EXHIBIT 10.5
PLEDGE AGREEMENT
PLEDGE AGREEMENT dated as of October 24, 2002 among FIVE STAR
QUALITY CARE TRUST and FIVE STAR QUALITY CARE HOLDINGS CO., INC. (each, together
with its successors and assigns, a "Grantor" and, collectively, the "Grantors"),
FSQC FUNDING CO., LLC, a Delaware limited liability company (together with its
successors and assigns, the "Purchaser"), and HFG HEALTHCO-4 LLC, a Delaware
limited liability company, as Collateral Agent for the benefit of the Lenders
and as assignee of the Purchaser (together with its successors and assigns, the
"Assignee") under a certain Assignment of Contracts, dated as of the date
hereof.
PRELIMINARY STATEMENTS. The Purchaser has entered into that
certain Receivables Purchase and Transfer Agreement, dated as of the date hereof
(as amended, restated, modified or supplemented from time to time, the "RPTA";
capitalized terms used herein and not defined herein shall have the meanings
attributed thereto in the RPTA) with each of the entities parties thereto as
providers (each, together with its successors and assigns, a "Provider" and,
collectively, the "Providers") and Five Star Quality Care, Inc., as Primary
Servicer.
The Purchaser, the Lenders, Dresdner Kleinwort Wasserstein
LLC, as Co- Program Manager, Syndication Agent and Lead Arranger, Healthcare
Finance Group, Inc., as Co- Program Manager, and the Assignee have entered into
that certain Loan and Security Agreement, dated as of the date hereof (as
amended, restated, modified or supplemented from time to time, the "LSA").
In connection with the RPTA, the Grantors have made that
certain Guaranty, dated as of the date hereof, in favor of the Purchaser (the
"Parent Guaranty").
It is a condition precedent to the effectiveness of the RPTA
and the LSA and the making of any financial accommodations thereunder that the
Grantors execute and deliver a pledge agreement in the form hereof to secure the
following (collectively, the "Obligations"): the full and prompt payment, at any
time and from time to time as and when due, of all liabilities and obligations
of the Grantors, whether now existing or hereafter incurred, created or arising
and whether direct or indirect, absolute or contingent, due or to become due
under, arising out of or in connection with the Parent Guaranty or this Pledge
Agreement, including, without limitation, any and all fees, costs and expenses,
(including reasonable counsel fees and expenses) paid or incurred in enforcing
any rights under the Parent Guaranty or this Pledge Agreement. Without limiting
the generality of the foregoing, the Grantors' liability shall extend to all
amounts that constitute part of the Obligations and would be owed by the
Grantors under the Parent Guaranty or this Pledge Agreement but for the fact
that they are unenforceable or not allowable due to the existence of a
bankruptcy, reorganization or similar proceeding involving any of the Grantors.
NOW, THEREFORE, the Grantors, the Purchaser and the Assignee
hereby agree as follows:
1. Defined Terms. For purposes of this Agreement, in addition
to the terms defined elsewhere herein, the following terms shall have the
meanings set forth below:
"Bankruptcy Code" shall mean 11 U.S.C. Sections 101 et seq.,
as amended from time to time, and any successor statute.
"Collateral" shall have the meaning given to such term in
Section 2(a).
"Equity Interest" shall mean, collectively, all of the issued
and outstanding shares, interests or other equivalents of capital stock of any
corporation at any time now or hereafter owned by any Grantor in any Provider,
whether voting or non-voting and whether common or preferred, all partnership,
joint venture, limited liability company or other equity interests in any
Provider not a corporation at any time now or hereafter owned by any Grantor,
all options, warrants and other rights to acquire, and all securities
convertible into, any of the foregoing, all rights to receive interest, income,
dividends, distributions, returns of capital and other amounts (whether in cash,
securities, property, or a combination thereof), and all additional stock,
warrants, options, securities, interests and other property, from time to time
paid or payable or distributed or distributable in respect of any of the
foregoing (but subject to the provisions of Section 6(b)), including, without
limitation, all rights of such Grantor to receive amounts due and to become due
under or in respect of any Investment Agreement or upon the termination thereof,
all rights of access to the books and records of any such Provider, and all
other rights, powers, privileges, interests, claims and other property in any
manner arising out of or relating to any of the foregoing, of whatever kind or
character (including any tangible or intangible property or interests therein),
and whether provided by contract or granted or available under applicable law in
connection therewith, including, without limitation, such Grantor's right to
vote and to manage and administer the business of any such Provider pursuant to
any applicable Investment Agreement, together with all certificates, instruments
and entries upon the books of securities intermediaries at any time evidencing
any of the foregoing, in each case whether now owned or existing or hereafter
acquired or arising.
"Investment Agreement" shall mean any articles or certificate
of incorporation, partnership agreement, joint venture agreement, limited
liability company operating agreement, stockholders agreement or other agreement
creating, governing or evidencing any Equity Interests and to which any Grantor
is now or hereafter becomes a party, as any such agreement may be amended,
modified, supplemented, restated or replaced from time to time.
"Obligations" shall have the meaning given to such term in the
Preliminary Statements.
"Partner Obligations" shall have the meaning given to such
term in Section 15.
