-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, JLd1Ce889AhSRk1srnZP5lpE/lfLkE/Wo+I6+6OHBwxpcyBP2K8K2E4MmtGVhGeF d9fyRyPGJmmT02eUO06SUQ== 0000890925-96-000008.txt : 19961227 0000890925-96-000008.hdr.sgml : 19961227 ACCESSION NUMBER: 0000890925-96-000008 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19961226 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961226 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MULTICARE COMPANIES INC CENTRAL INDEX KEY: 0000890925 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-SKILLED NURSING CARE FACILITIES [8051] IRS NUMBER: 223152527 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-22090 FILM NUMBER: 96686305 BUSINESS ADDRESS: STREET 1: 411 HACKENSACK AVE CITY: HACKENSACK STATE: NJ ZIP: 07601 BUSINESS PHONE: 2014888818 MAIL ADDRESS: STREET 1: 411 HACKENSACK AVENUE CITY: HACKENSACK STATE: NJ ZIP: 07601 8-K 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report: December 26, 1996 THE MULTICARE COMPANIES, INC. (Exact name of Registrant as specified in its Charter) Commission File No. 34-22090 Delaware 22-3152527 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 411 Hackensack Avenue Hackensack, New Jersey 07601 (Address of principal executive offices) Zip Code Registrant's telephone number, including area code (201) 488-8818 ITEM 2. Acquisition or Disposition of Assets. On December 12, 1996, the Registrant announced in a press release that it had completed the acquisition of The ADS Group. Under the terms of the agreement, Multicare paid approximately $60.1 million and assumed or repaid approximately $24.6 million in debt and issued 554,973 shares of its common stock for ADS. Alan D. Solomont, founder and chairman of ADS is a member of Multicare's Board of Directors. ADS owns, operates or manages 23 long-term care facilities with 3,072 beds, 20 hospital based subacute units with 514 beds and eight assisted living facilities, totaling 820 beds, almost all of which are located in Massachusetts. ADS also provides consulting services to an additional 14 facilities with 1,668 beds, operates several ancillary businesses including home health, both Medicare certified and private, and provides out-patient rehabilitation services at numerous locations. A copy of the press release is attached hereto as Exhibit 99.8 and is incorporated herein by reference. On December 18, 1996, the Registrant completed the previously announced acquisition of three facilities in Rhode Island for approximately $19.75 million. ITEM 5. Other Events. The Registrant has amended and restated its $350 million credit facility and in connection therewith has entered into a new lease facility in the amount of approximately $55 million. The Agent for these facilities is Nationsbank, N.A. ITEM 7. Financial Statements, and Exhibits. (a) Not applicable. (b) Not applicable. (c) Exhibits. Exhibit No. 10.37 Amendment No. 2, dated as of September 25, 1996 to the ADS Acquisition Agreement. 10.38 Amendment No. 3, dated as of October 29, 1996 to the ADS Acquisition Agreement. 10.39 Amendment No. 4, dated as of December 11, 1996 to the ADS Acquisition Agreement. 10.40 Third Amended and Restated Credit Agreement dated as of December 11, 1996 among The Multicare Companies, Inc. and certain of its Subsidiaries, and Nationsbank, N.A. as Administrative Agent. 10.41 Master Lease, Open End Mortgage and Purchase Option dated as of December 11, 1996 among Academy Nursing Home, Inc., Nursing and Retirement Center of the Andovers, Inc., Prescott Nursing Home, Inc., Willow Manor Nursing Home, Inc., and ADS/Multicare, Inc. 10.42 Appendix A to Participation Agreement, Master Lease, Supplements, Loan Agreement, and Lease Facility Mortgages. 10.43 Participation Agreement, dated as of December 11, 1996 among The Multicare Companies, Inc., as Guarantor, Various Subsidiaries of The Multicare Companies, Inc. as Lessees, Selco Service Corporation, as Lessor, Various Financial Institutions as Tranche A Lenders, Various Financial Institutions as Tranche B Lenders, Nationsbank, N.A., as Lease Agent for the Lenders, and Nationbank, N.A., as Collateral Agent for the Secured Parties. 99.8 Press Release dated December 12, 1996. Signature Pursuant to the requirements of the Securities Exchange of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE MULTICARE COMPANIES, INC. STEPHEN R. BAKER _______________________________ Stephen R. Baker Executive Vice President, Chief Financial Officer December 26, 1996 EX-10 2 Amendment No. 2 to Acquisition Agreement Amendment No. 2 dated as of September 25, 1996 ("Amendment No. 2"), to the Acquisition Agreement, dated as of June 17, 1996, as amended August 12, 1996 by and among ADS/Multicare, Inc. and Alan D. Solomont, David Solomont, Ahron M. Solomont, Jay H. Solomont, Meyer Solomont (who has become a party to such Agreement in lieu of David Solomont (of Lowell)), Susan S. Bailis and the Seller Entities signatory thereto (the "Acquisition Agreement"). The parties to the Acquisition Agreement hereby agree as follows: 1. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed thereto in the Acquisition Agreement. 2. Reference is made to Amendment No. 1, dated as of August 12, 1996 ("Amendment No. 1), to the Acquisition Agreement. 3. All occurrences of the phrase "August 30, 1996" in Amendment No. 1 are hereby deleted and the phrase "October 14, 1996" is substituted therefor. 4. All occurrences of the phrase "September 30, 1996" in Amendment No. 1 are hereby deleted and the phrase "October 31, 1996" is substituted therefor. 5. Except as specifically set forth in this Amendment No. 2, the Acquisition Agreement and Amendment No. 1 shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment No. 2 as of the day and year first above written. ADS/MULTICARE, INC. BRADFORD C. BURKETT By: _____________________________ Name: Bradford C. Burkett Title: Vice President ALAN D. SOLOMONT __________________________ Alan D. Solomont, as Sellers' Representative EX-10 3 Amendment No. 3 to Acquisition Agreement Amendment No. 3 dated as of October 29, 1996 ("Amendment No. 3"), to the Acquisition Agreement, dated as of June 17, 1996, as amended by Amendment No. 1 dated August 12, 1996 and Amendment No. 2 dated as of September 25, 1996, by and among ADS/Multicare, Inc. and Alan D. Solomont, David Solomont, Ahron M. Solomont, Jay H. Solomont, Meyer Solomont (who has become a party to such Agreement in lieu of David Solomont (of Lowell)), Susan S. Bailis and the Seller Entities signatory thereto (the "Acquisition Agreement"). The parties to the Acquisition Agreement hereby agree as follows: 1. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed thereto in the Acquisition Agreement. 2. Reference is made to Amendment No. 2, dated as of September 25, 1996 ("Amendment No. 2), to the Acquisition Agreement. 3. All occurrences of the phrase "October 14, 1996" in Amendment No. 2 are hereby deleted and the phrase "November 14, 1996" is substituted therefor. 4. All occurrences of the phrase "October 31, 1996" in Amendment No. 2 are hereby deleted and the phrase "November 30, 1996" is substituted therefor. 5. Except as specifically set forth in this Amendment No. 3, the Acquisition Agreement, Amendment No. 1 and Amendment No. 2 shall remain unmodified and in full force and effect. