Document:

Exhibit 4.1

 

SUPPLEMENTAL INDENTURE NO. 4

 

by and between

 

SENIOR
HOUSING PROPERTIES TRUST

 

and

 

U.S. BANK NATIONAL ASSOCIATION

 

As of April 9, 2010

 

 

SUPPLEMENTAL TO THE INDENTURE
DATED AS OF DECEMBER 20, 2001

 

 

 

 

SENIOR
HOUSING PROPERTIES TRUST

 

6.75% Senior Notes due 2020

 

 

This SUPPLEMENTAL INDENTURE NO. 4 (this “Supplemental
Indenture”) made and entered into as of April 9, 2010 between
SENIOR HOUSING PROPERTIES TRUST, a Maryland real estate investment trust (the “Company”), and U.S. BANK NATIONAL ASSOCIATION, a national
banking association, as Trustee (the “Trustee”),

 

WITNESSETH THAT:

 

WHEREAS, the Company and the Trustee are parties to
an Indenture, dated as of December 20, 2001 (as previously and from time
to time hereafter amended, supplemented or otherwise modified, the “Base Indenture” and, together with this Supplemental
Indenture, as amended, supplemented or otherwise modified from time to time,
the “Indenture”) to provide for the future
issuance of the Company’s senior debt securities (the “Securities”)
to be issued from time to time in one or more series; and

 

WHEREAS, pursuant to the terms of the Base Indenture, the Company
desires to provide for the establishment of a series of its Securities, to be
known as its 6.75% Senior Notes due 2020, the form and substance of such
Securities and the terms, provisions and conditions thereof to be set forth as
provided in the Indenture;

 

NOW, THEREFORE, THIS SUPPLEMENTAL INDENTURE
WITNESSETH:

 

ARTICLE 1

 

DEFINED TERMS

 

Section 1.1  The
following definitions supplement, and, to the extent inconsistent with, replace
the definitions in Section 101 of the Base Indenture:

 

“Acquired Debt”
means Debt of a Person (i) existing at the time such Person becomes a
Subsidiary or (ii) assumed in connection with the acquisition of assets
from such Person, in each case, other than Debt incurred in connection with, or
in contemplation of, such Person becoming a Subsidiary or such
acquisition.  Acquired Debt shall be
deemed to be incurred on the date of the related acquisition of assets from any
Person or the date the acquired Person becomes a Subsidiary.

 

“Adjusted Total Assets”
is defined in clause (i) of Section 3.1(a).

 

“Annual Debt Service”
as of any date means the maximum amount which is expensed in any 12-month period
for interest on Debt of the Company and its Subsidiaries excluding amortization
of debt discount and deferred financing costs.

 

“Business Day”
means any day other than a Saturday or Sunday or a day on which banking
institutions in the City of New York or in the city in which the Corporate
Trust Office of the Trustee are required or authorized to close.

 

“Capital Stock”
means, with respect to any Person, any capital stock (including preferred
stock), shares, interests, participation or other ownership interests (however
designated) of such 

 

 

Person and any rights (other
than debt securities convertible into or exchangeable for capital stock),
warrants or options to purchase any thereof.

 

“Cash
Equivalents” means:

 

(i)            demand
deposits, certificates of deposit or repurchase agreements with banks or other
financial institutions;

 

(ii)           marketable
obligations issued or directly and fully guaranteed as to timely payment by the
United States of America or any of its agencies or instrumentalities, or

 

(iii)          any
commercial paper or other obligation rated, at time of purchase, “P-2” (or its
equivalent) or better by Moody’s or “A-2” (or its equivalent) or better by
Standard & Poor’s.

 

“Consolidated Income
Available for Debt Service” for any period means Earnings from
Operations of the Company and its Subsidiaries plus amounts which have been
deducted, and minus amounts which have been added, for the following (without
duplication): (i) interest or distributions on Debt of the Company and its
Subsidiaries, (ii) provision for taxes of the Company and its Subsidiaries
based on income, (iii) amortization of debt discount and deferred
financing costs, (iv) provisions for gains and losses on properties and
property depreciation and amortization, (v) the effect of any noncash
charge resulting from a change in accounting principles in determining Earnings
from Operations for such period and (vi) amortization of deferred charges.

 

“Corporate Trust
Office” means the corporate trust office of the Trustee which it
designates as the office at which the Indenture will be administered (which it
may change by written notice to the Company from time to time), located on the
date of this Supplemental Indenture at One Federal Street, 3rd Floor, Boston,
Massachusetts 02110, Attention: Corporate Trust Department.

 

“Debt” of the
Company or any Subsidiary means, without duplication, any indebtedness of the
Company or any Subsidiary, whether or not contingent, in respect of (i) borrowed
money or evidenced by bonds, notes, debentures or similar instruments, (ii) indebtedness
for borrowed money secured by any Encumbrance existing on property owned by the
Company or any Subsidiary, to the extent of the lesser of (x) the amount
of indebtedness so secured or (y) the fair market value of the property subject
to such Encumbrance, (iii) the reimbursement obligations, contingent or
otherwise, in connection with any letters of credit actually issued (other than
letters of credit issued to provide credit enhancement or support with respect
to other indebtedness of the Company or any Subsidiary otherwise reflected as
Debt hereunder) or amounts representing the balance deferred and unpaid of the
purchase price of any property or services, except any such balance that
constitutes an accrued expense, trade payable, conditional sale obligations or
obligations under any title retention agreement, (iv) the principal amount
of all obligations of the Company or any Subsidiary with respect to redemption,
repayment or other repurchase of any Disqualified Stock, or (v) any lease
of property by the Company or any Subsidiary as lessee which is reflected on
the Company’s consolidated balance sheet as a capitalized lease in accordance
with GAAP, to the extent, in the case of items of indebtedness under (i) through
(iii) above, that any such items (other than letters of credit) would
appear as a liability on the Company’s consolidated balance sheet in accordance
with GAAP.  Debt also includes, to the
extent not otherwise included, 

 

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any obligation by the
Company or any Subsidiary to be liable for, or to pay, as obligor, guarantor or
otherwise (other than for purposes of collection in the ordinary course of
business), Debt of another Person (other than the Company or any Subsidiary);
it being understood that Debt shall be deemed to be incurred by the Company or
any Subsidiary whenever the Company or such Subsidiary shall create, assume,
guarantee or otherwise become liable in respect thereof.

 

“Disqualified Stock”
means, with respect to any Person, any Capital Stock of such Person which by
the terms of such Capital Stock (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, (i) matures
or is mandatorily redeemable, pursuant to a sinking fund obligation or
otherwise (other than Capital Stock which is redeemable solely in exchange for
Capital Stock which is not Disqualified Stock or for Subordinated Debt), (ii) is
convertible into or exchangeable or exercisable for Debt, other than
Subordinated Debt or Disqualified Stock, or (iii) is redeemable at the
option of the holder thereof, in whole or in part (other than Capital Stock
which is redeemable solely in exchange for Capital Stock which is not
Disqualified Stock or for Subordinated Debt); in each case on or prior to the
Stated Maturity of the principal of the Notes.

