereunder shall, to the extent of the
interest assigned by such Assignment and Acceptance, be released from its
obligations under this Agreement (and, in the case of an Assignment and
Acceptance covering all of the assigning Lender’s rights and obligations under
this Agreement, such Lender shall cease to be a party hereto but shall continue
to be entitled to the benefits of Sections 2.11, 2.12, 2.14
and 12.03).

 

(c)           The Administrative Agent, acting for this
purpose as an agent of Borrower, shall maintain at one of its offices a copy of
each Assignment and Acceptance delivered to it and a register for 

 

104

 

the recordation of the names and addresses of the
Lenders, and the Commitments of, and principal amount of the Loans and LC
Disbursements owing to, each Lender pursuant to the terms hereof from time to
time (the “Register”).  The entries in the Register shall be
conclusive in the absence of manifest error, and Borrower, the Administrative
Agent, the Issuing Bank and the Lenders may treat each Person whose name is
recorded in the Register pursuant to the terms hereof as a Lender hereunder for
all purposes of this Agreement, notwithstanding notice to the contrary.  The Register shall be available for
inspection by Borrower, the Issuing Bank, the Collateral Agent and any Lender
(with respect to its own interest only), at any reasonable time and from time
to time upon reasonable prior notice.

 

(d)           Upon its receipt of a duly completed
Assignment and Acceptance executed by an assigning Lender and an assignee, the
assignee’s completed Administrative Questionnaire (unless the assignee shall
already be a Lender hereunder), the processing and recordation fee referred to
in Section 12.04(b) and any written consent to such assignment
required by Section 12.04(b), the Administrative Agent shall accept
such Assignment and Acceptance and record the information contained therein in
the Register.  No assignment shall be
effective for purposes of this Agreement unless it has been recorded in the
Register as provided in this Section 12.04(b).  Any assignment or transfer by a Lender of
rights or obligations under this Agreement that does not comply with the
requirements of this Section 12.04 shall be treated for purposes of
this Agreement as a sale by such Lender of a participation in such rights and
obligations in accordance with Section 12.04(e).

 

(e)           Any Lender shall have the right at any
time, without the consent of, or notice to Borrower, the Administrative Agent
or the Issuing Bank or any other Person to sell participations to any Person
(other than any Company or any Affiliate thereof or a natural Person) (a “Participant”) in all or a portion of such
Lender’s rights and obligations under this Agreement (including all or a
portion of its Commitment and the Loans owing to it); provided that (i) such Lender’s
obligations under this Agreement shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations and (iii) Borrower, the Administrative Agent, the
Collateral Agent, the Issuing Bank and the other Lenders shall continue to deal
solely and directly with such Lender in connection with such Lender’s rights
and obligations under this Agreement. 
Any agreement or instrument pursuant to which a Lender sells such a
participation shall provide that such Lender shall retain the sole right to
enforce the Loan Documents and to approve any amendment, modification or waiver
of any provision of the Loan Documents; provided
that such agreement or instrument may provide that such Lender will not,
without the consent of the Participant, agree to any amendment, modification or
waiver that (1) is described in clauses (i), (ii) or (iii) of
the proviso to Section 12.02(b) and (2) directly affects
such Participant.  Subject to Section 12.04(f),
each Participant shall be entitled to the benefits of Sections 2.11, 2.12
and 2.14 to the same extent as if it were a Lender and had acquired its
interest by assignment pursuant to Section 12.04(b).  To the extent permitted by Legal
Requirements, each Participant also shall be entitled to the benefits of Section 12.08
as though it were a Lender; provided
that such Participant agrees in writing to be subject to Section 2.13(c) as
though it were a Lender.  Each Lender
shall, acting for this purpose as an agent of Borrower, maintain at one of its
offices a register for the recordation of the names and addresses of its
Participants, and the amount and terms of its participations; provided that no Lender shall be required
to disclose or share the information contained in such register with Borrower
or any other Person, except as required by applicable Legal Requirements (the “Participant Register”).

 

(f)            A Participant shall not be entitled to
receive any greater payment under Sections 2.11, 2.12 or 2.14
than the applicable Lender would have been entitled to receive with respect to
the participation sold to such Participant, unless the sale of the
participation to such Participant is made with the prior written consent of
Borrower (which consent shall not be unreasonably withheld, delayed or
conditioned).  A Participant that would
be a Foreign Lender if it were a Lender shall not be entitled to the 

 

105

 

benefits of Section 2.14 unless Borrower
is notified of the participation sold to such Participant and such Participant
agrees, for the benefit of Borrower, to comply with Section 2.14(e) as
though it were a Lender.

 

(g)           Any Lender may at any time pledge or
assign a security interest in all or any portion of its rights under this
Agreement to secure obligations of such Lender, including any pledge or
assignment to secure obligations to a Federal Reserve Bank, and this Section 12.04(g) shall
not apply to any such pledge or assignment of a security interest; provided that no such pledge or assignment
of a security interest shall release a Lender from any of its obligations
hereunder or substitute any such pledgee or assignee for such Lender as a party
hereto.  Without limiting the foregoing,
in the case of any Lender that is a fund that invests in bank loans or similar
extensions of credit, such Lender may, without the consent of Borrower, the
Issuing Bank, the Administrative Agent or any other Person, collaterally assign
or pledge all or any portion of its rights under this Agreement, including the
Loans and Notes or any other instrument evidencing its rights as a Lender under
this Agreement, to any holder of, trustee for, or any other representative of
holders of, obligations owed or securities issued, by such fund, as security
for such obligations or securities.

 

(h)           Notwithstanding anything to the contrary
contained herein, any Lender (a “Granting
Lender”) may grant to a special purpose funding vehicle (an “SPC”), identified as such in writing from
time to time by the Granting Lender to the Administrative Agent and Borrower,
the option to provide to Borrower all or any part of any Loan that such
Granting Lender would otherwise be obligated to make to such Borrower pursuant
to this Agreement; provided that
(i) nothing herein shall constitute a commitment by any SPC to make any
Loan and (ii) if an SPC elects not to exercise such option or otherwise
fails to provide all or any part of such Loan, the Granting Lender shall be
obligated to make such Loan pursuant to the terms hereof; provided  further
that nothing herein shall make the SPC a “Lender” for the purposes of this
Agreement, obligate Borrower or any other Loan Party or the Administrative
Agent to deal with such SPC directly, obligate Borrower or any other Loan Party
in any manner to any greater extent than they were obligated to the Granting
Lender, or increase costs or expenses of Borrower.  The Loan Parties and the Administrative Agent
shall be entitled to deal solely with, and obtain good discharge from, the
Granting Lender and shall not be required to investigate or otherwise seek the
consent or approval of any SPC, including for the approval of any amendment,
waiver or other modification of any provision of any Loan Document.  The making of a Loan by an SPC hereunder
shall utilize the Commitment of the Granting Lender to the same extent, and as
if, such Loan were made by such Granting Lender.  Each party hereto hereby agrees that no SPC
shall be liable for any indemnity or similar payment obligation under this
Agreement (all liability for which shall remain with the Granting Lender).  In furtherance of the foregoing, each party
hereto hereby agrees (which agreement shall survive the termination of this Agreement)
that, prior to the date that is one year and one day after the payment in full
of all outstanding commercial paper or other senior indebtedness of any SPC, it
will not institute against, or join any other Person in instituting against,
such SPC any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceedings under the laws of the United States of America or any state
thereof.  In addition, notwithstanding
anything to the contrary contained in this Section 12.04(h), any
SPC may (i) with notice to, but without the prior written consent of,
Borrower and the Administrative Agent and without paying any processing fee
therefor, assign all or a portion of its interests in any Loans to the Granting
Lender or to any financial institutions (consented to by Borrower and the
Administrative Agent) providing liquidity and/or credit support to or for the
account of such SPC to support the funding or maintenance of Loans and
(ii) disclose on a confidential basis any non-public information relating
to its Loans to any rating agency, commercial paper dealer or provider of any
surety, guarantee or credit or liquidity enhancement to such SPC.