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment No. 3 as of the day and year first above written. ADS/MULTICARE, INC. BRADFORD C. BURKETT By: _____________________________ Name: Bradford C. Burkett Title: Vice President ALAN D. SOLOMONT __________________________ Alan D. Solomont, as Sellers' Representative EX-10 4 Amendment No. 4 to Acquisition Agreement Amendment No. 4, dated as of December 11, 1996 ("Amendment No. 4"), to the Acquisition Agreement, dated as of June 17, 1996, as amended by Amendment No. 1 dated as of August 12, 1996, Amendment No. 2 dated as of September 25, 1996 and Amendment No. 3 dated as of October 29, 1996, by and among ADS/Multicare, Inc. and Alan D. Solomont, David Solomont, Ahron M. Solomont, Jay H. Solomont, Meyer Solomont (who has become a party to such Agreement in lieu of David Solomont (of Lowell)), Susan S. Bailis and the Seller Entities signatory thereto (the "Acquisition Agreement"). The parties to the Acquisition Agreement hereby agree as follows: 1. Capitalized terms used herein but not otherwise defined herein shall have the respective meanings ascribed thereto in the Acquisition Agreement. 2. The second sentence of the first paragraph of the Acquisition Agreement is hereby deleted in its entirety and replaced with the following: "The Owner Parties and the selling stockholders and partners listed on Schedule A who are not Owner Parties are collectively referred to as the 'Owners.'" 3. Exhibit A to the Acquisition Agreement is hereby deleted in its entirety and replaced by the Exhibit A attached hereto. At the Closing, Buyer shall assume all of the liabilities of Solomont Brookline Limited Partnership other than any liabilities as to which Buyer is indemnified under the Acquisition Agreement. 4. In the first sentence of Section 2.1 of the Acquisition Agreement, the sum of "$69,751,000" is hereby deleted and replaced with "$67,159,000." In the second sentence of Section 2.1 of the Acquisition Agreement, the sum of "$59,187,300" is hereby deleted and replaced with "$56,128,900" and the number "531,507," referring to the number of Parent Shares, is hereby deleted and replaced with the number "554,973." The amount of the Indemnification Holdback Amount is increased to $1,500,000 by reason of the provisions of paragraph 20 below. 5. A new paragraph is hereby added at the end of Section 2.1 of the Acquisition Agreement as follows: "In order to induce Susan S. Bailis and Thomas H. Grape to sell their interests in the Seller Entities, Buyer shall pay at the Closing in cash $2,400,000 to Susan S. Bailis and $100,000 to Thomas H. Grape." 6. Clause (b) in the first paragraph of Section 2.3.1 is hereby deleted and clause (c) thereof is relettered as clause (b). Academy shall not be considered a Seller Entity for purposes of preparing the Closing Balance Sheet under Section 2.3.1. The parties acknowledge that no post closing adjustment will be made respecting Heritage and that mutually agreeable adjustments will be made to recognize that such Facility is not being purchased at the Closing and post-closing adjustments respecting Heritage will be made as of the closing, if any, of the purchase of such Facility under procedures as similar as practicable to those set forth in the Acquisition Agreement. Unless and until Heritage is purchased, Heritage shall not be considered a Facility and neither ASL, Inc. nor Arcadia Associates shall be considered a Seller Entity for purposes of the covenants, warranties or indemnification provisions of the Acquisition Agreement. 7. Section 2.3.5 is hereby deleted and the following new Section 2.3.5 is substituted in its entirety therefor: "2.3.5 Academy. (a) Within 60 days following the Closing Date, KPMG Peat Marwick LLP shall deliver or cause to be delivered to Buyer and the Sellers' Representative an audited balance sheet of Academy as at the Closing Date, prepared in accordance with generally accepted accounting principles consistent with the balance sheet as at December 31, 1995 of Academy heretofore delivered to Buyer (the "Academy Closing Balance Sheet"), except that all expenses of Academy in connection with the preparation, execution and performance of this Agreement and the transactions contemplated hereby that have not been expended since December 31, 1995, shall be deducted from Shareholders Equity. The methods and time periods applicable to finalizing the Closing Balance Sheet in accordance with Section 2.3.1 shall also apply to finalizing the Academy Closing Balance Sheet. (b) (1) If the amount of the shareholders equity reflected on the Academy Closing Balance Sheet ("Academy Closing Equity") is less than $1,034,393 ("December 31 Academy Equity"), then the aggregate Purchase Price shall be reduced by an amount equal to the amount by which Academy Closing Equity is less than December 31 Academy Equity. If the amount of Academy Closing Equity is greater than December 31 Academy Equity, then the Purchase Price shall be increased by such excess. (2) If the amount of Net Academy Liabilities (as defined below) on the Academy Closing Balance Sheet is greater than $4,149,536, then the aggregate Purchase Price shall be reduced by the amount of such excess. Net Academy Liabilities means with respect to Academy (i) accounts payable plus accrued expenses plus short term debt plus long term debt (including current maturities of long term debt) less (ii) cash and cash equivalents. (c) The Buyer shall pay to the Sellers' Representative for payment to the relevant Owners, or the Sellers' Representative shall pay or cause to be paid to the Buyer the amount of the adjustment required under this Section 2.3.5. Such adjustment shall be made in cash not later than on the third business day following final determination of the Academy Closing Balance Sheet." 8. The first sentence of Section 3.2 is hereby amended by inserting "the day next following" immediately preceding "the Closing Date." 9. By executing and delivering this instrument (a) Encare of Massachusetts, Inc. ("Encare"), hereby joins in and becomes a party to the Acquisition Agreement as a Seller Entity with the intention and effect that Encare shall be deemed for all purposes to have executed and delivered the Acquisition Agreement and shall have all of the rights and benefits, subject to all of the obligations, of a Seller Entity thereunder and (b) the Owner Parties who are stockholders of Encare (each, an "Encare Owner Party") agree that each representation, warranty, covenant or agreement in the Acquisition Agreement made by an Encare Owner Party with respect to the Seller Entities shall be deemed to have been made with respect to Encare, except that (i) the representations and warranties made with respect to Encare shall be limited to the matters set forth in Sections 6.1.2, 6.1.3 and 6.2 (second and third sentences only) (it being understood that Encare will not be deemed a Seller Entity in making such representations but that the relevant Sellers will be transferring good and marketable title to their shares of Encare, free and clear of all Liens) and (ii) Encare shall be deemed a Seller Entity only for purposes of Sections 2.2, 3.3.1 (l) and (m), 8.7 (but only as to the obligations of Owner Parties respecting their shares of Encare and not any action by Encare), 8.13 and 10.8. 10. All references to Section 5.9 in Section 5.4 are hereby deleted. 