 

“Earnings from
Operations” for any period means net earnings excluding gains and
losses on sales of investments, gains or losses on early extinguishment of
debt, extraordinary items, distributions on equity securities and property
valuation losses, as reflected in the financial statements of the Company and
its Subsidiaries for such period, determined on a consolidated basis in
accordance with GAAP.

 

“Encumbrance”
means any mortgage, lien, charge, pledge, security interest or other
encumbrance of any kind.

 

“Exchange Act”
means the Securities Exchange Act of 1934, as amended.

 

“Interest Payment Date”
with respect to the Notes is defined in Section 101 of the Base Indenture
and Section 2.1(b) of this Supplemental Indenture.

 

“Make-Whole
Amount” means, in connection with any optional redemption or
accelerated payment of any Notes prior to October 15, 2019, the excess, if
any, of (i) the aggregate present value as of the date of such redemption
or accelerated payment of each dollar of principal being redeemed or paid and
the amount of interest (exclusive of interest accrued to the date of redemption
or accelerated payment) that would have been payable in respect of such dollar
if such redemption or accelerated payment had been made on October 15,
2019, determined by discounting, on a semiannual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment had
been made on October 15, 2019, over (ii) the aggregate principal
amount of the Notes being redeemed or paid. 
In the case of any redemption or accelerated payment of Notes on or
after October 15, 2019, the Make-Whole Amount means zero.  For purposes of this Supplemental Indenture
and the Notes, references in the Indenture to the payment of the principal (and
premium, if any) and interest on the Notes shall be deemed to include the
payment of the Make-Whole Amount, if any, due upon redemption with respect to
the Notes.  The Make-Whole Amount shall be calculated by the 

 

3

 

Company and set forth in an
Officers’ Certificate delivered to the Trustee, and the Trustee shall be
entitled to rely on said Officers’ Certificate.

 

“Moody’s”
means Moody’s Investors Service, Inc. or any successor thereof.

 

“Notes”
means the series of Securities titled 6.75% Senior Notes due 2020, issued under
the Indenture.

 

“Regular Record
Date” with respect to the Notes is defined in Section 101 of
the Base Indenture and Section 2.1(b) of this Supplemental Indenture.

 

“Reinvestment
Rate” means a rate per annum equal to the sum of 0.45% (forty-five
one-hundredths of one percent) plus the yield on treasury securities at
constant maturity under the heading “Week Ending” published in the Statistical
Release under the caption “Treasury Constant Maturities” for the maturity
(rounded to the nearest month) corresponding to the remaining life to maturity
(which, in the case of maturities corresponding to the principal and interest
due on the Notes at their maturity, shall be deemed to be October 15,
2019), as of the payment date of the principal being redeemed or paid.  If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding in each of such relevant periods
to the nearest month.  For purposes of
calculating the Reinvestment Rate, the most recent Statistical Release
published prior to the date of determination of the Make-Whole Amount shall be
used.

 

“Secured Debt”
means Debt secured by any Encumbrance.

 

“Standard &
Poor’s” means Standard & Poor’s Ratings Services, a
division of Standard & Poor’s Financial Services LLC business or any
successor.

 

“Statistical
Release” means the statistical release designated “H.15(519)” or any
successor publication which is published weekly by the Federal Reserve System
and which establishes yields on actively traded United States government
securities adjusted to constant maturities or, if such statistical release is
not published at the time of any determination under this Supplemental
Indenture, then any publicly available source of similar market data which
shall be designated by the Company.

 

“Subordinated
Debt” means Debt which by the terms of such Debt is subordinated in
right of payment to the principal of and interest and premium, if any, on the
Notes.

 

“Subsidiary”
means any corporation or other entity of which a majority of (i) the
voting power of the voting equity securities or (ii) the outstanding
equity interests are owned, directly or indirectly, by the Company or one or
more other Subsidiaries of the Company. 
For the purposes of this definition, “voting equity securities” means
equity securities having voting power for the election of directors or similar
functionaries, whether at all times or only so long as no senior class of
security has such voting power by reason of any contingency.

 

4

 

“Total Assets”
as of any date means the sum of (i) the Undepreciated Real Estate Assets
and (ii) all other assets of the Company and its Subsidiaries determined
in accordance with GAAP (but excluding accounts receivable and intangibles).

 

“Total
Unencumbered Assets” means the sum of (i) the amount of
Undepreciated Real Estate Assets of the Company and its Subsidiaries not
securing any portion of Secured Debt and (ii) the amount of all other
assets, including accounts receivable and intangibles, of the Company and its
Subsidiaries not securing any portion of Secured Debt determined on a
consolidated basis in accordance with GAAP. 
If Secured Debt secured by real estate or other property or assets of
the Company or its Subsidiaries (“Secondary Collateral”) is fully defeased in
accordance with the terms thereof or is also secured by cash or Cash
Equivalents in an amount (determined at the lesser of (i) carrying value
in accordance with GAAP or (ii) fair market value) at least equal to the
outstanding principal amount of such Secured Debt, such Secondary Collateral
shall be deemed not to secure any portion of such Secured Debt for purposes of
this definition.

 

“Undepreciated Real Estate
Assets” as of any date means the cost (original cost plus capital
improvements less adjustments to carrying value in accordance with GAAP made
prior to January 1, 2001) of real estate and associated tangible personal
property used in connection with the real estate assets of the Company and its
Subsidiaries on such date, before depreciation and amortization determined on a
consolidated basis in accordance with GAAP.

 

“Unsecured Debt”
means any Debt of the Company or its Subsidiaries which is not Secured Debt.

 

ARTICLE 2

 

TERMS OF THE NOTES

 

Section 2.1 
Pursuant to Section 301 of the Base Indenture, the Notes shall have
the following terms and conditions:

 

(a)  Title; Aggregate Principal Amount; Form of Notes.  The Notes shall be in registered form under
the Indenture and shall be known as the Company’s “6.75% Senior Notes due 2020.”  The Notes will be limited to an aggregate
principal amount of $200,000,000, subject to the right of the Company to reopen
such series for issuances of additional Notes and except (i) as provided
in this Section and (ii) for Notes authenticated and delivered upon
registration of transfer of, or in exchange for, or in lieu of, other Notes
pursuant to Section 304, 305, 306, 906 or 1107 of the Base Indenture and
except for any Notes which, pursuant to Section 303 of the Base Indenture,
are deemed never to have been authenticated and delivered hereunder. The Notes
(together with the Trustee’s certificate of authentication) shall be substantially
in the form of Exhibit A hereto, which is hereby incorporated in and made
a part of this Supplemental Indenture.

 

The Notes will initially be issued in the form of one or more
registered global securities without coupons (“Global
Notes”) that will be deposited with, or on behalf of, The Depository
Trust Company, New York, New York (“DTC”),
and registered in the name of DTC’s nominee, Cede & Co. Except under
the circumstance described below, the Notes will not be issuable in definitive
form. Unless and until it is exchanged in whole or in part for the individual
certificated 

 

5

 

notes represented thereby, a Global Note may
not be transferred except as a whole by DTC to a nominee of DTC or by a nominee
of DTC to DTC or another nominee of DTC or by DTC or any nominee of DTC to a
successor depositary or any nominee of such successor.