 

(i)            The words “execution,” “signed,”
“signature,” and words of like import in any Assignment and Acceptance shall be
deemed to include electronic signatures or the keeping of records in electronic
form, each of which shall be of the same legal effect, validity or
enforceability as a manually 

 

106

 

executed signature or the use of a paper-based
recordkeeping system, as the case may be, to the extent and as provided for in
any applicable Legal Requirement, including the Federal Electronic Signatures
in Global and National Commerce Act, the New York State Electronic Signatures
and Records Act, or any other similar state laws based on the Uniform
Electronic Transactions Act.

 

Section 12.05       Survival of Agreement. 
All covenants, agreements, representations and warranties made by the
Loan Parties in the Loan Documents and in the reports, certificates or other
instruments delivered in connection with or pursuant to this Agreement or any
other Loan Document shall be considered to have been relied upon by the other
parties hereto and shall survive the execution and delivery of the Loan
Documents and the making of any Loans and issuance of any Letters of Credit,
regardless of any investigation made by any such other party or on its behalf
and notwithstanding that the Agents, the Issuing Bank or any Lender may have
had notice or knowledge of any Default or incorrect representation or warranty
at the time any credit is extended hereunder, and shall continue in full force
and effect as long as any Obligation or any Letter of Credit is outstanding (or
Cash Collateralized) and so long as the Commitments have not expired or
terminated.  The provisions of Article XI
and Sections 2.11 to 2.14, 11.06, 12.03 and 12.08
to 12.10 shall survive and remain in full force and effect regardless of
the consummation of the Transactions and the other transactions contemplated
hereby, the repayment of the Loans, the payment of the Reimbursement
Obligations, the expiration or termination of the Letters of Credit and the
Commitments or the termination of this Agreement or any provision hereof.

 

Section 12.06       Counterparts; Integration; Effectiveness. 
This Agreement may be executed in counterparts (and by different parties
hereto on different counterparts), each of which shall constitute an original,
but all of which when taken together shall constitute a single contract.  This Agreement and the other Loan Documents,
and any separate letter agreements with respect to fees payable to the
Administrative Agent and/or the Arranger, constitute the entire contract among
the parties relating to the subject matter hereof and supersede any and all
previous agreements and understandings, oral or written, relating to the
subject matter hereof.  Except as
provided in Section 4.01, this Agreement shall become effective
when it shall have been executed by the Administrative Agent and when the
Administrative Agent shall have received counterparts hereof which, when taken
together, bear the signatures of each of the other parties hereto, and
thereafter shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. 
Delivery of an executed counterpart of a signature page of this
Agreement by telecopy or other electronic transmission shall be effective as
delivery of a manually executed counterpart of this Agreement.

 

Section 12.07       Severability.  Any provision
of this Agreement held to be invalid, illegal or unenforceable in any
jurisdiction shall, as to such jurisdiction, be ineffective to the extent of
such invalidity, illegality or unenforceability without affecting the validity,
legality and enforceability of the remaining provisions hereof; and the
invalidity of a particular provision in a particular jurisdiction shall not
invalidate such provision in any other jurisdiction.

 

Section 12.08       Right of Setoff.  If an Event
of Default shall have occurred and be continuing, each Lender, the Issuing Bank
and each of their respective Affiliates is hereby authorized at any time and
from time to time, to the fullest extent permitted by applicable Legal
Requirements, to set off and apply any and all deposits (general or special,
time or demand, provisional or final, in whatever currency) at any time held
and other obligations (in whatever currency) at any time owing by such Lender,
the Issuing Bank or any such Affiliate to or for the credit or the account of
any Loan Party against any and all of the obligations of any Loan Party now or
hereafter existing under this Agreement or any other Loan Documents held by
such Lender or the Issuing Bank, irrespective of whether or not such Lender shall
have made any demand under this Agreement or any other Loan Document and
although such obligations may be contingent or unmatured or are owed to a
branch or office of such Lender or the Issuing Bank different from the branch
or office holding such deposit or obligated on such indebtedness.  The rights of 

 

107

 

each Lender under this Section 12.08 are
in addition to other rights and remedies (including other rights of setoff)
which such Lender may have.

 

Section 12.09       Governing Law; Jurisdiction; Consent to Service of
Process.  (a)  This Agreement shall be construed
in accordance with and governed by the law of the State of New York, without
regard to conflicts of law principles that would require the application of the
laws of another jurisdiction.

 

(b)           Each Loan Party hereby irrevocably and
unconditionally submits, for itself and its property, to the nonexclusive
jurisdiction of the Supreme Court of the State of New York sitting in New York
County and of the United States District Court of the Southern District of New
York, and any appellate court from any thereof, in any action or proceeding
arising out of or relating to any Loan Document, or for recognition or
enforcement of any judgment, and each of the parties hereto hereby irrevocably
and unconditionally agrees that all claims in respect of any such action or
proceeding may be heard and determined in such New York State court or, to the
extent permitted by applicable Legal Requirements, in such federal court.  Each of the parties hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by applicable Legal Requirements. 
Nothing in this Agreement or any other Loan Document or otherwise shall
affect any right that the Administrative Agent, any other Agent, the Issuing
Bank or any Lender may otherwise have to bring any action or proceeding
relating to this Agreement or any other Loan Document against any Loan Party or
its properties in the courts of any jurisdiction.

 

(c)           Each Loan Party hereby irrevocably and
unconditionally waives, to the fullest extent permitted by applicable Legal
Requirements, any objection which it may now or hereafter have to the laying of
venue of any suit, action or proceeding arising out of or relating to this
Agreement or any other Loan Document in any court referred to in Section 12.09(b).  Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by applicable Legal Requirements, the
defense of an inconvenient forum to the maintenance of such action or
proceeding in any such court.

 

(d)           Each party to this Agreement irrevocably
consents to service of process in any action or proceeding arising out of or
relating to any Loan Document, in the manner provided for notices (other than
telecopy or email) in Section 12.01.  Nothing in this Agreement or any other Loan
Document will affect the right of any party to this Agreement to serve process
in any other manner permitted by applicable Legal Requirements.

 

Section 12.10       Waiver of Jury Trial.  Each party hereto hereby irrevocably waives,
to the fullest extent permitted by applicable Legal Requirements, any right it
may have to a trial by jury in any legal proceeding directly or indirectly
arising out of or relating to any Loan Document, the Transactions or the other
transactions contemplated hereby or thereby (whether based on contract, tort or
any other theory).  Each party hereto (a) certifies
that no representative, agent or attorney of any other party has represented,
expressly or otherwise, that such other party would not, in the event of
litigation, seek to enforce the foregoing waiver and (b) acknowledges that
it and the other parties hereto have been induced to enter into this Agreement
by, among other things, the mutual waivers and certifications in this Section 12.10.

 

Section 12.11       Headings; No Adverse Interpretation of Other
Agreements.  Article and Section headings and
the Table of Contents used herein are for convenience of reference only, are
not part of this Agreement and shall not affect the construction of, or be
taken into consideration in interpreting, this Agreement.  This Agreement may not be used to interpret
any other loan or debt agreement or 

 

108

 

instrument of any Company or of any other Person.  Any such loan or debt agreement or instrument
may not be used to interpret this Agreement or any other Loan Document.