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"Pledged Securities" shall have the meaning given to such term
in Section 2(a).
"Uniform Commercial Code" shall mean the Uniform Commercial
Code as the same may be in effect from time to time in the State of New York;
provided that if, by reason of applicable law, the validity or perfection or the
effect of perfection or non-perfection or the priority of any security interest
in any Collateral granted under this Agreement is governed by the Uniform
Commercial Code as in effect in a jurisdiction other than New York, then as to
the validity or perfection or the effect of perfection or non-perfection or the
priority, as the case may be, of such security interest, "Uniform Commercial
Code" shall mean the Uniform Commercial Code as in effect in such other
jurisdiction.
2. Pledge. (a) As security for the payment and performance in
full of the Obligations, each Grantor hereby transfers, grants, bargains, sells,
conveys, hypothecates, pledges, sets over, endorses over, and delivers unto the
Assignee, and grants to the Assignee, for the benefit of the Lenders and the
Purchaser, a Lien upon and a security interest in, all of such Grantor's right,
title and interest in and to the following, in each case whether now owned or
existing or hereafter acquired or arising or in which such Grantor now has or at
any time in the future may acquire any rights, title or interest (collectively,
the "Collateral"):
(i) all Equity Interests; and
(ii) any and all proceeds, as such term is defined in the
Uniform Commercial Code of or from any of the foregoing including, without
limitation, all cash, securities or other property at any time and from time to
time receivable or otherwise distributed in respect of or in exchange for any of
or all such Equity Interests.
Each Grantor authorizes the Assignee to file financing
statements under the Uniform Commercial Code describing the Collateral.
Upon delivery to the Assignee, any securities or other interests now or
hereafter included in the Collateral including, without limitation, the Equity
Interests (the "Pledged Securities") shall be accompanied (in the case of
Pledged Securities evidenced by certificates), by undated stock powers, undated
equity interest powers or undated beneficial interest powers, as applicable,
duly executed in blank or other instruments of transfer satisfactory to the
Assignee and by such other instruments and documents as the Assignee may
reasonably request. Each delivery of Pledged Securities shall be accompanied by
a schedule showing a description of the securities or other interests
theretofore and then being pledged hereunder, which schedule shall be attached
hereto as Schedule I and made a part hereof. Each schedule so delivered shall
supersede any prior schedules so delivered.
(b) If any Pledged Securities now or hereafter included in the
Collateral, are "uncertificated securities" within the meaning of the Uniform
Commercial Code or are otherwise
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not evidenced by any certificate or instrument, the Grantors will promptly
notify the Assignee thereof and will promptly take and cause to be taken, and
will (if the issuer of such uncertificated securities is a person other than a
subsidiary of a Grantor) use its commercially reasonable efforts to cause the
issuer to take, all actions required under Articles 8 and 9 of the Uniform
Commercial Code and any other applicable law, to enable the Assignee to acquire
"control" (within the meaning of such term under Section 8-106 (or its successor
provision) of the Uniform Commercial Code) of such uncertificated securities and
as may be otherwise necessary or deemed appropriate by the Assignee to perfect
the security interest of the Assignee therein.
3. Delivery of Collateral. Each Grantor agrees to deliver
promptly or cause to be delivered to the Assignee any and all Pledged Securities
and any and all certificates or other instruments or documents representing any
of the Collateral (together with any necessary endorsement).
4. Representations, Warranties. Each Grantor hereby represents
and warrants to and with the Purchaser and the Assignee that:
(a) except for the security interest granted to the Purchaser
and assigned to the Assignee, such Grantor (i) is and will at all times continue
to be the direct owner, beneficially and of record, of the Equity Interests that
it is pledging hereunder, (ii) holds the Collateral that it is pledging
hereunder free and clear of all Liens, charges, encumbrances and security
interests of every kind and nature, and the Equity Interests are subject to no
options to purchase or any similar or other rights of any person, (iii) will
make no assignment, pledge, hypothecation or transfer of, or create any security
interest in, the Collateral that it is pledging hereunder including, without
limitation, by virtue of becoming bound by any agreement which restricts in any
manner the rights of any present or future holder of any Equity Interests with
respect thereto, and (iv) subject to Section 6 below, will cause any and all
Collateral, whether for value paid by such Grantor or otherwise, to be forthwith
deposited with the Assignee and pledged or assigned hereunder;
(b) such Grantor (i) has good right and legal authority to
pledge the Collateral it is pledging hereunder in the manner hereby done or
contemplated, (ii) will not amend, modify or supplement any Pledged Security
without the prior written consent of the Purchaser and the Assignee, nor forgive
any indebtedness evidenced by any Pledged Security, and (iii) will defend its
title or interest thereto or therein against any and all attachments, Liens,
claims, encumbrances, security interests or other impediments of any nature,
however arising, of all persons whomsoever;
(c) no consent or approval of any governmental body or
regulatory authority or any securities exchange was or is necessary to the
validity of the pledge effected hereby;
(d) by virtue of the execution and delivery by each Grantor of
this Pledge Agreement, when the certificates, instruments or other documents
representing or evidencing the
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Collateral are delivered to the Assignee in accordance with this Pledge
Agreement, the Purchaser and the Assignee will obtain a valid and perfected
first Lien upon and security interest in such Collateral as security for the
repayment of the Obligations, prior to all other Liens and encumbrances thereon
and security interests therein;
(e) the pledge effected hereby is effective to vest in the
Purchaser and the Assignee the rights in the Collateral as set forth herein; and
(f) all of the Equity Interests have been duly authorized and
validly issued and are fully paid and nonassessable (or, in the case of
partnership, limited liability company or similar Equity Interests, not subject
to any capital call or other additional capital requirement) and not subject to
any preemptive rights, warrants, options or similar rights or restrictions in
favor of third parties or any contractual or other restrictions upon transfer.
