EXHIBIT 10.2
RECEIVABLES
PURCHASE AND TRANSFER
AGREEMENT
Dated as of October 24, 2002
Among
FIVE STAR QUALITY CARE, INC.,
as Primary Servicer,
THE PROVIDERS NAMED HEREIN
and
FSQC FUNDING CO., LLC,
as Purchaser
ALL THE RIGHT, TITLE AND INTEREST OF THE PURCHASER IN AND TO, ALL BENEFITS OF
THE PURCHASER UNDER AND ALL MONIES DUE OR TO BECOME DUE TO THE PURCHASER UNDER
OR IN CONNECTION WITH, THIS AGREEMENT HAVE BEEN ASSIGNED TO HFG HEALTHCO-4 LLC,
AS COLLATERAL SECURITY FOR ANY AND ALL THE OBLIGATIONS OF THE PURCHASER PURSUANT
TO A LOAN AND SECURITY AGREEMENT DATED AS OF OCTOBER 24, 2002 AMONG THE
PURCHASER, THE LENDERS FROM TIME TO TIME PARTY THERETO AND THE PROGRAM MANAGER.
TABLE OF CONTENTS
Page
ARTICLE I. TERMS OF THE PURCHASES AND CONTRIBUTIONS
SECTION 1.01 Sale, Contribution and Purchase of Receivables................................1
SECTION 1.02 Monthly Report................................................................1
SECTION 1.03 The Transfers.................................................................2
SECTION 1.04 Collection and Payment Procedures.............................................2
SECTION 1.05 Allocation of Servicer Responsibilities.......................................3
ARTICLE II. PAYMENT MECHANICS;MISDIRECTED PAYMENTS; EOB'S
SECTION 2.01 Non-Governmental Entities Payment Mechanics...................................4
SECTION 2.02 Governmental Entities Payment Mechanics.......................................4
SECTION 2.03 Misdirected Payments; EOB's...................................................5
SECTION 2.04 Unidentified Payments; Purchaser's Right
of Presumption ..........................................................6
SECTION 2.05 No Rights of Withdrawal.......................................................6
ARTICLE III. REPRESENTATIONS AND WARRANTIES; COVENANTS; EVENTS OF TERMINATION;
GROUP-WIDE EVENTS OF TERMINATION
SECTION 3.01 Representations and Warranties; Covenants.....................................6
SECTION 3.02 Group-Wide Event of Termination; Event
of Termination ..........................................................6
ARTICLE IV. INDEMNIFICATION; GRANT OF SECURITY INTEREST
SECTION 4.01 Denied Receivables............................................................7
SECTION 4.02 Indemnities by the Provider...................................................8
SECTION 4.03 Right of Set-Off..............................................................9
SECTION 4.04 Grant of Security Interest....................................................9
ARTICLE V. MISCELLANEOUS
SECTION 5.01 Amendments, etc..............................................................10
SECTION 5.02 Notices, etc.................................................................10
SECTION 5.03 Assignability................................................................10
SECTION 5.04 Further Assurances...........................................................11
SECTION 5.05 Costs, Expenses and Termination Fee..........................................11
SECTION 5.06 Confidentiality..............................................................12
SECTION 5.07 Term and Termination.........................................................12
SECTION 5.08 Sale and Contribution Treatment..............................................12
SECTION 5.09 Grant of Security Interest...................................................12
SECTION 5.10 No Liability of the Purchaser................................................13
SECTION 5.11 Addition and Removal of Providers............................................13
SECTION 5.12 Attorney-in-Fact.............................................................15
SECTION 5.13 Entire Agreement; Severability...............................................15
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SECTION 5.14 Governing Law................................................................15
SECTION 5.15 Waiver of Jury Trial, Jurisdiction
And Venue.........................................................15
SECTION 5.16 Execution in Counterparts....................................................16
SECTION 5.17 No Proceedings...............................................................16
SECTION 5.18 Survival of Termination......................................................16
SECTION 5.19 Joint and Several Liability; Providers.......................................16
SECTION 5.20 Accounting Information.......................................................16
EXHIBITS
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Exhibit I Definitions
Exhibit II Conditions of Purchases
Exhibit III Representations and Warranties
Exhibit IV Covenants
Exhibit V Events of Termination
Exhibit VI Receivable Information
Exhibit VII-A Form of Notice to Governmental Entities
Exhibit VII-B Form of Notice to non-Governmental Entities
Exhibit VIII Primary Servicer Responsibilities
Exhibit IX Servicer Termination Events
Exhibit X Interface Between Master Servicer and the Primary Servicer
Exhibit XI-A Memorandum of Providers' Counsel
with Respect to the Patient Consent Forms
Exhibit XI-B Form of Opinion of Providers' and Purchaser's Counsel
with Respect to Certain Corporate Matters
Exhibit XI-C Form of Opinion of Providers' and Purchaser's Counsel
with Respect to Certain Bankruptcy Matters
Exhibit XII Form of Depositary Agreement
Exhibit XIII Form of Parent Guaranty
Exhibit XIV Form of Pledge Agreement
Exhibit XV Form of Subscription Agreement
Exhibit XVI Form of Control Agreement
Exhibit XVII Form of Government Depositary Agreement
SCHEDULES
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Schedule I Providers
Schedule II Addresses for Notices
Schedule III Credit and Collection Policy
Schedule IV Disclosures
Schedule V Lockbox Information
Schedule VI Tradenames
Schedule VII Net Value Factors
Schedule VIII Providers with Facilities in Certain States
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RECEIVABLES PURCHASE AND TRANSFER AGREEMENT
Dated as of October 24, 2002
FIVE STAR QUALITY CARE, INC., a corporation organized under the laws of
the State of Maryland (together with its successors and assigns, "Five Star"),
each of the entities named on Schedule I hereto, as such Schedule I may be
amended from time to time pursuant to Section 5.11 hereof (each, together with
each one's successors and assigns, a "Provider" and, collectively, the
"Providers") and FSQC Funding Co., LLC, a limited liability company organized
under the laws of the State of Delaware (together with its successors and
assigns, the "Purchaser"), agree as follows:
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I to this Agreement. References
herein and in the Exhibits and Schedules hereto to the "Agreement" refer to this
Agreement, as amended, restated, modified or supplemented from time to time in
accordance with its terms (the "Agreement").
The Providers wish to sell or contribute to the Purchaser on a
continuing basis all of its healthcare receivables. The Purchaser is prepared to
purchase or to accept the contribution of such healthcare receivables on the
terms and subject to the conditions set forth herein. Accordingly, the parties
agree as follows:
ARTICLE I.
TERMS OF THE PURCHASES AND CONTRIBUTIONS
SECTION 1.01 Sale, Contribution and Purchase of Receivables. On each
Transfer Date until the Facility Termination Date and on the terms and
conditions set forth herein, each Provider agrees to sell or contribute, without
recourse except to the extent expressly provided herein, all of such Provider's
Receivables to the Purchaser, and the Purchaser agrees to purchase or accept
such contribution of, all of each Provider's Receivables.
SECTION 1.02 Monthly Report. On or prior to the 15th day of each Month,
the Primary Servicer, on behalf of each Provider, shall provide the Master
Servicer by Transmission a report (the "Monthly Report") containing the
information listed on Exhibit VI hereto (as such Exhibit may be modified by the
Purchaser from time to time, the "Receivable Information") with respect to the
new Receivables sold or contributed to the Purchaser during the immediately
prior Month. Based on the Monthly Report, the Providers and Purchaser shall
finalize and record on their respective books and records (to the extent not
previously recorded) the determination of those Receivables that were purchased
and those that were contributed. All Receivable Information that has been
received by the Master Servicer shall be reviewed by the Master Servicer and the
Program Manager.
SECTION 1.03 The Transfers. On each Transfer Date (i) subject to
satisfaction of the applicable conditions set forth in Exhibit II hereto, the
Providers shall sell to the Purchaser all Eligible Receivables, that the
Providers have submitted, if any, to the Purchaser for purchase hereunder and to
be included in the Purchased Batch, (ii) the Providers will contribute to the
capital of the Purchaser all other Eligible Receivables in the Transferred
Batch, and (iii) the Providers will contribute to the capital of the Purchaser
all other Receivables that do not constitute Eligible Receivables. The Purchaser
shall (x) pay to the Primary Servicer for the benefit of the Providers, at the
Primary Servicer Account, an amount equal to the Purchase Price of the Purchased
Batch, and (y) record on the books and records of the Purchaser the capital
contribution with respect to those Receivables contributed to the capital of the
Purchaser in such Transferred Batch, in each case, promptly and in no event
later than seven Business Days after the applicable Transfer Date for such
Batch. The Primary Servicer shall remit the proceeds of the Purchase Price of
the Purchased Batch to each Provider in accordance with their respective
interests.
(a) Effective on each Transfer Date, in consideration of the payment of
the Purchase Price, or the increase in the capital accounts of the applicable
Provider in the Purchaser, and for other good and valuable consideration, each
Provider hereby sells, contributes, assigns and conveys to the Purchaser and the
Purchaser hereby purchases and accepts, as absolute owner, all right, title and
interest in and to the Batch Receivables purchased or contributed on such
Transfer Date.
SECTION 1.04 Collection and Payment Procedures. Collections on Batches.
The Purchaser shall be entitled with respect to each Batch, (i) to receive all
Collections on such Batch and (ii) to have and to exercise any and all rights
(x) to collect, record, track and, during the continuance of an Event of
Termination or a Servicer Termination Event, take all actions to obtain
Collections with respect to each Batch Receivable payable by Persons other than
Governmental Entities and (y) to the extent permitted by law and in a manner
consistent with all applicable laws and regulations, to record, track and,
during the continuance of an Event of Termination or a Servicer Termination
Event, take all actions to obtain Collections with respect to each Receivable
included in a Batch payable by Governmental Entities.
(a) Collections Not Part of a Batch. On each Settlement Date, and
provided that (i) each Provider shall have paid all amounts then due and owing
to the Purchaser under this Agreement, (ii) each Provider, or the Primary
Servicer on behalf of such Provider, shall have successfully sent by
Transmission to the Master Servicer all information required with respect to the
Batch Receivables for the immediately preceding Settlement Period, and (iii) no
Event of Termination shall have occurred and be continuing, the Purchaser shall
pay or turn over, as the case may be, to the Primary Servicer for the benefit of
the applicable Providers any and all cash collections or other cash or non-cash
proceeds received by the Purchaser during the immediately preceding Settlement
Period with respect to Accounts that are not part of any Batch. The Primary
Servicer shall remit such cash and proceeds to each Provider in accordance with
their respective interests.
(b) Distributions. On each Business Day and with respect to each Batch,
Total Collections shall be distributed to the Purchaser.
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SECTION 1.05 Allocation of Servicer Responsibilities. Tracking of
purchases, Collections and other transactions pertaining to each Batch shall be
administered by the Master Servicer in a manner consistent with the terms of
this Agreement. The responsibilities of the Providers, the Primary Servicer and
the Master Servicer are set forth in Exhibit X attached hereto. Each Provider
shall cooperate fully with the Primary Servicer and the Master Servicer in
establishing and maintaining the Transmission of the Receivable Information,
including, without limitation, the matters described in Exhibit X, and shall
provide promptly to the Master Servicer such other information necessary or
desirable for the administration of Collections on the Batch Receivables as may
be requested from time to time.
(a) The Purchaser hereby appoints Five Star as its agent for the
administration and servicing obligations set forth in Exhibit VIII hereto with
respect to the Receivables sold or transferred by the Providers to the Purchaser
hereunder (the "Primary Servicer Responsibilities"), and Five Star hereby
accepts such appointment and agrees to perform the Primary Servicer
Responsibilities on behalf of the Providers; provided, however, that such
appointment shall not release any Provider from any of its duties,
responsibilities, liabilities and obligations resulting or arising hereunder.
Each of Five Star, the Providers and the Purchaser hereby acknowledge that Five
Star's appointment as Primary Servicer is expressly limited by and subject to
the Program Manager's right as specified by the Loan Agreement to replace the
Purchaser or its agent as the Primary Servicer (which replacement may be
effectuated through the outplacement to a Person of all back office duties,
including billing, collection and processing responsibilities, and access to all
personnel, hardware and software utilized in connection with such
responsibilities). The Purchaser may, with the consent of the Program Manager,
at any time following the occurrence of a Servicer Termination Event (and shall,
without requirement of notice to any party, upon a Servicer Termination Event
resulting from the events described in clauses (g) or (j) of Exhibit V hereto)
or a Group-Wide Event of Termination, appoint another Person (which may be the
Master Servicer) to succeed Five Star as agent for performance of the Primary
Servicer Responsibilities (which appointment may be effectuated through the
outplacement to a Person of all back office duties, including billing,
collection and processing responsibilities, and access to all personnel,
hardware and software utilized in connection with such responsibilities).
(b) As compensation for the performance of the Primary Servicer
Responsibilities, the Providers shall pay Five Star (or the successor Primary
Servicer who performs such Primary Servicer Responsibilities) the Primary
Servicing Fee.
ARTICLE II.
PAYMENT MECHANICS;
MISDIRECTED PAYMENTS; EOB'S
SECTION 2.01 Non-Governmental Entities Payment Mechanics. On or prior
to the Initial Transfer Date, each of the Primary Servicer, the Providers, the
Purchaser, the Program Manager, the Collateral Agent and the Lockbox Bank shall
have entered into the Depositary
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Agreement and shall have caused the Lockbox Bank to establish the Primary
Purchaser Account. In addition, on or prior to the Initial Transfer Date, the
Primary Servicer, the Providers, the Purchaser, the Program Manager, the
Collateral Agent, and the Local Banks shall have entered into the Control
Agreements with respect to each of the Local Purchaser Accounts and shall have
caused the Local Banks to establish each Local Purchaser Account.
(a) Each Provider shall prepare, execute and deliver to each
non-Governmental Entity who is or is expected to be an Obligor, with copies to
the Purchaser, on or prior to the Initial Transfer Date, a Notice to
non-Governmental Entities addressed to each such non-Governmental Entity, which
Notice to non-Governmental Entities shall state that all present and future
Receivables owing to such Provider have been and will be transferred to the
Purchaser and that all checks and EOB's from such non-Governmental Entity on
account of Receivables shall be sent to the applicable Provider for immediate
deposit in the applicable Purchaser Account and all wire transfers from such
non-Governmental Entity on account of Receivables shall be wired directly into
the applicable Purchaser Account.
(b) Each Provider covenants and agrees that, on and after the Initial
Transfer Date, all invoices (and, if provided by such Provider, return
envelopes) to be sent to non-Governmental Entities shall set forth only the
address of the applicable Provider as a return address for payment of
Receivables and delivery of EOB's, and only the applicable Purchaser Account
with respect to wire transfers for payment of Receivables. Each Provider hereby
further covenants and agrees to cause each check received by such Provider to be
deposited in the applicable Purchaser 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 Entities
with respect to payment of Receivables, wire transfers and EOB's.
SECTION 2.02 Governmental Entities Payment Mechanics. On or prior to
the Initial Transfer Date, each of the Primary Servicer, the Providers, the
Purchaser, the Program Manager, the Collateral Agent and the Lockbox Bank shall
have entered into the Depositary Agreement, and the Providers shall have caused
the Lockbox Bank to establish the Primary Provider Account and the Government
Lockboxes and Government Lockbox Accounts for those Providers indicated on
Schedule VIII. In addition, on or prior to the Initial Transfer Date, each of
the Providers listed on Schedule VIII hereto that have or will have established
a Government Lockbox and Government Lockbox Account at a bank other than the
Lockbox Bank shall have entered into a Government Depositary Agreement with the
bank listed next to such Provider's name on Schedule VIII, the Primary Servicer,
the Purchaser, the Program Manager and the Collateral Agent, and shall have
caused such bank to establish a Government Lockbox and a Government Lockbox
Account. Each Provider shall prepare, execute and deliver to each Governmental
Entity or its fiscal intermediary who is or is expected to be an Obligor, with
copies to the Purchaser, on or prior to the Initial Transfer Date, Notices to
Governmental Entities, which Notices to Governmental Entities shall provide that
all checks and EOB's from Governmental Entities on account of Receivables shall
be sent to the applicable Government Lockbox and all wire transfers on account
of Receivables shall be wired directly into the applicable Provider Account.
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(a) Each Provider covenants and agrees that, on and after the Initial
Transfer Date, all invoices to be sent to Governmental Entities (and, if
provided by such Provider, return envelopes) shall set forth only the address of
the applicable Government Lockbox as a return address for payment of Receivables
and delivery of EOB's, and only the applicable Provider Account with respect to
wire transfers for payment of Receivables. 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 Entities with respect to payment of Receivables, wire transfers and
EOB's.