 

Section 12.12       Confidentiality.  Each of the
Administrative Agent, the Issuing Bank and the Lenders agrees to maintain the
confidentiality of the Information (as defined below), except that Information
may be disclosed (a) to its and its Affiliates’ and Approved Funds’
directors, officers, employees, agents, advisors and other representatives,
including accountants, legal counsel and other advisors (it being understood
that the persons to whom such disclosure is made will be informed of the
confidential nature of such Information and instructed to keep such Information
confidential pursuant to the terms hereof), (b) to the extent requested by
any regulatory authority or any quasi-regulatory authority (such as the
National Association of Insurance Commissioners), (c) to the extent
required by applicable Legal Requirements or by any subpoena or similar legal
process, (d) to any other party to this Agreement, (e) in connection
with the exercise of any remedies under the Loan Documents or any suit, action
or proceeding relating to this Agreement or any other Loan Document or the
enforcement of rights hereunder or thereunder, (f) subject to an agreement
containing provisions substantially the same as those of this Section 12.12,
to (i) any assignee of or Participant in, or any prospective assignee of
or Participant in, any of its rights or obligations under this Agreement,
(ii) any actual or prospective counterparty (or its advisors) to any swap
or derivative transaction relating to Borrower and its obligations, (iii) any
actual or prospective investor in an SPC or (iv) any rating agency for the
purpose of obtaining a credit rating applicable to any Loan or Loan Party,
(g) with the consent of Borrower or (h) to the extent such
Information (i) is publicly available at the time of disclosure or becomes
publicly available other than as a result of a breach of this Section 12.12
or (ii) becomes available to the Administrative Agent, the Issuing Bank or
any Lender on a nonconfidential basis from a source other than Borrower or any
Subsidiary.  In addition, the Agents, the
Issuing Bank and the Lenders may disclose the existence of the Loan Documents
and information about the Loan Documents to market data collectors, similar
service providers to the financing community, and service providers to the
Agents, the Issuing Bank and the Lenders. 
For the purposes of this Section 12.12, “Information” shall mean all information
received from Borrower relating to Borrower or any of its Subsidiaries or its
business that is clearly identified at the time of delivery as confidential,
other than any such information that is available to the Administrative Agent,
the Issuing Bank or any Lender on a nonconfidential basis prior to disclosure
by Borrower.  Any Person required to
maintain the confidentiality of Information as provided in this Section 12.12
shall be considered to have complied with its obligation to do so if such
Person has exercised the same degree of care to maintain the confidentiality of
such Information as such Person would accord to its own confidential
information.

 

Section 12.13       Interest Rate Limitation. 
Notwithstanding anything herein to the contrary, if at any time the
interest rate applicable to any Loan, together with all fees, charges and other
amounts which are treated as interest on such Loan under applicable law
(collectively, the “Charges”),
shall exceed the maximum lawful rate (the “Maximum
Rate”) which may be contracted for, charged, taken, received or
reserved by the Lender holding such Loan in accordance with applicable Legal
Requirements, the rate of interest payable in respect of such Loan hereunder,
together with all Charges payable in respect thereof, shall be limited to the
Maximum Rate and, to the extent lawful, the interest and Charges that would
have been payable in respect of such Loan but were not payable as a result of
the operation of this Section 12.13 shall be cumulated and the
interest and Charges payable to such Lender in respect of other Loans or
periods shall be increased (but not above the Maximum Rate therefor) until such
cumulated amount, together with interest thereon at the Federal Funds Effective
Rate to the date of repayment, shall have been received by such Lender.

 

Section 12.14       Assignment and Acceptance. 
Each Lender to become a party to this Agreement (other than the
Administrative Agent and any other Lender that is a signatory hereto) shall do
so by 

 

109

 

delivering to the Administrative Agent an Assignment
and Acceptance duly executed by such Lender, Borrower (if Borrower consent to
such assignment is required hereunder) and the Administrative Agent.

 

Section 12.15       Obligations Absolute. 
To the fullest extent permitted by applicable law, all obligations of
the Loan Parties hereunder shall be absolute and unconditional irrespective of:

 

(a)           any bankruptcy, insolvency,
reorganization, arrangement, readjustment, composition, liquidation or the like
of any Loan Party;

 

(b)           any lack of validity or enforceability of
any Loan Document or any other agreement or instrument relating thereto against
any Loan Party;

 

(c)           any change in the time, manner or place
of payment of, or in any other term of, all or any of the Obligations, or any
other amendment or waiver of or any consent to any departure from any Loan
Document or any other agreement or instrument relating thereto;

 

(d)           any exchange, release or non-perfection
or loss of priority of any Liens on any or all of the Collateral, or any
release or amendment or waiver of or consent to any departure from any
guarantee, for all or any of the Obligations;

 

(e)           any exercise or non-exercise, or any
waiver of any right, remedy, power or privilege under or in respect hereof or
any Loan Document; or

 

(f)            any other circumstances which might
otherwise constitute a defense available to, or a discharge of, the Loan
Parties.

 

Section 12.16       Waiver of Defenses; Absence of Fiduciary Duties. 
(a)  Each of the Loan Parties hereby waives any and all suretyship
defenses available to it as a Guarantor arising out of the joint and several
nature of its respective duties and obligations hereunder (including any
defense contained in Article VII).

 

(b)           Each of the Loan Parties agrees that in
connection with all aspects of the transactions contemplated hereby or by the
other Loan Documents and any communications in connection therewith, the Loan
Parties and their respective Affiliates, on the one hand, and each Lender, SPC
and Agent, on the other hand, will have a business relationship that does not
create, by implication or otherwise, any fiduciary duty on the part of any
Lender, SPC or any Agent or any of their respective Affiliates, and no such
duty will be deemed to have arisen in connection with any such transactions or
communications.

 

Section 12.17       USA Patriot Act.  Each Lender
hereby notifies each Loan Party that pursuant to the requirements of the
Patriot Act, it is required to obtain, verify and record information that
identifies the Loan Parties, which information includes the name, address  and taxpayer identification number of each
Loan Party and other information that will allow such Lender to identify such
Loan Party in accordance with the Patriot Act.

 

(Signature
Pages Follow)

 

110

 

IN
WITNESS WHEREOF, the parties hereto have caused this Credit Agreement to be
duly executed by their respective authorized officers or other authorized
signatories as of the day and year first above written.

 

	
   

  	
  FIVE
  STAR QUALITY CARE, INC., as Borrower

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
  Name: Paul Hoagland

  
	
   

  	
   

  	
  Title: Treasurer and
  Chief Financial Officer

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JEFFERIES
  FINANCE LLC,

  as Arranger, Administrative Agent, Collateral Agent and a Lender

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ E. Joseph Hess

  
	
   

  	
   

  	
  Name: E. Joseph Hess

  
	
   

  	
   

  	
  Title: Managing
  Director

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  JEFFERIES
  GROUP INC.,

  as Issuing Bank

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
  /s/ Charles J. Hendrickson

  
	
   

  	
   

  	
  Name: Charles J. Hendrickson

  
	
   

  	
   

  	
  Title:

  	
  Managing Director & Treasurer

  

 

Signature Page to Credit
and Security Agreement

 

 

	
  GUARANTORS:

  
	
   

  
	
   

  	
   

  	
  ALLIANCE
  PHARMACY SERVICES, LLC

  
	
   

  	
   

  	
  FIVE STAR
  QUALITY CARE-CA, INC.

  
	
   

  	
   

  	
  FIVE STAR
  QUALITY CARE-IA, INC.

  
	
   

  	
   

  	
  FIVE STAR
  QUALITY CARE-NE, 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-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

  
	
   

  	
   

  	
  FIVE STAR
  QUALITY CARE-CA II, LLC

  
	
   

  	
   

  	
  FIVE STAR
  QUALITY CARE TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name: Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title: Treasurer and Chief
  Financial Officer

  

 

Signature Page to Credit
and Security Agreement

 

 

	
   

  	
   

  	
  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/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name: Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title: Treasurer and Chief
  Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  ANNAPOLIS HERITAGE PARTNERS, LLC

  
	
   

  	
   

  	
  COLUMBIA HERITAGE PARTNERS, LLC

  
	
   

  	
   

  	
  ENCINITAS HERITAGE PARTNERS, LLC

  
	
   

  	
   

  	
  FREDERICK HERITAGE PARTNERS, LLC

  
	
   

  	
   

  	
  FSQ PHARMACY HOLDINGS LLC

  
	
   

  	
   

  	
  HAGERSTOWN HERITAGE PARTNERS, LLC

  
	
   

  	
   

  	
  NEWARK HERITAGE PARTNERS I, LLC

  
	
   

  	
   

  	
  NEWARK HERITAGE PARTNERS II, LLC

  
	
   

  	
   

  	
  REDLANDS HERITAGE PARTNERS, LLC

  
	
   

  	
   

  	
  STOCKTON HERITAGE PARTNERS, LLC,

  
	
   

  	
   

  	
  each a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name: Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title: Treasurer and Chief
  Financial Officer

  

 

Signature Page to Credit
and Security Agreement

 