 

So long as DTC or its nominee is the registered owner of a Global Note,
DTC or such nominee, as the case may be, will be considered the sole owner or
holder of the Notes represented by such Global Note for all purposes under this
Supplemental Indenture. Except as described below, owners of beneficial
interest in Notes evidenced by a Global Note will not be entitled to have any
of the individual Notes represented by such Global Note registered in their
names, will not receive or be entitled to receive physical delivery of any such
Notes in definitive form and will not be considered the owners or holders
thereof under the Indenture for any purpose, including with respect to the
giving of any direction, instructions or approvals to the Trustee hereunder.

 

If DTC is at any time unwilling, unable or ineligible to continue as
depositary and a successor depositary is not appointed by the Company within 90
days, the Company will issue individual Notes in exchange for the Global Note
or Global Notes representing such Notes. In addition, the Company may at any
time and in its sole discretion, subject to certain limitations set forth in the
Indenture, determine not to have any of such Notes represented by one or more
Global Notes and, in such event, will issue individual Notes in exchange for
the Global Note or Global Notes representing the Notes. Individual Notes so
issued will be issued in denominations of $1,000 and integral multiples
thereof.

 

(b)  Interest and Interest Rate.  The Notes will bear interest at a rate of 6.75%
per annum, from April 9, 2010 (or, in the case of Notes issued upon the
reopening of this series of Notes, from the date designated by the Company in
connection with such reopening) or from the immediately preceding Interest
Payment Date to which interest has been paid or duly provided for, payable
semiannually in arrears on each April 15 and October 15, commencing October 15,
2010 (each of which shall be an “Interest
Payment Date”), to the Persons in whose names the Notes are
registered in the Security Register at the close of business on April 1 or
October 1, as the case may be (whether or not a Business Day), next preceding
such Interest Payment Date (each, a “Regular
Record Date”).

 

(c)  Principal Repayment; Currency.  The Stated Maturity of the principal of the
Notes is April 15, 2020, provided, however, the Notes may be earlier redeemed at the option of
the Company as provided in paragraph (d) below. The principal of each Note
payable at its Stated Maturity shall be paid against presentation and surrender
thereof at the Corporate Trust Office of the Trustee in such coin or currency
of the United States of America as at the time of payment is legal tender for
the payment of public or private debts.

 

(d)  Redemption at the Option of the Company.  The Notes will be subject to redemption in
whole at any time or in part from time to time before they mature at the option
of the Company, in whole or in part, upon not less than 30 nor more than 60
days’ notice to each Holder of Notes to be redeemed at its address appearing in
the Security Register, at a redemption price equal to the sum of (i) the
outstanding principal amount of the Notes being redeemed, plus accrued and
unpaid interest, if any, to but excluding the applicable Redemption Date, plus (ii) the

 

6

 

Make-Whole Amount, if any (it being
understood that if the Notes are redeemed on or after October 15, 2019,
the Make-Whole Amount equals zero).

 

(e)  Notices.  All
notices and other communications hereunder shall be in writing and shall be
deemed to have been duly given if mailed or transmitted by any standard form of
telecommunication.  Notices to the
Company shall be directed to it at 400 Centre Street, Newton, Massachusetts
02458, fax number (617) 796-8349, Attention: President; notices to the Trustee
shall be directed to it at One Federal Street, 3rd Floor,
Boston, Massachusetts 02110, fax number (617) 603-6683, Attention: Corporate
Trust Department, Re: Senior Housing Properties Trust 6.75% Senior Notes due
2020; or as to either party, at such other address as shall be designated by
such party in a written notice to the other party.

 

(f)  Global Note Legend. 
Each Global Note shall bear the following legend on the face thereof:

 

UNLESS THIS CERTIFICATE IS
PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A
NEW YORK CORPORATION (“DTC”), TO ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE, OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE
NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE &
CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR
VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.

 

(g)  Applicability of Discharge, Defeasance and Covenant
Defeasance Provisions.  The
Discharge, Defeasance and Covenant Defeasance provisions in Article Thirteen
of the Base Indenture will apply to the Notes.

 

ARTICLE 3

 

ADDITIONAL COVENANTS

 

Section 3.1 
Holders of the Notes shall have the benefit of the following covenants,
in addition to the covenants of the Company set forth in Article Eight and
Article Ten of the Base Indenture:

 

(a)  Limitations on Incurrence of Debt.

 

(i)            The
Company will not, and will not permit any Subsidiary to, incur any Debt if,
immediately after giving effect to the incurrence of such additional Debt and
the application of the proceeds thereof, the aggregate principal amount of all
outstanding Debt of the Company and its Subsidiaries on a consolidated basis
determined in accordance with GAAP is greater than 60% of the sum (“Adjusted
Total Assets”) of 

 

7

 

(without duplication) (A) the
Total Assets of the Company and its Subsidiaries as of the end of the calendar
quarter covered in the Company’s Annual Report on Form 10-K, or Quarterly
Report on Form 10-Q, as the case may be, most recently filed with the
Securities and Exchange Commission (or, if such filing is not permitted under
the Exchange Act, with the Trustee) prior to the incurrence of such additional
Debt and (B) the purchase price of any real estate assets or mortgages
receivable acquired, and the amount of any securities offering proceeds
received (to the extent that such proceeds were not used to acquire real estate
assets or mortgages receivable or used to reduce Debt), by the Company or any
Subsidiary since the end of such calendar quarter, including those proceeds
obtained in connection with the incurrence of such additional Debt.

 

(ii)           The
Company will not, and will not permit any Subsidiary to, incur any Secured Debt
if, immediately after giving effect to the incurrence of such additional
Secured Debt and the application of the proceeds thereof, the aggregate
principal amount of all outstanding Secured Debt of the Company and its
Subsidiaries on a consolidated basis in accordance with GAAP is greater than
40% of Adjusted Total Assets.

 

(iii)          The
Company will not, and will not permit any Subsidiary to, incur any Debt if the
ratio of Consolidated Income Available for Debt Service to the Annual Debt
Service for the four consecutive fiscal quarters most recently ended prior to
the date on which such additional Debt is to be incurred shall have been less
than 1.5 to 1.0, on a pro forma basis after giving effect thereto and to the
application of the proceeds therefrom, and calculated on the assumption that (A) such
Debt and any other Debt incurred by the Company and its Subsidiaries on a
consolidated basis since the first day of such four-quarter period and the
application of the proceeds therefrom, including to refinance other Debt, had
occurred at the beginning of such period; (B) the repayment or retirement
of any other Debt by the Company and its Subsidiaries on a consolidated basis
since the first date of such four-quarter period had been repaid or retired at
the beginning of such period (except that, in making such computation, the
amount of Debt under any revolving credit facility shall be computed based upon
the average daily balance of such Debt during such period); (C) in the
case of Acquired Debt or Debt incurred in connection with any acquisition since
the first day of such four-quarter period, the related acquisition had occurred
as of the first day of such period with appropriate adjustments with respect to
such acquisition being included in such pro forma calculation; and (D) in
the case of any acquisition or disposition by the Company or its Subsidiaries
on a consolidated basis of any asset or group of assets since the first day of
such four-quarter period, whether by merger, stock purchase or sale, or asset
purchase or sale, such acquisition or disposition or any related repayment of
Debt had occurred as of the first day of such period with the appropriate
adjustments with respect to such acquisition or disposition being included in
such pro forma calculation. If the Debt giving rise to the need to make the
foregoing calculation or any other Debt incurred after the first day of the
relevant four-quarter period bears interest at a floating rate then, for
purposes of calculating the Annual Debt Service, the interest rate on such Debt
shall be computed on a pro forma basis as if the average interest rate which
would have been in effect during the entire such four-quarter period had been
the applicable rate for the entire such period.