(b) The Providers shall maintain the Government Lockbox, the Government
Lockbox Account and the Provider Account solely and exclusively for the receipt
of payments on account of Receivables from Governmental Entities. The Providers
and the Primary Servicer shall take all actions necessary to ensure that no
payments from any Person other than a Governmental Entity shall be deposited in
any Government Lockbox or any Provider Account.
SECTION 2.03 Misdirected Payments; EOB's. In the event that 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 Local
Purchaser Account or Government Lockbox, 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 Purchaser 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.
(a) If a Misdirected Payment in the form of a check is received by the
Purchaser more than six days after the postmark date on the envelope enclosing a
check from the Obligor (or, if no such envelope is sent to the Government
Lockbox by a Provider, more than six days after the date of such check or wire
transfer with respect thereto), then the Providers shall pay interest on such
Misdirected Payment to the Purchaser from such sixth subsequent day to and
including the date such check is received in the Primary Purchaser Account, at a
rate equal to the interest rate then in effect under the Loan Agreement.
(b) Each Provider hereby agrees and consents to the Purchaser taking
such actions as are reasonably necessary to ensure that future payments from the
Obligor of a Misdirected Payment shall be made in accordance with the Notice
previously delivered to such Obligor, or, if no Notice was provided, in
accordance with the provisions of Sections 2.01 and 2.02, including, without
limitation, to the maximum extent permitted by law, (i) the Purchaser, its
assigns or designees, or the Program Manager executing on such Provider's behalf
and delivering to such Obligor a new Notice, and (ii) the Purchaser, its assigns
or designees, or the Program Manager contacting such Obligor by telephone to
confirm the instructions previously set forth in the Notice to such Obligor.
Upon the Purchaser's request, such Provider shall promptly (and in any event,
within two Business Days from such request) take such similar actions as the
Purchaser may request.
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SECTION 2.04 Unidentified Payments; Purchaser's Right of Presumption.
Each Provider and the Purchaser agree and consent that the Program Manager or
its designees or assigns, may apply any payment it receives from an Obligor or
any other payor against a Transferred Batch if the Program Manager is unable in
good faith to determine from the information in the EOB whether such payment
relates to a Transferred Batch.
SECTION 2.05 No Rights of Withdrawal. None of the Providers, the
Primary Servicer or the Purchaser shall have any rights of direction or
withdrawal with respect to amounts held in the Purchaser Account, except on each
day that there are any funds in a Local Purchaser Account, the applicable
Provider shall cause all such funds to be transferred to the Primary Purchaser
Account.
ARTICLE III.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION; GROUP-WIDE EVENTS OF TERMINATION
SECTION 3.01 Representations and Warranties; Covenants. Each Provider
makes, on the Initial Transfer Date and on each subsequent Transfer Date, the
representations and warranties on and as of such dates, and hereby agrees to
perform and observe the covenants, set forth in Exhibits III and IV,
respectively, hereto.
SECTION 3.02 Group-Wide Event of Termination; Event of Termination. If
a Group-Wide Event of Termination shall occur and be continuing, the Purchaser
may, by notice to the Providers or by notice to the Primary Servicer (which
notice shall be deemed to have been given to the Providers), take either or both
of the following actions: (x) declare the Facility Termination Date to have
occurred (except with respect to a Group-Wide Event of Termination arising as a
result of clause (g) of Exhibit V, in which case the Facility Termination Date
shall be deemed to have occurred automatically and without notice), and (y)
without limiting any rights hereunder, terminate the appointment of Five Star as
Primary Servicer and replace Five Star as Primary Servicer in the manner set
forth in Section 1.05(b). Upon any such declaration or designation, the
Purchaser shall have, in addition to the rights and remedies which it may have
under this Agreement, all other rights and remedies provided after default under
the UCC and under other applicable law, which rights and remedies shall be
cumulative.
(a) If an Event of Termination shall occur and be continuing with
respect to a Provider, following the receipt by the Purchaser of (x) all
Collections with respect to Eligible Receivables (that have not become Denied
Receivables) and (y) all Return Prices and Indemnified Amounts with respect to
Denied Receivables, in each case, attributable to such Provider, the Primary
Servicer may request that such Provider be removed as a Provider for the
purposes of the Provider Documents, provided that the conditions set forth in
Section 5.11(b) shall have been satisfied.
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ARTICLE IV.
INDEMNIFICATION;
GRANT OF SECURITY INTEREST
SECTION 4.01 Denied Receivables. If a breach of any of the
representations or warranties contained herein relating to a Batch Receivable
shall be discovered at any time (each, a "Denied Receivable"), the Primary
Servicer or the applicable Provider shall on the next Settlement Date, purchase
such Denied Receivable from the Purchaser at the Return Price.
(a) For ease of administration, the Purchaser shall be entitled to
presume that the failure of any Batch Receivable (or portion thereof) to be paid
in full on or after the 180th day following the Last Service Date thereof is the
result of a breach of a representation or warranty contained herein with respect
to such Batch Receivable, unless the Purchaser shall have actual knowledge to
the contrary (such as, by way of example, actual knowledge of the financial
inability of an Obligor to pay its obligations represented by a Receivable).
Each Provider hereby represents and warrants to the Purchaser that it would
generally become aware, in the ordinary course of its business, if an Obligor
did not have the financial ability to pay its obligations represented by a
Receivable. Each Provider agrees that it shall provide notice to the Purchaser
and the Program Manager, as soon as such Provider becomes aware of any Obligor's
financial inability to pay obligations represented by a Receivable. In the event
the Purchaser receives the Return Price for any such Batch Receivable and it is
thereafter determined that the failure of such Batch Receivable to be paid in
full was not the result of a breach of representation or warranty contained
herein, the parties hereto shall make an appropriate adjustment to the
appropriate Provider's capital account or increase the Purchase Price of any
Purchased Batch to be purchased on or after such date.
(b) Upon receipt by (or on behalf of) the Purchaser of the Return Price
with respect to any Denied Receivable, the Purchaser shall be deemed to have
reassigned and resold to the applicable Provider such Denied Receivable without
any representation, warranty or recourse whatsoever, and, thereafter, neither
the Purchaser nor any member of the Lender Group shall have any further
servicing or other obligation to such Provider with respect to such Denied
Receivable. At the request of a Provider (and at such Provider's sole cost and
expense), the Purchaser shall promptly deliver to such Provider such documents,
assignments, releases, notices and instruments of termination as such Provider
may reasonably request to evidence the reconveyance by the Purchaser of a Denied
Receivable pursuant to the terms of this Section 4.01(c).
SECTION 4.02 Indemnities by the Provider. Without limiting any other
rights that the Purchaser, the Program Manager, the Master Servicer or any of
their respective Affiliates (together with their respective officers, directors,
agents, representatives, shareholders, counsel, employees and lenders, each, an
"Indemnified Party") may have hereunder or under applicable law, the Providers
hereby agree to indemnify each Indemnified Party from and against any and all
claims, losses and liabilities (including, without limitation, reasonable
attorneys' fees) (all of the foregoing being collectively referred to as
"Indemnified Amounts") arising out of or resulting from any of the following:
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(a) the sale or contribution of any Receivable which purports
to be part of a Transferred Batch but which is not, at the date of such
sale or contribution, an Eligible Receivable;
(b) any representation or warranty made or deemed made by any
Provider (or any of its officers) under or in connection with this
Agreement (and not relating to the Eligibility Criteria) which shall
have been incorrect in any material respect when made;
(c) the failure by any Provider or any Batch Receivable to
comply with any applicable law, rule or regulation;
(d) the failure to vest in the Purchaser a perfected ownership
interest in each Receivable included in a Transferred Batch and the
proceeds and Collections in respect thereof, free and clear of any
Liens (other than Liens expressly permitted hereunder);
(e) any dispute, claim, set-off or defense to the payment, in
whole or in part, of any Receivable (including, without limitation, a
defense based on such Receivable not being a legal, valid and binding
obligation) or any other claim resulting from the services or
merchandise related to such Receivable or the furnishing or failure to
furnish such services or merchandise or relating to collection
activities with respect to such Receivable (if such collection
activities were performed by a Provider or any of its Affiliates acting
as Primary Servicer); provided, however, this clause (e) shall not be
deemed to include any dispute, claim, set-off or defense to the payment
of any Receivable arising out of the financial inability of an Obligor
to pay its obligations represented by such Receivable including,
without limitation, a discharge in bankruptcy;
(f) a failure of any Provider, including, without limitation,
the Primary Servicer's actions on behalf of the Providers under Section
1.05(b) of this Agreement with respect to Primary Servicer
Responsibilities, to perform its duties or obligations in accordance
with the provisions hereof or to perform its duties or obligations
hereunder; or
(g) the commingling by any Provider of Collections at any time
with other funds of such or any other Provider;
provided, however, that in all events there shall be excluded from the foregoing
indemnification any claims, losses or liabilities resulting solely from the
gross negligence or willful misconduct of an Indemnified Party or which
constitute credit recourse for an uncollectible Batch Receivable.
Such Indemnified Party shall notify the Primary Servicer, on
behalf of the Providers, of such claim, provided that the failure to so notify
shall not affect or invalidate the indemnity granted pursuant to this Section
4.02.
SECTION 4.03 Right of Set-Off. Unless a Provider notifies the Purchaser
in writing that it desires to pay on the date when due the Return Price under
Section 4.01 or any Indemnified Amounts under Section 4.02 and such Provider
makes such payment to the Purchaser
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in immediately available funds on such date, such Provider hereby irrevocably
instructs the Purchaser to set-off the full amount of the Return Price or the
Indemnified Amounts, as the case may be, against the Purchase Price of any
Purchased Batch to be purchased on or after such date. No further notification,
act or consent of any nature whatsoever is required prior to the right of the
Purchaser to exercise such right of set-off; provided, however, the Purchaser or
the Program Manager shall notify the Primary Servicer on behalf of such Provider
that a set-off pursuant to this Section 4.03 occurred, the amount of such
set-off and a description of the Denied Receivable or Indemnified Amounts, as
the case may be; provided, further that the failure to so notify shall not
affect or invalidate the indemnity granted pursuant to Section 4.02. The
Purchaser shall exercise its right to set-off hereunder to the extent funds are
available prior to making a demand for indemnification under Section 4.02.
SECTION 4.04 Grant of Security Interest. As collateral security for the
Providers' existing and future (i) obligations to purchase Denied Receivables
under Section 4.01 hereof, (ii) indemnification obligations to the Purchaser
under Section 4.02 hereof, and (iii) obligations to pay costs, expenses and fees
under Section 5.05 hereof, each Provider hereby grants to the Purchaser a first
priority lien on and security interest in, and right of set-off against, (1) all
of the Accounts now or hereafter owned or held by such Provider, (2) all of the
Additional Collateral, (3) any and all amounts held in any accounts maintained
at any bank, and (5) all proceeds of the foregoing (all of the foregoing, the
"Collateral").
(a) In connection with the grant under (a) above, this Agreement shall
be deemed to be a security agreement as understood under the UCC. Each Provider
agrees to execute, and hereby authorizes the Purchaser to file, one or more
financing statements or continuation statements or amendments thereto or
assignments thereof in respect of the lien created pursuant to this Section 4.04
which may at any time be required or, in the opinion of the Purchaser, be
desirable, and to do so without the signature of such Provider where permitted
by law.
ARTICLE V.
MISCELLANEOUS
SECTION 5.01 Amendments, etc. No amendment or waiver of any provision
of this Agreement or consent to any departure therefrom by a party hereto shall
be effective unless in writing signed by the Primary Servicer, each Provider,
the Purchaser, and consented to in writing by the Collateral Agent as assignee
of all of the Purchaser's rights and remedies hereunder, and then such
amendment, waiver or consent shall be effective only in the specific instance
and for the specific purpose for which given. No failure on the part of the
Purchaser, the Primary Servicer or a Provider to exercise, and no delay in
exercising, any right hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right.
SECTION 5.02 Notices, etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which may
include facsimile communication)
9
and shall be faxed or delivered to, (i) each party hereto, at its address set
forth under its name on the signature pages hereof or at such other address as
shall be designated by such party in a Written Notice to the other parties
hereto (each Provider hereby acknowledges and agrees that notices and
communications to or for its benefit may be delivered to Five Star and such
delivery to Five Star shall be deemed to be received by such Provider),(ii) the
Program Manager and the Master Servicer at the addresses set forth on Schedule
II attached hereto (as such Schedule may be amended from time to time) and (iii)
if the Primary Servicer is a person other than Five Star, at the address
provided by such Primary Servicer. Notices and communications by facsimile shall
be effective when sent (and shall be followed by hard copy sent by regular mail)
and notices and communications sent by other means shall be effective when
received.
SECTION 5.03 Assignability. This Agreement shall inure to the benefit
of and be binding upon the parties hereto and their respective permitted
successors and assigns.
(a) Subject to Section 5.03(b) of the Loan Agreement, this Agreement
and the Purchaser's rights and obligations herein (including, without
limitation, ownership of the Batch Receivables in each Transferred Batch, the
Purchaser Account and rights in relation to the Government Lockbox and the
Provider Account) shall be assignable by the Purchaser and its successors and
assigns. Each Provider hereby acknowledges that the Purchaser is granting to the
Collateral Agent, for the benefit of the Collateral Agent, the Program Manager
and the Lenders, which may further grant to their respective lenders or to any
Federal Reserve Bank, a security interest in, and collateral assignment of, this
Agreement and all of the Purchaser's rights, title and interests hereunder
(including, without limitation, the Batch Receivables, the Providers'
obligations hereunder, the Purchaser Account, and rights in relation to the
Government Lockbox and the Provider Account).
(b) No Provider may assign its rights or obligations hereunder or any
interest herein without the prior written consent of the Purchaser, the Program
Manager and the Collateral Agent.
SECTION 5.04 Further Assurances. Each Provider shall, at its cost and
expense, upon the request of the Purchaser, duly execute and deliver, or cause
to be duly executed and delivered, to the Purchaser such further instruments and
do and cause to be done such further acts as may be necessary or proper in the
reasonable opinion of the Purchaser to carry out more effectively the provisions
and purposes of this Agreement.
SECTION 5.05 Costs, Expenses and Termination Fee. In addition to the
rights of indemnification granted under Section 4.02 hereof, the Providers agree
to pay on demand all reasonable costs and expenses in connection with the
preparation, execution and delivery of this Agreement and any waiver,
modification, supplement or amendment hereto, including, without limitation, the
reasonable fees and out-of-pocket expenses of counsel for the Purchaser and the
members of the Lender Group, and all costs and expenses, if any (including
reasonable counsel fees and expenses), of the Purchaser, its Affiliates and the
members of the Lender Group in connection with the enforcement, collection,
protection, maintenance, preservation and foreclosure on its interests with
respect to this Agreement, any related documents, any Collateral, the
Receivables, any Lien, or under any instrument or document delivered pursuant to
this Agreement, and the Purchaser
10
may take judgment for all such amounts. The attorneys' fees arising from such
services, including those of any appellate proceedings, and all reasonable
out-of-pocket expenses, charges, costs and other fees incurred by such counsel
in any way or in any respect to or arising out of or in connection with or
relating to any of the events or actions described in this Section 5.05 shall be
payable by the Providers to the Purchaser on demand (with interest accruing from
the tenth Business Day following the date of such demand).
(a) The Providers further agree to pay on the Initial Transfer Date
(and with respect to costs and expenses incurred following the Initial Transfer
Date, within seven days of demand therefor) (i) all reasonable costs and
expenses incurred by the Purchaser or its agent in connection with periodic
audits of the Receivables, (ii) all reasonable costs and expenses incurred by
the Master Servicer or the Program Manager to accommodate any significant coding
or data system changes made by a Provider that would affect the transmission or
interpretation of data received through the interface, and (iii) all reasonable
costs and expenses incurred by the Purchaser for additional time and material
expenses of the Master Servicer resulting from a lack of cooperation or
responsiveness of any Provider or the Primary Servicer to agreed-upon protocol
and schedules with the Master Servicer; provided, that such Provider or the
Primary Servicer has been informed of the alleged lack of cooperation or
responsiveness and has been provided an opportunity to correct such problems.
(b) In the event that a Facility Termination Date is declared (or is
deemed to have occurred) pursuant to a Group-Wide Event of Termination, the
Providers shall pay to the Purchaser an early termination fee in an amount equal
to the termination fee payable by the Purchaser pursuant to Section 5.07(d) of
the Loan Agreement.
SECTION 5.06 Confidentiality. All parties hereto agree to comply with
all applicable state or federal statutes or regulations relating to patient
medical record confidentiality.