 

	
   

  	
   

  	
  FIVE STAR QUALITY CARE - GHV, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - IL, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - IN, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - MN, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - MS, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE — NORTH CAROLINA, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - NJ, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - NS OPERATOR, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - NS OWNER, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - NS TENANT, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - OBX OPERATOR, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - OBX OWNER, LLC

  
	
   

  	
   

  	
  FIVE STAR QUALITY CARE - TX, LLC

  
	
   

  	
   

  	
  FS COMMONWEALTH LLC

  
	
   

  	
   

  	
  FS PATRIOT LLC

  
	
   

  	
   

  	
  FSQC-AL, LLC,

  
	
   

  	
   

  	
  each a Maryland limited
  liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name:
  Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title:
  Treasurer and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  MORNINGSIDE OF CONCORD, LLC

  
	
   

  	
   

  	
  MORNINGSIDE OF GASTONIA, LLC

  
	
   

  	
   

  	
  MORNINGSIDE OF GREENSBORO, LLC

  
	
   

  	
   

  	
  MORNINGSIDE OF RALEIGH, LLC

  
	
   

  	
   

  	
  MORNINGSIDE OF WILLIAMSBURG, LLC,

  
	
   

  	
   

  	
  each a Delaware limited liability company

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  LIFETRUST AMERICA, INC., its sole member

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name:
  Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title:
  Treasurer and Chief Financial Officer

  

 

Signature Page to Credit
and Security Agreement

 

 

	
   

  	
   

  	
  MORNINGSIDE OF FAYETTE, L.P.

  
	
   

  	
   

  	
  MORNINGSIDE OF PARIS, L.P.,

  
	
   

  	
   

  	
  each a Delaware limited partnership

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  LIFETRUST AMERICA, INC., its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name:
  Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title:
  Treasurer and Chief Financial Officer

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  FRESNO HERITAGE PARTNERS, A

  
	
   

  	
   

  	
  CALIFORNIA LIMITED PARTNERSHIP

  
	
   

  	
   

  	
  ROSEVILLE HERITAGE PARTNERS, A

  
	
   

  	
   

  	
  CALIFORNIA LIMITED PARTNERSHIP

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:
  SOMERFORD PLACE LLC, its general partner

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Name:
  Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title:
  Treasurer and Chief Financial Officer

  

 

Signature Page to Credit
and Security Agreement

 

 

	
   

  	
   

  	
  FS TENANT HOLDING COMPANY TRUST

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  By:

  	
  /s/ Paul
  Hoagland

  
	
   

  	
   

  	
   

  	
  Name:  Paul Hoagland

  
	
   

  	
   

  	
   

  	
  Title:  Treasurer and Chief Financial Officer

  

 

 

[The
following schedules and annexes have been omitted and will be supplementally
furnished to the Securities and Exchange Commission upon request:]

 

	
  Annex I

  	
   

  	
  Initial Lenders and
  Commitments

  
	
   

  	
   

  	
   

  
	
  Schedule 1.01(a)

  	
   

  	
  Existing Affected
  Properties

  
	
  Schedule 1.01(d)

  	
   

  	
  Material Provider

  
	
  Schedule 1.01(f)

  	
   

  	
  Released Guarantors

  
	
  Schedule 1.01(g)

  	
   

  	
  Relevant Existing Provider

  
	
  Schedule 3.01(b)

  	
   

  	
  Subsidiaries; Ownership
  Structure

  
	
  Schedule 3.01(f)

  	
   

  	
  Leases

  
	
  Schedule 3.01(g)

  	
   

  	
  Existing Indebtedness

  
	
  Schedule 3.01(h)

  	
   

  	
  Litigation

  
	
  Schedule 3.01(cc)

  	
   

  	
  Deposit Accounts

  
	
  Schedule 4.01(m)

  	
   

  	
  Uses of Closing Date
  Credit Extensions

  
	
  Schedule 6.03(g)

  	
   

  	
  Permitted Indebtedness

  
	
  Schedule 6.04(a)

  	
   

  	
  Permitted Liens

  

 

 

SCHEDULE 1.01(c)

 

GUARANTORS

 

Alliance Pharmacy Services,
LLC

Annapolis Heritage Partners, LLC

Columbia Heritage Partners, LLC

Encinitas Heritage Partners, LLC

Five Star Quality Care-CA, Inc.

Five Star Quality Care-IA, Inc.

Five
Star Quality Care - IL, LLC

Five
Star Quality Care - IN, LLC

Five Star Quality Care-NE, Inc.

Five Star Quality Care-AZ,
LLC

Five Star Quality Care-CA,
LLC

Five Star Quality Care-CA
II, LLC

Five Star Quality
Care-Colorado, LLC

Five Star Quality Care-CT,
LLC

Five Star Quality Care-FL,
LLC

Five Star Quality Care-GA,
LLC

Five
Star Quality Care - GHV, LLC

Five Star Quality Care-IA,
LLC

Five Star Quality Care-KS,
LLC

Five Star Quality Care-MD,
LLC

Five
Star Quality Care - MN, LLC

Five Star Quality Care-MO,
LLC

Five
Star Quality Care - MS, LLC

Five Star Quality Care-NE,
LLC

Five
Star Quality Care - NJ, LLC

Five
Star Quality Care-North Carolina, LLC

Five
Star Quality Care - NS Operator, LLC

Five
Star Quality Care - NS Owner, LLC

Five
Star Quality Care - NS Tenant, LLC

Five
Star Quality Care - OBX Operator, LLC

Five
Star Quality Care - OBX Owner, LLC

Five
Star Quality Care - TX, LLC

Five Star Quality Care-VA,
LLC

Five Star Quality Care-WI,
LLC

Five Star Quality Care-WY,
LLC

Five Star Quality Care Trust

Frederick Heritage Partners, LLC

Fresno Heritage Partners, a California Limited
Partnership

FS
Commonwealth LLC

FS Lafayette Tenant Trust

FS Leisure Park Tenant Trust

FS Lexington Tenant Trust

 

 

FS
Patriot LLC

FS Tenant Holding Company
Trust

FS Tenant Pool I Trust

FS Tenant Pool II Trust

FS Tenant Pool III Trust

FS Tenant Pool IV Trust

FSQ Pharmacy Holdings LLC

FSQC-AL,
LLC

Hagerstown Heritage Partners, LLC

Morningside of Alabama, L.P.

Morningside of Anderson,
L.P.

Morningside of Athens,
Limited Partnership

Morningside of Belmont, LLC

Morningside of Columbus,
L.P.

Morningside
of Concord, LLC

Morningside of Dalton, Limited
Partnership

Morningside of Decatur, L.P.

Morningside of Evans,
Limited Partnership

Morningside
of Fayette, L.P.

Morningside of Gallatin, LLC

Morningside
of Gastonia, LLC

Morningside
of Greensboro, LLC

Morningside of Greenwood,
L.P.

Morningside of Kentucky,
Limited Partnership

Morningside
of Paris, L.P.

Morningside
of Raleigh, LLC

Morningside of Springfield,
LLC

Morningside
of Williamsburg, LLC

Newark Heritage Partners I, LLC

Newark Heritage Partners II, LLC

Redlands Heritage Partners, LLC

Roseville Heritage Partners, a California Limited
Partnership

Stockton
Heritage Partners, LLC

 

 

EXHIBIT
A

 

FORM OF
ACCESSION AGREEMENT

 

THIS ACCESSION AGREEMENT (this “Agreement”), dated as of ________________,
2010, is entered into by ________________________, a __________________ (the “Joining Party”), and acknowledged by JEFFERIES
FINANCE LLC, in its capacity as collateral agent (the “Collateral Agent”).

 

Reference is made to that certain Credit
and Security Agreement (as amended, restated, supplemented or otherwise
modified from time to time, the “Credit
Agreement”), dated as of March [ ], 2010, entered into by and among FIVE STAR QUALITY CARE, INC., a
Maryland corporation (the “Borrower”),
the other Guarantors party thereto from time to time, the Lenders, the Collateral Agent, in its capacity as arranger,
administrative agent for the Lenders and as collateral agent for the Secured
Parties, and JEFFERIES GROUP INC., as issuing bank for the Lenders (the “Issuing Bank”).  Capitalized terms used herein without
definition shall have the meaning assigned thereto in the Credit Agreement.