 

8

 

(b)  Maintenance of Total Unencumbered
Assets.  The Company and its
Subsidiaries will maintain at all times Total Unencumbered Assets of not less
than 150% of the aggregate outstanding principal amount of the Unsecured Debt
of the Company and its Subsidiaries on a consolidated basis in accordance with
GAAP.

 

(c)  Company May Consolidate, Etc.,
Only on Certain Terms.  In addition
to the provisions of Section 801 of the Base Indenture, the Company shall
not consolidate with or merge into any other Person or convey, transfer or
lease its properties and assets substantially as an entirety to any Person, and
the Company shall not permit any Person to consolidate with or merge into the
Company or convey, transfer or lease its properties and assets substantially as
an entirety to the Company, unless immediately after giving effect to such
transaction, the Person formed by such consolidation or into which the Company
is merged or the Person which acquires by conveyance or transfer, or which
leases, the properties and assets of the Company substantially as an entirety
would be permitted to incur at least $1.00 of Debt (other than Debt between
such Person and one or more of its Subsidiaries or between one or more or its
Subsidiaries) under the terms of Section 3.1(a) of this Supplemental
Indenture.

 

ARTICLE 4

 

ADDITIONAL EVENTS OF DEFAULT

 

Section 4.1  For purposes of this Supplemental Indenture
and the Notes, in addition to the Events of Default set forth in Section 501
of the Base Indenture, it shall also constitute an “Event of Default” if one or
more final judgments or orders (not covered by insurance, treating any
deductibles, self-insurance or retention as not so covered) for the payment of
money in excess of $20,000,000 in the aggregate for all such judgments or
orders against the Company or any Subsidiary and such judgments or orders shall
not be paid or discharged, and there shall be a period of 60 consecutive days
after the final judgment or order that causes such aggregate amount to exceed
$20,000,000 million during which a stay of enforcement of such final judgment(s) or
order(s) are not in effect.

 

Section 4.2  Notwithstanding any provisions to the
contrary in the Base Indenture including, without limitation, Section 501 (a) thereof, the failure to
pay the principal of or any premium on the Notes at its Maturity shall
constitute an “Event of Default”.

 

Section 4.3  Notwithstanding any provisions to the contrary
in the Base Indenture including, without limitation, Section 501 (e) thereof, the default
under any bonds, debentures, notes or other evidences of indebtedness of the
Company, or under any mortgage, indenture or other instrument of the Company
(including a default with respect to Securities of any series other than the
Notes) under which there may be issued or by which there may be secured any
indebtedness of the Company (or by one or more Subsidiaries, the repayment of
which the Company has guaranteed or for which the Company is directly
responsible or liable as obligor or guarantor), whether such indebtedness now
exists or shall hereafter be created, which default(s) shall constitute a
failure to pay an aggregate principal amount exceeding $20,000,000 of such
indebtedness when due and payable after the expiration of any applicable grace
period with respect thereto and shall have resulted in such indebtedness in an
aggregate principal amount exceeding $20,000,000 becoming or being declared due
and payable prior to the date on which it

 

9

 

would otherwise have become
due and payable, without such indebtedness having been discharged, or such
acceleration having been rescinded or annulled, within a period of 10 days
after there shall have been given, by registered or certified mail, to the Company
by the Trustee or to the Company and the Trustee by the Holders of at least 25%
in principal amount of the Outstanding Notes a written notice specifying such
default and requiring the Company to cause such indebtedness to be discharged
or cause such acceleration to be rescinded or annulled and stating that such
notice is a “Notice of Default” hereunder,
shall constitute an “Event of Default”.

 

Section 4.4  Notwithstanding
any provisions to the contrary in the Base Indenture, upon any acceleration of
the Notes under Section 502 of the Base Indenture, the amount immediately
due and payable in respect of the Notes shall equal the principal amount
thereof, plus accrued and unpaid interest thereon, plus, if such acceleration
occurs prior to October 15, 2019, the Make-Whole Amount.

 

ARTICLE 5

 

EFFECTIVENESS

 

Section 5.1  This
Supplemental Indenture shall be effective for all purposes as of the date and
time this Supplemental Indenture has been executed and delivered by the Company
and the Trustee in accordance with Article Nine of the Base Indenture. As
supplemented hereby, the Base Indenture is hereby confirmed as being in full
force and effect.

 

ARTICLE 6

 

NOTICE TO TRUSTEE

 

Section 6.1 
Notwithstanding anything to the contrary in the Base Indenture including,
without limitation, Section 1102 thereof, in connection with the
redemption at the election of the Company of less than all the Notes, the
Company shall notify the Trustee of the establishment of a Redemption Date and
the principal amount of Notes to be redeemed at least 45 days prior to such
Redemption Date unless a shorter period shall be satisfactory to the Trustee.

 

ARTICLE 7

 

MISCELLANEOUS

 

Section 7.1  In
the event any provision of this Supplemental Indenture shall be held invalid or
unenforceable by any court of competent jurisdiction, such holding shall not
invalidate or render unenforceable any other provision hereof or any provision
of the Indenture.

 

Section 7.2  To
the extent that any terms of this Supplemental Indenture or the Notes are inconsistent
with the terms of the Base Indenture, the terms of this Supplemental Indenture
or the Notes shall govern and supersede such inconsistent terms.

 

10

 

Section 7.3  This
Supplemental Indenture shall be governed by and construed in accordance with
the laws of the State of New York.

 

Section 7.4  This
Supplemental Indenture may be executed in several counterparts, each of which
shall be an original and all of which shall constitute but one and the same instrument.

 

11

 

IN WITNESS WHEREOF, the Company and the Trustee have caused this
Supplemental Indenture to be executed as an instrument under seal in their
respective corporate names as of the date first above written.

 

	
   

  	
  SENIOR
  HOUSING PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  
	
   

  	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION, as Trustee

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
   

  
	
   

  	
   

  	
  Name:

  
	
   

  	
   

  	
  Title:

  

 

 

[Signature
Page to Supplemental Indenture]

 

 

EXHIBIT A

 

FORM OF NOTE

 

[Form of Face of Security]

 

SENIOR HOUSING PROPERTIES TRUST

 

6.75% Senior Notes
due 2020

 

	
  No.