(a) Each of the Providers, the Primary Servicer and the Purchaser
hereby grants the Program Manager the right to place one or more advertisements
in newspapers and journals, on its website and in other its materials (all, at
its own expense) that recites the transaction, the amount of the transaction and
utilizes the corporate logo of Five Star.
SECTION 5.07 Term and Termination. This Agreement shall continue in
full force and effect from the date hereof until the Final Payment Date;
provided, however, that, with respect to any Transferred Batches transferred
prior to the Final Payment Date and not purchased pursuant to Section 4.01, the
occurrence of the Final Payment Date shall not terminate any security interest
of the Purchaser hereunder, nor shall it relieve or discharge any Provider, the
Primary Servicer or the Purchaser of or from their respective duties,
obligations or covenants hereunder and all the terms, provisions and conditions
of this Agreement shall remain in effect for such purpose until such obligations
have been satisfied and performed in full. Upon the satisfaction in full of all
the obligations, the Purchaser shall deliver all assignments, certificates,
releases, notices and other documents at the Providers' expense, as the
Providers may reasonably request to effect such termination.
11
SECTION 5.08 Sale and Contribution Treatment. The Providers and the
Purchaser have structured the transactions contemplated by this Agreement with
respect to each Transferred Batch as a sale or contribution and intend that such
transactions constitute a sale or contribution. Five Star will prepare year-end
financial statements on an annual basis for it and its consolidated subsidiaries
(including the Purchaser) in accordance with GAAP. Such consolidated financial
statements will contain footnotes or other information to the effect that: (i)
the Purchaser's business consists of both purchased and contributed Receivables
from the Providers; and (ii) the Purchaser is a separate Delaware limited
liability company with its own separate creditors which, upon liquidation of the
Purchaser will be entitled to be satisfied solely out of the Purchaser's assets.
The Purchaser will prepare separate financial statements, which statements will
treat all transfers of purchased and contributed Receivables pursuant to this
Agreement respectively as sales and contributions to the Purchaser's capital,
and not as secured loans, and Five Star will classify all purchased and
contributed Receivables transferred under this Agreement as assets owned
exclusively by the Purchaser for all purposes. Each Provider will advise all
persons inquiring about the ownership of the Receivables that all Receivables
have been sold or contributed to the Purchaser. Each Provider will pay all taxes
(excluding income or franchise taxes of the Purchaser), if any, relating to the
transactions contemplated under this Agreement, including, without limitation,
the sale, transfer and contribution of each Batch to the Purchaser.
SECTION 5.09 Grant of Security Interest. In the event that, contrary to
the mutual intent of the Providers and the Purchaser, any purchase or
contribution of a Batch is not characterized as a sale or contribution, each
Provider shall, effective as of the date hereof, be deemed to have granted (and
such Provider hereby does grant) (in addition to and not in substitution of the
grant under Section 4.04 hereof) to the Purchaser a first priority security
interest in and to any and all present and future Receivables and the proceeds
thereof to secure the repayment of all amounts paid to such Provider hereunder
with accrued interest thereon, and this Agreement shall be deemed to be a
security agreement. With respect to such grant of a security interest, the
Purchaser may at its option exercise from time to time any and all rights and
remedies available to it under the UCC or otherwise. Each Provider agrees that
five Business Days shall be reasonable prior notice to such Provider or to the
Primary Servicer on behalf of such Provider of the date of any public or private
sale or other disposition of all or any of the Batch Receivables.
SECTION 5.10 No Liability of the Purchaser. Neither this Agreement nor
any document executed in connection herewith shall constitute an assumption by
the Purchaser of any obligation to an Obligor or a patient/customer of a
Provider.
SECTION 5.11 Addition and Removal of Providers. Subject to satisfaction
of the conditions set forth below and any other conditions required by the
Purchaser or the Program Manager, upon 30-days' prior written request from time
to time of the Primary Servicer, the Purchaser hereby agrees to the adding of
other Persons designated by the Primary Servicer as additional Providers
hereunder (each such event, an "Addition"):
(i) the Required Lenders shall have agreed in writing to such
Addition;
12
(ii) no Group-Wide Event of Termination is existing and the
proposed Addition shall not cause, or shall not reasonably be expected
to cause, a Group-Wide Event of Termination;
(iii) as of the effective date of such Addition, the
conditions precedent applicable to such Person as set forth in Exhibit
II hereto shall have been fulfilled;
(iv) as of the effective date of such Addition, the
representations and warranties set forth in Exhibit III hereto
applicable to such Person shall be true and correct;
(v) the Purchaser shall have received a certificate from the
Master Servicer stating that all computer linkups and interfaces
necessary or desirable, in the judgment of the Master Servicer, to
effectuate the transactions and information transfers under this
Agreement with respect to the Addition, are fully operational to the
reasonable satisfaction of the Master Servicer and the Master Servicer
shall have received an interface fee for each additional computer
interface;
(vi) such Person shall execute such agreements, instruments
and documents as the Purchaser (or its assignees) may reasonably
request, in form and substance satisfactory to the Purchaser to
effectuate the Addition, including without limitation (x) the
appropriate subscription agreement in the form of Exhibit XV attached
(the "Subscription Agreement") to this Agreement whereby such Person
agrees to be bound by the terms of this Agreement, (y) financing
statements covering the Receivables that such Person may sell or
contribute to the Purchaser and (z) financing statements covering the
Collateral in which such Person will grant a security interest pursuant
to Section 4.04(a);
(vii) the Purchaser and its assigns shall have been provided
with such information (whether financial or otherwise), documents or
opinions as they may reasonably request; and
(viii) such Person shall become a member of the Purchaser.
Upon the effectiveness of any Addition, Schedule I hereto shall be
deemed amended to add the name of the applicable Person.
(a) Subject to satisfaction of the conditions set forth below and any
other conditions required by the Purchaser or the Program Manager, upon 30-days'
prior written request of the Primary Servicer made pursuant to Section 3.02(b)
or otherwise, the Purchaser hereby agrees to the removal of any Provider
designated by the Primary Servicer (each such event, a "Removal").
(i) if such Provider individually or in the aggregate with all
other Providers removed pursuant to this Section 5.11(b) constitutes a
Group Wide Provider, the Required Lenders shall have agreed in writing
to such Removal;
13
(ii) no Group-Wide Event of Termination is existing and the
proposed Removal shall not cause, or shall not reasonably be expected
to cause, a Group-Wide Event of Termination;
(iii) such Person shall execute such agreements, instruments
and documents as the Purchaser may reasonably request, in form and
substance satisfactory to the Purchaser to effectuate the Removal,
including without limitation an amendment to this Agreement
effectuating such Removal;
(iv) the Purchaser shall have received all Collections with
respect to Eligible Receivables (that have not become Denied
Receivables) and (y) all Return Prices and Indemnified Amounts with
respect to Denied Receivables, in each case, attributable to such
Person; and
(v) such Person shall have withdrawn as a member of the
Purchaser; provided, however, that such Person's capital account as a
member shall not be paid out until the earlier of (x) the date of
termination of this Agreement as set forth in Section 5.07 and (y) the
Final Payment Date with respect to the Receivables of such Provider.
Upon the effectiveness of any Removal, Schedule I hereto shall be
deemed amended to delete the name of the applicable Person.
(b) Notwithstanding any Removal of a Person as a Provider made in
accordance with the provisions of Section 5.11(b), the provisions of Article IV
(and the representations and warranties with respect thereto) and Sections 5.06,
5.08, 5.10 and 5.17 shall, with respect to such Person, survive such Removal.
SECTION 5.12 Attorney-in-Fact. Each Provider hereby irrevocably
designates and appoints the Purchaser, the Primary Servicer, the Master
Servicer, the Collateral Agent and the Program Manager, to the extent permitted
by applicable law and regulation, as such Provider's attorneys-in-fact, which
irrevocable power of attorney is coupled with an interest, with authority to (i)
endorse or sign such Provider's name to financing statements, remittances,
invoices, assignments, checks (other than payments from Governmental Entities),
drafts or other instruments or documents in respect of the Batch Receivables,
(ii) notify non-Governmental Entities to make payments on the Batch Receivables
directly to the Purchaser, and (iii) bring suit in such Provider's name and
settle or compromise such Batch Receivables as the Purchaser, the Primary
Servicer, the Collateral Agent or the Master Servicer may, in its discretion,
deem appropriate.
SECTION 5.13 Entire Agreement; Severability. This Agreement, including
all exhibits and schedules hereto, and the documents referred to herein, embody
the entire agreement and understanding of the parties concerning the subject
matter contained herein. This Agreement supersedes any and all prior agreements
and understandings between the parties, whether written or oral.
14
(a) If any provision of this Agreement shall be declared invalid or
unenforceable, the parties hereto agree that the remaining provisions of this
Agreement shall continue in full force and effect.
SECTION 5.14 GOVERNING LAW. THIS AGREEMENT SHALL, IN ACCORDANCE WITH
SECTION 5-1401 OF THE GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK, BE
GOVERNED BY THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO ANY CONFLICTS
OF LAWS PRINCIPLES THEREOF THAT WOULD CALL FOR THE APPLICATION OF THE LAWS OF
ANY OTHER JURISDICTION.
SECTION 5.15 WAIVER OF JURY TRIAL, JURISDICTION AND VENUE. EACH OF THE
PARTIES HERETO HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY IN THE EVENT OF ANY
LITIGATION WITH RESPECT TO ANY MATTER RELATED TO THIS AGREEMENT, AND HEREBY
IRREVOCABLY CONSENTS TO THE JURISDICTION OF THE STATE AND FEDERAL COURTS LOCATED
IN NEW YORK COUNTY, NEW YORK CITY, NEW YORK IN CONNECTION WITH ANY ACTION OR
PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT. IN ANY SUCH LITIGATION,
EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR
OTHER PROCESS AND AGREES THAT SERVICE THEREOF MAY BE MADE BY CERTIFIED OR
REGISTERED MAIL DIRECTED TO SUCH PARTY AT ITS ADDRESS SET FORTH ON THE SIGNATURE
PAGE HEREOF. EACH OF THE PARTIES HERETO SHALL APPEAR IN ANSWER TO SUCH SUMMONS,
COMPLAINT OR OTHER PROCESS WITHIN THE TIME PRESCRIBED BY LAW, FAILING WHICH SUCH
PARTY FAILING TO SO APPEAR SHALL BE DEEMED IN DEFAULT AND JUDGMENT MAY BE
ENTERED BY THE OTHER PARTY FOR THE AMOUNT OF THE CLAIM AND OTHER RELIEF
REQUESTED THEREIN.
SECTION 5.16 Execution in Counterparts. This Agreement may be executed
in counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the same
agreement.
SECTION 5.17 No Proceedings. Each Provider hereby agrees that it will
not institute against the Purchaser or any Lender any proceeding of the type
referred to in paragraph (g) of Exhibit V so long as any senior indebtedness
issued by the Purchaser or such Lender shall be outstanding or there shall not
have elapsed one year plus one day since the last day on which any such senior
indebtedness shall have been outstanding.
SECTION 5.18 Survival of Termination. The provisions of Article IV (and
the representations and warranties with respect thereto) (other than Section
4.04) and Sections 5.05, 5.06, 5.10 and 5.17 shall survive any termination of
this Agreement.
SECTION 5.19 Joint and Several Liability; Providers. Each Provider
agrees that each reference to "the Providers" in this Agreement shall be deemed
to refer to each such
15
Provider jointly and severally with the other Providers. Each Provider (i) shall
be jointly and severally liable for the obligations, duties and covenants of
each other such Provider under this Agreement and the acts and omissions of each
other such Provider including, without limitation, under Article IV hereof, and
(ii) jointly and severally makes each representation and warranty for itself and
each other such Provider under this Agreement; provided, however, that the
breach of an obligation, duty, covenant, representation or warranty by one
Provider shall not result in an Event of Termination with respect to any other
Provider unless such breach constitutes a Group-Wide Event of Termination.
SECTION 5.20 Accounting Information. Each Provider authorizes the
Purchaser and the Lender Group to discuss the financial position of such
Provider with its independent public accountant with respect to their audit of
the financial statements of such Provider and agrees that none of the Purchaser,
the Lender Group or the independent public accountants, shall have any liability
to any Provider with respect to any such discussion or communication except for
violations by a member of the Lender Group of federal and state securities laws
solely with respect to such discussions or communications. The Purchaser and the
Lender Group expressly agree to maintain the disclosed information in
confidence. Each Provider shall deliver a letter addressed to such accountants
authorizing them to comply with the provisions of this subsection, which letter
shall be acknowledged to in writing by such accountants. The Purchaser and the
Lender Group may rely on the financial statements provided to such Purchaser and
Lender Group by each Provider.
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16
IN WITNESS WHEREOF, the parties have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
PROVIDERS: 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-KS, LLC
FIVE STAR QUALITY CARE-MI, 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-CA, INC.
FIVE STAR QUALITY CARE-IA, INC.
FIVE STAR QUALITY CARE-MI, INC.
FIVE STAR QUALITY CARE-NE, INC.
By: /s/ Bruce J. Mackey, Jr.
Bruce J. Mackey, Jr.
Chief Financial Officer, Treasurer
and Assistant Secretary
Address: 400 Center Street
Newton, MA 02458
Facsimile Number: 617-796-8385
PURCHASER: FSQC FUNDING CO., LLC
By: /s/ Bruce J. Mackey, Jr.
Bruce J. Mackey, Jr.
Chief Financial Officer, Treasurer
and Assistant Secretary
Address: 400 Center Street
Newton, MA 02458
Facsimile Number: 617-796-8385
PRIMARY SERVICER: FIVE STAR QUALITY CARE, INC.
By: /s/ Bruce J. Mackey, Jr.
Bruce J. Mackey, Jr.
Chief Financial Officer, Treasurer
and Assistant Secretary
Address: 400 Center Street
Newton, MA 02458
Facsimile Number: 617-796-8385
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits and Schedules), the
following terms shall have the following meanings (such meanings to be equally
applicable to both the singular and plural forms of the terms defined):
"Accounts" means all health-care-insurance receivables, accounts,
chattel paper, instruments, general intangibles and goodwill, whether now
existing or hereafter arising, including, all Receivables and all payments due
from any Governmental Entity based on a cost report settlement or expected
settlement, and all proceeds of any of the foregoing.
"Addition" has the meaning set forth in Section 5.11(a) hereto.
"Additional Collateral" means all assets of each Provider.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person or is a director or officer of such Person. For the purposes of this
definition, "control", when used with respect to any specified Person, means the
power to direct the management and policies of such Person, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
"Agreement" has the meaning set forth in the preliminary statements
hereto.
"Availability" means, the difference between (a) the Borrowing Limit
(as defined in the LSA) and (b) Lender Debt (as defined in the LSA).
"Batch" means, with respect to any Transfer Date, all Receivables,
including the Transferred Batch with respect to such Transfer Date, which are
purchased, or purported to be purchased, by the Purchaser or contributed, or
purported to be contributed, to the capital of the Purchaser.
"Batch Receivable" means a Receivable that is included in a Transferred
Batch, but excludes a Denied Receivable for which the Return Price has been
received by the Purchaser.
"Business Day" means any day on which banks are not authorized or
required to close in New York City, New York.
"Capital Lease" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee, the
obligations of which are required, in accordance with GAAP, to be capitalized on
the balance sheet of that Person.
"CHAMPUS" means 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 ss.ss. 1071-1106, and all regulations promulgated thereunder
including without limitation (a) all federal statutes (whether set forth in 10
USC ss.ss. 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) 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 of Control" means (a) 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 50% or more of the total voting
power of the then outstanding common equity of Five Star except as a result of a
transaction approved by Five Star's Board of Directors involving the issuance of
new Five Star common shares, or 15% or more of the total voting power of the
then outstanding equity of any Provider; or (b) individuals (or a substitute
elected by the holders of the equity of Five Star or any Provider, as the case
may be, and which are reasonably satisfactory to the Purchaser and the Program
Manager) who on the Initial Transfer Date constituted the Board of Directors (or
the equivalent) of Five Star or any Provider cease for any reason to constitute
a majority of the Board of Directors of such Person then in office; or (c) any
two of Barry M. Portnoy, Gerard M. Martin, Evrett W. Benton or Bruce J. Mackey
(or a substitute elected by the directors or trustees of REIT Management &
Research LLC or Five Star, as the case may be, and which is reasonably
satisfactory to the Purchaser and the Program Manager) shall cease to serve as
an officer, director or trustee of REIT Management & Research LLC or Five Star
in a position, in the case of an officer, of equal or greater seniority to the
respective offices each holds with REIT Management & Research LLC or Five Star,
as the case may be, as of the Closing Date (any event that would be a Change of
Control under this clause (c) shall be deemed to relate to Five Star,
individually); or (d) the sale, lease, conveyance, transfer, assignment or other
disposition in one or more transactions of all or substantially all of the
assets of Five Star or any Provider (whether now or hereafter acquired) to any
Person or group (as such term is defined in Section 13(d)(3) of the Exchange
Act); or (e) the liquidation or dissolution of (or the adoption of a plan of
liquidation by) Five Star or any Group-Wide Providers.