(g) as at the date hereof, the Pledged Securities constitute
(i) all of the issued and outstanding shares of capital stock, equity interests
or beneficial interests of the issuers listed on Schedule I annexed hereto owned
by the Grantor, (ii) the percentage of the outstanding shares of capital stock,
equity interests or beneficial interests of each issuer set forth on Schedule I
annexed hereto and (iii) all of the Equity Interests of the Providers owned by
the Grantor.
All representations, warranties and covenants of the Grantors contained in this
Pledge Agreement shall survive the execution, delivery and performance of this
Pledge Agreement until the termi nation of this Pledge Agreement pursuant to
Section 17 hereof.
5. Registration in Nominee Name; Denominations. Upon the
occurrence and during the continuance of an Event of Termination, the Purchaser
and the Assignee shall have the right (in their sole and absolute discretion
with subsequent notice to the Grantors) to transfer to or to register the
Pledged Securities in their own name or the name of their nominee. In addition,
the Purchaser and the Assignee shall at all times have the right to exchange the
certificates representing Pledged Securities for certificates of smaller or
larger denominations for any purpose consistent with this Pledge Agreement.
6. Voting Rights; Dividends; etc. (a) Unless and until an
Event of Termination under the RPTA shall have occurred and be continuing:
(i) Each Grantor shall be entitled to exercise any and all
voting and/or consensual rights and powers accruing to an owner of Pledged
Securities or any part thereof for any purpose not inconsistent with the terms
of this Pledge Agreement and the Parent Guaranty provided that such action would
not adversely affect the rights inuring to the Purchaser and its successors,
transferees and assigns, including, without limitation, the Assignee, under this
Pledge Agreement or the Parent Guaranty or adversely affect the rights and
remedies of the Purchaser or the Assignee under this Pledge Agreement or the
Parent Guaranty or the ability of the Purchaser or the Assignee to exercise the
same.
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(ii) The Purchaser and the Assignee shall execute and deliver
to the Grantors, or cause to be executed and delivered to the Grantors, all such
proxies, powers of attorney, and other instruments as the Grantors may
reasonably request for the purpose of enabling the Grantors to exercise the
voting and/or consensual rights and powers which they are entitled to exercise
pursuant to subparagraph (i) above.
(iii) The Grantors shall be entitled to receive and retain any
and all cash dividends paid on the Pledged Securities only to the extent that
such cash dividends are permitted by, and otherwise paid in accordance with the
terms and conditions of, the Parent Guaranty and applicable laws. Any and all
a. noncash dividends,
b. stock equity interests, beneficial interests or dividends
paid or payable in cash or otherwise in connection with a partial or total
liquidation or dissolution, and
c. instruments, securities, other distributions in property,
return of capital, capital surplus or paid-in surplus or other distributions
made on or in respect of Pledged Securities (other than dividends permitted by
this Section 6(a)(iii)), whether paid or payable in cash or otherwise, whether
resulting from a subdivision, combination or reclassification of the outstanding
capital stock, equity interest or beneficial interest of the issuer of any
Pledged Securities or received in exchange for Pledged Securities or any part
thereof, or in redemption thereof, as a result of any merger, consolidation,
acquisition or other exchange of assets to which such issuer may be a party or
otherwise,
shall be and become part of the Collateral, and, if received by any Grantor,
shall not be commingled by such Grantor with any of its other funds or property
but shall be held separate and apart therefrom, shall be held in trust for the
benefit of the Purchaser and the Assignee and shall be forthwith delivered to
the Assignee in the same form as so received (with any necessary endorsement).
(a) Upon the occurrence and during the continuance of an Event
of Termination, all rights of the Grantors to receive any dividends, stock,
instruments, securities and other distributions which any Grantor is authorized
to receive pursuant to paragraph (a)(iii) of this Section 6 shall cease, and all
such rights shall thereupon become vested in the Purchaser and the Assignee,
which shall have the sole and exclusive right and authority to receive and
retain such dividends. All dividends which are received by any Grantor contrary
to the provisions of this Section 6(b) shall be received in trust for the
benefit of the Purchaser and the Assignee, shall be segregated from other
property or funds of such Grantor and shall be forthwith delivered to the
Assignee as Collateral in the same form as so received (with any necessary
endorsement). Any and all money and other property paid over to or received by
the Assignee pursuant to the provisions of this Section 6(b) shall be retained
by the Assignee in an account to be established
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by the Assignee upon receipt of such money or other property and shall be
applied in accordance with the provisions of Section 9 hereof.