  	
  $

  

 

Senior Housing Properties
Trust, a real estate investment trust duly organized and existing under the
laws of Maryland (herein called the “Company”, which
term includes any successor Person under the Indenture hereinafter referred
to), for value received, hereby promises to pay to
                                                          ,
or registered assigns, the principal sum of                                       
Dollars ($                          )
on April 15, 2020, and to pay interest thereon from April 9, 2010 or
from the most recent Interest Payment Date to which interest has been paid or
duly provided for, semi-annually on April 15 and October 15 in each
year, commencing October 15, 2010 at the rate of 6.75% per annum, until the
principal hereof is paid or made available for payment.  The interest so payable, and punctually paid
or duly provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose name this Security (or one or more
Predecessor Securities) is registered at the close of business on the Regular
Record Date for such interest, which shall be April 1 or October 1
(whether or not a Business Day), as the case may be, next preceding such
Interest Payment Date. Any such interest not so punctually paid or duly
provided for will forthwith cease to be payable to the Holder on such Regular
Record Date and may either be paid to the Person in whose name this Security (or
one or more Predecessor Securities) is registered at the close of business on a
Special Record Date for the payment of such Defaulted Interest to be fixed by
the Trustee, notice whereof shall be given to Holders of Securities of this
series not less than 10 days prior to such Special Record Date, or be paid
at any time in any other lawful manner not inconsistent with the requirements
of any securities exchange on which the Securities of this series may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture.

 

Payment of the principal of
(and premium, if any) and any such interest on this Security will be made at
the office or agency of the Company maintained for that purpose in such coin or
currency of the United States of America as at the time of payment is legal
tender for payment of public and private debts; provided,
however, that at the option of the
Company payment of interest may be made by check mailed to the address of the
Person entitled thereto as such address shall appear in the Security Register.

 

Reference is hereby made to
the further provisions of this Security set forth on the reverse hereof, which
further provisions shall for all purposes have the same effect as if set forth
at this place.

 

Unless the certificate of
authentication hereon has been executed by the Trustee referred to on the
reverse hereof by manual signature, this Security shall not be entitled to any
benefit under the Indenture or be valid or obligatory for any purpose.

 

THE AMENDED AND RESTATED
DECLARATION OF TRUST ESTABLISHING SENIOR HOUSING PROPERTIES TRUST, DATED
SEPTEMBER 20, 1999, AS AMENDED AND SUPPLEMENTED, AS FILED WITH THE STATE
DEPARTMENT OF ASSESSMENTS AND TAXATION OF MARYLAND, PROVIDES THAT NO TRUSTEE,
OFFICER, SHAREHOLDER, EMPLOYEE OR AGENT OF SENIOR HOUSING PROPERTIES TRUST
SHALL BE HELD TO ANY PERSONAL LIABILITY, JOINTLY OR SEVERALLY, FOR ANY
OBLIGATION OF, OR CLAIM AGAINST, SENIOR HOUSING PROPERTIES TRUST. ALL PERSONS
DEALING WITH SENIOR HOUSING PROPERTIES TRUST IN ANY WAY SHALL LOOK ONLY TO THE
ASSETS OF SENIOR HOUSING PROPERTIES TRUST FOR THE PAYMENT OF ANY SUM OR THE
PERFORMANCE OF ANY OBLIGATION.

 

A-1

 

IN WITNESS WHEREOF, the
Company has caused this instrument to be duly executed.

 

	
  Dated:

  	
  SENIOR
  HOUSING PROPERTIES TRUST

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Title:

  

 

 

CERTIFICATE OF AUTHENTICATION

 

Dated:

 

This is one of the
Securities of the series designated therein referred to in the within-mentioned
Indenture.

 

	
   

  	
  U.S.
  BANK NATIONAL ASSOCIATION, As Trustee

  
	
   

  	
   

  
	
   

  	
  By

  	
   

  
	
   

  	
   

  	
  Authorized
  Officer

  

 

A-2

 

[Form of Reverse of Security]

 

1.             General. 
This Security is one of a duly authorized issue of securities of the
Company (herein called the “Securities”),  issued and to be issued in one or more series
under an Indenture, dated as of December 20, 2001, between the Company and
State Street Bank and Trust Company (“State Street”)
(as amended, supplemented or otherwise modified from time to time, the “Base Indenture”), as supplemented by a Supplemental
Indenture No. 4, dated as of April 9, 2010, between the Company and
U.S. Bank National Association, as successor trustee to State Street (herein
called the “Trustee”, which term includes State Street
as applicable) (as amended, supplemented or otherwise modified from time to
time, the “Supplemental Indenture” and the Base
Indenture, as supplemented by such Supplemental Indenture, the “Indenture”), and reference is hereby made to the Indenture
for a statement of the respective rights, limitations of rights, duties and
immunities thereunder of the Company, the Trustee, and the Holders of the
Securities and of the terms upon which the Securities are, and are to be,
authenticated and delivered.  This
Security is one of the series designated on the face hereof (such series, the “Notes”).

 

2.             Optional Redemption.  (i)    The Notes will be subject to redemption
in whole at any time or in part from time to time before they mature at the
option of the Company upon not less than 30 nor more than 60 days’ notice to
each Holder of Notes to be redeemed at its address appearing in the Security
Register, at a redemption price equal to the sum of (i) the principal
amount of the Notes being redeemed plus accrued interest and unpaid interest,
if any, to but excluding the applicable Redemption Date and (ii) the
Make-Whole Amount, if any (it being understood that if the Notes are redeemed
on or after October 15, 2019, the Make-Whole Amount equals zero).

 

As used herein the term “Make-Whole
Amount” means, in connection with any optional redemption or
accelerated payment of any Notes prior to October 15, 2019, the excess, if
any, of (i) the aggregate present value as of the date of such redemption
or accelerated payment of each dollar of principal being redeemed or paid and
the amount of interest (exclusive of interest accrued to the date of redemption
or accelerated payment) that would have been payable in respect of such dollar
if such redemption or accelerated payment had been made on October 15,
2019, determined by discounting, on a semiannual basis, such principal and
interest at the Reinvestment Rate (determined on the third Business Day
preceding the date such notice of redemption is given or declaration of
acceleration is made) from the respective dates on which such principal and
interest would have been payable if such redemption or accelerated payment had
been made on October 15, 2019, over (ii) the aggregate principal
amount of the Notes being redeemed or paid. 
In the case of any redemption or accelerated payment of Notes on or
after October 15, 2019, the Make-Whole Amount means zero.  For purposes of the Supplemental Indenture
and the Notes, references in the Indenture to the payment of the principal (and
premium, if any) and interest on the Notes shall be deemed to include the
payment of the Make-Whole Amount, if any, due upon redemption with respect to
the Notes.  The Make-Whole Amount shall
be calculated by the Company and set forth in an Officers’ Certificate delivered
to the Trustee, and the Trustee shall be entitled to rely on said Officers’
Certificate.

 

As used herein the term “Reinvestment Rate” means a rate per annum equal to the sum
of 0.45% (forty-five one-hundredths of one percent) plus the yield on treasury
securities at constant maturity under the heading “Week Ending” published in
the Statistical Release under the caption “Treasury Constant Maturities” for
the maturity (rounded to the nearest month) corresponding to the remaining life
to maturity (which, in the case of maturities corresponding to the principal
and interest due on the Notes at their maturity, shall be deemed to be October 15,
2019), as of the payment date of the principal being redeemed or paid.  If no maturity exactly corresponds to such
maturity, yields for the two published maturities most closely corresponding to
such maturity shall be calculated pursuant to the immediately preceding
sentence and the Reinvestment Rate shall be interpolated or extrapolated from
such yields on a straight-line basis, rounding in each of such relevant periods
to the nearest month. For purposes of calculating the Reinvestment Rate, the
most recent Statistical Release published prior to the date of determination of
the Make-Whole Amount shall be used.