"Closing Date" means October 24, 2002.
"CMS" means the Centers for Medicare and Medicaid Services of the
United States Department of Health and Human Services.
"Collateral" has the meaning set forth in Section 4.04(a) hereto.
"Collateral Agent" means HFG Healthco-4 LLC and its successors and
assigns.
"Collections" means, with respect to any Receivable included in a
Batch, all cash collections, wire transfers, electronic funds transfers and
other cash proceeds of such Receivable, deposited in or transferred to the
Primary Purchaser Account, including, without limitation, all cash proceeds
thereof.
"Consolidated Net Worth" means with respect to any Person and its
Subsidiaries determined on a consolidated basis, at any date of determination,
total stockholders', owners' or members' equity in accordance with GAAP.
"Control Agreement" means each Control Agreement, dated as of the date
hereof, among the Primary Servicer, the Provider named therein, the Purchaser,
the Program Manager, the Collateral Agent and the Local Bank named therein, in
substantially the form attached hereto as Exhibit XVI, as such agreement may be
amended, modified or supplemented from time to time.
"Credit and Collection Policy" means those receivables credit and
collection policies and practices of the Providers in effect on the date of the
Agreement and set forth in Schedule III hereto, as modified from time to time in
accordance with the consent of the Purchaser and the Program Manager.
"Current Assets" means, at any date of determination, the aggregate
amount of all assets of Five Star and its Subsidiaries on a consolidated basis
that are classified as current assets at such date computed and calculated in
accordance with GAAP and excluding the Marriott Assets.
"Current Liabilities" means, at any date of determination, the
aggregate amount of all liabilities of Five Star and its Subsidiaries on a
consolidated basis that would be classified as current liabilities at such date
computed and calculated in accordance with GAAP and excluding the Marriott
Current Liabilities and current portions of long term debt due.
"Current Ratio" means, at any date of determination, the ratio of (i)
the remainder of (x) Current Assets plus Availability to (ii) Current
Liabilities.
"Debt" means as to any Person (without duplication): (i) all
obligations of such party for borrowed money, (ii) all obligations of such party
evidenced by bonds, notes, debentures, or other similar instruments, (iii) all
obligations of such party to pay the deferred purchase price of property or
services (other than trade payables in the ordinary course of business), (iv)
all Capital Leases of such party, (v) all Debt of others directly or indirectly
Guaranteed (which term shall not include endorsements in the ordinary course of
business) by such party, (vi) all obligations secured by a Lien existing on
property owned by such party, whether or not the obligations secured thereby
have been assumed by such party or are non-recourse to the credit of such party
(but only to the extent of the value of such property), and (vii) all
reimbursement obligations of such party (whether contingent or otherwise) in
respect of letters of credit, bankers' acceptance and similar instruments.
"Defaulted Receivable" means a Batch Receivable (i) as to which the
Obligor therefor or any other Person obligated thereon has taken any action, or
suffered any event to occur, of the type described in paragraph (g) of Exhibit V
or (ii) which, consistent with the Credit and
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Collection Policy, would be written off the applicable Provider's books as
uncollectible; provided, however, that a Batch Receivable as to which the
Obligor therefor has suffered a temporary governmental shutdown or delay shall
not be a "Defaulted Receivable".
"Delinquent Receivable" means a Batch Receivable (a) that has not been
paid in full on or following the 180th day following the date of original
invoicing thereof, or (b) that is a Denied Receivable.
"Denied Receivable" has the meaning set forth in Section 4.01(a)
hereto.
"Depositary Agreement" means that certain Depositary Account Agreement,
dated as of the date hereof, among the Primary Servicer, the Providers, the
Purchaser, the Program Manager, the Collateral Agent and the Lockbox Bank, in
substantially the form attached hereto as Exhibit XII, as such agreement may be
amended, modified or supplemented from time to time in accordance with its
terms.
"Eligibility Criteria" has the meaning specified in the Loan Agreement.
"Eligible Receivables" means Receivables that satisfy the Eligibility
Criteria, as determined by the Program Manager.
"Employee Benefit Plan" means any employee benefit plan within the
meaning of ss. 3(3) of ERISA maintained by the Provider or any ERISA Affiliate,
or with respect to which any of them have any liability.
"EOB" means the explanation of benefit from an Obligor that identifies
the services rendered on account of the Batch Receivable specified therein.
"Equity Net Proceeds" means, with respect to the issuance, sale or
other disposition of any stock or other equity interests or any security which
under GAAP is recorded as equity, the excess of (i) the aggregate amount
received in cash (excluding any cash received by way of deferred payment
pursuant to a note receivable, other non-cash consideration or otherwise, prior
to the time when such cash is so received) in connection with such issuance,
sale or other disposition, over (ii) the sum of (A) the reasonable fees,
commissions, discounts and other out-of-pocket expenses including, without
limitation, related legal, investment banking and accounting fees and
disbursements incurred in connection with such issuance, sale or other
disposition, and (B) all income and transfer taxes payable in connection with
such issuance, sale or other disposition, whether payable at such time or
thereafter.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" means any entity which is under common control with
any Provider within the meaning of ERISA or which is treated as a single
employer with any Provider under the Internal Revenue Code of 1986, as amended.
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"Event of Termination" means any of the events specified in Exhibit V
hereto.
"Expected Net Value" means, with respect to any Batch Receivable, the
gross unpaid amount of such Receivable on the Transfer Date therefor, times the
applicable Net Value Factor.
"Facility Termination Date" means the earlier of (a) October 24, 2005
(subject to automatic extensions of such date to coincide with extensions under
Section 5.07 of the Loan Agreement) and (b) the date of occurrence of a
Group-Wide Event of Termination.
"Final Payment Date" means the first Settlement Date following the
Settlement Period in which final collection has been received for all Batch
Receivables or such Batch Receivables have become Denied Receivables or
Defaulted Receivables.
"Five Star" has the meaning set forth in the preamble hereto.
"GAAP" means generally accepted accounting principles in the United
States of America, applied on a consistent basis, as set forth in Opinions of
the Accounting Principles Board of the American Institute of Certified Public
Accountants or in statements of the Financial Accounting Standards Board or the
rules and regulations of the Securities and Exchange Commission or their
respective successors and which are applicable in the circumstances as of the
date in question.
"Governmental Entity" means the United States of America, any state,
any political subdivision of a state and any agency or instrumentality of the
United States of America or any state or political subdivision thereof and any
entity exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government. Payments from Governmental Entities
shall be deemed to include payments governed under the Social Security Act (42
U.S.C. ss.ss. 1395 et seq.), including payments under Medicare, Medicaid, and
CHAMPUS/Champva, and payments administered or regulated by CMS.
"Government Depositary Agreement" means each Depositary Account
Agreement, dated as of the date hereof, among the Primary Servicer, the Provider
named therein, the Purchaser, the Program Manager, the Collateral Agent and the
bank named therein, in substantially the form attached hereto as Exhibit XVII,
as such agreement may be amended, modified or supplemented from time to time in
accordance with its terms.
"Government Lockbox(es)" means each of the lockboxes identified on
Schedule V hereto as a Government Lockbox, established to receive checks and
EOB's with respect to Receivables payable by Governmental Entities to the
Providers listed on Schedule VIII hereto.
"Government Lockbox Account(s)" means each of the accounts identified
on Schedule V hereto as a Government Lockbox Account in the name of a Provider
listed on Schedule VIII hereto and associated with the Government Lockbox
established and controlled by such Provider to deposit all cash collections,
wire transfers, electronic funds transfers and other cash proceeds of
Receivables from the applicable Governmental Entity listed on Schedule VIII,
including
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collections received in the associated Government Lockbox and collections
received by wire transfer directly from applicable the Governmental Entity, all
as more fully set forth in the Government Depositary Agreement.
"Group-Wide Event of Termination" means (i) an Event of Termination
which relates to the Group-Wide Providers or Five Star, individually, (ii) a
Servicer Termination Event or (iii) an Event of Termination arising under any of
clause (i), clause (t) or clauses (w) through (aa) of Exhibit V hereto.
"Group-Wide Providers" means, as of any date of determination, the
Providers responsible for the sale or contribution to the Purchaser of more than
25% of the Batch Receivables (whether or not purchased) in the 90 days prior to
such date (or, if less than 90 days, the number of days as shall have elapsed
from the Closing Date to such date of determination).
"Guaranty" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other obligation
of any other Person and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Debt or other obligation (whether arising by virtue of partnership arrangements,
by agreement to keep-well, to purchase assets, goods, securities or services, to
take-or-pay), or (ii) entered into for the purpose of assuring in any other
manner the obligee of such Debt or other obligation of the payment thereof or to
protect the obligee of such Debt or other obligation of the payment thereof or
to protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guaranty shall not include endorsements for collection or
deposit in the ordinary course of business. The term "Guaranty" used as a verb
has a corresponding meaning.
"Indemnified Amounts" has the meaning set forth in Section 4.02 hereto.
"Indemnified Party" has the meaning set forth in Section 4.02 hereto.
"Initial Transfer Date" means the date of the initial purchase and
contribution of Receivables hereunder.
"Insurer" means any Person (other than a Governmental Entity) 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. "Insurer" includes insurance companies
issuing health, personal injury, workers' compensation or other types of
insurance but does not include any individual guarantors.
"Interest Expense" means, with respect to any Person for any period,
the interest expense of such Person during such period as determined in
accordance with GAAP.
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"Last Service Date" means, with respect to any Receivable, the date set
forth on the related invoice or statement as the most recent date on which
services or merchandise were provided by the related Provider to the related
patient.
"Lender" means the Persons party to the Loan Agreement from time to
time as lenders.
"Lender Group" means each Lender, the Program Manager, the Master
Servicer, the Collateral Agent and their agents, delegates, designees and
assigns identified from time to time.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
hypothecation, assignment, preference, priority, other charge or encumbrance, or
any other type of preferential arrangement of any kind or nature whatsoever by
or with any Person (including, without limitation, any conditional sale or title
retention agreement), whether arising by contract, operation of law, or
otherwise.
"Loan Agreement" means the Loan and Security Agreement dated as of the
date hereof among the Purchaser as borrower, the Lenders, the Program Manager
and the Collateral Agent, as such agreement may be modified, supplemented or
amended from time to time in accordance with its terms.
"Local Bank" means each bank at which a Local Purchaser Account is
located.
"Local Purchaser Account" means each of the accounts identified on
Schedule V hereto as a Local Purchaser Account established by the Purchaser to
deposit all cash collections, wire transfers, electronic funds transfers and
other cash proceeds of Receivables from non-Governmental Entities, including
collections received in the form of a check and collections received by wire
transfer directly from non-Governmental Entities.
"Lockbox Bank" means Citizens Bank as lockbox bank under the Depositary
Agreement.
"Marriott Current Assets" means, at any date of determination, all
current assets computed and calculated in accordance with GAAP that relate to
the facilities managed by Marriott on behalf of Five Star (and excluding amounts
due from Marriott that relate to payment of prior Months' owner's profit).
"Marriott Current Liabilities" means, at any date of determination, all
current liabilities computed and calculated in accordance with GAAP that relate
to the facilities managed by Marriott on behalf of Five Star.
"Master Servicer" means Healthcare Finance Group, Inc., and any other
Person then identified by the Program Manager to the Providers, or the Primary
Servicer on behalf of the Providers, as being authorized to administer and
service Receivables.
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"Material Adverse Effect" means any event, condition, change or effect
that (a) has a materially adverse effect on the business, Properties,
capitalization, liabilities, operations, prospects or financial condition of (i)
the Providers, taken as a whole, or (ii) Five Star, (b) materially impairs the
ability of the Primary Servicer or any Provider to perform its obligations under
the Agreement, (c) materially impairs the validity or enforceability of, or
materially impairs the rights, remedies or benefits available to the Purchaser
under the Agreement, or (d) changes, or could reasonably be expected to change,
the characterization and treatment of the sales and contributions of Receivables
under the Agreement as something other than a true sale or complete transfer of
ownership.
"Misdirected Payment" means any form of payment in respect of a Batch
Receivable made by an Obligor in a manner other than as provided in the Notice
sent to such Obligor or other than as provided in Sections 2.01 and 2.02,
including, in the case of a check received by a Provider with respect to a
payment made by an Obligor that is not a Governmental Entity, the failure to
deposit such check in the applicable Local Purchaser Account within one Business
Day of receipt of such check.
"Month" means a calendar month.
"Monthly Report" has the meaning set forth in Section 1.02 hereto.
"Multiemployer Plan" means a plan, within the meaning of ss. 3(37) of
ERISA, as to which the Primary Servicer, any Provider or any ERISA Affiliate
contributed or was required to contribute within the preceding five years.
"Net Value Factor" means, initially, the percentages set forth on
Schedule VII hereto, as such percentages may be adjusted upwards or downwards in
accordance with the Loan Agreement, based on the historical actual final
collections received on the Receivables within 180 days of the Last Service Date
of such Receivables (without regard to the factors set forth in the definition
of "Defaulted Receivable").
"New Patient Consent Form" has the meaning set forth in clause (i) of
Exhibit II hereto.
"Notice" means a Notice to Governmental Entities or Notice to
non-Governmental Entities, as applicable.
"Notice to Governmental Entities" means a notice letter on a Provider's
corporate letterhead in substantially the form attached hereto as Exhibit VII-A.
"Notice to non-Governmental Entities" means a notice letter on a
Provider's corporate letterhead in substantially the form attached hereto as
Exhibit VII-B.
"Obligor" means each Person who is responsible for the payment of all
or any portion of a Receivable.
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"Parent Guaranty" means that certain Guaranty, dated as of the date
hereof, made by Five Star in favor of the Purchaser, in substantially the form
attached hereto as Exhibit XIII.
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Debt" means, with respect to the Providers, any Debt that is
(i) in connection with this Agreement and the transactions contemplated hereby,
(ii) purchase money Debt incurred to finance the acquisition of equipment, or
(iii) obligations secured by a Lien existing on property owned by such party,
that are non-recourse to the credit of such party (but only to the extent of the
value of such property).
"Person" means an individual, partnership, corporation (including a
business trust), limited liability company, joint stock company, trust,
unincorporated association, joint venture or other entity, an Insurer or a
Governmental Entity.
"Pledge Agreements" means the Pledge Agreement, dated as of the date
hereof, between Five Star and the Purchaser, in substantially the form attached
hereto as Exhibit XIV.
"Primary Provider Account" means the account set forth on Schedule V
hereto in the name of the Providers established and controlled by the Providers
to deposit all cash collections, wire transfers, electronic funds transfers and
other cash proceeds of Receivables from Governmental Entities, collections
received in the Government Lockbox Accounts and collections received by wire
transfer directly from Governmental Entities, all as more fully set forth in the
Depositary Agreement and the Government Depositary Agreement.
"Primary Purchaser Account" means the account identified on Schedule V
hereto as the Primary Purchaser Account, established by the Purchaser to deposit
all cash collections, wire transfers, electronic funds transfers and other cash
proceeds of Receivables from non-Governmental Entities, including collections
received in the Local Purchaser Accounts and collections received by wire
transfer directly from non-Governmental Entities, all as more fully set forth in
the Depositary Agreement.
"Primary Servicer" means any person then appointed as Primary Servicer
to perform the Primary Servicer Responsibilities pursuant to Section 1.05(b)
hereto, initially being Five Star.
"Primary Servicer Account" means account #1135638907 of the Primary
Servicer at Citizens Bank, ABA #211070175, Exchange Place, 53 State Street
Building, Boston, MA 02109, or such other bank account designated by the Primary
Servicer by Written Notice to the Master Servicer, the Purchaser and the Program
Manager from time to time, as the account for receipt of proceeds on behalf of
the Provider.
"Primary Servicer Responsibilities" has the meaning set forth in
Section 1.05(b) hereto.
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"Primary Servicing Fee" means, with respect to any Transferred Batch,
an amount equal to 0.1% of Collections with respect to the Receivables in all
Transferred Batches; provided, however, that if the Primary Servicer is at any
time a Person other than Five Star or an Affiliate of Five Star, then "Primary
Servicing Fee" means, with respect to any Transferred Batch, an amount equal to
the greater of (i) 0.1% of Collections with respect to the Receivables in all
Transferred Batches and (ii) the then-current market rate.