11. Buyer shall be entitled to indemnification under Section 12.2(c) of the Acquisition Agreement only to the extent that the amount of such indemnification exceeds the amount reserved for such items by the Seller Entity as of the Closing Date (as reflected in the Closing Balance Sheet and/or the Academy Closing Balance Sheet), as such reserve may be increased in accordance with the following: The amount reserved for such items shall be increased on a dollar for dollar basis by the amount by which any refund or other positive adjustment by reason of any audit by any Governmental Authority concerning the operation of any Facility prior to the Closing exceeds the amount booked as revenue for the period covered by such audit. Any payment required hereunder shall be made first from the $1MM Indemnification Deposit or the Academy Indemnification Deposit (as the case may be) pursuant to the Escrow Agreement and then, when claims of any type against such funds exceed $1,000,000 (in the case of the $1MM Indemnification Deposit) or $300,000 (in the case of the Academy Indemnification Deposit), from the appropriate Owner Parties as contemplated by Article 12. Not less frequently than once per calendar year, Buyer shall deliver a statement to the Sellers' Representative setting forth in reasonable detail information reasonably necessary to determine the size of any payments due under this Paragraph and the size of the reserve for such items. In no event shall Buyer be obligated to pay (but the reserve shall be credited as aforesaid) to any Owner or Seller Entity any amount by reason of receipt of refunds or other positive adjustments. 12. Section 6.9 is hereby amended by adding the following prefatory language before the subsections thereof: "The representations and warranties in Section 6.9.1 and Section 6.9.3 are qualified in their entirety by the disclosure set forth on Schedule 6.9.1." 13. Paragraphs (c), (h), (k), (l) and (p) of Section 6.17 are hereby deleted and are replaced in their entirety by the following: "(c) Subject to Schedule 6.17(c), each Benefit Plan conforms to, and its administration is in compliance with, all applicable laws and regulations. (h) No Benefit Plan is a multiemployer plan as defined in Code section 414(f) or ERISA sections 3(37) or 4001(a)(3). Except as set forth in Schedule 6.17 (h), no Benefit Plan is a multiple employer plan within the meaning of Code section 413(c) or ERISA sections 4063, 4064 or 4066. (k) Except as set forth in Schedule 6.17(k), each Benefit Plan which is intended to qualify under Code section 401(a) or 403(a) so qualifies and its related trust is exempt from taxation under Code section 501(a). (l) Each Benefit Plan that is a "group health plan" (as defined in ERISA section 607(1) or Code section 5000(b)(1)) has been operated at all times in compliance with the provisions of COBRA and any applicable, similar state law. (p) As of the Closing, none of the Seller Entities Commonly Controlled Entity has incurred any liability or obligation under the Worker Adjustment and Retraining Notification Act, as it may be amended from time to time or any similar state law (collectively, "WARN") and within the six-month period immediately following the Closing, will not incur any such liability or obligation if, during such six-month period, only terminations of employment in the normal course of operations occur." 14. A new Section 8.18 is hereby added to the Acquisition Agreement as follows: 8.18 Individual Account Plan. The ADS Group 401(k) Plan sponsored by The ADS Group, Inc. and the Academy Manor Retirement & Savings Plan (each a "Plan," together, the "Plans") as in effect on the Closing Date shall remain in effect after the Closing Date, until such time as Buyer decides to terminate either or both of said Plans, for the benefit of the employees of the Business participating or eligible to participate in each such Plan as of the Closing Date or who will thereafter become eligible to participate upon satisfaction of the applicable eligibility requirements. If Buyer decides to terminate the ADS Group 401(k) Plan after the Closing Date, at a time when any entity outside of Buyer's ERISA controlled group is a participating employer therein, Buyer shall cooperate in the transfer of sponsorship of the ADS Group 401(k) Plan to any such entity outside of its ERISA controlled group desiring to continue such Plan. The Buyer, the Owner Parties and the Seller Entities shall cooperate and take any and all action, and cause each of their respective Affiliates to take any and all action, as may be necessary or appropriate to accomplish the purposes of the foregoing, including, but not by way of limitation, the adoption of each such Plan as a participating employer or plan sponsor effective as of the Closing Date. 15. A new Section 8.19 is hereby added to the Acquisition Agreement as follows: 8.19 Post-Closing Environmental Actions. (a) As soon as is reasonably practicable after the Closing Date, Buyer shall remove the underground storage tanks located at Academy Manor Nursing Home and Prescott House Nursing Home (the "USTs"), and shall undertake all actions, including, without limitation, investigation and remediation of any Hazardous Substances in the environment associated with the removal of the USTs, reasonably necessary to obtain a written statement from either (i) any Governmental Authority which has exercised jurisdiction over the removal of the USTs or (ii) from a "Licensed Site Professional" (as defined in 310 CMR 40.0006) to the effect that no further action is required under applicable Environmental Laws with respect to the USTs and any associated Hazardous Substances. (b) As soon as is reasonably practicable after the Closing Date, the Buyer shall undertake all actions, if any, necessary to cause the disposal of the wastewater generated in connection with floor cleaning and boiler blowdown at Palm Manor Nursing Home and Westford Nursing and Rehabilitation Center to comply with all applicable Environmental Laws. (c) Buyer shall have the exclusive right to manage and control all action undertaken pursuant to Sections 8.19(a) and 8.19(b); provided, however, that all such actions shall be reasonably cost effective to accomplish the aims set forth by such Sections. (d) Subject to the limitations set forth in Sections 12.4 and 12.6, the Owner Parties shall indemnify and hold harmless Buyer and its agents, representatives, employees, officers, directors, stockholders, controlling persons and Affiliates (collectively, the "Buyer Indemnities"), and shall reimburse the Buyer Indemnities for any loss, liability, claim, damage, expense (including, but not limited to, reasonable costs of investigation and defense and reasonable attorneys' fees), whether or not involving a third party claim (collectively, "Damages"), arising from or in connection with (a) the actions undertaken pursuant to Sections 8.19(a) and 8.19(b) (provided, however, that the Owner Parties shall not be obligated to indemnify the Buyers Indemnities to the extent that such actions are not conducted in accordance with reasonable and customary practices in order to accomplish the aims set forth by such Sections), (b) the USTs and the presence of any "reportable concentrations" (as defined in 310 CMR 40.0006) of Hazardous Substances in the environment resulting from the presence, use or operation of the USTs, (c) the presence of any "reportable concentrations" (as defined in 310 CMR 40.0006) of Hazardous Substances resulting from the discharge of