 

The Joining Party hereby becomes a
Guarantor (as such term is defined in the Credit Agreement).

 

Accordingly, the Joining Party agrees as
follows with the Borrower, the Collateral Agent and the Issuing Bank:

 

1.             The
Joining Party hereby acknowledges, agrees and confirms that, by its execution
of this Agreement, the Joining Party will be deemed to be a party to the Credit
Agreement, and, from and after the date hereof, shall have all of the
obligations of a Guarantor thereunder as if it had executed the Credit
Agreement.  The Joining Party hereby
ratifies, as of the date hereof, and agrees to be bound by, all of the terms,
provisions and conditions applicable to a Guarantor contained in the Credit
Agreement.

 

2.             To
the extent the Joining Party is an agent or trustee for one or more secured
parties, the Joining Party acknowledges that it has the authority to bind such
secured parties to the Credit Agreement and such secured parties are hereby
bound to the Credit Agreement.  The
Joining Party hereby agrees (on behalf of itself and any secured parties
claiming through it) to comply with the terms of the Credit Agreement.

 

3.             The
address of the Joining Party for purposes of all notices and other
communications is _____________________ , _______________________,
Attention of ___________________ (Facsimile No.                         ).

 

4.             [The Joining Party is a Provider.]

 

5.             This
Agreement may be executed in multiple counterparts, each of which shall
constitute an original but all of which when taken together shall constitute one
contract.

 

6.             This Agreement shall be
construed in accordance with and governed by the law of the State of New York,
without regard to conflicts of law principles that would require the
application of the laws of another jurisdiction.

 

(Signature Page Follows)

 

A-1

 

IN WITNESS WHEREOF, the Joining Party has
caused this Accession Agreement to be duly executed by its authorized
representative, and each of the parties have caused the same to be accepted by
its authorized representative, as of the day and year first above written.

 

	
   

  	
  [NAME OF JOINING PARTY]

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  	
   

  
	
   

  	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  Acknowledged and accepted:

  
	
   

  	
   

  
	
   

  	
  JEFFERIES FINANCE LLC,

  
	
   

  	
  as Collateral Agent

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  JEFFERIES GROUP INC.,

  
	
   

  	
  as Issuing Bank

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

A-2

 

EXHIBIT
B

 

FORM OF

ASSIGNMENT AND ACCEPTANCE

 

Reference is made to the Credit and Security
Agreement, dated as of March [ ], 2010 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Credit
Agreement”), among Five
Star Quality Care, Inc.., a Maryland corporation (the “Borrower”), the other Guarantors party
thereto from time to time, the Lenders,
Jefferies Finance LLC, as administrative agent for the Lenders and Jefferies
Group Inc., as issuing bank (in such capacity, the “Issuing Bank”) for the Lenders.  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement.

 

1.             __________________(the “Assignor”) hereby irrevocably sells and
assigns, without recourse, to the Assignee, and the Assignee hereby irrevocably
purchases and assumes, from the Assignor, without recourse to the Assignor,
effective as of the Effective Date set forth below (but not prior to the
registration of the information contained herein in the Register pursuant to Section 12.04(c) of
the Credit Agreement), the interests set forth below (the “Assigned Interest”) in the Assignor’s
rights and obligations under the Credit Agreement and the other Loan Documents,
including, without limitation, the Revolving Commitment, the Revolving Loans
and participations held by the Assignor in Letters of Credit which are
outstanding on the Effective Date.  From
and after the Effective Date (i) the Assignee shall be a party to and be
bound by the provisions of the Credit Agreement and, to the extent of the
interests assigned by this Assignment and Acceptance Agreement, have the rights
and obligations of a Lender thereunder and under the Loan Documents and (ii) the
Assignor shall, to the extent of the interests assigned by this Assignment and
Acceptance Agreement, relinquish its rights and be released from its obligations
under the Credit Agreement.

 

2.             The Assignor (a) represents
and warrants that (i) it is the legal and beneficial owner of the interest
being assigned hereby free and clear of any lien, encumbrance or other adverse
claim created by the Assignor and that its Commitments, and the outstanding
balances of its Loans, without giving effect to assignments thereof which have
not become effective, are as set forth in this Assignment and Acceptance
Agreement and (ii) it has all necessary power and authority, and has taken
all action necessary, to execute and deliver this Assignment and Acceptance
Agreement and to consummate the transactions contemplated hereby; and (b) except
as set forth in (a) above, the Assignor makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit
Agreement, or the execution, legality, validity, enforceability, genuineness,
sufficiency or value of the Credit Agreement, any other Loan Document or any
other instrument or document furnished pursuant thereto, or the financial
condition of any Loan Party or the performance or observance by any Loan Party
of any of its obligations under the Credit Agreement, any other Loan Document
or any other instrument or document furnished pursuant thereto.

 

3.             The Assignee (a) represents and warrants that (i) it
is legally authorized to enter into this Assignment and Acceptance Agreement
and (ii) it has all necessary power and authority, and has taken all
action necessary, to execute and deliver this Assignment and Acceptance
Agreement and to consummate the transactions contemplated hereby and become a
Lender under the Credit Agreement; (b) confirms that it has received a
copy of the Credit Agreement, and such other documents and information as it
has deemed appropriate to make its own credit analysis and decision to enter
into this Assignment and Acceptance Agreement; (c) agrees that it will,
independently and without reliance upon the Assignor, the Agents or any Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, 

 

B-1

 

the other Loan Documents or any other instrument or
document furnished pursuant hereto or thereto; (d) appoints and authorizes
the Agents to take such action as agents on its behalf and to exercise such
powers and discretion under the Credit Agreement, the other Loan Documents or
any other instrument or document furnished pursuant hereto or thereto as are
delegated to the Agents by the terms thereof, together with such powers as are
incidental thereto; and (e) agrees that it will be bound by the provisions
of the Credit Agreement and will perform in accordance with its terms all the
obligations which by the terms of the Credit Agreement are required to be
performed by it as a Lender.

 

4.             The effective
date of this Assignment and Acceptance Agreement shall be the later of (x) the
Effective Date of Assignment described in Schedule 1 hereto and (y) if
the Assignee is a Foreign Lender, the date on which such Assignee has complied
with the provisions of Section 2.14(e) of the Credit Agreement
(the “Effective Date”).  Following the execution of this Assignment
and Acceptance Agreement, it will be delivered to the Administrative Agent for
acceptance by it and recording by the Administrative Agent pursuant to the
Credit Agreement, effective as of the Effective Date (which shall not, unless
otherwise agreed to by the Administrative Agent, in its sole discretion, be
earlier than three business Days after the date of such acceptance and
recording by the Administrative Agent).  This
Assignment and Acceptance Agreement will be delivered to the Administrative
Agent together with (a) if the Assignee is a Foreign Lender, the forms
specified in Section 2.14(e) of the Credit Agreement, duly
completed and executed by such Assignee; (b) if the Assignee is not
already a Lender under the Credit Agreement, an Administrative Questionnaire,
and (c) a processing and recordation fee of $3,500, if required under the
Loan Documents.

 

5.             Upon such
acceptance and recording, from and after the Effective Date, the Administrative
Agent shall make all payments in respect of the Assigned Interest (including
payments of principal, interest, fees and other amounts) to the Assignor for
amounts which have accrued to the Effective Date and to the Assignee for
amounts which have accrued subsequent to the Effective Date.

 

6.             From and after
the Effective Date, (a) the Assignee shall be a party to the Credit
Agreement and, to the extent provided in this Assignment and Acceptance
Agreement, have the rights and obligations of a Lender thereunder and under the
other Loan Documents and shall be bound by the provisions thereof and (b) the
Assignor shall, to the extent provided in this Assignment and Acceptance
Agreement, relinquish its rights and be released from its obligations under the
Credit Agreement.

 

7.             This Assignment
and Acceptance Agreement shall be construed in accordance with and governed by
the law of the State of New York, without regard to conflicts of law principles
that would require the application of the laws of another jurisdiction.