"Program Manager" means (i) collectively, Dresdner Kleinwort
Wasserstein LLC and Healthcare Finance Group, Inc., or (ii) any other Person
identified by the then Program Manager in writing to the Primary Servicer as
being authorized to provide administrative services with respect to the
Purchaser and the Purchaser's purchase, funding and collection of healthcare
receivables.
"Property" means property of all kinds, movable, immovable, corporeal,
incorporeal, real, personal or mixed, tangible or intangible (including, without
limitation, all rights relating thereto), whether owned or acquired on or after
the date of this Agreement.
"Provider" or "Providers" has the meaning set forth in the preamble
hereto.
"Provider Documents" means this Agreement, the Depositary Agreement,
the Government Depositary Agreements, the Control Agreements, the Parent
Guaranty, the Pledge Agreement, each agreement now existing or hereafter created
providing collateral security for the payment or performance of any Provider's
obligations described in Section 4.04(a) or any Person's obligations under a
Guaranty of such obligations of the Providers, and each other document or
instrument now or hereafter executed and delivered to the Purchaser by or on
behalf of the Providers pursuant to or in connection herewith or therewith.
"Provider Account(s)" means, collectively, the Primary Provider Account
and the Government Lockbox Accounts set forth on Schedule V hereto in the name
of the Providers and associated, in the case of the Government Lockbox Accounts,
with the Government Lockboxes established and controlled by the Providers to
deposit all cash collections, wire transfers, electronic funds transfers and
other cash proceeds of Receivables from Governmental Entities, including
collections received in the Government Lockboxes and collections received by
wire transfer directly from Governmental Entities, all as more fully set forth
in the Depositary Agreement and the Government Depositary Agreements.
"Purchase Price" means, with respect to Eligible Receivables in each
Purchased Batch, an amount equal to 95% of the aggregate Expected Net Value of
such Receivables.
"Purchased Batch" means all Eligible Receivables purchased on any
Transfer Date.
"Purchaser" has the meaning set forth in the preamble hereto.
"Purchaser Account(s)" means, collectively, the Primary
Purchaser Account and the Local Purchaser Accounts set forth on Schedule V
hereto established by the Purchaser to deposit all
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cash collections, wire transfers, electronic funds transfers and other cash
proceeds of Receivables from non-Governmental Entities, including collections
received in the form of a check and collections received by wire transfer
directly from non-Governmental Entities.
"Receivable Information" has the meaning set forth in Section 1.02
hereto.
"Receivables" means all third-party reimbursable portions or
third-party directly payable portions of health-care-insurance receivables, all
accounts and general intangibles, and all other obligations for the payment of
money, in each case, owing (or in the case of Unbilled Receivables, to be owing)
to any Provider and arising out of the rendition of medical, surgical,
diagnostic or other professional medical services or the sale of medical
products by such Provider in the ordinary course of its business, including all
rights to reimbursement under any agreements with and payments from Obligors,
customers, residents, patients or other Persons, together with, to the maximum
extent permitted by law, all accounts and general intangibles related thereto,
all rights, remedies, guaranties, security interests and Liens in respect of the
foregoing, all books, records and other Property evidencing or related to the
foregoing, and all proceeds of any of the foregoing.
"Removal" has the meaning set forth in Section 5.11 hereto.
"Required Lenders" has the meaning specified in the Loan Agreement.
"Return Price" means, with respect to a Denied Receivable, an amount
equal to (x) either the Purchase Price or the increase in the capital account of
the applicable Provider with respect to the prior contribution thereof, in each
case, of such Denied Receivable, minus (y) any cash received from the Obligor in
the Primary Purchaser Account with respect to such Denied Receivable, plus (z)
accrued and unpaid interest on such amount calculated at the interest rate then
in effect under the Loan Agreement on the average outstanding difference between
clauses (x) and (y) from and including the Business Day following the Transfer
Date of such Denied Receivable to the date the Return Price is received by the
Purchaser.
"Servicer Termination Event" means any of the events specified in
Exhibit IX hereto.
"Settlement Date" means two Business Days following the date of
delivery of the Monthly Report; provided, that, if, following the occurrence of
a Group-Wide Event of Termination, the Purchaser shall have selected a period
shorter than one month as the Settlement Period, the Settlement Date shall mean
the fifth Business Day following the end of each such Settlement Period.
"Settlement Period" means each Month; provided, that notwithstanding
the foregoing, the first Settlement Period shall be the period from and
including the Initial Transfer Date through October 24, 2002; and provided,
further, that following the occurrence of a Group-Wide Event of Termination, the
Purchaser may from time to time, by notice to the Primary Servicer on behalf of
the Providers, select a shorter period as the Settlement Period.
"Subscription Agreement" has the meaning set forth in Section 5.11
hereof.
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"Subsidiary" means, with respect to any Person, any corporation or
entity of which at least a majority of the outstanding shares of stock or other
ownership interests having by the terms thereof ordinary voting power to elect a
majority of the board of directors (or Persons performing similar functions) of
such corporation or entity (irrespective of whether or not at the time, in the
case of a corporation, stock of any other class or classes of such corporation
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by such
Person.
"Total Collections" means, as to each Batch, the sum of all
Collections, Return Prices and Indemnified Amounts (but only to the extent that
such Indemnified Amounts are received in lieu of Collections) distributed to and
received by the Purchaser with respect thereto.
"Transfer Date" means the Initial Transfer Date and each Business Day
thereafter.
"Transferred Batch" means, with respect to any Transfer Date, all
Receivables purported by the Primary Servicer and applicable Provider to
constitute Eligible Receivables and which are purchased by the Purchaser or
contributed to capital of the Purchaser as of such Transfer Date.
"Transmission" means, upon establishment of computer interface between
the Providers and the Master Servicer in accordance with the specifications
established by the Master Servicer, the transmission of Receivable Information
through computer interface or e-mail communication to the Master Servicer in a
manner satisfactory to the Master Servicer.
"UCC" means the Uniform Commercial Code as in effect from time to time
in the specified jurisdiction.
"Unbilled Receivable" means a Receivable 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 Obligor.
"Written Notice" and "in writing" mean any form of written
communication or a communication by means of telex, facsimile device, telegraph
or cable.
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with GAAP. All terms used in Article 9 of the UCC in
the State of New York, and not specifically defined herein, are used herein as
defined in such Article 9.
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EXHIBIT II
CONDITIONS OF PURCHASES AND CONTRIBUTIONS
1. Conditions Precedent on the Initial Transfer Date. The purchase or
contribution of the Transferred Batch under the Agreement on the Initial
Transfer Date is subject to the conditions precedent that the Purchaser shall
have received on or before the Initial Transfer Date the following, each (unless
otherwise indicated) dated such date, in form and substance reasonably
satisfactory to the Purchaser:
(a) For each Provider and the Primary Servicer, a certificate issued by
the Secretary of State of the state of such entity's (i) organization as to the
legal existence and good standing of such entity and (ii) locale of operation,
if different from its state of organization, as to the foreign qualification,
authorization and good standing of such entity in such locale (all of which
certificates shall be dated not more than 20 days prior to the Initial Transfer
Date).
(b) For each Provider and the Primary Servicer, certified copies of the
charter and by-laws of such entity, certified copies of resolutions of the Board
of Directors of such entity approving the Agreement, certified copies of all
documents filed to register any and all assumed/trade names of such entity, and
certified copies of all documents evidencing other necessary corporate action
and governmental approvals, if any, with respect to the Agreement.
(c) For each Provider and the Primary Servicer, a certificate of the
Secretary or Assistant Secretary of such entity certifying the names and true
signatures of the incumbent officers of such entity authorized to sign the
Agreement and the other documents to be delivered by it hereunder.
(d) (i) Certified copies of the consolidated balance sheets of Five
Star and its Subsidiaries as at December 31, 2001, and for the prior fiscal year
and the related consolidated statements of income and expense, cash flow and
retained earnings of Five Star and its Subsidiaries for the fiscal years then
ended, each certified in a manner acceptable to the Purchaser by independent
public accountants acceptable to the Purchaser and demonstrating that no
Material Adverse Effect has occurred; (ii) certified copies of the consolidating
balance sheets of Five Star and its Subsidiaries as at December 31, 2001, and
for the prior fiscal year and the related consolidating statements of income and
expense of Five Star and its Subsidiaries for the fiscal years then ended; and
(iii) unaudited consolidated and consolidating balance sheets of Five Star and
its Subsidiaries for the fiscal quarters ended March 31, 2002 and June 30, 2002
and the related consolidated and consolidating statements of income and expense
and the related consolidated statements of cash flow of Five Star and its
Subsidiaries for the periods then ended.
(e) Acknowledgment or time stamped receipt copies of proper financing
statements (showing each Provider as debtor/seller, the Purchaser as secured
party/purchaser and the Collateral Agent as assignee, and stating that the
financing statements are being filed because UCC Section 9-109 does not
distinguish between a sale and a secured loan for filing purposes) duly filed
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on or before the Initial Transfer Date under the UCC of all jurisdictions that
the Purchaser may deem necessary or desirable in order to perfect the ownership
interests contemplated by the Agreement.
(f) Acknowledgment or time-stamped receipt copies of proper financing
statements (showing each Provider as debtor and the Purchaser as secured party
and the Collateral Agent as assignee with respect to the grant by such Provider
of a first priority security interest to the Purchaser in the Collateral, as
contemplated by Section 4.04 of the Agreement) duly filed on or before the
Initial Transfer Date under the UCC of all jurisdictions that the Purchaser may
deem necessary or desirable in order to perfect such security interest.
(g) Completed requests for information (UCC search results) dated
within 20 days of the Initial Transfer Date, and a schedule thereof listing all
effective financing statements filed in the jurisdictions referred to in
subsections (e) and (f) above that name each Provider as debtor, together with
copies of all other financing statements filed against each Provider (none of
which shall cover any Collateral or the Receivables).
(h) Releases of, and acknowledgment copies of proper termination
statements (Form UCC-3), if any, necessary to evidence the release of all
security interests, ownership and other rights of any Person previously granted
by the Provider in the Receivables or any of the other Collateral and proceeds
thereof.
(i) A memorandum of Schnader Harrison Segal & Lewis LLP, counsel for
the Providers, substantially in the form attached hereto as Exhibit XI-A,
regarding compliance with patient confidentiality laws, and including a new form
of patient consent form to be used by the Providers in each locale (the "New
Patient Consent Form"), and as to such other matters as the Lender Group
requests.
(j) A favorable opinion of Schnader Harrison Segal & Lewis LLP, counsel
for the Primary Servicer and the Providers, substantially in the form attached
hereto as Exhibit XI-B, and as to such other matters as the Lender Group
requests.
(k) A favorable opinion of Schnader Harrison Segal & Lewis LLP, counsel
for the Primary Servicer and the Providers, substantially in the form attached
hereto as Exhibit XI-C, and as to such other matters as the Lender Group
requests.
(l) Proof of payment of all fees and other amounts due and payable, on
or prior to the Initial Transfer Date under this Agreement, the Loan Agreement
or otherwise, including the reimbursement or payment of all out-of-pocket
expenses required to be reimbursed or paid and all reasonable attorneys' fees
and disbursements incurred by the Purchaser and the Lender Group.
(m) A duly executed Depositary Agreement, together with evidence
satisfactory to the Purchaser that the Primary Purchaser Account and the Primary
Provider Account and the Government Lockbox and the Government Lockbox Account
with respect to the applicable Providers listed on Schedule VIII hereto have
been established.
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(n) Duly executed Government Depositary Agreements, together with
evidence satisfactory to the Purchaser that the Government Lockboxes and the
Government Lockbox Accounts with respect to the applicable Providers listed on
Schedule VIII hereto have been established.
(o) Duly executed Control Agreements, together with evidence
satisfactory to the Purchaser that the Local Purchaser Accounts have been
established.
(p) Copies of all Notices required pursuant to Article II of the
Agreement, together with evidence satisfactory to the Purchaser that such
Notices have been or will be delivered to the addressees thereof.
(q) A copy of each new form of invoice from each Provider showing the
applicable Government Lockbox as the remittance address.
(r) A copy of all of each Provider's existing forms of patient consents
which were signed by each patient for which the currently existing Receivables
were created, as well as a copy of each New Patient Consent Form to be signed by
each patient for which a Receivable will be created on or after the Initial
Transfer Date, which consents authorize certain demographic and medical
information with respect to such patient to be disclosed by such Provider to its
servicing agents and by such servicing agents to any third party obligors
thereon, certified by an officer of such Provider, as being true, complete,
correct and the only consent forms presently in effect.
(s) A certificate from the Master Servicer stating that all computer
linkups and interfaces necessary or desirable, in the judgment of the Master
Servicer, to effectuate the transactions and information transfers contemplated
hereunder, are fully operational to the reasonable satisfaction of the Master
Servicer.
(t) A duly executed Parent Guaranty.
(u) A duly executed Pledge Agreement, the certificates evidencing the
equity interests pledged thereunder, together with undated equity interest
powers executed in blank.
2. Conditions Precedent on All Transfer Dates. Each purchase and
contribution of a Transferred Batch on a Transfer Date (including the Initial
Transfer Date) shall be subject to the further conditions precedent that the
Primary Servicer, the Providers and the Purchaser shall have agreed upon the
terms of such purchase and also that:
(a) The Providers shall have delivered to the Purchaser or the Master
Servicer, as the case may be, at least one Business Day prior to such Transfer
Date, in form and substance satisfactory to the Purchaser or the Master Servicer
(as the case may be), to the extent not previously provided, executed Notices to
each Obligor responsible for the payment of any of the Batch Receivables to be
transferred on such Transfer Date, directing such Obligors to make payment to
the addresses and accounts designated in such Notices, as set forth in Article
II hereof, together with evidence that such Notices have been delivered to such
Obligors.
II-3
(b) On each such Transfer Date the following statements shall be true
(and acceptance of the proceeds of such purchase by the Primary Servicer on
behalf of the Providers shall be deemed a representation and warranty by each
Provider that such statements are then true):
(i) the representations and warranties contained in Exhibit
III are true and correct in all material respects on and as of the date
of such purchase as though made on and as of such date except any
representation or warranty that expressly indicates that it is being
made as of a specific date, in which case such representation or
warranty shall be true and correct on and as of such date, and
(ii) no event has occurred and is continuing, or would result
from such purchase, that constitutes an Event of Termination or a
Group-Wide Event of Termination or that would constitute an Event of
Termination or a Group-Wide Event of Termination but for the
requirement that notice be given or time elapse or both.
(c) The Purchaser shall have received a duly executed Subscription
Agreement for each Provider that became a Provider after the Initial Transfer
Date.
(d) The Purchaser shall have received such other approvals, opinions or
documents as it may reasonably request.
II-4
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
Each Provider and the Primary Servicer represents and warrants as
follows:
(a) It is duly incorporated or organized, validly existing and in good
standing under the laws of the state of its formation as set forth in the
preamble hereto or on Schedule I hereto, and is duly qualified to do business,
and is in good standing, in every jurisdiction where the nature of its business
requires it to be so qualified, except in any jurisdiction where the failure to
be so qualified would not result in a Material Adverse Effect.
(b) The execution, delivery and performance by it of the Agreement and
the other documents to be delivered by it thereunder, (i) are within its powers,
(ii) have been duly authorized by all necessary action, (iii) do not contravene
(1) its charter, by-laws or operating agreement, (2) any law, rule or regulation
applicable to it, (3) any contractual restriction binding on or affecting it or
its Property, or (4) any order, writ, judgment, award, injunction or decree
binding on or affecting it or its Property, and (iv) do not result in or require
the creation of any Lien upon or with respect to any of its Properties, other
than the interests created by the Agreement. The Agreement has been duly
executed and delivered by it. It has furnished to the Purchaser a true, correct
and complete copy of its certificate of incorporation, organization or formation
and by-laws or operating agreement, as applicable, including all amendments
thereto.
(c) No authorization or approval or other action by, and no notice to
or filing with, any Governmental Entity other than as required by this Agreement
is required for the due execution, delivery and performance by it of the
Agreement or any other document to be delivered thereunder.
(d) The Agreement constitutes the legal, valid and binding obligation
of it, enforceable against it in accordance with its terms, except as limited by
bankruptcy, insolvency, moratorium, fraudulent conveyance or other laws relating
to the enforcement of creditors' rights generally and general principles of
equity (regardless of whether enforcement is sought at equity or law).
(e) It has all power and authority, and has all permits, licenses,
accreditations, certifications, authorizations, approvals, consents and
agreements of all Insurers, Governmental Entities, accreditation agencies and
any other Person (including without limitation, 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 Receivables) that it now owns, and (ii) to
carry on its business as now conducted, except, in each case, where the failure
to do so could not reasonably be expected to result in a Material Adverse
Effect.