(b) Upon the occurrence and during the continuance of an Event
of Termination, all rights of each Grantor to exercise the voting and consensual
rights and pursuant to the irrevocable proxy granted herein, powers which it is
entitled to exercise pursuant to Section 6(a)(i) shall cease, and all such
rights shall thereupon become vested in the Assignee, which, to the extent
permitted by applicable law, shall have the sole and exclusive right and
authority to exercise (i) all voting, consensual and other rights and powers
pertaining to the Equity Interests (whether or not transferred into the name of
the Assignee), at any meeting of shareholders, partners, members or otherwise,
and (ii) any and all rights of conversion, exchange, subscription and any other
rights, privileges or options pertaining to the Equity Interests as if it were
the absolute owner thereof (including, without limitation, the right to exchange
at its discretion any and all of the Equity Interests upon the merger,
consolidation, reorganization, reclassification, combination of shares or
interests, similar rearrangement or other similar fundamental change in the
structure of the applicable issuer, or upon the exercise by any Grantor or the
Assignee of any right, privilege or option pertaining to such Equity Interests),
and in connection therewith, the right to deposit and deliver any and all of the
Equity Interests with any committee, depositary, transfer agent, registrar or
other designated agency upon such terms and conditions as the Assignee may
determine, and give all consents, waivers and ratifications in respect of the
Equity Interests, all without liability except to account for any property
actually received by it, but the Assignee shall have no duty to exercise any
such right, privilege or option or give any such consent, waiver or ratification
and shall not be responsible for any failure to do so or delay in so doing
(c) In order to permit the Assignee to exercise the voting and
other consensual rights which it may be entitled to exercise pursuant to Section
6(c) and to receive all dividends and other distributions which it may be
entitled to receive under Section 6(a)(iii) or Section 6(b), each Grantor shall
promptly execute and deliver (or cause to be executed and delivered) to the
Assignee all such proxies, dividend payment orders and other instruments as the
Assignee may from time to time reasonably request.
Without limiting the effect of the foregoing, each Grantor
does hereby constitute and appoint the Assignee as its proxy, and the Assignee
shall have the right, upon the occurrence and during the continuance of an Event
of Termination, to exercise all rights, benefits, privileges and powers accruing
to such Grantor, as owner of the Pledged Securities including, without
limitation, giving or withholding consent, calling and attending shareholders or
members meetings to be held from time to time with full power to vote and act
for and in the name, place, and stead of such Grantor and in the same manner, to
the same extent, and with the same effect that such Grantor would if personally
present at such meetings, giving to the Assignee full power of substitution and
revocation, which proxy shall be effective, automatically and without the
necessity of any action (including any transfer of any Pledged Securities on the
record books of
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the issuer thereof) by any person (including the issuer of the Pledged
Securities or any officer or agent thereof).
THIS PROXY IS IRREVOCABLE
Any proxy or proxies heretofore given by any Grantor to any
person or persons whatsoever are hereby revoked. This proxy shall continue in
full force and effect until such time as all Obligations are paid and satisfied
in full in accordance with the terms of the Parent Guaranty.
7. Issuance of Additional Interests. Each Grantor agrees that
it will cause each of its subsidiaries not to issue any stock or other
securities or interests, whether in addition to, by dividend or other
distribution upon, or in substitution for, the Pledged Securities or otherwise.
8. Ownership; After-Acquired Equity Interests.
(a) Each Grantor will cause the Equity Interests pledged by it
hereunder to constitute at all times 100% of the capital stock or other Equity
Interests in each issuer held by such Grantor thereof, such that the issuer
thereof shall be a wholly owned subsidiary of such Grantor, and unless the
Assignee shall have given its prior written consent, no Grantor will cause or
permit any such issuer to issue or sell any new capital stock, any warrants,
options or rights to acquire the same, or other Equity Interests of any nature
to any person other than such Grantor, or cause, permit or consent to the
admission of any other person as a stockholder, partner or member of any such
issuer.
(b) If any Grantor shall, at any time and from time to time
after the date hereof, acquire any additional capital stock or other Equity
Interests in any person of the types described in the definition of the term
"Equity Interests," the same shall be automatically deemed to be Equity
Interests, and to be pledged to the Assignee, for the benefit of the Lenders and
the Purchaser pursuant to Section 2, and such Grantor will forthwith pledge and
deposit the same with the Assignee and deliver to the Assignee any certificates
or instruments therefor, together with the endorsement of such Grantor (in the
case of any promissory notes or other instruments), undated stock powers (in the
case of Equity Interests evidenced by certificates) or other necessary
instruments of transfer or assignment, duly executed in blank and in form and
substance satisfactory to the Assignee, together with such other certificates
and instruments as the Assignee may reasonably request (including Uniform
Commercial Code financing statements or appropriate amendments thereto), and
will promptly thereafter deliver to the Assignee a fully completed and duly
executed amendment to this Agreement in the form of Exhibit A (each, a "Pledge
Amendment") in respect thereof. Each Grantor hereby authorizes the Assignee to
attach each such Pledge Amendment to this Agreement, and agrees that all such
Collateral listed on any Pledge Amendment shall for all purposes be deemed
Collateral hereunder and shall be subject to the provisions hereof; provided
that the failure of any Grantor to execute and deliver any Pledge Amendment with
respect to any such additional Collateral as
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required hereinabove shall not impair the security interest of the Assignee, for
the benefit of the Lender and the Purchaser, in such Collateral or otherwise
adversely, affect the rights and remedies of the Assignee, the Lender or the
Purchaser hereunder with respect thereto.