any Hazardous Substances to the septic systems at the Palm Manor Nursing Home or the Westford Nursing and Rehabilitation Center, or (d) any environmental conditions, noncompliance with environmental laws, or other events, acts or conditions identified in (i) the Level I environmental site assessments of the Operated Facilities prepared by Rizzo Associates, Inc. and provided to Sellers on or before the Closing Date or (ii) any environmental assessments, reports or other documents concerning the Facilities provided by Sellers to Buyer where, in the case of either (i) or (ii), Buyer refrained from any further investigation, it being understood that all such matters where Buyer refrained from further investigation are listed in a letter between counsel to the respective parties, dated the date hereof. Third party claims subject to indemnification pursuant to this Section 8.19(d) shall be subject to the procedures set forth in Section 12.5. Owner Parties' obligation to indemnify Buyer pursuant to this Section 8.19(d) shall not be limited or otherwise affected by Sellers' disclosure on Schedule 6.9.1 to this Acquisition Agreement. Claims for indemnification hereunder shall be effected under Article 12, it being understood that claims with respect to Academy being made solely against Meyer Solomont as well as the related $300,000 Indemnification Holdback Amount. (e) The Owner Parties shall have no obligation to indemnify Buyer pursuant to Section 8.19(d) with respect to any claim unless, on or before the fifth anniversary of the Closing Date, the Sellers' Representative is given notice asserting such claim and specifying its factual basis in reasonable detail to the extent then known by Buyer. (f) Buyer shall promptly provide to the Sellers' Representative copies of all final scopes of work, sampling data, notices to or from a Governmental Authority or third party, test results and reports concerning the actions undertaken pursuant to Section 8.19(a) and 8.19(b). (g) To the extent that any rights of recovery, contribution, reimbursement or indemnification exist against the owner of the Palm Manor Nursing Home ("Recovery"), including, without limitation, by reason of Section 12.4(b) below, pursuant to the lease of said Facility or otherwise, Buyer and Sellers agree to use reasonable efforts to cooperate to obtain such Recovery and any such Recovery obtained will be paid to Buyer and applied against Owner Parties' obligation to indemnify Buyer for the Damages to which the Recovery relates or, to the extent Owner Parties have already made cash payment to Buyer Indemnities pursuant to their indemnification obligation with respect to the subject matter of the Recovery, the Recovery will be paid to Owner Parties. (h) To the extent that any of the Buyer Indemnities obtain any recovery pursuant to an insurance policy with respect to Damages for which such Buyer Indemnities have received indemnification payments from any Owner Parties, such Buyer Indemnities shall thereupon reimburse such Owner Parties on a dollar for dollar basis. If this provision would have the effect of causing any Buyer Indemnitee to lose any benefits under any such policy, this Section 15(h) will to the extent necessary to prevent such loss be deemed null and void. In no event shall any Buyer Indemnitee suffer any net reduction in recovery by reason of this Section 15(h). 16. A new Section 8.20 is hereby added to the Acquisition Agreement as follows: "Subject to any required approval of the Lessor under the Operating Lease, dated June 30, 1995, between Health Care Property Investors and ADS Palm Chelmsford, Inc. (the "Palm and Reservoir Lease"), Buyer shall have the right (the "Palm Option") to purchase all shares of stock of ADS Reservoir Waltham, Inc. and ADS Palm Chelmsford, Inc. for an aggregate purchase price of $100 for each such corporation five days following delivery of written notice of exercise of such right to the Sellers' Representative at any time prior to January 1, 2016 (or one year after such later date to which the Palm and Reservoir Lease may be extended). No person other than Buyer who owns any stock of either such corporation may sell, dispose of, transfer, pledge or encumber any of such stock, and neither such corporation shall sell, transfer or encumber, or enter into any agreement to sell, transfer or encumber, all or substantially all of its assets, or enter into any agreement respecting, or effect, any merger or consolidation, in each case at any time until the expiration of the Palm Option. Until the expiration of the Palm Option, neither corporation shall pay any dividend (other than dividends payable solely in shares of stock, pro rata, to all shareholders) or make any distribution. ADS Palm Chelmsford, Inc. hereby agrees to assign to Buyer upon request all of ADS Palm Chelmsford, Inc.'s rights under the Palm and Reservoir Lease, without any recourse to, or representation or warranty from, ADS Palm Chelmsford, Inc., whether or not such assignment breaches the Palm and Reservoir Lease, provided that Buyer shall indemnify the officers, directors and shareholders of ADS Palm Chelmsford, Inc. and ADS Reservoir Waltham, Inc. in connection with such assignment." 17. The final sentence of Section 9 is hereby amended by deleting the same in its entirety and substituting the following therefor: "Buyer agrees to cause Parent to permit any Seller receiving Parent Shares pursuant to this Agreement to include the sale of Parent Shares acquired by them pursuant to this Agreement in any registration statement effected by the Parent under the Securities Act of 1933 later than one year following the Closing Date on the same basis that the co-chief executive officers may include shares of common stock of the Parent therein, unless the Parent shall have received an opinion of counsel that such Seller may sell such shares without registration under such Act." 18. A new Section 10.11 is hereby added to the Acquisition Agreement as follows: 10.11 Post-Closing Option to Purchase Heritage. (a) Buyer and Sellers acknowledge that the Heritage Nursing Care Center ("Heritage") has been removed from the Operated Facilities the ownership of which will be transferred pursuant to this Agreement. Sellers who hold ownership interests in Heritage ("Heritage Sellers") hereby grant and convey to Buyer an option to either (i) purchase Heritage, pursuant to the terms of this Agreement, including the application of all representations, warranties and covenants contained in this Agreement to Heritage but the liability of the Owner Parties for matters relating to Hazardous Substance and all environmental issues associated with Heritage under or with respect to this Agreement shall be limited to 10% of the equity price for Heritage, and at a price and in the manner set forth on Exhibit A to this Agreement or (ii) propose alternative terms for the purchase or lease by Buyer of Heritage (the "Option"). (b) The Option may be exercised at any time during the period which shall commence on the Closing Date and shall expire 180 days thereafter (the "Option Period"). (c) Buyer shall exercise the Option at any time during the Option Period by giving notice, pursuant to Section 15.7 hereof, of such exercise to Sellers' Representative. (d) If Buyer exercises the Option in the manner specified in Section 10.11(a)(ii), Buyer shall include with its notice of the