III-1
(f) It has not been notified by any Insurer, Governmental Entity or
instrumentality, accreditation agency or any other Person, during the
immediately preceding 24 Month period, that such party has rescinded or not
renewed, or is reasonably likely to rescind or not renew, any permit, license,
accreditation, certification, authorization, approval, consent or agreement
granted to it or to which it is a party except as disclosed in Schedule IV
hereto.
(g) As of the Initial Transfer Date, all conditions precedent set forth
in Exhibit II have been fulfilled or waived in writing by the Purchaser, and as
of each Transfer Date, the conditions precedent set forth in paragraph 2 of such
Exhibit II have been fulfilled or waived in writing by the Purchaser.
(h) The consolidated balance sheet of Five Star and its Subsidiaries as
at June 30, 2002, and the related consolidated statements of income and expense,
and cash flows of Five Star and its Subsidiaries for the fiscal periods then
ended, copies of which have been furnished to the Purchaser, fairly present the
consolidated financial position of Five Star and its Subsidiaries as at such
date and the results of the operations of Five Star and its Subsidiaries for the
period ended on such date, all in accordance with GAAP, and since June 30, 2002
there has been no Material Adverse Effect.
(i) There is no pending or, to its knowledge, threatened action or
proceeding or injunction, writ or restraining order affecting it or any of its
Subsidiaries before any court, Governmental Entity or arbitrator which could
reasonably be expected to result in a Material Adverse Effect, and it or any
Subsidiary thereof is not currently the subject of, and has no present intention
of commencing, an insolvency proceeding or petition in bankruptcy.
(j) It is the legal and beneficial owner of each Batch Receivable free
and clear of any Lien (other than any Lien on Accounts that is expressly
subordinated in writing to the Lien created hereunder in a manner acceptable to
the Purchaser, in its sole discretion); upon each purchase or contribution of a
Transferred Batch, the Purchaser shall acquire valid ownership of each Batch
Receivable therein and in the collections with respect thereto prior to all
other Liens thereon. No effective financing statement or other instrument
similar in effect covering any Collateral or any Batch Receivable is on file in
any recording office, except those filed in favor of the Purchaser, the
Collateral Agent or any permitted assignee of the Collateral Agent or a Lender
relating to the Agreement, and no competing notice or notice inconsistent with
the transactions contemplated in the Agreement remains in effect with respect to
any Obligor.
(k) All Receivable Information, information provided in the application
for the program effectuated by the Agreement, and each other document, report
and Transmission provided by the Primary Servicer or any Provider to the Lender
Group is or shall be accurate in all material respects as of its date and as of
the date so furnished, and no such document contains or will contain any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements contained therein, in the light of the
circumstances under which they were made, not misleading.
III-2
(l) The principal place of business and chief executive office of each
Provider and the office where such Provider keeps its records concerning the
Collateral and the Batch Receivables are located at the respective address
referred to on the signature pages of the Agreement and there have been no other
such locations for the four immediately prior Months.
(m) Each transfer of a Transferred Batch will constitute a purchase or
other acquisition of notes, drafts, acceptances, open accounts receivable or
other obligations representing part or all of the sales price of merchandise,
insurance or services within the meaning of Section 3(c)(5) of the Investment
Company Act of 1940, as amended.
(n) The provisions of the Agreement create legal and valid security
interests in all of the Collateral owned or held by the Providers in the
Purchaser's favor, 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 owned or held by the Providers
(excluding the Batch Receivables sold or contributed to the Purchaser pursuant
to the provisions of the Agreement), having priority over all other liens on
such Collateral of the Providers, enforceable against the Providers and all
third parties.
(o) All required Notices have been prepared and delivered to each
applicable Governmental Entity and Insurer, and all invoices now bear only the
appropriate remittance instructions for payment direction to the applicable
Provider (solely in the case of invoices to Obligors that are not Governmental
Entities) the applicable Purchaser Account, the applicable Government Lockbox or
the applicable Provider Account, as the case may be.
(p) Except as disclosed on Schedule IV hereto, no Provider has changed
its principal place of business or chief executive office in the last five
years.
(q) The exact name of each Provider is as set forth on the signature
pages of the Agreement and, except as set forth on such signature page or in a
Written Notice pursuant to clause (j)(vii) of Exhibit IV, no Provider has
changed its name in the last five years and, except as set forth on Schedule IV
or in a Written Notice pursuant to clause (j)(vii) of Exhibit IV, during such
period no Provider has used, nor does any Provider now use, any other
fictitious, assumed or trade name.
(r) With respect to itself or any Subsidiary thereof there exists no
event which has or is reasonably likely to result in a Material Adverse Effect.
(s) It is not in violation under any applicable statute, rule, order,
decree or regulation of any court, arbitrator or governmental body or agency
having jurisdiction over it which could result in a Material Adverse Effect.
(t) It has filed on a timely basis all tax returns (federal, state and
local) required to be filed and has paid, or made adequate provision for payment
of, all taxes, assessments and other governmental charges due from it, unless
contested in good faith by appropriate proceedings. No tax Lien has been filed
and is now effective against it or any of its Properties, except any Lien in
respect of taxes and other charges not yet due or contested in good faith by
appropriate proceedings.
III-3
To its knowledge, there are no pending investigations of it by any taxing
authority or any pending but unassessed tax liability of it. It does not have
any obligation under any tax sharing agreement for periods prior to December 31,
2001.
(u) It is solvent and will not become insolvent after giving effect to
the transactions contemplated by the Agreement; it has not incurred debts or
liabilities beyond its ability to pay; it will, after giving effect to the
transaction contemplated by the Agreement, have an adequate amount of capital to
conduct its business in the foreseeable future; the sales and contributions of
Receivables hereunder are made in good faith and without intent to hinder, delay
or defraud its present or future creditors.
(v) The Government Lockboxes are the only post office boxes and the
Provider Accounts are the only accounts or lockbox accounts maintained by any
Provider for Receivables, the Obligors of which are Governmental Entities; the
Providers do not maintain any lockboxes and the Purchaser Accounts are the only
lockbox accounts maintained for Receivables, the Obligors of which are
non-Governmental Entities; and no direction of any Provider is in effect
directing Obligors to remit payments on Receivables other than to the applicable
Provider, Purchaser Account, Government Lockbox or Provider Account in
accordance with Sections 2.01 and 2.02.
(w) Each pension plan or profit sharing plan to which it is a party has
been fully funded in accordance with its obligations as set forth in such plan.
(x) To its knowledge, there are no pending civil or criminal
investigations by any Governmental Entity involving it or its officers or
directors and neither it nor any of its officers or directors has been involved
in, or the subject of, any civil or criminal investigation by any Governmental
Entity, other than facility reviews or license reviews in the ordinary course
that have not resulted in any action being taken by the Governmental Entity
against it or its officers or directors.
(y) The primary business of each Provider is the provision of
healthcare services, products, merchandise or equipment and the primary business
of Five Star is the ownership and operation of senior residences directly or
through Subsidiaries.
(z) The assets of each Provider are free and clear of any liens in
favor of the Internal Revenue Service, any Employee Benefit Plan or the PBGC
other than inchoate tax liens resulting from an assessment of such Provider.
(aa) With respect to each Employee Benefit Plan of it, including to its
knowledge as to any Multiemployer Plan, such Employee Benefit Plan has complied
and been administered in accordance with its terms and in substantial compliance
with all applicable provisions of ERISA and the Internal Revenue Code of 1986,
as amended; neither it nor any ERISA Affiliate has been notified by the sponsor
of a Multiemployer Plan that such Multiemployer Plan is in reorganization or has
been terminated, within the meaning of Title IV of ERISA; and it has no material
unpaid and unaccrued liability for any Employee Benefit Plan.
III-4
(bb) No Batch Receivable constitutes or has constituted an obligation
of any Subsidiary thereof, parent or other Person which is its Affiliate.
(cc) No transaction contemplated under this Agreement requires
compliance with any bulk sales act or similar law.
(dd) It has, or has the right to use, valid provider identification
numbers and licenses to generate the Receivables.
(ee) Five Star will prepare year-end financial statements on an annual
basis for it and its consolidated Subsidiaries (including the Purchaser) in
accordance with GAAP, which will contain footnotes or other information to the
effect that: (i) the Purchaser's business consists of both purchased and
contributed Receivables from the Providers; and (ii) the Purchaser is a separate
Delaware limited liability company with its own separate creditors which, upon
liquidation of the Purchaser will be entitled to be satisfied solely out of the
Purchaser's assets and the Purchaser will prepare separate financial statements,
which statements will treat all transfers of purchased and contributed
Receivables pursuant to this Agreement respectively as sales and contributions
to the Purchaser's capital, and not as secured loans, and Five Star will
classify all purchased and contributed Receivables transferred under this
Agreement as assets owned exclusively by the Purchaser for all purposes.
(ff) It is not engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying margin stock (within the meaning of Regulation T, U, or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds of any
extension of credit under this Agreement will be used to purchase or carry any
such margin stock or to extend credit to others for the purpose of purchasing or
carrying margin stock.
(gg) On and after the Initial Transfer Date, only the New Patient
Consent Forms are being obtained by it from each patient and customer who
commences to receive services or products from any Provider thereafter.
(hh) With respect to each Receivable contributed to the capital of the
Purchaser in each Batch, the Purchaser shall record in each applicable
Provider's own capital account the aggregate Expected Net Value of such
Receivables as a capital contribution.
(ii) Except as set forth on Schedule IV, no Provider has any Debt other
than Permitted Debt.
III-5
EXHIBIT IV
COVENANTS
Until the later of the Facility Termination Date and the Final Payment
Date, each Provider and the Primary Servicer agrees as follows:
(a) Compliance With Laws, etc. It will comply in all material respects
with all applicable laws, rules, regulations and orders and preserve and
maintain its corporate existence, rights, franchises, qualifications, and
privileges.
(b) Offices, Records and Books of Account. It will keep its principal
place of business and chief executive office and the office where it keeps its
records concerning the Collateral and the Batch Receivables at the address set
forth under its name on the signature pages to the Agreement or, upon 30 days'
prior Written Notice to the Purchaser, at any other locations in jurisdictions
where all actions reasonably requested by the Purchaser or otherwise necessary
to protect, perfect and maintain the Purchaser's security interest in the
Collateral have been taken and completed. It shall keep its books and accounts
in accordance with GAAP and shall make a notation on its books and records,
including any computer files, to indicate which Receivables have been sold or
contributed to the Purchaser and the security interest of the Purchaser in the
Collateral and its Receivables not sold or contributed to the Purchaser. It
shall maintain and implement administrative and operating procedures (including,
without limitation, an ability to recreate records evidencing Receivables 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 Batch Receivables (including, without
limitation, records adequate to permit the daily identification of each Batch
Receivable and all Collections of and adjustments to each existing Batch
Receivable) and for providing the Receivable Information.
(c) Performance and Compliance With Contracts and Credit and Collection
Policy. It 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 Batch Receivables and its
responsibilities under the Agreement, and timely and fully comply in all
material respects with the Credit and Collection Policy in regard to each Batch
Receivable and the related contract, and it shall maintain, at its expense, in
full operation each of the bank accounts and lockboxes required to be maintained
under the Agreement. It shall not 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 the Purchaser, or the Master Servicer or any other Person
designated by the Purchaser on behalf of the Purchaser, of the Batch
Receivables.
(d) Notice of Breach of Representations and Warranties. It shall
promptly (and in no event later than one Business Day following actual knowledge
thereof) inform the Purchaser and the Master Servicer of any breach of covenants
or representations and warranties hereunder, including, without limitation, upon
discovery of a breach of the Eligibility Criteria set forth in the Loan
Agreement.
IV-1
(e) Sales, Liens and Debt. It will not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create or suffer to exist any
Liens upon or with respect to, the Collateral, the Batch Receivables or upon or
with respect to any account to which any Collections of any Batch Receivable are
sent, or assign any right to receive income in respect thereof except those
Liens in favor of the Purchaser, the Collateral Agent or any assignee of the
Collateral Agent or any Lender relating to the Agreement. It will not, directly
or indirectly (x) at any time pay any amount of principal or prepay, defease,
purchase, redeem any Debt, during the continuance of an Event of Termination or
(y) pay any management fees or other similar fees to any Affiliate; provided
that nothing in this clause (e) shall prohibit payment of non-cash interest
"in-kind" thereunder.
(f) Extension or Amendment of Batch Receivables. It shall not amend,
waive or otherwise permit or agree to any deviation from the terms or conditions
of any Batch Receivable except in accordance with the Credit and Collection
Policy.
(g) Change in Credit and Collection Policy. It will not make any
material change in the Credit and Collection Policy without the prior written
consent of the Program Manager; provided, however, that during the continuance
of an Event of Termination, it will not make any change in the Credit and
Collection Policy. The Providers will not make any change in the character of
their businesses that is reasonably likely to result in a Material Adverse
Effect.
(h) Audits and Visits. It will, at any time and from time to time
during regular business hours as requested by the Purchaser, permit the
Purchaser, or its agents or representatives (including the Master Servicer),
upon reasonable notice, (i) on a confidential basis, to examine and make copies
of and abstracts from all books, records and documents (including, without
limitation, computer tapes and disks) in its possession or under its control
relating to Batch Receivables including, without limitation, the related
contracts, and (ii) to visit its offices and properties for the purpose of
examining and auditing such materials described in clause (i) above, and to
discuss matters relating to Batch Receivables or its performance hereunder or
under the contracts with any of its officers or employees having knowledge of
such matters. It shall, at any time and from time to time during regular
business hours as requested by the Master Servicer, permit the Master Servicer
to have at least one agent or representative physically present in its
administrative office, upon reasonable notice, to assist it in performing its
obligations under the Agreement, including its obligations with respect to the
collection of Batch Receivables pursuant to Article I of the Agreement;
provided, however, that no notice shall be required upon the occurrence of and
during the continuance of an Event of Termination.
(i) Change in Payment Instructions. It will not terminate the Primary
Provider Account, any Government Lockbox, or any Government Lockbox Account, or
make any change or replacement in the instructions contained in any invoice,
Notice or otherwise, or regarding payments with respect to Receivables to be
made to the any Government Lockbox, any Government Lockbox Account, the Primary
Provider Account, the Primary Purchaser Account, or any Local Purchaser Account,
except upon the prior and express written consent of the Program Manager or the
Purchaser.