9. Remedies upon Event of Default. If an Event of Termination
shall have occurred and be continuing, subject to strict compliance with all
applicable federal and state securities laws, the Assignee may sell or otherwise
dispose of all or any part of the Collateral, at public or private sale or at
any broker's board or on any securities exchange, for cash, upon credit or for
future delivery as the Assignee shall deem appropriate. Each such purchaser at
any such sale shall hold the property sold absolutely, free from any claim or
right on the part of any Grantor, and each Grantor hereby waives (to the extent
permitted by law) all rights of redemption, stay and appraisal which the Grantor
now has or may at any time in the future have under any rule of law or statute
now existing or hereafter enacted.
The Assignee shall give the Grantors 30 days' written notice
(which each Grantor agrees is reasonable notice within the meaning of Article 9
of the Uniform Commercial Code as in effect in New York) of the Assignee's
intention to make any sale of Collateral. Such notice, in the case of a public
sale, shall state the time and place for such sale and, in the case of a sale at
a broker's board or on a securities exchange, shall state the board or exchange
at which such sale is to be made and the day on which the Collateral, or portion
thereof, will first be offered for sale at such board or exchange. Any such
public sale shall be held at such time or times within ordinary business hours
and at such place or places as the Assignee may fix and state in the notice (if
any) of such sale. At any such sale, the Collateral, or portion thereof, to be
sold may be sold in one lot as an entirety or in separate parcels, as the
Assignee may (in its sole and absolute discretion) determine. The Assignee shall
not be obligated to make any sale of any Collateral if it shall determine not to
do so, regardless of the fact that notice of sale of such Collateral shall have
been given. The Assignee may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may, without
further notice, be made at the time and place to which the same was so
adjourned. In case any sale of all or any part of the Collateral is made on
credit or for future delivery, the Collateral so sold may be retained by the
Assignee until the sale price is paid by the purchaser or purchasers thereof,
but the Assignee shall not incur any liability in case any such purchaser or
purchasers shall fail to take up and pay for the Collateral so sold and, in case
of any such failure, such Collateral may be sold again upon like notice. At any
public sale made pursuant to this Section 9, the Assignee may bid for or
purchase, free (to the extent permitted by law) from any right of redemption,
stay or appraisal on the part of the Grantors (all said rights being also hereby
waived and released to the extent permitted by law), with respect to the
Collateral or any part thereof offered for sale and the Assignee may make
payment on account thereof by using any claim then due and payable to the
Purchaser or the Assignee from the Grantors as a credit against the purchase
price, and the Assignee may, upon compliance with the terms of sale, hold,
retain and dispose of such property without further accountability to the
Grantors therefor. For purposes hereof, a written agreement to purchase the
Collateral or any portion thereof shall be treated as a sale thereof; the
Purchaser and the Assignee shall be free to carry out such sale and purchase
pursuant to such agreement, and the Grantors shall
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not be entitled to the return of the Collateral or any portion thereof subject
thereto, notwithstanding the fact that after the Assignee shall have entered
into such an agreement all defaults under the Parent Guaranty shall have been
remedied and the Obligations paid in full. The Grantors shall remain, jointly
and severally, liable for any deficiency. As an alternative to exercising the
power of sale herein conferred upon it, the Assignee may proceed by a suit or
suits at law or in equity to foreclose this Pledge Agreement and to sell the
Collateral or any portion thereof pursuant to a judgment or decree of a court or
courts having competent jurisdiction or pursuant to a proceeding by a
court-appointed receiver.
10. Application of Proceeds of Sale. The proceeds of any sale
of Collateral, as well as any Collateral consisting of cash, shall be applied by
the Assignee promptly as follows:
FIRST, to the payment of all costs and expenses reasonably
incurred by the Purchaser and the Assignee in connection with such sale
or otherwise in connection with this Pledge Agreement or any of the
Obligations, including, but not limited to, all court costs and the
reasonable fees and expenses of the Assignee and its legal counsel, the
repayment of all advances made by the Purchaser and the Assignee on
behalf of the Grantors and as specified to the Grantors and any other
reasonable costs or expenses incurred in connection with the exercise
of any right or remedy hereunder;
SECOND, pro rata to the payment in full of principal and
interest in respect of any Revolving Loans outstanding (pro rata as
among the Lenders in accordance with the amounts of the Revolving Loans
made by them pursuant to the LSA);
THIRD, pro rata to the payment in full of all Obligations
(other than those referred to above) owed to the Lenders (pro rata as
among the Lenders in accordance with their respective Revolving
Commitment); and
LAST, to the Grantors, their successors or assigns, or as a
court of competent jurisdiction may otherwise direct.