exercise of the Option a purchase or lease agreement reflecting Buyer's alternative terms (the "Alternative Purchase Agreement"), and within 30 days of receipt of Buyer's notice, Sellers' Representative shall notify Buyer as to whether the Heritage Sellers accept the sale or lease of Heritage on the terms proposed by Buyer. If Sellers' Representative notifies Buyer that the Heritage Sellers accept the sale or lease of Heritage on Buyer's terms, Sellers and Buyer shall execute the Alternative Purchase Agreement. If Sellers' Representative notifies Buyer that the Heritage Sellers are not accepting the sale or lease of Heritage on Buyer's terms (or if Sellers' Representative fails to so notify the Buyer within such 30 day period ), the Option shall expire (except that Buyer shall retain the Option under Section 10.11(a)(i) for an additional 60 days) and Buyer shall have the right to terminate at any time on 60 days notice the supply arrangement referred to in Section 10.11(h). (e) The Heritage Sellers shall not voluntarily convey, sell, transfer, mortgage or encumber (except for current mortgage lien and liens for real estate taxes, properly assessed) Heritage, or any part thereof or interest therein, during the Option Period without the prior consent of Buyer. (f) If Buyer fails to exercise the Option in the manner provided for herein during the Option Period, the Option shall automatically terminate. (g) The purchase or lease of Heritage shall be effected not later than the thirtieth day (subject to extension for health regulatory requirements) following (i) the exercise of the Option in the manner set forth in Section 10.11(a)(i) or (ii) the acceptance of the Alternative Purchase Agreement in accordance with Section 10.11(d). (h) Effective upon the Closing, the management agreement between Heritage and ADS Management, Inc. shall be terminated and all amounts owed thereunder shall be promptly settled. Following the Closing, ADS Management, Inc. shall supply Heritage with accounting, reimbursement, consulting, payroll and other services (to be agreed upon) on an annual basis, for which Heritage shall pay at prices to be agreed upon, but in no event shall the amounts paid pursuant to such service arrangements, regardless of the level used by Heritage, be less than 5% of revenues of Heritage. Such arrangement shall be renewed on a mutually agreeable basis. 19. The following sentences are hereby added at the end of Section 12.4(b) of the Acquisition Agreement: "Any Damages incurred or suffered by Buyer in connection with the presence, abatement, removal, disposal or replacement of asbestos-containing building material shall not be subject to indemnification pursuant to this Agreement, but such Damages shall reduce the amount of the Sellers' Basket as if such Damages were subject to indemnification under Section 12.2 of this Agreement." 20. The parties hereto acknowledge that Meyer Solomont heretofore was substituted for David Solomont of Lowell under, among other things, Section 12.7. Section 12.7 is amended by deleting therefrom the final sentence and substituting therefor the following: "Buyer shall deposit $500,000 of the Purchase Price relating to Academy on the Closing Date, of which $300,000 shall secure the indemnification obligations under the Agreement respecting Academy and $200,000 shall secure potential liabilities arising from two severance agreements referred to on Schedule 6.17(a), all as more fully set forth in the Escrow Agreement. Buyer shall be entitled to be indemnified dollar for dollar without regard to any basket for any payments that are required to be made pursuant to such severance agreements" 21. In view of the fact that the schedules to the Acquisition Agreement were completed at the Closing, no person shall have any liability by reason of the fact that any representation or warranty was untrue as of anytime prior to the Closing, so long as the same shall be true and correct as of the Closing. 22. The description of Alan Solomont's interest in certain assisted living ventures and other matters annexed hereto as Exhibit B is true and correct in all material respects and does not omit any fact necessary to make the statements therein truthful and accurate as of the date hereof. ADS and SSB and certain other Owner Parties have interests in three assisted living development projects known as Dartmouth, Danvers and Hingham. At Closing, all rights and interests of such Persons in such projects, as well as all other nursing facilities or projects and assisted living projects other than those listed on Schedule 6.23 of the Acquisition Agreement, are being assigned to Buyer (or its affiliated designee), subject to third party consents and Buyer shall become responsible for all development costs and capital contributions. In addition, at or after the Closing (upon receipt and verification of backup), Buyer shall reimburse each such Person for any unreimbursed expenditures by such Persons on all such projects, by paying to Sellers' Representative for their accounts the amounts set forth on Exhibit C. The Sellers represent that none of such expenses has been paid by any entity being acquired pursuant to the Acquisition Agreement. ADS and SSB agree to use their best efforts to obtain any necessary third-party consents to such transfer within 90 days following the Closing, ADS and SSB acknowledge and agree that such interests will be permitted under Section 10.9 of the Acquisition Agreement only until the 90th day following the Closing. 23. The Sellers' Representative has heretofore provided to Buyer a copy of an agreement respecting the termination of employment of Thomas Grape. The Buyer confirms that the severance of Mr. Grape under the terms set forth in such agreement will not constitute a breach of the Acquisition Agreement. Sellers' Representative agrees that it is the intention of the parties that, except for the obligation of the Buyer to pay $95,000 to Mr. Grape, the financial terms of such letter agreement shall not adversely affect Buyer and that any payments to Mr. Grape, regardless of whether made prior or after the Closing, will be deemed to be made prior to the Closing for purposes of preparation of the Closing Balance Sheet and any other appropriate adjustment shall be made such that any and all costs relating to such severance or arising out of such agreement will not be borne directly or indirectly by the Buyer. IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Amendment No. 4 as of the day and year first above written. ADS/MULTICARE, INC. By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President ENCARE OF MASSACHUSETTS, INC. By: DANIEL E. STRAUS Name: Daniel E. Straus Title: By: ALAN D. SOLOMONT Name: Alan D. Solomont Title: Exhibit A Arcadia Associates (General Partnership) ASL, Inc. d/b/a Heritage Nursing Care Center (S Corporation) A. Each partner of Arcadia Associates (i.e., Alan Solomont (12.5%), David Solomont (12.5%), Jay Solomont (12.5%), Ahron Solomont (12.5%), Leon Landa (25%), E. Casso (6.25%), G. Jasne (6.25%), P. Altsher (6.25%) and B. Petty (6.25%)) shall transfer their partnership interests in Arcadia Associates to SELCO. B. SELCO shall pay cash consideration to each partner of Arcadia Associates, as follows: Alan Solomont $ 136,500 David Solomont $ 136,500 Jay Solomont $ 136,500 Ahron Solomont $ 136,500 Leon Landa $ 273,000 E. Casso $ 68,250 G. Jasne $ 68,250 P. Altsher $ 68,250 B. Petty $ 68,250 TOTAL $ 1,092,000