 

As
used herein the term “Statistical Release” means the statistical release designated
“H.15(519)” or any successor publication which is published weekly by the
Federal Reserve System and which establishes yields on actively traded United
States government securities adjusted to constant maturities or, if such
statistical release is not published at the time of any determination under the
Supplemental Indenture, then any publicly available source of similar market
data which shall be designated by the Company.

 

A-3

 

(ii)           The Company
shall not be required to make sinking fund or redemption payments with respect
to the Notes.

 

(iii)          In
the event of redemption of this Security in part only, a new Note  or Notes and of 
like tenor for the unredeemed portion hereof will be issued in the name
of the Holder hereof upon the cancellation hereof.

 

3.             Defeasance. 
The Indenture contains provisions for defeasance at any time of the
entire indebtedness of this Security upon compliance with certain conditions
set forth in the Indenture.

 

4.             Defaults and Remedies.  If an Event of Default with respect to Notes
shall occur and be continuing, the principal of the Notes may be declared due and
payable in the manner and with the effect provided in the Indenture.

 

5.             Actions of Holders.  The Indenture permits, with certain
exceptions as therein provided, the amendment thereof and the modification of
the rights and obligations of the Company and the rights of the Holders of the
Securities of each series to be affected under the Indenture at any time by the
Company and the Trustee with the consent of the Holders of a majority in
principal amount of the Securities at the time Outstanding of each series to be
affected.  The Indenture also contains
provisions permitting the Holders of specified percentages in principal amount
of the Securities of each series at the time Outstanding, on behalf of the
Holders of all Securities of such series, to waive compliance by the Company
with certain provisions of the Indenture and certain past defaults under the
Indenture and their consequences. Any such consent or waiver by the Holder of
this Security shall be conclusive and binding upon such Holder and upon all
future Holders of this Security and of any Security issued upon the
registration of transfer hereof or in exchange therefor or in lieu hereof,
whether or not notation of such consent or waiver is made upon this Security.

 

As provided in and subject
to the provisions of the Indenture, the Holder of this Security shall not have
the right to institute any proceeding with respect to the Indenture or for the
appointment of a receiver or trustee or for any other remedy thereunder, unless
such Holder shall have previously given the Trustee written notice of a continuing
Event of Default with respect to the Notes, the Holders of not less
than a majority in principal amount of the Notes at the time Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee reasonable
indemnity, and the Trustee shall not have received from the Holders of a
majority in principal amount of Notes at the time Outstanding a
direction inconsistent with such request, and shall have failed to institute
any such proceeding, for 60 days after receipt of such notice, request and
offer of indemnity. The foregoing shall not apply to any suit instituted by the
Holder of this Security for the enforcement of any payment of principal hereof
or any premium or interest hereon on or after the respective due dates
expressed herein.

 

6.             Payments Not Impaired.  No reference herein to the Indenture and no
provision of this Security or of the Indenture shall alter or impair the
obligation of the Company, which is absolute and unconditional, to pay the
principal of and any premium and interest on this Security at the times, place
and rate, and in the coin or currency, herein prescribed.

 

7.             Denominations, Transfer, Exchange.  As provided in the Indenture and subject to
certain limitations therein set forth, the transfer of this Security is
registrable in the Security Register, upon surrender of this Security for
registration of transfer at the office or agency of the Company in any place
where the principal of and any premium and interest on this Security are
payable, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Security Registrar duly executed
by, the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Notes
and of like tenor, of authorized denominations and for the same
aggregate principal amount, will be issued to the designated transferee or
transferees.

 

The Notes are issuable only in
registered form without coupons in denominations of $1,000 and any integral
multiple thereof. As provided in the Indenture and subject to certain
limitations therein set forth, Notes are exchangeable for a like
aggregate principal amount of Notes and of like tenor of a
different authorized denomination, as requested by the Holder surrendering the
same.

 

A-4

 

No service charge shall be
made for any such registration of transfer or exchange, but the Company may
require payment of a sum sufficient to cover any tax or other governmental
charge payable in connection therewith.

 

8.             Persons Deemed Owners.  Prior to due presentment of this Security for
registration of transfer, the Company, the Trustee and any agent of the Company
or the Trustee may treat the Person in whose name this Security is registered
as the owner hereof for all purposes, whether or not this Security be overdue,
and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.

 

9.             Defined Terms. 
All terms used in this Security which are defined in the Indenture shall
have the meanings assigned to them in the Indenture.

 

A-5

 

[ASSIGNMENT FORM]

 

ABBREVIATIONS

 

The following abbreviations,
when used in the inscription on the face of this instrument, shall be construed
as though they were written out in full according to applicable laws or
regulations:

 

	
  TEN
  COM

  	
  —

  	
  as
  tenants in common

  	
  UNIF
  GIFT MIN ACT  —

  	
   

  	
   Custodian

  	
   

  	
   

  
	
  TEN
  ENT

  	
  —

  	
  as
  tenants by the entireties

  	
   

  	
  (Cust)

  	
   

  	
  (Minor)

  	
   

  
	
  JT
  TEN

  	
  —

  	
  as
  joint tenants with right of survivorship

  	
  Under
  Uniform Gifts to Minors

  	
   

  
	
   

  	
   

  	
  and
  not as tenants in common

  	
  Act

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
   

  	
  (State)

  	
   

  	
   

  
										

 

Additional abbreviations may also be used though not in the above list.

 

	
   

  	
   

  	
   

  	
   

  	
   

  	
   

  

 

FOR VALUE RECEIVED, the
undersigned registered holder hereby sell(s), assign(s) and transfer(s) unto

 

PLEASE
INSERT SOCIAL SECURITY OR OTHER IDENTIFYING NUMBER OF ASSIGNEE

 

	
   

  	
   

  

 

	
   

  
	
  PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS OF ASSIGNEE

  

 

	
   

  
	
  the
  within security and all rights thereunder, hereby irrevocably constituting
  and appointing

  

 

	
   

  	
   Attorney

  
	
  to
  transfer said security on the books of the Company with full power of
  substitution in the premises.

  	
   

  

 

 

	
  Dated:

  	
   

  	
   

  	
  Signed:

  	
   

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Notice:  The signature to this assignment must
  correspond with the name as it appears upon the face of the within security
  in every particular, without alteration or enlargement or any change
  whatever.

  
	
   

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  	
  Signature
  Guarantee*:

  	
   

  
						

 

	
   

  	
   

  	
   

  	
  *  Participant in a recognized Signature
  Guarantee Medallion Program (or other signature guarantor acceptable to the
  Trustee).

  

 

A-6Exhibit
10.1

 

Form ISO/NQSO Agreement

Exhibit B-2

 

JOE’S
JEANS INC.