 

B-2

 

SCHEDULE 1

 

to

 

Assignment
and Acceptance

 

	
  Effective
  Date of Assignment:

  	
   

  
	
   

  
	
  Legal
  Name of Assignor:

  	
   

  
	
   

  
	
  Legal
  Name of Assignee:

  	
   

  
	
   

  
	
  Assignee’s
  Address for Notices:

  	
   

  
	
   

  
	
   

  
	
  Percentage
  Assigned of Applicable Loan/Commitment:

  
				

 

	
  Loan/Commitment

  	
   

  	
  Principal Amount

  Assigned

  	
   

  	
  Percentage Assigned of applicable

  Loan/Commitment (set forth, to at least

  15 decimals, as a percentage of the Loans and the

  aggregate Commitments of all Lenders

  thereunder)

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Revolving Loans

  	
   

  	
  $

  	
   

  	
  %

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  
	
  Letters of Credit

  	
   

  	
  $

  	
   

  	
  %

  	
   

  

 

(Signature Page Follows)

 

B-3

 

	
   

  	
  The
  terms set forth above are hereby agreed to:

  
	
   

  	
   

  
	
   

  	
  [

  	
   

  	
   ]

  
	
   

  	
  as
  Assignor

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
  as
  Assignee

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
					

 

	
  Accepted:*

  	
   

  
	
   

  	
   

  
	
  [FIVE STAR QUALITY CARE, INC.]

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  JEFFERIES
  FINANCE LLC,

  	
   

  
	
  as
  Administrative Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  
	
   

  	
   

  
	
   

  	
   

  
	
  [ISSUING BANK]

  	
   

  
	
  as Collateral Agent

  	
   

  
	
   

  	
   

  
	
  By:

  	
   

  	
   

  
	
   

  	
  Name:

  	
   

  
	
   

  	
  Title:

  	
   

  

 

*              To be completed to the extent Borrower, Administrative Agent or Issuing
Bank consent is required under Section 12.04(b) of the Credit Agreement.

 

B-4

 

EXHIBIT
C

 

FORM OF

BORROWING
REQUEST

 

Jefferies Finance LLC,
    as Administrative Agent for the
Lenders

520 Madison Avenue

New York, New York 10022

Attention: Account Manager — Five Star Quality Care, Inc.

Facsimile: (212) 284-3444

 

 

	
  Re:

  	
   

  	
  Five Star Quality Care, Inc.

  	
  __________
  __, 20__

  

 

Ladies and Gentlemen:

 

Reference is made to the Credit and Security
Agreement, dated as of March [   ], 2010 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Five
Star Quality Care, Inc., a Maryland corporation (the “Borrower”), the other Guarantors party
thereto from time to time, the Lenders,
the Collateral Agent, in its capacity as lead arranger, administrative agent
for the Lenders and as collateral agent for the Secured Parties, and Jefferies
Group Inc., as issuing bank for the Lenders.  Capitalized
terms used herein without definition shall have the meaning assigned thereto in
the Credit Agreement.  Borrower
hereby gives you notice pursuant to Section 2.03 of the Credit
Agreement that it requests a Borrowing under the Credit Agreement, and that in
connection therewith sets forth below the terms on which such Borrowing is
requested to be made:

 

C-1

 

	
  (A)

  	
  Aggregate
  amount of Borrowing:(1)

  	
   

  
	
   

  	
   

  	
   

  
	
  (B)

  	
  Date
  of Borrowing (which is a Business Day):

  	
   

  
	
   

  	
   

  	
   

  
	
  (C)

  	
  Type
  of Borrowing:

  	
  [ABR
  Borrowing] [Eurodollar Borrowing]

  
	
   

  	
   

  	
   

  
	
  (D)

  	
  Interest
  Period and the last day thereof:(2)

  	
   

  
	
   

  	
   

  	
   

  
	
  (E)

  	
  Funds
  are requested to be disbursed

  	
   

  
	
   

  	
  to Borrower’s account
  with:

  	
   

  
	
   

  	
   

  	
  Account No.

  	
   

  

 

Borrower hereby represents and warrants that the
conditions to lending specified in Section 4.02(b), (c) and
(d) of the Credit Agreement are satisfied as of the date hereof.

 

(Signature Page Follows)

 

(1)           See Section 2.02(a) of the Credit
Agreement for minimum borrowing amounts.

 

(2)           To be inserted if a Eurodollar Borrowing, and to be
subject to the definition of “Interest Period” in the Credit Agreement.

 

C-2

 

	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

C-3

 

EXHIBIT D

 

BORROWING BASE CERTIFICATE

 

                    ,
2010

 

Jefferies Finance LLC,

   as
Administrative Agent and 

   Collateral
Agent for the Lenders

520 Madison Avenue

New York, New York 10022

Attention: Account Manager — Five Star Quality Care, Inc.

Facsimile: (212) 284-3444

 

Ladies
and Gentlemen:

 

Reference
is made to the Credit and Security Agreement, dated as of March [   ],
2010 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”),
among Five Star Quality Care, Inc.,
a Maryland corporation (the “Borrower”),
the Guarantors party thereto from time to time, the Lenders, Jefferies Finance LLC, in its capacity as lead arranger, administrative agent for the
Lenders and as collateral agent for the Secured Parties, and Jefferies Group
Inc., as issuing bank for the Lenders.  Capitalized
terms used herein without definition shall have the meaning assigned thereto in
the Credit Agreement.

 

Pursuant
to Section 5.01(d)(xiii) of the Credit Agreement, the undersigned hereby
certifies to the Lenders as follows:

 

(1)           The undersigned is the Treasurer and
Chief Financial Officer of the Borrower.

 

(2)           As of               
    , 2010, the Borrowing Base is as set forth on
Schedule 1 hereto

 

(3)           All adjustments and calculations
related to the amounts set forth in (2) above are attached as Schedule 2
hereto.

 

D-1

 

IN
WITNESS WHEREOF, the undersigned has executed this certificate as of the date
first above written.

 

 

	
   

  	
   

  
	
   

  	
  Name:

  
	
   

  	
  Title:

  

 

D-2

 

SCHEDULE 1

 

Total
Borrowing Base

 

	
  Eligible
  Accounts

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Borrowing Base

  	
   

  	
  X .85

  

 

Pharmacy
Borrowing Base

 

	
  Eligible
  Accounts

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Borrowing Base

  	
   

  	
  X .85

  

 

Borrowing
Base (Excluding Pharmacies)

 

	
  Eligible
  Accounts

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  Total
  Borrowing Base

  	
   

  	
  X .85

  

 

D-3

 

SCHEDULE 2

 

Adjustments and calculations related to the amounts
set forth in Schedule 1 above

 

D-4

 

EXHIBIT
E

 

COMPLIANCE
CERTIFICATE

 

This Compliance Certificate
is delivered to you pursuant to Section 5.01(c) of the Credit
and Security Agreement, dated as of
                     ,
2010 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”),
among Five Star Quality Care, Inc..,
a Maryland corporation (the “Borrower”),
the other Guarantors party thereto from time to time, the Lenders, the Collateral Agent, in its capacity as lead
arranger, administrative agent for the Lenders and as collateral agent for the
Secured Parties, and Jefferies Group Inc., as issuing bank for the Lenders.  Unless otherwise defined
herein, terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement. 
All certifications made in this Compliance Certificate are made in my
capacity as Chief Financial Officer and not in any individual
capacity.

 

1.             I am the duly elected, qualified
and acting Chief Financial Officer of Borrower.

 

2.             I have reviewed and am familiar
with the contents of this Compliance Certificate.

 

3.             To the best of my knowledge,
information and belief after due inquiry, no Default or Event of Default
exists[, except as set forth below].(1)

 

4.             Attached hereto as Attachment 1
are the computations setting forth in reasonable detail the calculations
required to establish Borrower’s compliance with the covenants set forth in Section 6.01
of the Credit Agreement.

 

(Signature Page Follows)

 

(1) Together
with each Compliance Certificate delivered with the financial statements
furnished pursuant to Section 5.01(b) of the Credit Agreement,
Borrower must also provide a certificate of independent certified public
accountants with regard to the existence or non-existence of a Default or Event
of Default.