C. The trustee of Arcadia Realty Trust will be changed to a person designated by SELCO. D. SELCO shall strip the real estate assets out of Arcadia Realty Trust/Arcadia Associates. E. SELCO shall lease the real estate assets to ASL, Inc. F. Each stockholder of ASL, Inc., (i.e., Alan Solomont (12.5%), David Solomont (12.5%), Jay Solomont (12.5%), Ahron Solomont (12.5%), Leon Landa (25%), E. Casso (6.25%), G. Jasne (6.25%), P. Altsher (6.25%) and B. Petty (6.25%)) shall sell their stock to Buyer. G. Buyer shall pay cash consideration to each stockholder of ASL, Inc. as follows: Alan Solomont $ 125,000 David Solomont $ 125,000 Jay Solomont $ 125,000 Ahron Solomont $ 125,000 Leon Landa $ 250,000 E. Casso $ 62,500 G. Jasne $ 62,500 P. Altsher $ 62,500 B. Petty $ 62,500 TOTAL $ 1,000,000
H. Management Agreement will remain between ADS Management, Inc. and ASL, Inc. License is held by ASL, Inc. I. Consents required: (i) The consent of each of Leon B. Landa, Elizabeth Casso, Gail Jasne, Philip M. Altsher and Barbara Petty is required for the transfer of each of the partnership interests of all of the other partners in Arcadia Associates pursuant to the Arcadia Associates partnership agreement. (ii) The board of directors of ASL, Inc. must waive restrictions on stock transfer pursuant to the articles of incorporation of ASL, Inc. (iii) Loan Agreement dated 11/30/93 between ASL, Inc. and Fleet Bank to be repaid. Release liens and guaranties made by Ahron Solomont, Alan Solomont, Leon Landa, Jay Solomont and David Solomont. Exhibit B Operating Assisted Living Facilities. ADS Senior Housing, Inc. (a company being acquired by Multicare) currently manages eight assisted living facilities. Alan Solomont has ownership interests in five of the eight: (i) Heritage at North Andover; (ii) Cabot Park Village; (iii) Heritage at the Falls; (iv) Heritage at Cleveland Circle; and (v) Heritage at Vernon Court. Four of the five facilities (all except North Andover) are essentially joint ventures between an entity owned in substantially equivalent portions by Alan, Susan Bailis and three of Alan's brothers on one side and National Development of New England ("NDNE"), an independent developer, on the other side. The ADS entity and NDNE have substantially equivalent general partner and limited partner interests in each facility. Three of the four facilities (all except Cabot) also include third party investors known as "investor limited partners," who acquired their interests in equity syndications. These investor limited partners own limited partnership interests ranging generally from 45%-55% of each entity. Alan serves as president of each ADS entity. In each instance, the ADS entity manages the facility and earns development and management fees, while NDNE develops and constructs the property, earning development and construction fees. The fifth facility, North Andover, is owned in five tranches of 20% each by Alan, Susan and each of Alan's three brothers. Information setting forth more precisely the investment interests is attached. Assisted Living Development Projects. Alan Solomont, Susan Bailis and three of Alan's brothers have ownership interests in three assisted living development projects known as Dartmouth, Danvers and Hingham. These are covered by Amendment No. 4. Exhibit C Schedule of amounts to be paid at or after Closing re Assisted Living (upon receipt and verification of back-up) ADS Senior Housing Danvers Assisted Living $ 219,507 Hingham Assisted Living $ 154,176 Worcester Assisted Living $ 105,302 Southington Assisted Living $ 11,574 Dartmouth Assisted Living $ 211,624 TOTAL ADS SENIOR HOUSING $ 702,183
ADS Management Southeast Nursing Home $ 550,000 TOTAL ADS MANAGEMENT $ 550,000
Total ADS Group Total ADS Senior Housing $ 702,183 Total ADS Management $ 550,000 TOTAL ADS GROUP $ 1,252,183
EX-10 5 THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 11, 1996 among THE MULTICARE COMPANIES, INC. AND CERTAIN OF ITS SUBSIDIARIES THE BANKS SIGNATORY HERETO and NATIONSBANK, N.A. as Administrative Agent Table of Contents ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS. . . . . . . . . . .2 Section 1.01. Definitions. . . . . . . . . . . . . . . .2 Section 1.02. Accounting Terms . . . . . . . . . . . . 25 ARTICLE 2. THE CREDIT . . . . . . . . . . . . . . . . . . . 25 Section 2.01. Loans. . . . . . . . . . . . . . . . . . 25 Section 2.02. The Notes. . . . . . . . . . . . . . . . 26 Section 2.03. Purpose. . . . . . . . . . . . . . . . . 26 Section 2.04. Borrowing Procedures . . . . . . . . . . 26 Section 2.05. Prepayments and Conversions. . . . . . . 27 Section 2.06. Interest Periods; Renewals . . . . . . . 27 Section 2.07. Changes of Commitments . . . . . . . . . 27 Section 2.08. Certain Notices. . . . . . . . . . . . . 27 Section 2.09. Minimum Amounts. . . . . . . . . . . . . 28 Section 2.10. Interest . . . . . . . . . . . . . . . . 28 Section 2.11. Fees . . . . . . . . . . . . . . . . . . 29 Section 2.12. Payments Generally . . . . . . . . . . . 29 Section 2.13. Restatement. . . . . . . . . . . . . . . 30 Section 2.14. Optional Conversion of Revolving Credit Commitments to Synthetic Lease Commitments . . . . . . . . . . . . . . 30 ARTICLE 3. THE LETTERS OF CREDIT. . . . . . . . . . . . . . 31 Section 3.01. Letters of Credit. . . . . . . . . . . . 31 Section 3.02. Purposes . . . . . . . . . . . . . . . . 31 Section 3.03. Procedures for Issuance of Letters of Credit . . . . . . . . . . . 31 Section 3.04. Participating Interests. . . . . . . . . 32 Section 3.05. Payments . . . . . . . . . . . . . . . . 32 Section 3.06. Further Assurances . . . . . . . . . . . 33 Section 3.07. Obligations Absolute . . . . . . . . . . 33 Section 3.08. Cash Collateral Account. . . . . . . . . 34 Section 3.09. Letter of Credit Fees. . . . . . . . . . 34 ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC. . . . . . . . 35 Section 4.01. Additional Costs . . . . . . . . . . . . 35 Section 4.02. Limitation on Types of Loans . . . . . . 36 Section 4.03. Illegality . . . . . . . . . . . . . . . 37 Section 4.04. Certain Conversions pursuant to Sections 4.01 and 4.03 . . . . . . . . . 37 Section 4.05. Certain Compensation . . . . . . . . . . 38 ARTICLE 5. CONDITIONS PRECEDENT.. . . . . . . . . . . . . . 39 Section 5.01. Documentary Conditions Precedent . . . . 39 Section 5.02. Additional Conditions Precedent. . . . . 42 Section 5.03. Deemed Representations . . . . . . . . . 42 ARTICLE 6. REPRESENTATIONS AND WARRANTIES.. . . . . . . . . 43 Section 6.01. Organization, Good Standing and Due Qualification . . . . . . . . . . . 43 Section 6.02. Power and Authority; No Conflicts. . . . 43 Section 6.03. Legally Enforceable Agreements . . . . . 44 Section 6.04. Litigation . . . . . . . . . . . . . . . 44 Section 6.05. Financial Statements . . . . . . . . . . 44 Section 6.06. Ownership and Liens. . . . . . . . . . . 45 Section 6.07. Taxes. . . . . . . . . . . . . . . . . . 46 Section 6.08. ERISA. . . . . . . . . . . . . . . . . . 46 Section 6.09. Subsidiaries and Ownership of Stock. . . 46 Section 6.10. Credit Arrangements. . . . . . . . . . . 46 Section 6.11. Operation of Business. . . . . . . . . . 47 Section 6.12. Operating Agreements and Leases. . . . . 48 Section 6.13. Health Care Facilities . . . . . . . . . 48 Section 6.14. Hazardous Materials. . . . . . . . . . . 