2004
STOCK INCENTIVE PLAN

 

STOCK
OPTION AGREEMENT

 

This
Stock Option Agreement (the “Agreement”)
is made and entered into as of the date of grant set forth below (the “Date of Grant”) by and between Joe’s
Jeans Inc., a Delaware corporation (the “Company”),
and participant named below (“Participant”).
Capitalized terms not defined herein will have the meaning ascribed to them in
the Company’s 2004 Stock Incentive Plan (the “Plan”).

 

Participant:

Social Security:

Address:

 

Total
Option Shares:

Exercise
Price Per Share:

Date of
Grant:

Expiration
Date:

 

Type of Stock Option

	
  (Check One):

  	
   

  	
  [  ]  Incentive Stock Option

  
	
   

  	
   

  	
  [  ]  Nonqualified
  Stock Option

  

 

1.              Grant of Option. 
The Company hereby grants to Participant an option (this “Option”) to purchase the total
number of shares of Common Stock of the Company set forth above as Total Option
Shares (the “Shares”) at the Exercise
Price Per Share set forth above (the “Exercise Price”),
subject to all of the terms and conditions of this Agreement and the Plan. If
designated as an Incentive Stock Option above, the Option is intended to
qualify as an “incentive stock option” (the “ISO”)
within the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended (the “Code”), although the Company
makes no representation or guarantee that such Option will qualify as an
ISO.  The Option will be an ISO to the
maximum extent permitted under the Code and any portion which cannot qualify
will be a Nonqualified Stock Option.

 

2.              Exercise Period.

 

2.1       Provided Participant continues to provide Continuous
Service to the Company or any Subsidiary, the Option will become vested and
exercisable with respect to [    ]% of the Shares subject
thereto on each of the next [                (    )                ]
anniversaries of the Date of Grant until the Option is 100% vested.  Except as provided in this Agreement,
unvested Options will not be exercisable on or after Participant’s termination
of Continuous Service (“Termination Date”)
and will immediately terminate on such Termination Date.

 

1

 

2.2       The Option will expire on the Expiration Date set
forth above or earlier as provided in Section 2.1, 3, or 10 of this
Agreement or, if applicable, pursuant to Section 7 or 18 of the Plan.

 

3.              Termination of Continuous
Service.

 

3.1                               If Participant’s Continuous Service is
terminated, Options will remain exercisable as follows:

 

(a)                                 If Participant’s termination of
Continuous Service is due to death, all unvested Options will terminate and all
vested Options will be exercisable by Participant’s designated beneficiary, or
if none, the person(s) to whom such Participant’s rights under the Option
are transferred by will or the laws of descendent and distribution for 1 year
following the Termination Date (but in no event beyond the term of the Option);
provided, that, if the Option is a Nonqualified Stock Option,
Participant’s designated beneficiary, or if none, the person(s) to whom
such Participant’s rights under the Option are transferred by will or the laws
of descent and distribution will have at least 1 year from the Termination Date
to exercise such vested Option.

 

(b)                                 If Participant’s termination of
Continuous Service is due to Disability, all unvested Options will terminate
and all vested Options will be exercisable by Participant for 1 year following
the Termination Date (but in no event beyond the term of the Option).

 

(c)                                  If Participant’s termination of
Continuous Service is due to termination for Cause, the Option will terminate
on the Termination Date, regardless of whether the Option was then exercisable.

 

(d)                                 If Participant’s termination of
Continuous Service is due to any other reason, all unvested Options will
terminate on the Termination Date and all Options (to the extent exercisable as
of the Termination Date) will be exercisable for a period of 3 months following
such Termination Date (but in no event beyond the term of the Option) and will
thereafter terminate.  The Participant’s
status as an employee will not be considered terminated in the case of leave of
absence agreed to in writing by the Company (including but not limited to
military and sick leave); provided, that, such leave is for a
period of not more than 3 months or reemployment upon expiration of such leave
is guaranteed by contract or statute.

 

3.2                               Nothing in the Plan or this Agreement
will confer on Participant any right to the continuation of service with the
Company, or any of its Subsidiaries, or interfere in any way with the right of
the Company or its Subsidiaries to terminate his or her Continuous Service at
any time.

 

2

 

4.              Manner of Exercise.

 

4.1                               To exercise this Option, Participant (or
in the case of exercise after Participant’s death or incapacity, Participant’s
executor, administrator, heir or legatee, as the case may be) must deliver to
the Company an executed stock option exercise agreement in the form as may be
approved by the Committee from time to time (the “Exercise Agreement”), which
shall set forth, inter alia, (i) Participant’s election to exercise the
Option, (ii) the number of shares being purchased, (iii) any
restrictions imposed on the shares and (iv) any representations warranties
and agreements regarding Participant’s investment intent and access to
information as may be required by the Company to comply with applicable
securities laws.  If someone other than
Participant exercises the Option, then such person must submit documentation
reasonably acceptable to the Company verifying that such person has the legal
right to exercise the Option.  The Option
may not be exercised unless such exercise is in compliance with all applicable
federal and state securities laws, as they are in effect on the date of
exercise.  The Exercise Agreement shall
be accompanied by full payment of the Exercise Price for the Shares being
purchased in cash (by check), or where permitted by law and consented to by the
Committee in its sole discretion:

 

(a)                                 by surrender of shares of the Company’s
Common Stock (or attestation of ownership thereof) that (1) either (A) have
been owned by Participant for more than six (6) months (or such longer or
shorter period required to avoid a charge to earnings for financial accounting
purposes) and have been paid for within the meaning of SEC Rule 144; or (B) were
obtained by Participant in the open public market; and (2) are clear of
all liens, claims, encumbrances or security interests;

 

(b)                                 through a “same day sale” commitment from
Participant and a broker-dealer that is a member of the National Association of
Securities Dealers (an “NASD Dealer”)
whereby Participant irrevocably elects to exercise the Option and to sell a
portion of the shares so purchased sufficient to pay for the total Exercise
Price and whereby the NASD Dealer irrevocably commits upon receipt of such
shares to forward the total Exercise Price directly to the Company;

 

(c)                                  by having the Company withhold Shares
otherwise deliverable upon exercise of the Option with a Fair Market Value
equal to the Exercise Price; or

 

(d)                                 by any combination of the foregoing.

 

4.2                               At the time of exercise, Participant
shall pay to the Company such amount as the Company deems necessary to satisfy
its obligation to withhold Federal, state or local income or other taxes
incurred by reason of the exercise of Options granted hereunder.  Such payment shall be made: (a) in cash,
(b) with respect to (b), (c) and (d), by having the Company retain
shares which would otherwise be delivered upon exercise of an Option, (c) by
delivering to the Company owned and unencumbered Shares not acquired from the
Company, or (d) by any combination of any such methods.  For purposes hereof, Shares shall be valued
at Fair Market Value.

 

5.              Issuance of Shares. 
Except as otherwise provided in the Plan or this Agreement, as promptly
as practicable after receipt of such written notification of exercise and full
payment of the Exercise Price and any required income tax withholding, the
Company will issue or transfer to Participant the number of Shares with respect
to which Options have been so exercised (less shares withheld in satisfaction
of tax withholding obligations, if any), and will deliver to Participant a
certificate or certificates therefor, registered in Participant’s name.

 

3

 

6.              Company; Participant.

 

6.1       The term “Company” as used in this Agreement with
reference to Continuous Service will include the Company and its Subsidiary, if
any, as appropriate.