 

E-1

 

IN WITNESS WHEREOF,
Borrower, through the undersigned acting solely in his or her capacity as Chief
Financial Officer and not in any individual capacity, executes this Certificate
this         
day of                         ,
2010.

 

 

	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  Paul V.
  Hoagland

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  

 

E-2

 

ATTACHMENT 1

 

[Set forth calculation of financial covenants]

 

E-3

 

EXHIBIT F

 

[INTENTIONALLY
DELETED]

 

F-1

 

EXHIBIT
G

 

FORM OF

INTEREST
ELECTION REQUEST

 

                    ,
20      

 

Jefferies Finance LLC,

 as
Administrative Agent for the Lenders 

520 Madison Avenue

New York, New York 
10022

Attention: 
Account Manager — Five Star
Quality Care, Inc.

Telecopy: 
(212) 284-3444

 

Re:              Five Star Quality
Care, Inc.

 

Ladies and Gentlemen:

 

Pursuant to Section 2.08
of that certain Credit and Security Agreement, dated as of                      
     , 2010 (as amended, amended and restated,
supplemented or otherwise modified from time to time, the “Credit
Agreement”; capitalized terms used but not defined herein having the
meanings, as applicable, given such terms in the Credit Agreement), among Five Star Quality Care, Inc., a Maryland corporation (the “Borrower”), the other Guarantors party
thereto from time to time, the Lenders,
the Collateral Agent, in its capacity as arranger, administrative agent for the
Lenders and as collateral agent for the Secured Parties (the “Administrative Agent”), and Jefferies Group
Inc., as issuing bank for the Lenders (the “Issuing
Bank”), Borrower hereby gives the Administrative Agent
notice that Borrower hereby requests:

 

[Option
A - Conversion of Eurodollar Borrowings to ABR Borrowings:  to convert $                      
in principal amount of presently outstanding Eurodollar Revolving Borrowings
with a final Interest Payment Date of                         
        ,           
to ABR Borrowings on                     
        ,         
(which is a Business Day).]

 

[Option
B - Conversion of ABR Borrowings to Eurodollar Borrowings:  to convert $                    
in principal amount of presently outstanding ABR Revolving Borrowings to
Eurodollar Borrowings on                         
        ,           
(which is a Business Day).  The Interest
Period for such Eurodollar Borrowings is             
month[s].]

 

[Option
C - Continuation of Eurodollar Borrowings as Eurodollar Borrowings:  to continue as Eurodollar Borrowings
$                    
in presently outstanding Eurodollar Revolving Borrowings with a final Interest
Payment Date of
                        
        ,           
(which is a Business Day).  The Interest
Period for such Eurodollar Borrowings is             
month[s].]

 

(Signature Page Follows)

 

G-1

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title

  

 

G-2

 

EXHIBIT
H

 

FORM OF

LC REQUEST

 

                        ,
20   

 

Jefferies
Group Inc.

520
Madison Avenue

New
York, New York  10022

Attention:  Mark Sahler — Five Star Quality Care, Inc.

Telecopy
No.:  (201) 761-4023

 

With
a copy to:

 

Jefferies Finance LLC

520 Madison Avenue

New York, New York 
10022

Attention: 
Account Officer — Five Star Quality Care, Inc.

Telecopy No.: 
(212) 284-3444

 

Re:              Five Star Quality
Care, Inc.

 

Ladies and Gentlemen:

 

The undersigned, Five Star
Quality Care, Inc., a Maryland corporation (“Borrower”),
hereby makes reference to that certain Credit and Security Agreement, dated as
of March [  ], 2010 (as amended, amended and
restated, supplemented or otherwise modified from time to time, the “Credit Agreement”), among Borrower,
the other Guarantors party thereto from time to time, the Lenders party thereto, and Jefferies Finance LLC, as
Administrative Agent for the Lenders.  Unless otherwise defined herein, terms
defined in the Credit Agreement and used herein shall have the meanings given
to them in the Credit Agreement. 
Borrower hereby gives notice, pursuant to Section 2.16(b) of
the Credit Agreement, that Borrower hereby requests the issuance of a Letter of
Credit under the Credit Agreement, and in connection therewith sets forth below
the information relating to such issuance (the “Proposed
Issuance”):

 

	
  (i)

  	
  The
  requested date of the Proposed Issuance:                 

  
	
   

  	
  (which
  is a Business Day)

  
	
   

  	
   

  
	
  (ii)

  	
  The
  face amount of the proposed Letter of Credit: $            

  
	
   

  	
   

  
	
  (iii)

  	
  The
  expiry date of such Letter of Credit:               

  
	
   

  	
  (which
  shall not be later than the close of business of the Letter of Credit
  Expiration Date))

  
	
   

  	
   

  
	
  (iv)

  	
  The name and address of
  the beneficiary of such requested Letter of Credit is:

  

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

H-1

 

	
  (vi)

  	
  The
  Proposed Issuance is requested for the account of [Borrower/Name of
  Wholly-Owned Subsidiary] (provided that
  Borrower shall remain jointly and severally liable as co-applicant).

  
	
   

  	
   

  
	
  (vii)

  	
  Any documents to be
  presented by such beneficiary in connection with any drawing hereunder,
  including any certificate(s), application or form of such requested Letter of
  Credit, are attached hereto as Attachment 1 or described therein.

  

 

In connection with a request
for an amendment, renewal or extension of any outstanding Letter of Credit,
Borrower sets forth the information below relating to such proposed amendment,
renewal or extension:

 

	
  (i)

  	
  A
  copy of the outstanding Letter of Credit requested to be amended, renewed or
  extended is attached hereto as Attachment 2.

  
	
   

  	
   

  
	
  (ii)

  	
  The
  proposed date of amendment, renewal or extension thereof:                         

  
	
   

  	
  (which
  shall be a Business Day)

  
	
   

  	
   

  
	
  (iii)

  	
  The nature of the proposed
  amendment, renewal or extension:

  

 

	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  

 

The undersigned hereby
certifies that the following statements are true and correct on the date
hereof, and will be true and correct on the date of the Proposed Issuance or on
the date that any amendment (to increase the amount available thereunder),
renewal or extension of an outstanding Letter of Credit becomes effective
hereunder:

 

(A)          the representations and warranties contained in each Loan
Document are true and correct in all material respects on and as of the date of
the Proposed Issuance, before and after giving effect to the Proposed Issuance
requested hereby, as though made on and as of such date, other than any such
representations and warranties that, by their terms, are specifically made as
of a date other than the date of the Proposed Issuance;

 

(B)           no event has occurred and is continuing, or would result
from the Proposed Issuance requested hereby, that constitutes a Default or
Event of Default; and

 

(C)           the LC Exposure does not exceed the LC Commitment and the
total Revolving Exposures do not exceed the total Revolving Commitments.

 

(Signature Page Follows)

 

H-2

 

	
   

  	
  Very
  truly yours,

  
	
   

  	
   

  
	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

H-3

 

ATTACHMENT 1

 

[Documents required by Issuing Bank]

 

H-4

 

ATTACHMENT 2

 

[Outstanding Letter of Credit]

 

H-5

 

EXHIBIT
I

 

FORM OF

REVOLVING NOTE

 

	
  $[                         
  ]

  	
   

  	
  New
  York, New York

  
	
   

  	
   

  	
  [
                          
  ]

  

 

FOR VALUE RECEIVED, the
undersigned, Five Star Quality Care, Inc., a Maryland corporation (“Borrower”), hereby promises to pay to [                                 
] or its registered successors and assigns (the “Lender”)
on the Revolving Maturity Date (as defined in the Credit Agreement referred to
below) in lawful money of the United States and in immediately available funds,
the principal amount of the lesser of (a) [                         
] DOLLARS and (b) the aggregate unpaid principal amount of all
Revolving Loans of the Lender outstanding under the Credit Agreement referred
to below.  Borrower further agrees to pay
interest in like money at such office on the unpaid principal amount hereof
from time to time at the rates, and on the dates, specified in Section 2.06
of the Credit Agreement.  Capitalized
terms used herein which are defined in the Credit Agreement shall have such
defined meanings unless otherwise defined herein.