11. The Assignee Appointed Attorney-in-Fact. Each Grantor
hereby appoints the Assignee its attorney-in-fact for the purpose of carrying
out the provisions of this Pledge Agreement and taking any action and executing
any instrument which the Assignee may deem necessary or advisable to accomplish
the purposes hereof, which appointment is irrevocable and coupled with an
interest. Without limiting the generality of the foregoing the Assignee shall
have the right, upon the occurrence and during the continuance of an Event of
Termination, with full power of substitution either in the Purchaser's name or
in the name of any Grantor, to ask for, demand, sue for, collect, receive
receipt and give acquittance for any and all moneys due or to become due and
under and by virtue of any Collateral, to endorse checks, drafts, orders and
other instruments for the payment of money payable to any Grantor representing
any interest or dividend, or other distribution payable in respect of the
Collateral or any part thereof or on account thereof and to give full discharge
for the same, to settle, compromise, prosecute or defend any action, claim or
proceeding with respect
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thereto, and to sell, assign, endorse, pledge, transfer and make any agreement
respecting, or otherwise deal with, the same; provided, however, that nothing
herein contained shall be construed as requiring or obligating the Assignee to
make any commitment or to make any inquiry as to the nature or sufficiency of
any payment received by the Assignee, or to present or file any claim or notice,
or to take any action with respect to the Collateral or any part thereof or the
moneys due or to become due in respect thereof or any property covered thereby,
and no action taken by the Assignee or the Purchaser, or omitted to be taken
with respect to the Collateral or any part thereof shall give rise to any
defense, counterclaim or offset in favor of the Grantor or to any claim or
action against the Assignee in the absence of the gross negligence or wilful
misconduct of the Assignee.
12. No Waiver. No failure on the part of the Purchaser or the
Assignee to exercise, and no delay in exercising, any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy by the Purchaser or the Assignee
preclude any other or further exercise thereof or the exercise of any other
right, power or remedy. All remedies hereunder are cumulative and are not
exclusive of any other remedies provided by law. The Purchaser and the Assignee
shall not be deemed to have waived any rights hereunder or under any other
agreement or instrument unless such waiver shall be in writing and signed by
such parties.
13. Registration, etc. Each Grantor recognizes that, by reason
of certain prohibitions contained in the Securities Act and applicable state
securities laws as in effect from time to time, the Assignee may be compelled,
with respect to any sale of all or any part of the Equity Interests conducted
without registration or qualification under the Securities Act and such state
securities laws, to limit purchasers to any one or more persons who will
represent and agree, among other things, to acquire such Equity Interests for
their own account, for investment and not with a view to the distribution or
resale thereof. Each Grantor acknowledges that any such private sales may be
made in such manner and under such circumstances as the Assignee may deem
necessary or advisable in its sole and absolute discretion, including at prices
and on terms less favorable than those obtainable through a public sale without
such restrictions (including, without limitation, a public offering made
pursuant to a registration statement under the Securities Act), and,
notwithstanding such circumstances, agrees that any such private sale shall be
deemed to have been made in a commercially reasonable manner and agrees that the
Assignee shall have no obligation to conduct any public sales and no obligation
to delay the sale of any Equity Interests for the period of time necessary to
permit its registration for public sale under the Securities Act and applicable
state securities laws, and shall not have any responsibility or liability as a
result of its election so not to conduct any such public sales or delay the sale
of any Equity Interests, notwithstanding the possibility that a substantially
higher price might be realized if the sale were deferred until after such
registration. Each Grantor hereby waives any claims against the Assignee, the
Lenders or the Purchaser arising by reason of the fact that the price at which
any Equity Interests may have been sold at any private sale was less than the
price that might have been obtained at a public sale or was less than the
aggregate amount of the Obligations, even if the Assignee accepts the first
offer received and does not offer such Equity Interests to more than one
offeree.
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14. Security Interest Absolute. All rights of the Purchaser
and the Assignee hereunder, the grant of a security interest in the Collateral
and all obligations of the Grantors hereunder, shall be absolute and
unconditional irrespective of (i) any lack of validity or enforceability of the
Parent Guaranty, the RPTA, the LSA, any agreement with respect to any of the
Obligations or any other agreement or instrument relating to any of the
foregoing, (ii) any change in time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other amendment or waiver
of or any consent to any departure from the Parent Guaranty, the RPTA, the LSA
or any other agreement or instrument, (iii) any exchange, release or
nonperfection of any other collateral, or any release or amendment or waiver of
or consent to or departure from any guarantee, for all or any of the Obligations
or (iv) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, the Grantors in respect of the Obligations or
in respect of this Pledge Agreement.