IV-2
(j) Reporting Requirements. It will provide to the Purchaser (in
multiple copies, if requested by the Purchaser) the following:
(i) as soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of Five
Star, consolidated and consolidating balance sheets of Five Star and
its Subsidiaries as of the end of such quarter and consolidated and
consolidating statements of income and consolidated cash flows and
retained earnings of Five Star and its Subsidiaries for the period
commencing at the beginning of the current fiscal year and ending with
the end of such quarter, certified by the chief financial officer of
Five Star and accompanied by a certificate of an authorized officer of
the Primary Servicer detailing the Primary Servicer's and each
Provider's compliance for such fiscal period with all terms, including
calculations demonstrating compliance with the financial covenants,
contained in the Agreement, and to the extent any non-compliance
exists, a description of the steps being taken by the Primary Servicer
or the applicable Provider to address such non- compliance;
(ii) as soon as available and in any event within 90 days
after the end of each fiscal year of Five Star a copy of consolidating
financial statements and the audited consolidated financial statements
(together with explanatory notes thereon) and the auditor's report
letter for such year for Five Star and its Subsidiaries, containing
financial statements for such year audited by Ernst & Young LLP or
other independent public accountants of recognized standing acceptable
to the Purchaser, certified by the chief financial officer of the
Primary Servicer and accompanied by a certificate of an authorized
officer of the Primary Servicer detailing the Primary Servicer's and
each Provider's compliance for such fiscal period with all terms,
including the financial covenants, contained in the Agreement, and to
the extent any non-compliance exists, a description of the steps being
taken by the Primary Servicer or the applicable Provider to address
such non-compliance;
(iii) on or before the 25th of each Month, monthly and
year-to-date statistical and financial reports and unaudited
consolidated profit and loss reports, from the chief financial officer
of the Providers;
(iv) promptly and in any event within two Business Days after
the occurrence of (x) each Event of Termination or event which, with
the giving of notice or lapse of time, or both, would constitute an
Event of Termination, a statement of the chief financial officer of
applicable Provider setting forth details of such Event of Termination
or event, and the action that it has taken and proposes to take with
respect thereto and (y) each Group-Wide Event of Termination or event
which, with the giving of notice or lapse of time, or both, would
constitute a Group-Wide Event of Termination, a certificate of the
Primary Servicer setting forth the details of such Group-Wide Event of
Termination or event, and the action that has been taken and proposes
to take with respect thereto;
(v) promptly after the sending or filing thereof, if any,
copies of all reports and registration statements that any Provider or
any Subsidiary thereof files with the Securities and Exchange
Commission or any national securities exchange and official
IV-3
statements that any Provider or any Subsidiary thereof files with
respect to the issuance of tax-exempt indebtedness and after an Event
of Termination or Servicer Termination Event, copies of all reports (if
any) that the Provider or any Subsidiary thereof sends to any of its
security holders;
(vi) promptly after the filing or receiving thereof, copies of
all reports and notices that any Provider or any of its Affiliates (it
being understood that for purposes of this Section (j)(vi), the term
"Affiliates" does not include REIT Management & Research LLC or Senior
Housing Properties Trust) files under ERISA with the Internal Revenue
Service or the PBGC or the U.S. Department of Labor or that any
Provider or any of its Affiliates receives from any of the foregoing or
from any Multiemployer Plan to which such Provider or any of its
Affiliates is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal
liability or an event or condition which could, in the aggregate,
result in the imposition of liability on such Provider or any such
Affiliate in excess of $100,000;
(vii) at least ten Business Days prior to any change in any
Provider's name or any implementation of a new trade/assumed name, a
Written Notice setting forth the new name or trade name and the
proposed effective date thereof and copies of all documents required to
be filed in connection therewith;
(viii) promptly (and in no event later than one Business Day
following actual knowledge or receipt thereof), Written Notice in
reasonable detail, of (w) any Lien asserted or claim made against a
Batch Receivable, (x) the occurrence of a Service Termination Event or
a Group-Wide Event of Termination, or any other event which could
result in a material adverse effect on the value of a Batch Receivable
or on the interest of the Purchaser in a Batch Receivable, (y) any
notice of any investigations or similar audits of any Provider being
conducted by any federal, state or county Governmental Entity or its
agents or designees or (z) the results of any cost report filed and
reviewed by any Governmental Entity or its fiscal intermediary or
settled, and any investigation or similar audit being conducted by any
federal, state or county Governmental Entity or its agents or
designees;
(ix) not later than 30 days after the commencement of each
fiscal year, a consolidated and consolidating operating plan (together
with a statement in reasonable detail of the assumptions on which such
plan is based) of Five Star and its Subsidiaries, and which shall, in
each case, include budgets for the prospective year in reasonable
detail acceptable to the Purchaser and will integrate operating profit
and cash flow projections, capital expenditures, and facilities plans;
(x) promptly upon receipt thereof, a copy of any management
letter or written report submitted to any Provider by independent
certified public accountants with respect to the Subsidiaries thereof,
business, condition (financial or otherwise), operations, prospects, or
Properties of such Provider;
IV-4
(xi) no later than two Business Days after the commencement
thereof, Written Notice of all actions, suits, and proceedings before
any Governmental Entity or arbitrator affecting any Provider which, if
determined adversely to such Provider, could result in a Material
Adverse Effect;
(xii) promptly after the furnishing thereof, copies of any
statement or report furnished by any Provider to any other party
pursuant to the terms of any indenture, loan, or credit or similar
agreement and not otherwise required to be furnished to the Purchaser
pursuant to this Agreement;
(xiii) as soon as possible and in any event within five days
after becoming aware of the occurrence thereof, Written Notice of any
matter that could reasonably be expected to result in a Material
Adverse Effect;
(xiv) as soon as available, (A) one copy of each financial
statement, report, notice or proxy statement sent by Five Star to its
stockholders generally, (B) and one copy of each regular, periodic or
special report, registration statement, or prospectus filed by Five
Star with any securities exchange or the Securities and Exchange
Commission or any successor agency or the Bankruptcy Court, and (C) all
press releases and other statements made available by Five Star to the
public concerning developments in the business of such Provider;
(xv) within the sixty (60) day period prior to the end of each
fiscal year of each Provider, a report satisfactory in form to the
Purchaser, listing all material insurance coverage maintained as of the
date of such report by such Provider and all material insurance planned
to be maintained by such Provider in the subsequent fiscal year; and
(xvi) promptly, and in no event later than three Business Days
following the earlier of actual knowledge or receipt of notification
from a Governmental Entity, estimates of amounts of Receivables
generated which are subject to offset by Governmental Entities;
(xvii) at the time of each Monthly Report, internally prepared
cost-report settlement estimates with respect to Governmental Entities;
and
(xviii) such other information respecting the Receivables or
the condition or operations, financial or otherwise, of any Provider or
any Subsidiary or Affiliate thereof as the Purchaser may from time to
time reasonably request.
(k) Notice of Proceedings; Overpayments. The Primary Servicer shall
promptly notify the Master Servicer in the event of any action, suit,
proceeding, dispute, set-off, deduction, defense or counterclaim that is or may
be asserted by an Obligor with respect to any Batch Receivable. Each Provider
shall make any and all payments to the Obligors necessary to prevent the
Obligors from offsetting any earlier overpayment to such Provider against any
amounts the Obligors owe on any Batch Receivables.
IV-5
(l) Officer's Certificate. On the date the financial statements
referred to in clause (j) above are to be delivered in each fiscal year after
the Initial Transfer Date, the chief financial officer of each Provider shall
deliver a certificate to the Purchaser, stating that, as of such date, (i) all
representations and warranties set forth in the Agreement are true and correct,
(ii) the conditions precedent set forth in paragraph 2 of Exhibit II have been
fulfilled or waived in writing by the Purchaser, and (iii) no Event of
Termination or Group-Wide Event of Termination exists and is continuing.
(m) Further Instruments, Continuation Statements. Each Provider shall,
at its expense, promptly execute and deliver all further instruments and
documents, and take all further action that the Program Manager or the Purchaser
may reasonably request, from time to time, in order to perfect, protect or more
fully evidence the full and complete transfer of ownership of the Batch
Receivables and the security interest in the Collateral, or to enable the
Purchaser or the Program Manager to exercise or enforce the rights of the
Purchaser hereunder or under the Batch Receivables. Without limiting the
generality of the foregoing, each Provider will upon the request of the Program
Manager execute and file such UCC financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be, in the opinion of the Program Manager, necessary or
appropriate. Each Provider hereby authorizes the Program Manager or its
designees, upon two Business Days' notice, to file one or more financing or
continuation statements and amendments thereto and assignments thereof, relative
to all or any of the Batch Receivables or the Collateral now existing or
hereafter arising without the signature of such Provider where permitted by law.
If any Provider fails to perform any of its agreements or obligations under the
Agreement, the Program Manager may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Program Manager incurred in connection therewith shall be payable by such
Provider.
(n) Taxes. Each Provider shall pay any and all taxes (excluding the
Purchaser's income, gross receipts, franchise, doing business or similar taxes)
relating to the transactions contemplated under the Agreement, including but not
limited to the sale, transfer and assignment of each Batch Receivable.
(o) Deviation from Terms of Batch Receivable, etc. No Provider shall,
without the prior written consent of the Purchaser:
(i) other than in connection with the purchase of a Denied
Receivable, compromise, adjust, extend, satisfy, subordinate, rescind,
set off, waive, amend, or otherwise modify, or permit or agree to any
deviation from, the terms and conditions of any Batch Receivable, or
materially or adversely amend, modify or waive any term or condition of
any contract related thereto;
(ii) (x) amend, modify, supplement or delete in any way or to
any extent any provision for uncollectible accounts and free care
applicable to any Batch Receivable or (y) amend, modify or supplement
in any way or to any extent any financial category or change in any way
or to any extent the manner in which any financial category is treated
or reflected in the Provider's records;
IV-6
(iii) alter or modify (x) its claims processing system, or (y)
its third party billing system, as applicable (except for technical
changes of an immaterial nature); or
(iv) change, modify or rescind any direction contained in any
invoice or previously delivered Notice.
(p) Purchaser's Ownership of Batch Receivables. It shall not prepare or
permit to be prepared any financial statements which shall account for the
transactions contemplated hereby in a manner which is, or in any other respect
account for the transactions contemplated hereby in a manner which is,
inconsistent with the Purchaser's ownership of the Batch Receivables.
(q) No "Instruments". It shall not take any action which would allow,
result in or cause any Transferred Batch or Batch Receivable to be evidenced by
an "instrument" within the meaning of the UCC of the applicable jurisdiction.
(r) Deviation from New Patient Consent Form. No Provider shall, without
the prior written consent of the Purchaser, substitute, alter, modify or change
in any way the New Patient Consent Form.
(s) Implementation of New Invoices. Each Provider shall take all
reasonable steps to ensure that all invoices rendered or dispatched on or after
the Initial Transfer Date contain only the remittance instructions required
under Article II of this Agreement.
(t) Assumed/Trade Name Certificates. On or before December 31, 2002,
the Purchaser shall receive copies of all certificates filed by each Provider in
each applicable jurisdiction regarding the use of each of the trade or assumed
names set forth opposite such Provider's name on Schedule VI attached hereto.
(u) Notice of Termination or Suspension of Contracts. It shall promptly
(and in no event later than one Business Day following actual knowledge thereof)
inform the Purchaser and the Master Servicer of any termination or suspension of
any of its contracts.
(v) Incurrence of Debt. It will not incur any Debt other than Permitted
Debt.
IV-7
EXHIBIT V
EVENTS OF TERMINATION
Each of the following shall be an "Event of Termination":
(a) The Primary Servicer, in its capacity as agent for the Providers
and the Purchaser pursuant to Section 1.05(b), shall fail to perform or observe
any term, covenant or agreement included in the Primary Servicer
Responsibilities (other than a Servicer Termination Event resulting from the
events described in paragraph (g) of this Exhibit) and such failure shall remain
unremedied for 15 days or the Primary Servicer or any Provider shall fail to
make when due any payment or deposit to be made by it under the Agreement.
(b) A Provider or the Primary Servicer (i) fails to transfer in a
timely manner any servicing rights and obligations with respect to the Batch
Receivables to any successor designated pursuant to Section 1.05(b) of the
Agreement, (ii) fails to make any payment required under the Agreement (unless
such payment obligation has been fulfilled in full pursuant to the Purchaser's
set- off rights under Section 4.03 of the Agreement) or (iii) sends a
"Revocation Order" (as defined in the Depositary Agreement or the Government
Depositary Agreement) or makes any change or replacement in the "Standing
Revocable Instruction" (as defined in the Depositary Agreement or the Government
Depositary Agreement).
(c) Any representation or warranty (other than those representations
and warranties (i) with respect to the purchase of Receivables that are covered
by paragraph (f) of this Exhibit and (ii) with respect to Batch Receivables, the
Return Price with respect thereto is paid to the Purchaser in the manner set
forth in Article IV of this Agreement within two Business Days following demand
therefor) made or deemed made by any Provider or the Primary Servicer under or
in connection with the Agreement, any Provider's Document or any information or
report delivered by any Provider or the Primary Servicer pursuant to the
Agreement or any Provider Document shall prove to have been incorrect or untrue
in any material respect when made or deemed made or delivered.
(d) A Provider or the Primary Servicer fails to perform or observe any
other term, covenant or agreement contained in the Agreement or in any other
Provider Document on its part to be performed or observed and any such failure
shall remain unremedied for five Business Days after the earlier of (i) the
discovery thereof by such Provider or the Primary Servicer and (ii) written
notice thereof shall have been given to such Provider or the Primary Servicer by
the Purchaser.
(e) A Provider shall fail to pay any principal of or premium or
interest on any of its Debt when the same becomes due and payable (whether by
scheduled maturity, required prepayment, acceleration, demand or otherwise), and
such failure shall continue after the applicable grace period, if any, specified
in the agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating to any
such Debt and shall continue after the applicable grace period, if any,
specified in such agreement or
V-1
instrument, if the effect of such event or condition is to accelerate, or to
permit the acceleration of, the maturity of such Debt; or any such Debt shall be
declared to be due and payable, or required to be prepaid (other than by a
regularly scheduled required prepayment), redeemed, purchased or defeased, or an
offer to repay, redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof.
(f) Any purchase or contribution of a Transferred Batch pursuant to the
Agreement shall for any reason (other than pursuant to the terms hereof) fail or
cease to create or fail or cease to be a valid and perfected ownership interest
in each Batch Receivable in such Transferred Batch and the Collections with
respect thereto free and clear of all Liens (other than Liens referred to in
paragraph (e) of Exhibit IV) unless, as to any such Batch Receivable, the Return
Price with respect thereto is paid to the Purchaser in the manner set forth in
Article IV of the Agreement within five Business Days following demand therefor.
(g) A Provider or the Primary Servicer shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against a Provider or the
Primary Servicer seeking to adjudicate it a bankrupt or insolvent, or seeking
liquidation, winding up, reorganization, arrangement, adjustment, protection,
relief, or composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of an
order for relief or the appointment of a receiver, trustee, custodian or other
similar official for it or for any substantial part of its Property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 30
days, or any of the actions sought in such proceeding (including, without
limitation, the entry of an order for relief against, or the appointment of a
receiver, trustee, custodian or other similar official for, it or for any
substantial part of its Property) shall occur; or a Provider or the Primary
Servicer shall take any action to authorize any of the actions set forth above
in this paragraph (g).
(h) As of any date of determination, a Provider is found to have been
overpaid by Governmental Entities by an amount equal to 10% of the Expected Net
Value of all Eligible Receivables or more during any period covered by an audit
conducted by CMS or any state authority and such overpayment is not repaid
within 30 days of its due date or reserved for in a manner reasonably acceptable
to the Program Manager.
(i) There shall have occurred any Material Adverse Effect since June
30, 2002.
(j) There shall have occurred a Change of Control.
(k) Judgments or orders for payment of money (other than judgments or
orders in respect of which adequate insurance is maintained for the payment
thereof) against a Provider in excess of $100,000 in the aggregate remain
unpaid, unstayed on appeal, undischarged, unbonded or undismissed for a period
of 30 days or more.
V-2
(l) Any governmental authority (including, without limitation, the
Internal Revenue Service or the PBGC) files a notice of a Lien against the
assets of a Provider other than a Lien (i) that is limited by its terms to
assets other than Receivables and (ii) that does not result in a Material
Adverse Effect.
(m) A Provider does not maintain, keep, and preserve all of its
Properties necessary or useful in the proper conduct of its business in good
repair, working order, and condition (ordinary wear and tear excepted) and make
all reasonably necessary repairs, renewals, replacements, betterments, and
improvements thereof.
(n) A Provider does not pay or discharge at or before maturity or
before becoming delinquent (i) all taxes, levies, assessments, and governmental
charges imposed on it or its income or profits or any of its Property, and (ii)
all lawful claims for labor, material, and supplies, which, if unpaid, might
become a Lien upon any of its Property.
(o) A Provider does not keep insured by financially sound and reputable
insurers all Property of a character usually insured by corporations engaged in
the same or similar business similarly situated against loss or damage of the
kinds and in the amounts customarily insured against by such corporations and
carry such other insurance as is usually carried by such corporations. Each
policy referred to in this clause (o) shall provide that it will not be
canceled, amended, or reduced except after not less than thirty (30) days' prior
written notice to the Purchaser and the Collateral Agent and shall also provide
that the interests of the Purchaser shall not be invalidated by any act or
negligence of the applicable Provider. A Provider does not advise the Purchaser
promptly of any policy cancellation, reduction, or amendment. Any insurance
policy for property, casualty, liability and business interruption coverage for
a Provider does not name the Collateral Agent as assignee of the Purchaser as
loss payee (as the Purchaser's interests may appear) or an additional insured,
as appropriate.
(p) A Provider or the Primary Servicer does not maintain proper books
of record and account in which full, true and correct entries in conformity with
GAAP are made of all dealings and transactions in relation to its business and
activities.
(q) A Provider or the Primary Servicer does not comply in all material
respects with (i) any document directly relating to the responsibilities of such
Provider or the Primary Servicer, respectively, under the Agreement or (ii) any
agreement, contract, or instrument that results in a Material Adverse Effect.
(r) A Provider does not comply with all minimum funding requirements
and all other material requirements of ERISA, if applicable, so as not to give
rise to any material liability thereunder.
(s) A Provider engages in any line or lines of business activity other
than the businesses in which it is engaged on the date hereof.
V-3
(t) An "Event of Default" (as defined in the Loan Agreement) shall
occur under the Loan Agreement.
(u) Any provision of this Agreement shall for any reason cease to be
valid and binding on the Primary Servicer or any Provider, or the Primary
Servicer or any Provider shall so state in writing.
(v) A Change of Control shall occur.
(w) The Current Ratio, calculated at the end of any fiscal quarter of
the Providers, is less than 1.05:1.00.