48 Section 6.15. No Default on Outstanding Judgments or Orders . . . . . . . . . . . . . . . 48 Section 6.16. No Defaults on Other Agreements. . . . . 48 Section 6.17. Labor Disputes and Acts of God . . . . . 49 Section 6.18. Governmental Regulation. . . . . . . . . 49 Section 6.19. No Forfeiture. . . . . . . . . . . . . . 49 Section 6.20. Solvency . . . . . . . . . . . . . . . . 49 Section 6.21. Security Documents . . . . . . . . . . . 49 Section 6.22. Senior Indebtedness. . . . . . . . . . . 50 Section 6.23. Representations and Warranties in the ADS Acquisition Documents. . . . . . . . 50 Section 6.24. Representations and Warranties in the ADS Synthetic Lease Documents. . . . . . 50 ARTICLE 7. AFFIRMATIVE COVENANTS. . . . . . . . . . . . . . 51 Section 7.01. Maintenance of Existence . . . . . . . . 51 Section 7.02. Conduct of Business. . . . . . . . . . . 51 Section 7.03. Maintenance of Properties. . . . . . . . 51 Section 7.04. Maintenance of Records . . . . . . . . . 52 Section 7.05. Maintenance of Insurance . . . . . . . . 52 Section 7.06. Compliance with Laws . . . . . . . . . . 52 Section 7.07. Right of Inspection. . . . . . . . . . . 52 Section 7.08. Reporting Requirements . . . . . . . . . 52 Section 7.09. Additional Subsidiary Guarantors . . . . 56 ARTICLE 8. NEGATIVE COVENANTS.. . . . . . . . . . . . . . . 56 Section 8.01. Debt . . . . . . . . . . . . . . . . . . 56 Section 8.02. Guaranties, Etc. . . . . . . . . . . . . 58 Section 8.03. Liens. . . . . . . . . . . . . . . . . . 58 Section 8.04. Leases . . . . . . . . . . . . . . . . . 60 Section 8.05. Investments. . . . . . . . . . . . . . . 60 Section 8.06. Dividends. . . . . . . . . . . . . . . . 61 Section 8.07. Sale of Assets . . . . . . . . . . . . . 62 Section 8.08. Stock of Subsidiaries, Etc . . . . . . . 63 Section 8.09. Transactions with Affiliates . . . . . . 63 Section 8.10. Mergers, Etc . . . . . . . . . . . . . . 63 Section 8.11. Acquisitions . . . . . . . . . . . . . . 63 Section 8.12. No Activities Leading to Forfeiture. . . 63 Section 8.13. Capital Expenditures . . . . . . . . . . 63 Section 8.14. Amendments or Waivers of Certain Documents . . . . . . . . . . . . . . .. 64 Section 8.15. Rights under Other Agreements. . . . . . 64 Section 8.16. Restrictions . . . . . . . . . . . . . . 64 ARTICLE 9. FINANCIAL COVENANTS. . . . . . . . . . . . . . . 65 Section 9.01. Fixed Charge Coverage Ratio. . . . . . . 65 Section 9.02. Modified Senior Leverage Ratio . . . . . 65 Section 9.03. Modified Leverage Ratio. . . . . . . . . 65 Section 9.04. Interest Coverage Ratio. . . . . . . . . 65 Section 9.05. Minimum Net Worth. . . . . . . . . . . . 65 ARTICLE 10. EVENTS OF DEFAULT.. . . . . . . . . . . . . . . 65 Section 10.01. Events of Default . . . . . . . . . . . 65 ARTICLE 11. THE ADMINISTRATIVE AGENT. . . . . . . . . . . . 69 Section 11.01. Appointment, Powers and Immunities of Administrative Agent . . . . . . . . . 69 Section 11.02. Reliance by Administrative Agent. . . . 69 Section 11.03. Defaults. . . . . . . . . . . . . . . . 70 Section 11.04. Rights of Administrative Agent as a Bank70 Section 11.05. Indemnification of Administrative Agent 71 Section 11.06. Documents . . . . . . . . . . . . . . . 71 Section 11.07. Non-Reliance on Administrative Agent and Other Banks. . . . . . . . . . . . .71 Section 11.08. Failure of Administrative Agent to Act. 72 Section 11.09. Resignation or Removal of Administrative Agent . . . . . . . . . 72 Section 11.10. Amendments Concerning Agency Function . 72 Section 11.11. Liability of Administrative Agent . . . 73 Section 11.12. Transfer of Agency Function . . . . . . 73 Section 11.13. Non-Receipt of Funds by the Administrative Agent . . . . . . . . . 73 Section 11.14. Withholding Taxes . . . . . . . . . . . 73 Section 11.15. Several Obligations and Rights of Banks 74 Section 11.16. Pro Rata Treatment of Loans, Etc. . . . 74 Section 11.17. Sharing of Payments Among Banks . . . . 74 Section 11.18. Co-Agents . . . . . . . . . . . . . . . 75 ARTICLE 12. MISCELLANEOUS.. . . . . . . . . . . . . . . . . 75 Section 12.01. Amendments and Waivers. . . . . . . . . 75 Section 12.02. Usury . . . . . . . . . . . . . . . . . 76 Section 12.03. Expenses. . . . . . . . . . . . . . . . 76 Section 12.04. Survival. . . . . . . . . . . . . . . . 77 Section 12.05. Assignment; Participations. . . . . . . 77 Section 12.06. Notices . . . . . . . . . . . . . . . . 78 Section 12.07. Setoff. . . . . . . . . . . . . . . . . 78 Section 12.08. JURISDICTION; IMMUNITIES. . . . . . . . 78 Section 12.09. Table of Contents; Headings . . . . . . 79 Section 12.10. Severability. . . . . . . . . . . . . . 79 Section 12.11. Counterparts. . . . . . . . . . . . . . 79 Section 12.12. Integration . . . . . . . . . . . . . . 80 Section 12.13. GOVERNING LAW . . . . . . . . . . . . . 80 Section 12.14. Confidentiality . . . . . . . . . . . . 80 Section 12.15. Treatment of Certain Information. . . . 80 Section 12.16. Certain Subsidiary Co-Borrower Waivers and Releases . . . . . . . . . .. . . 80 EXHIBITS Exhibit A Revolving Credit Note Exhibit B Term Note Exhibit C Multicare Guaranty Exhibit D Compliance Certificate Exhibit E Opinion of Outside Counsel to the Consolidated Entities Exhibit F Opinion of Local Counsel to the Consolidated Entities Exhibit G Intercreditor and Collateral Agency Agreement Exhibit H Second Amended and Restated Security Agreement Exhibit I Second Amended and Restated Pledge Agreement Exhibit J Form of Second Amended and Restated Mortgage Exhibit K Form of Assumption Agreement SCHEDULES Schedule I Commitments Schedule II Litigation Schedule III Subsidiaries and Affiliates Schedule IV Credit Arrangements Schedule V Licenses Schedule VI Operating Agreements and Leases Schedule VII Facilities Schedule VIII Affiliate Transactions THIRD AMENDED AND RESTATED CREDIT AGREEMENT THIRD AMENDED AND RESTATED CREDIT AGREEMENT dated as of December 11, 1996 among THE MULTICARE COMPANIES, INC., a corporation organized under the laws of Delaware (the "Borrower"); BREYUT CONVALESCENT CENTER, INC., a corporation organized under the laws of New Jersey, ENCARE OF MENDHAM, INC., a corporation organized under the laws of New Jersey, HEALTH RESOURCES OF CEDAR GROVE, INC., a corporation organized under the laws of New Jersey, HEALTH RESOURCES OF CINNAMINSON, INC., a corporation organized under the laws of New Jersey, HEALTH RESOURCES OF EMERY, INC., a corporation organized under the laws of Delaware, HEALTH RESOURCES OF EWING, INC., a corporation organized under the laws of New Jersey, HEALTH RESOURCES OF FAIR LAWN, INC., a corporation organized under the laws of Delaware, HEALTH RESOURCES OF MORRISTOWN, INC., a corporation organized under the laws of New Jersey, HEALTH RESOURCES OF RIDGEWOOD, INC., a corporation organized under the laws of New Jersey, HEALTH RESOURCES OF WEST ORANGE, INC., a corporation organized under the laws of Delaware, HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P., a limited partnership organized under the laws of Delaware, MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P., a limited partnership organized under the laws of Delaware, POMPTON ASSOCIATES L.P., a limited partnership organized under the laws of New Jersey, POMPTON CARE, INC., a corporation organized under the laws of New Jersey, ROEPHEL CONVALESCENT CENTER, INC., a corporation organized under the laws of New Jersey, THE STRAUS GROUP-OLD