 

6.2       Whenever the word “Participant” is used in any
provision of this Agreement under circumstances where the provision should
logically be construed to apply to the beneficiaries, the executors, the
administrators, or the person or persons to whom the Options may be transferred
by will or by the laws of descent and distribution, the word “Participant” will
be deemed to include such person or persons.

 

7.              Non-Transferability. 
The Options are not transferable by Participant otherwise than to a
designated beneficiary upon death or by will or the laws of descent and
distribution, and are exercisable during Participant’s lifetime only by him or
her.  No assignment or transfer of the
Options, or of the rights represented thereby, whether voluntary or
involuntary, by operation of law or otherwise (except to a designated
beneficiary, upon death, by will or the laws of descent and distribution), will
vest in the assignee or transferee any interest or right herein whatsoever, but
immediately upon such assignment or transfer the Options will terminate and
become of no further effect.

 

8.              Rights as Shareholder. 
Participant or a transferee of the Options will have no rights as
shareholder with respect to any Shares until he or she will have become the
holder of record of such share, and no adjustment will be made for dividends or
distributions or other rights in respect of such Shares for which the record
date is prior to the date upon which he or she will become the holder of record
thereof.

 

9.              Adjustments. 
Options may be adjusted or terminated in any manner as contemplated by
the Plan.

 

10.       Change in Control. 
Upon the occurrence of a Change in Control, all Options will become 100%
vested and exercisable in accordance with the Plan; provided, that,
Participant is then in Continuous Service.

 

11.       Compliance with Law. 
Notwithstanding any of the provisions hereof, Participant hereby agrees
that he or she will not exercise the Options, and that the Company will not be
obligated to issue or transfer any shares to Participant hereunder, if the
exercise hereof or the issuance or transfer of such shares will constitute a
violation by Participant or the Company of any provisions of any law or
regulation of any governmental authority. 
Any determination in this connection by the Committee will be final,
binding and conclusive.  The Company will
in no event be obliged to register any securities pursuant to the Securities
Act (as now in effect or as hereafter amended) or to take any other affirmative
action in order to cause the exercise of the Options or the issuance or
transfer of shares pursuant thereto to comply with any law or regulation of any
governmental authority.

 

4

 

12.       Notice. 
Every notice or other communication relating to this Agreement will be
in writing, and will be mailed to or delivered to the party for whom it is
intended at such address as may from time to time be designated by it in a
notice mailed or delivered to the other party as herein provided; provided,
that, unless and until some other address be so designated, all notices
or communications by Participant to the Company will be mailed or delivered to
the Company at its principal executive office, and all notices or
communications by the Company to Participant may be given to Participant
personally or may be mailed to him or her at his or her address as recorded in
the records of the Company.

 

13.       Binding Effect. 
Subject to Section 7 hereof, this Agreement will be binding upon
the heirs, executors, administrators and successors of the parties hereto.

 

14.       Governing Law. 
This Agreement will be construed and interpreted in accordance with the
laws of the State of Delaware without regard to its conflict of law principles.

 

15.       Plan. 
The terms and provisions of the Plan are incorporated herein by
reference, and Participant hereby acknowledges receiving a copy of the
Plan.  In the event of a conflict or
inconsistency between the discretionary terms and provisions of the Plan and
the provisions of this Agreement, this Agreement will govern and control.

 

16.       Notice of Disqualifying
Disposition of ISO Shares.  If the Option is an ISO, and if Participant
sells or otherwise disposes of any of the Shares acquired pursuant to the ISO
on or before the later of (i) the date 2 years after the Date of Grant,
and (ii) the date 1 year after transfer of such Shares to Participant upon
exercise of the Option, Participant will immediately notify the Company in
writing of such disposition. Participant agrees that Participant may be subject
to income tax withholding by the Company on the compensation income recognized
by Participant from the early disposition by payment in cash or out of the
current wages or other compensation payable to Participant.  Participant understands that if he elects to
exercise the Option in the manner contemplated by Section 4.1(c) hereof,
the portion of the Shares withheld to pay the Exercise Price will result in a
disqualifying disposition of such Shares under this Section 18.

 

17.       Tax Consequences.  Set forth below
is a brief summary as of the Effective Date of the Plan of some of the federal
tax consequences of exercise of the Option and disposition of the Shares. THIS
SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX LAWS AND REGULATIONS ARE SUBJECT
TO CHANGE. PARTICIPANT SHOULD CONSULT A TAX ADVISOR BEFORE EXERCISING THE
OPTION OR DISPOSING OF THE SHARES.

 

17.1                        If the Option qualifies as an ISO, there
will be no regular federal income tax liability upon the exercise of the
Option, although the excess, if any, of the Fair Market Value of the Shares on
the date of exercise over the Exercise Price will be treated as a tax
preference item for federal alternative minimum tax purposes and may subject
Participant to the alternative minimum tax in the year of exercise.

 

17.2                        If the Option does not qualify as an ISO,
there may be a regular federal income tax liability upon the exercise of the
Option. Participant will be treated as having received compensation income
(taxable at ordinary income tax rates) equal to the excess, if any, of the Fair
Market Value of the Shares on the date of exercise over the Exercise Price. If
Participant is a current or former employee of the Company, the Company may be
required to withhold from Participant’s compensation or collect from Participant
and pay to the applicable taxing authorities an amount equal to a percentage of
this compensation income at the time of exercise.

 

5

 

17.3                        The following tax consequences may apply
upon disposition of the Shares.

 

(a)         If the Shares are held for more than 12
months after the date of the transfer of the Shares pursuant to the exercise of
an ISO and are disposed of more than 2 years after the Date of Grant, any gain
realized on disposition of the Share will be treated as long term capital gain
for federal income tax purposes. If Shares purchased under an ISO are disposed
of within the applicable 1 year or 2 year period, any gain realized on such
disposition will be treated as compensation income (taxable at ordinary income
rates) to extent of the excess, if any, of the Fair Market Value of the Shares
on the date of exercise over the Exercise Price.

 

(b)         If the Shares are held for more than 12
months after the date of the transfer of the Shares pursuant to the exercise of
an Nonqualified Stock Options, any gain realized on disposition of the Share
will be treated as long term capital gain.

 

(c)          The Company may be required to withhold
from Participant’s compensation or collect from Participant and pay to the
applicable taxing authorities an amount equal to a percentage of this
compensation income.

 

18.       Successors and Assigns.  The Company
may assign any of its rights under this Agreement.  This Agreement will be binding upon and inure
to the benefit of the successors and assigns of the Company. Subject to the
restrictions on transfer set forth herein, this Agreement will be binding upon
Participant and Participant’s heirs, executors, administrators, legal
representatives.

 

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IN WITNESS WHEREOF, the
Company has caused this Agreement to be executed in triplicate by its duly
authorized representative and Participant has executed this Agreement in
triplicate, effective as of the Date of Grant.

 

 

	
  JOE’S JEANS INC.

  	
   

  	
  PARTICIPANT

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  By:

  	
   

  	
   

  	
   

  
	
   

  	
   

  	
  (Signature)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Please print name)

  	
   

  	
  (Please print name)

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
  (Please print title)

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