15. The Grantors Remain Liable. Notwithstanding anything
herein to the contrary, (i) each Grantor shall remain liable under all
Investment Agreements to perform all of its obligations thereunder to the same
extent as if this Agreement had not been executed, (ii) the exercise by the
Assignee of any of its rights or remedies hereunder shall not release any
Grantor from any of its obligations under any of such Investment Agreements, and
(iii) except as specifically provided for hereinbelow, none of the Assignee, the
Lenders or the Purchaser shall have any obligation or liability by reason of
this Agreement under any of such Investment Agreements, nor shall the Assignee
or any Lender be obligated to perform any of the obligations or duties of any
Grantor thereunder or to take any action to collect or enforce any claim for
payment assigned hereunder. This Agreement shall not in any way be deemed to
obligate the Assignee, any Lender, the Purchaser or any other purchaser at a
foreclosure sale under this Agreement to assume any of a Grantor's obligations,
duties or liabilities under any Investment Agreement, including, without
limitation, any Grantor's obligations, if any, to manage the business and
affairs of the applicable partnership, joint venture, limited liability company,
limited liability partnership or other issuer (collectively, the "Partner
Obligations"), unless the Assignee, any Lender, the Purchaser or any other
purchaser otherwise agrees in writing to assume any or all of such Partner
Obligations. In the event of foreclosure by the Assignee hereunder, then except
as provided in the preceding sentence, each applicable Grantor shall remain
bound and obligated to perform its Partner Obligations and none of the Assignee,
any Lender or the Purchaser shall be deemed to have assumed any Partner
Obligations. In the event the Assignee, any Lender, the Purchaser or any other
purchaser at a foreclosure sale elects to become a substitute partner or member
in place of a Grantor, the party making such election shall adopt in writing
such Investment Agreement and agree to be bound by the terms and provisions
thereof; and subject to the execution of such written agreement, each Pledgor
hereby irrevocably consents in advance to the admission of the Assignee, any
Lender, the Purchaser or such other purchaser as a substitute partner or member
to the extent of the Equity Interests acquired pursuant to such sale, and agrees
to execute any documents or instruments and take any other action as may be
necessary or as may be reasonably requested in connection therewith. The powers,
rights and remedies conferred on the Assignee hereunder are solely to protect
its interest and privilege in such Investment Agreements, as Collateral, and
shall not impose any duty upon it to exercise any such powers, rights or
remedies.
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16. Purchaser's and Assignee's Fees and Expenses. Each
Grantor, jointly and severally, shall be obligated to, upon demand, pay to the
Purchaser and the Assignee the amount of any and all reasonable expenses,
including the reasonable fees and expenses of their respective counsel and of
any experts or agents which the Purchaser or the Assignee may incur in
connection with (i) the administration of this Pledge Agreement, (ii) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (iii) the exercise or enforcement of
any of the rights of the Purchaser or the Assignee hereunder or (iv) the failure
by a Grantor to perform or observe any of the provisions hereof. In addition,
each Grantor, jointly and severally, indemnifies and holds the Purchaser and the
Assignee harmless from and against any and all liability incurred by the
Purchaser or the Assignee hereunder or in connection herewith, unless such
liability shall be due to the gross negligence or wilful misconduct of the
Purchaser or the Assignee, as the case may be. Any such amounts payable as
provided hereunder or thereunder shall be additional Obligations secured hereby.
17. Termination. This Pledge Agreement shall terminate when
(a) all of the Obligations have been fully paid in cash and (b) the Lenders have
no further commitment to make any advances under the LSA, at which time the
Purchaser and the Assignee shall reassign and deliver to each Grantor, or to
such person or persons as the Grantors shall designate, against receipt, such of
the Collateral (if any) as shall not have been sold or otherwise still be held
by it hereunder, together with appropriate instruments of reassignment and
release, including delivery of Uniform Commercial Code termination statements
and similar documents reasonably requested by the Grantors; provided, however,
that all indemnities of the Grantors contained in this Pledge Agreement shall
survive, and remain operative and in full force and effect regardless of, the
termination of this Pledge Agreement. Any such reassignment shall be without
recourse to or warranty by the Purchaser and the Assignee and at the expense of
the Grantors.
18. Notices. All communications and notices hereunder shall be
in writing and given as provided in the RPTA.
19. Further Assurances. Each Grantor agrees to do such further
acts and things, and to execute and deliver such additional conveyances,
assignments, agreements and instruments, as the Purchaser and the Assignee may
at any time reasonably request in connection with the administration and
enforcement of this Pledge Agreement or with respect to the Collateral or any
part thereof or in order better to assure and confirm unto the Purchaser and the
Assignee their rights and remedies hereunder.
20. ASSIGNABILITY. SUBJECT TO SECTION 5.03(a) OF THE LSA, THIS
PLEDGE AGREEMENT AND THE PURCHASER'S RIGHTS AND OBLIGATIONS HEREIN SHALL BE
ASSIGNABLE BY THE PURCHASER AND ITS SUCCESSORS AND ASSIGNS. EACH GRANTOR HEREBY
ACKNOWLEDGES AND CONFIRMS THAT, AS COLLATERAL SECURITY FOR ANY AND ALL
OBLIGATIONS OF THE PURCHASER PURSUANT TO THE LSA, THE PURCHASER IS GRANTING TO
THE ASSIGNEE, FOR THE BENEFIT OF THE
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LENDERS, A SECURITY INTEREST IN, AND COLLATERAL ASSIGNMENT OF, THIS PLEDGE
AGREEMENT AND ALL OF THE PURCHASER'S RIGHTS, TITLE AND INTERESTS HEREUNDER,
INCLUDING, ALL MONIES DUE OR TO BECOME DUE TO THE PURCHASER, UNDER OR IN
CONNECTION WITH THIS PLEDGE AGREEMENT.