 

The holder of this Note may
endorse and attach a schedule to reflect the date, type and amount of each
Revolving Loan of the Lender outstanding under the Credit Agreement, the date
and amount of each payment or prepayment of principal hereof, and the date of
each interest rate conversion or continuation pursuant to Section 2.08
of the Credit Agreement and the principal amount subject thereto; provided that the failure of the Lender to make any such
recordation (or any error in such recordation) shall not affect the obligations
of Borrower hereunder or under the Credit Agreement.

 

This Note is one of the
Notes referred to in the Credit and Security Agreement, dated as of March [  ],
2010 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”),
among Borrower, the other
Subsidiaries party thereto, the other Guarantors party thereto from time to
time, the Lenders from time to time
party thereto and Jefferies Finance LLC, as administrative agent for the
Lenders.  This Note is subject to the
provisions thereof and is subject to optional and mandatory prepayment in whole
or in part as provided therein.

 

This Note is secured and
guaranteed as provided in the Credit Agreement and the Security Documents.  Reference is hereby made to the Credit
Agreement and the Security Documents for a description of the properties and
assets in which a security interest has been granted, the nature and extent of
the security and guarantees, the terms and conditions upon which the security
interest and each guarantee was granted and the rights of the holder of this
Note in respect thereof.

 

Upon the occurrence and
during the continuation of any one or more Events of Default under Section 9.01(f) or
(g), all amounts then remaining unpaid on this Note shall become immediately
due and payable, all as provided in the Credit Agreement.  Upon the occurrence and during the
continuation of any one or more other Events of Default, all amounts then
remaining unpaid on this Note may be declared to be immediately due and
payable, all as provided in the Credit Agreement.

 

All parties now and
hereafter liable with respect to this Note, whether maker, principal, surety,
guarantor, endorser or otherwise, hereby waive presentment, demand, protest and
all other notices of any kind.

 

I-1

 

THIS NOTE MAY NOT BE
TRANSFERRED OR ASSIGNED BY THE LENDER TO ANY PERSON EXCEPT IN COMPLIANCE WITH
THE TERMS OF THE CREDIT AGREEMENT.  THE
RIGHTS EVIDENCED BY THIS NOTE TO RECEIVE PRINCIPAL AND INTEREST MAY ONLY
BE TRANSFERRED IF THE TRANSFER IS REGISTERED ON A RECORD OF OWNERSHIP AND THE
TRANSFEREE IS IDENTIFIED AS THE OWNER OF AN INTEREST IN THE OBLIGATION PURSUANT
T0 SECTION 11.04 OF THE CREDIT AGREEMENT. 
THIS NOTE MAY NOT AT ANY TIME BE ENDORSED TO, OR TO THE ORDER OF,
BEARER.  TRANSFERS OF THIS NOTE MUST BE
RECORDED IN THE REGISTER MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE
TERMS OF THE CREDIT AGREEMENT.

 

THIS NOTE SHALL BE CONSTRUED IN
ACCORDANCE WITH AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT
REGARD TO CONFLICTS OF LAW PRINCIPLES THAT WOULD REQUIRE THE APPLICATION OF THE
LAWS OF ANOTHER JURISDICTION.

 

	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
  as
  Borrower

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title

  

 

I-2

 

EXHIBIT J

 

[INTENTIONALLY DELETED]

 

J-1

 

EXHIBIT K

 

[INTENTIONALLY
DELETED]

 

K-1

 

EXHIBIT
L

 

FORM OF

NON-BANK CERTIFICATE

 

Reference is made to the
Credit and Security Agreement, dated as of March [  ],
2010 (as amended, amended and restated, supplemented or otherwise modified from
time to time, the “Credit Agreement”),
among Five Star Quality Care, Inc.,
a Maryland corporation (the “Borrower”),
the other Guarantors party thereto from time to time, the Lenders from time to time party thereto and Jefferies Finance LLC as
administrative agent for the Lenders.

 

The undersigned hereby
certifies to Borrower that:

 

1.             The
undersigned is the sole record owner of the loans or the obligations evidenced
by the Note(s) in respect of which it is providing this certificate.

 

2.             The
undersigned is not a bank (as such term is used in Section 881(c)(3)(A),
of the Internal Revenue Code of 1986, as amended (the “Code”)).  In this regard the undersigned further
represents and warrants that:

 

(a)           the undersigned is not subject to
regulatory or other legal requirements as a bank in any jurisdiction; and

 

(b)           the undersigned has not been treated
as a bank for purposes of any tax, securities law or other filing or submission
made to any governmental authority, any application made to a rating agency or
qualification for any exemption from tax, securities law or other legal
requirements.

 

3.             The
undersigned is not a “10-percent shareholder” of Borrower (as such term is used
in Section 881(c)(3)(B) of the Code).

 

4.             The
undersigned is not a controlled foreign corporation related to Borrower within
the meaning of Section 864(d)(4) of the Code.

 

	
   

  	
  [NAME
  OF LENDER]

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
  [ADDRESS]

  

 

Dated:                                        ,
20

 

L-1

 

EXHIBIT
M

 

FORM OF

SOLVENCY CERTIFICATE

 

The undersigned, Paul V. Hoagland, Chief Financial Officer of
Five Star Quality Care, Inc., a Maryland corporation (“Borrower”), solely in my capacity as
Chief Financial Officer of Borrower and not in any individual capacity, does
hereby certify pursuant to Section 4.01(g) of that certain
Credit and Security Agreement (as amended, amended and restated, supplemented
or otherwise modified from time to time, the “Credit
Agreement”), dated as of                   
      , 2010, by and among Borrower, the other Guarantors party thereto from time to time, the Lenders from time to time party thereto
and Jefferies Finance LLC, as Administrative Agent (in such capacity, the “Administrative Agent”), as follows:

 

Both immediately before and
immediately after the consummation of the Transactions to occur on the Closing
Date and immediately following the making of each Credit Extension on the
Closing Date and after giving effect to the application of the proceeds of each
Credit Extension on the Closing Date:

 

(a)           The fair value of the
properties of the Loan Parties, taken as a whole, will exceed their
consolidated debts and liabilities, subordinated, contingent or otherwise;

 

(b)           The present fair saleable
value of the property of the Loan Parties, taken as a whole, will be greater
than the amount that will be required to pay the probable liability of their
consolidated debts and other liabilities, subordinated, contingent or
otherwise, as such debts and other liabilities become absolute and matured;

 

(c)           The Loan Parties, taken as a
whole, will be able to pay their consolidated debts and liabilities,
subordinated, contingent or otherwise, as such debts and liabilities become
absolute and matured;

 

(d)           The Loan Parties, taken as a
whole, will not have unreasonably small capital with which to conduct the
business in which they are engaged as such business is now conducted and is
proposed, contemplated or about to be conducted following the Closing Date;

 

(e)           No Loan Party has incurred
(by way of assumption or otherwise) any obligation or liability (contingent or otherwise) under the Credit
Agreement with actual intent to hinder, delay or defraud either present or
future creditors of any Loan Party or any of their Affiliates, as the case may
be; and

 

(f)            In reaching the conclusions
set forth in this Certificate, the undersigned has considered such facts,
circumstances and matters as the undersigned has deemed appropriate and has
made such investigations and inquiries as the undersigned has deemed
appropriate, having taken into account the nature of the particular business
anticipated to be conducted by each Loan Party after consummation of the
Transactions.

 

Unless otherwise defined
herein, terms defined in the Credit Agreement and used herein shall have the
meanings given to them in the Credit Agreement.

 

(Signature Page Follows)

 

M-1

 

The undersigned understands
that the Lenders are relying on the truth and accuracy of contents of this
Certificate in connection with each Credit Extension made on the Closing Date
to Borrower pursuant to the Credit Agreement.

 

 

	
   

  	
  FIVE STAR QUALITY CARE, INC.

  
	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:
  Paul V.
  Hoagland

  
	
   

  	
   

  	
  Title: Chief Financial
  Officer

  

 

M-2

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