(x) The Consolidated Net Worth of Five Star and its Subsidiaries
calculated at the end of any fiscal quarter of the Providers, is less than an
amount equal to the sum of (i) $37,500,000 plus (ii) 100% of Equity Net
Proceeds.
V-4
EXHIBIT VI
RECEIVABLE INFORMATION
The following information shall, as appropriate, be provided by each
Provider to the Master Servicer with respect to each Batch Receivable, together
with such other information and in such form as may reasonably be requested from
time to time by the Master Servicer and as, in accordance with applicable law,
may be disclosed or released to the Master Servicer (the "Receivable
Information"):
(i) customer/patient demographic information;
(ii) insured party demographic and other policy-related
information;
(iii) such Provider's services and products classification
information (i.e., D.R.G. and other like information established by
such Provider from time to time to classify services rendered or goods
sold at or by such Provider's institutions);
(iv) Obligor required information (i.e., information provided
in the ordinary course of business to any specified Obligor or any
other information required to be provided to an Obligor pursuant to any
agreement, contract or other arrangement with such Obligor); and
(v) billing information (i.e., all information provided by
such Provider on invoices to Obligors and any other information
required to be provided pursuant to the Credit and Collection Policy
and, to the extent the Transmission will not be via computer interface,
including a copy of the admitting face sheet, CMS Form and a detailed
copy of the bill).
VI-1
EXHIBIT VII-A
FORM OF NOTICE TO GOVERNMENTAL ENTITIES
[Letterhead of the Provider]
[Date]
[Name and Address
of Governmental Entity]
Re: Change of Account and Address
To Whom it May Concern:
Please be advised that we have opened a new bank account at [Lockbox
Bank]1 and a post-office box with respect to such bank account. Accordingly,
until further notice, we hereby request that:
(1) All wire transfers be made directly into our account at:
[Lockbox Bank]
___________________
___________________
Account #_______________
ABA #__________________
Confirm Phone Number: _______________
Attention: ___________________
(2) All Explanations of Benefits, remittance advices and
other forms of payment, including checks, be made to
our post office box located at:
___________________
___________________
___________________
Reference: Account #____________
Thank you for your cooperation in this matter.
[NAME OF PROVIDER]
By:____________________
[Authorized Officer]
- --------
1 In the case of WI it will not be the Lockbox Bank.
VII-A-1
EXHIBIT VII-B
FORM OF NOTICE TO NON-GOVERNMENTAL ENTITIES
[Letterhead of the Provider]
[Date]
[Name and Address
of Obligor]
Re: Change of Account and Address
To Whom it May Concern:
Please be advised that we are selling and contributing to FSQC
Funding Co., LLC (the "Purchaser"), an affiliated company, all of our existing
and future receivables payable by you to us; and the Purchaser is assigning the
aforementioned existing and future arising receivables as collateral to
____________, for the benefit of the Purchaser's lenders . Accordingly, you are
hereby directed to make:
(1) All wire transfers directly to the following account:
__________________
__________________
___________________
Account #_______________
ABA #__________________
Confirm Phone Number: _______________
Attention: ___________________
(2) All Explanation of Benefits, remittance advices and
other forms of payment, including checks, to the
following address:
__________________
__________________
Reference: _________________
The foregoing directions shall apply to all existing
receivables payable to us and (until further written notice) to all receivables
arising in the future and may not be revoked except by a writing executed by the
Purchaser.
VII-B-1
Please acknowledge your receipt of this notice by signing the
enclosed copy of this letter and returning it in the enclosed envelope.
Thank you for your cooperation in this matter.
[NAME OF PROVIDER]
By:_______________________________
[Authorized Officer]
FSQC FUNDING CO., LLC
By:____________________
[Authorized Officer]
Receipt Acknowledged:
[Name of Obligor]
By: ____________________
Title:
VII-B-2
EXHIBIT VIII
PRIMARY SERVICER RESPONSIBILITIES
Each Provider shall be responsible for the following administration and
servicing obligations (the "Primary Servicer Responsibilities") which shall be
performed by the Primary Servicer on behalf of the Providers until such time as
a successor servicer shall be designated and shall accept appointment pursuant
to Section 1.05(b) of the Agreement:
(a) Servicing Standards and Activities. The Primary Servicer agrees to
administer and service the Batch Receivables sold or contributed by the
Providers in each Transferred Batch (i) to the extent consistent with the
standards set forth in clauses (b)(i) through (iv) below, with the same care
that it exercises in administering and servicing similar receivables for its own
account, (ii) within the parameters of services set forth in paragraph (b) of
this Exhibit VIII, as such parameters may be modified by mutual written
agreement of the Purchaser and the Primary Servicer, (iii) in compliance at all
times with applicable law and with the agreements, covenants, objectives,
policies and procedures set forth in the Agreement, and (iv) in accordance with
industry standards for servicing healthcare receivables unless such standards
conflict with the procedures set forth in paragraph (b) of this Exhibit VIII in
which case the provisions of paragraph (b) shall control. The Primary Servicer
shall establish and maintain electronic data processing services for monitoring,
administering and collecting the Batch Receivables in accordance with the
foregoing standards and shall, within three Business Days of the deposit of any
checks, other forms of cash deposits, EOB's or other written matter into a
Government Lockbox, post such information to its electronic data processing
services.
(b) Parameters of Primary Servicing. The Primary Servicer
Responsibilities shall be performed within the following parameters:
(i) Subject to the review and authority of the Purchaser and
except as otherwise provided herein, the Primary Servicer 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 Batch Receivables. Without limiting the generality of
the foregoing, the Primary Servicer 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 Agreement.
The Primary Servicer agrees that the Primary Servicing Fee has been
calculated to cover all costs and expenses incurred in the performance
of its servicing obligations hereunder and no other reimbursement of
costs and expenses shall be payable to the Primary Servicer.
(ii) The Primary Servicer shall not be entitled to sue to
enforce or collect any Batch Receivable without the prior written
consent of the Purchaser unless the Primary Servicer shall have
purchased such Batch Receivable in accordance with the Agreement.
VIII-1
(iii) The Primary Servicer 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 Purchaser.
(iv) The Primary Servicer will be responsible for monitoring
and collecting the Batch Receivables, including, without limitation,
contacting Obligors that have not made payment on their respective
Batch Receivables within the customary time period for such Obligor,
and resubmitting any claim rejected by an Obligor due to incomplete
information.
(v) If the Primary Servicer determines that a payment with
respect to a Batch Receivable has been received directly by a patient
or any other Person, the Primary Servicer shall promptly advise the
Purchaser, and the Purchaser shall be entitled to presume that the
reason such payment was made to such patient or other Person was
because of a breach of representation or warranty in the Agreement with
respect to such Batch Receivable (such as, by way of example, the forms
related to such Batch Receivable not being properly completed so as to
provide for direct payment by the Obligor to the Primary Servicer),
unless the Primary Servicer shall demonstrate that such is not the
case. In the case of any such Batch Receivable which is determined not
to be a Denied Receivable, the Primary Servicer shall promptly demand
that such patient or other Person remit and return such funds. If such
funds are not promptly received by the relevant Provider, the Primary
Servicer shall take all reasonable steps to obtain such funds.
(vi) Notwithstanding anything to the contrary contained
herein, the Primary Servicer may not amend, waive or otherwise permit
or agree to any deviation from the terms or conditions of any Batch
Receivable in any material respect without the prior consent of the
Purchaser.
(c) The Loan Agreement. The Primary Servicer shall be responsible, with
the Purchaser, for the determination and application of the Eligibility Criteria
and the delivery and certification of information relating to the Receivables
required to be delivered under the Loan Agreement.
(d) Aged Term Servicing. The parties hereby agree that at such time as
any Batch Receivable is unpaid for more than 120 days after the Last Service
Date, the Primary Servicer shall, upon the request of the Purchaser, turn over
all of its Primary Servicer Responsibilities under this Agreement with respect
to such Batch Receivable to a successor servicer selected by the Purchaser, and
such servicer shall thereafter service such Batch Receivable.
(e) Termination of Primary Servicer Responsibilities; Cooperation. Upon
the termination of the performance of the Primary Servicer Responsibilities by
the Primary Servicer in accordance with Section 1.05(b) of the Agreement, the
Primary Servicer shall immediately transfer to a successor servicer designated
by the Purchaser all records, computer access and other information as shall be
necessary or desirable, in the reasonable judgment of such successor servicer,
VIII-2
to perform such responsibilities. The Primary Servicer shall otherwise cooperate
fully with such successor servicer.
(f) Primary Servicing Fee. Upon the transfer of servicing with respect
to any Receivable pursuant to this Agreement, the Primary Servicer shall no
longer be paid the Primary Servicing Fee relating to such Receivables, and such
Primary Servicing Fee will be paid to the successor Person performing the
Primary Servicer Responsibilities with respect thereto.
VIII-3
EXHIBIT IX
SERVICER TERMINATION EVENTS
Each of the following shall be a "Servicer Termination Event":
(a) An event has occurred and is continuing that constitutes an Event
of Termination with respect to the Primary Servicer or that would constitute an
Event of Termination with respect to the Primary Servicer but for the
requirement that notice be given or time elapse or both.
(b) The Primary Servicer is not performing, or becomes unable (in the
commercially reasonable determination of the Purchaser) to perform, fully the
Primary Servicer Responsibilities set forth in Exhibit VIII hereof or the
Purchaser, in its sole judgment, which judgment shall be commercially
reasonable, is not satisfied with the performance by any Provider, or the
Primary Servicer on behalf of the Providers, of the Primary Servicer
Responsibilities.
(c) The Primary Servicer is unable to maintain the Transmission
interface described in Exhibit X to the reasonable satisfaction of the Master
Servicer, or the electronic information servicing capabilities of the Primary
Servicer are not functioning for a period of more than three consecutive
Business Days.
(d) The Primary Servicer has sent multiple Transmissions to the Master
Servicer in a manner that is not in compliance with the specifications set forth
in Exhibit X hereof.
(e) As of any date after the Initial Transfer Date, more than 8% of all
outstanding Batch Receivables (excluding Denied Receivables) are aged more than
120 days but less than 180 days from the respective Last Service Dates of such
Batch Receivables.
IX-1
EXHIBIT X
INTERFACE BETWEEN MASTER SERVICER AND THE PRIMARY SERVICER
1. The Master Servicer will convey appropriate data requirements
and instructions to the Primary Servicer to establish a
computer interface between the Primary Servicer's systems and
the Master Servicer's receivables monitoring system. The
interface will permit the Master Servicer to receive
electronically the Primary Servicer's accounts receivable
data, including the Receivable Information, billing data and
collection and other transaction data relating to the
Receivables.
2. The Primary Servicer shall give the Master Servicer and the
Purchaser at least ten Business Days' notice of any coding
changes or electronic data processing system modifications
made by the Primary Servicer which could affect the Master
Servicer's processing or interpretation of data received
through the interface.
3. The Master Servicer shall have no responsibility to return to
the Primary Servicer any information which the Master Servicer
receives pursuant to the computer interface.
4. The Primary Servicer will prepare weekly accounts receivable
data files of all transaction types for all of the Primary
Servicer's sites that are included in the program. The weekly
cutoff will occur at a predetermined time each week, and the
weekly cutoff date for all of the sites must occur at exactly
the same time. The cutoff date that will be selected will be
at the end of business for a specific day of the week, or in
other words, at the end of the Primary Servicer's transaction
posting process for that day. The Primary Servicer will
temporarily maintain a copy of the accounts data files in the
event that the data is degraded or corrupted during
transmission, and needs to be re-transmitted.
5. The Master Servicer will be responsible for the management of
the hardware, communications and software used in the program.
6. The Master Servicer's data center will receive the Receivable
files, and immediately confirm that the files have been passed
without degradation or corruption of data by balancing the
detailed items to the control totals that accompany the files.
Any problems in this process will be immediately reported to
the Primary Servicer so that the Receivable file can be re-
transmitted, if necessary.
7. Once the receipt of the Receivable data has been confirmed,
the Master Servicer will perform certain tests and edits to
ensure that each Receivable
X-1
meets the specified eligibility criteria for purchase by the
Purchaser. Compliance with concentration limits will be
verified and the Master Servicer will notify the Program
Manager to initiate a Receivable purchase using the Receivable
file received. Upon the successful completion of a purchase,
the Master Servicer will generate a one-line trial balance
(listing all purchased accounts) confirming the Receivables
that have been purchased. A copy of the trial balance will be
forwarded to the Providers, to the Primary Servicer, to the
Purchaser, and to the Program Manager to confirm the purchase.
8. The Primary Servicer's sites will continue to post daily
transactions to their respective Receivable files. The Primary
Servicer's Receivable files for each of the eligible sites
will include all transactions posted through that day. The
Primary Servicer will create a transaction report and a
Receivable file for each of the eligible sites. The
transaction report will contain all transactions posted to the
respective site Receivable file for the specified period (and
will indicate the respective site and the number of items and
total dollars on each transaction report for control
purposes). The Receivable file will contain balances that
reflect the transactions posted on the Primary Servicer's
systems through the end of business of the specified period.
9. The Primary Servicer will transmit the billing, transaction,
and the most current Receivable data files to the Master
Servicer's data center according to the established schedule.
The Providers and the Primary Servicer should, again, maintain
the backup of each of these files in the event that a re-
transmission is necessary.
10. The Master Servicer's data center will confirm that the files
have been received intact, and will immediately communicate
any problems to the Primary Servicer in order to initiate a
re-transmission. The Master Servicer will then post the
transaction files to the accounts receivable for the
previously purchased accounts that the Master Servicer is
maintaining, and consequently update the affected balances.
Upon completion of the posting process, the Master Servicer
will generate summary reports of the posting process that the
Program Manager will use to complete various funding
activities. The Master Servicer summary reports will reference
the Primary Servicer's transaction codes and activity to codes
that are common to the funding program.
11. The Master Servicer will then compare the updated accounts
balances on the Master Servicer's system to the corresponding
account balances reflected on the Receivable file. The Master
Servicer expects that the balances for the funded Receivables
will be congruent, and any discrepancies will be immediately
examined and resolved through the cooperative effort of the
Master Servicer and the Primary Servicer. The Master Servicer
shall produce
X-2
discrepancy reports (e.g., "Funding Only" or "Out of Balance"
reports) and the Primary Servicer shall respond promptly to
such reports.
12. Once the reconciliation process has been completed and any
discrepancies between the Master Servicer and the Primary
Servicer's Receivable files resolved through the discrepancy
report process described in paragraph 11 above, the Master
Servicer will then process the Receivable file and advise the
Purchaser that it may purchase any new Receivable that is
eligible. The Master Servicer will then proceed through
exactly the same process described in paragraph 6 above.
X-3
SCHEDULE I
PROVIDERS
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-KS, LLC
Five Star Quality Care-MI, 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-CA, Inc.
Five Star Quality Care-IA, Inc.
Five Star Quality Care-MI, Inc.
Five Star Quality Care-NE, Inc.
SCHEDULE II
ADDRESSES FOR NOTICE
If to the Program Manager:
Dresdner Kleinwort Wasserstein LLC
75 Wall Street, 32nd Floor
New York, New York 10005
Attention: Stephen Kovach
Tel: (212) 895-1774
Fax: (212) 895-1766
and
Healthcare Finance Group, Inc.
110 Wall Street, 2nd Floor
New York, New York 10005
Attention: David Hyams, Chief Credit Officer
Tel: (212) 785-9212
Fax: (212) 785-9211
If to the Master Servicer:
Healthcare Finance Group, Inc.
110 Wall Street, 2nd Floor
New York, New York 10005
Attention: David Hyams, Chief Credit Officer
Tel: (212) 785-9212
Fax: (212) 785-9211
OMITTED EXHIBITS AND SCHEDULES
The following Exhibits and Schedules to the Receivables Purchase and Transfer
Agreement have been omitted:
Exhibit Number Exhibit Title
- -------------- -------------
XI-A Memorandum of Providers' Counsel with respect to
the Patient Consent Forms
XI-B Form of Opinion of Providers' and Purchaser's
Counsel with Respect to Certain Corporate Matters
XI-C Form of Opinion of Providers' and Purchaser's
Counsel with Respect to Certain Bankruptcy
Matters
XII Form of Depository Agreement
XIII Form of Parent Guaranty
XIV Form of Pledge Agreement
XV Form of Subscription Agreement
Schedule Number Schedule Title
- --------------- --------------
Schedule III Credit and Collection Policy
Schedule IV Disclosures
Schedule V Lockbox Information
Schedule VI Tradenames
Schedule VII Net Value Factors
Schedule VIII Providers with Facilities in Certain States
The Registrant agrees to furnish supplementally a copy of the foregoing omitted
exhibits and schedules to the Securities and Exchange Commission upon request.