21. Binding Agreement; Assignments. This Pledge Agreement, and
the terms, covenants and conditions hereof, shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns,
except that the Grantors shall not be permitted to assign this Pledge Agreement
or any interest herein or in the Collateral, or any part thereof, or otherwise
pledge, encumber or grant any option with respect to the Collateral, or any part
thereof, or any cash or property held by the Assignee as Collateral under this
Pledge Agreement.
22. GOVERNING LAW. THIS PLEDGE AGREEMENT SHALL, IN ACCORDANCE
WITH SECTION 5-1401 OF THE GENERAL OBLIGATION 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.
23. Severability. In case any one or more of the provisions
contained in this Pledge Agreement should be invalid, illegal or unenforceable
in any respect, the validity, legality and enforceability of the remaining
provisions contained herein shall not in any way be affected or impaired.
24. Counterparts. This Pledge Agreement may be executed in two
or more counterparts, each of which shall constitute an original, but all of
which, when taken together, shall constitute but one instrument. This Pledge
Agreement shall be effective when counterparts which bear the signature of each
Grantor shall have been delivered to the Assignee.
25. Section Headings. Section headings used herein are for
convenience only and are not to affect the construction of, or be taken into
consideration in interpreting, this Pledge Agreement.
[Remainder of this page intentionally left blank]
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IN WITNESS WHEREOF, the parties hereto have duly executed this
Pledge Agreement as of the day and year first above written.
FIVE STAR QUALITY CARE TRUST
By /s/ Bruce J. Mackey, Jr.
Name: Bruce J. Mackey, Jr.
Title: Chief Financial Officer, Treasurer
and Assistant Secretary
FIVE STAR QUALITY CARE HOLDING CO., INC.
By /s/ Bruce J. Mackey, Jr.
Name: Bruce J. Mackey, Jr.
Title: Chief Financial Officer, Treasurer
and Assistant Secretary
FSQC FUNDING CO., LLC
By /s/ Bruce J. Mackey, Jr.
Name: Bruce J. Mackey, Jr.
Title: Chief Financial Officer, Treasurer
and Assistant Secretary
HFG HEALTHCO-4, LLC, as Collateral Agent
and as Assignee
By: HFG Healthco-4, Inc.
By /s/ Orlando Figueroa
Name: Orlando Figueroa
Title: Vice President
SCHEDULE I
to Pledge Agreement
Percentage
Number of of
Name of Type of Certificate Par Value, if Shares/Units Outstanding
Grantor Issuer Interests No(s). applicable if applicable Interests
- --------------------------------------------------------------------------------------------------------------------------
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust AZ, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust CA, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust Colorado,
LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust CT, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust GA, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust IA, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust KS, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust MI, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust MO, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust NE, LLC
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust WI, LLC
Percentage
Number of of
Name of Type of Certificate Par Value, if Shares/Units Outstanding
Grantor Issuer Interests No(s). applicable if applicable Interests
- --------------------------------------------------------------------------------------------------------------------------
Five Star Five Star Company N/A N/A N/A 100%
Quality Care Quality Care- Interests
Trust WY, LLC
Five Star Five Star Shares of 2 $0.01 per 1,000 100%
Quality Care Quality Care- Common share
Holding Co., CA, Inc. Stock
Inc.
Five Star Five Star Shares of 2 $0.01 per 1,000 100%
Quality Care Quality Care- Common share
Holding Co., IA, Inc. Stock
Inc.
Five Star Five Star Shares of 2 $0.01 per 1,000 100%
Quality Care Quality Care- Common share
Holding Co., MI, Inc. Stock
Inc.
Five Star Five Star Shares of 2 $0.01 per 1,000 100%
Quality Care Quality Care- Common share
Holding Co., NE, Inc. Stock
Inc.
EXHIBIT A
PLEDGE AMENDMENT
THIS AMENDMENT, dated as of ____________, 200_, is delivered
by [NAME OF PLEDGOR] (the "Pledgor") pursuant to Section 8 of the Pledge
Agreement referred to hereinbelow. The Pledgor hereby agrees that this Amendment
may be attached to the Pledge Agreement, dated as of October __, 2002, made by
the Pledgor and certain other pledgors named therein in favor of HFG HEALTHCO-4
LLC, a Delaware limited liability company, as Collateral Agent for the benefit
of the Lenders and as assignee of the Purchaser (together with its successors
and assigns, the "Assignee") under a certain Assignment of Contracts, dated as
of the date hereof. (as amended, modified or supplemented from time to time, the
"Pledge Agreement," capitalized terms defined therein being used herein as
therein defined), and that the Equity Interests listed on Annex A to this
Amendment shall be deemed to be part of the Equity Interests within the meaning
of the Pledge Agreement and shall become part of the Collateral and shall secure
all of the Obligations as provided in the Pledge Agreement. This Amendment and
its attachments are hereby incorporated into the Pledge Agreement and made a
part thereof.
[NAME OF PLEDGOR]
By:______________________________
Title:_____________________________
Annex A
to Amendment to Pledge Agreement
Equity Interests
No. of Percentage of
Certificate No. Shares/Units Outstanding
Name of Issuer Type of Interests (if applicable) (if applicable) Interests in Issuer
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