BRIDGE, L.P., a limited partnership organized under the laws of New Jersey, and THE STRAUS GROUP-RIDGEWOOD, L.P., a limited partnership organized under the laws of New Jersey (individually a "Subsidiary Co-Borrower" and collectively the "Subsidiary Co-Borrowers" and, together with the Borrower, the "Primary Obligors"); each of the banks which is a signatory hereto or which shall become a party hereto from time to time (individually a "Bank" and collectively the "Banks"); and NATIONSBANK, N.A., a national banking association organized under the laws of the United States of America, as Administrative Agent for the Banks (in such capacity, together with its successors in such capacity, the "Administrative Agent"). WHEREAS, the Borrower, the Subsidiary Co-Borrowers, certain of the Subsidiary Guarantors, certain of the Banks and The Chase Manhattan Bank, N.A., as Agent have entered into that certain Second Amended and Restated Credit Agreement dated as of May 22, 1996 (the "Existing Credit Agreement") pursuant to which the Banks have extended credit to the Obligors evidenced by certain Promissory Notes (the "Existing Notes") issued by the Borrower and the respective Subsidiary Co-Borrowers and guarantied by the Subsidiary Guarantors; and WHEREAS, the Primary Obligors, the Banks and the Administrative Agent are entering into this Agreement to provide for, among other things, the entering into of the ADS Synthetic Lease, the issuance of Letters of Credit and modifications of certain covenants and definitions contained in the Existing Credit Agreement. NOW THEREFORE, the parties hereto agree as follows: ARTICLE 1. DEFINITIONS; ACCOUNTING TERMS. Section 1.01. Definitions. As used in this Agreement the following terms have the following meanings (terms defined in the singular to have a correlative meaning when used in the plural and vice versa): "Acceleration Event" means, at any time, the occurrence of (a) an acceleration of all amounts due in respect of the Notes or (b) the exercise of remedies under Section 16.2 of the ADS Synthetic Lease. "Acceptable Acquisition" means any Acquisition which meets all of the following conditions: (a) (i) the aggregate consideration paid for such Acquisition does not exceed $30,000,000 (excluding consideration consisting of (x) capital stock of the Borrower and (y) contingent payments based on future operating performances so long as the aggregate of all such contingent payments does not exceed $2,500,000) or (ii) the purchase by any ADS Lessee of any ADS Mortgaged Property pursuant to Section 15.1,18.1(a) or 18.1(b) of the ADS Synthetic Lease; (b) such Acquisition has been approved in good faith by the Board of Directors of the Person making the Acquisition on an individual basis or in accordance with a master Acquisition plan; (c) no Default or Event of Default exists or would exist after giving effect to such Acquisition; and (d) after reviewing historical financial statements of the business being acquired and considering the pro forma position of the Consolidated Entities subsequent to such Acquisition, the Borrower believes in good faith that the Consolidated Entities will continue to be in compliance with the financial covenants contained in Article 9 on a pro forma basis. "Acquisition" means any transaction (excluding any transaction in which any Consolidated Entity acquires an interest in undeveloped realty or a project under construction, and in related regulatory approvals, so long as such transaction is reflected in Consolidated Capital Expenditures) pursuant to which any Consolidated Entity (a) acquires equity securities (or warrants, options or other rights to acquire such securities) of any Person or debt securities or instruments of any Person where such Consolidated Entity believes that it is likely to acquire a controlling interest in such Person or such Health Care Facility, (b) causes or permits any Person to be merged into any Consolidated Entity, in any case pursuant to a merger, purchase of assets or any reorganization providing for the delivery or issuance to the holders of such Person's then outstanding securities, in exchange for such securities, of cash or securities of any Consolidated Entity, or a combination thereof, or (c) purchases all or substantially all of the business or assets of any Person or any Health Care Facility. "Additional Costs" shall have the meaning assigned to such term in Section 4.01(a). "Administrative Agent" shall have the meaning assigned to such term in the introductory paragraph. "ADS Acquisition" means the Acquisition by the ADS Buyers of the Health Care Facilities owned or managed by the ADS Seller Entities, or of the equity interests in the owners or managers thereof, pursuant to the terms of the ADS Acquisition Agreement. "ADS Acquisition Agreement" means that certain Acquisition Agreement dated as of June 17, 1996 among ADS/Multicare, the ADS Owner Parties and the ADS Seller Entities (including all exhibits, schedules and disclosure letters referred to therein or delivered pursuant thereto), as amended by that certain Amendment No. 1 to Acquisition Agreement dated as of August 12, 1996, as further amended by that certain Amendment No. 2 to Acquisition Agreement dated as of September 25, 1996, as further amended by that certain Amendment No. 3 to Acquisition Agreement dated as of October 29, 1996 and as further amended by that certain Amendment No. 4 to Acquisition Agreement dated as of December 11, 1996. "ADS Acquisition Documents" means (a) the ADS Acquisition Agreement, (b) the Guaranty dated June 17, 1996 of the Borrower, (c) the Escrow Agreement dated as of December 11, 1996 among ADS/Multicare, Alan D. Solomont, as "Seller Representative" for the ADS Owner Parties and the ADS Seller Entities, and the "Escrow Agent" named therein, (d) the Employment Agreements dated as of December 11, 1996 between the Borrower and Alan D. Solomont and Susan M. Bailis, respectively, and (e) each of the other agreements and instruments to be executed pursuant to the terms of each such ADS Acquisition Document, as each may be amended or modified from time to time. "ADS Assignment of Lease" means the Assignment of Lease and Rents dated as of December 11, 1996 by the Lessor in favor of the Collateral Agent. "ADS Buyers" means, collectively, ADS/Multicare, ADS Consulting Acquisition Corp., a Massachusetts corporation, ADS Senior Housing Acquisition Corp., a Massachusetts corporation, Senior Source Acquisition Corp., a Massachusetts corporation, and ADS Group Acquisition Corp., a Massachusetts corporation, each of which is a wholly-owned Subsidiary of the Borrower. "ADS Lease Agent" means NationsBank, N.A., as agent for the ADS Lease Banks and the ADS Lessor. "ADS Lease Banks" means each of the financial institutions a party to the ADS Lessor Loan Agreement. "ADS Lessees" means, collectively, Academy Nursing Home, Inc., a Massachusetts corporation, Nursing and Retirement Center of the Andovers, Inc., a Massachusetts corporation, Prescott Nursing Home, Inc., a Massachusetts corporation, Willow Manor Nursing Home, Inc., a Massachusetts corporation, and ADS/Multicare, each of which is a wholly-owned Subsidiary of the Borrower. "ADS Lessor" means SELCO Service Corporation, an Ohio corporation. "ADS Lessor Loan Agreement" means that certain Loan Agreement dated as of December 11, 1996 among the ADS Lessor, the ADS Lease Banks and the ADS Lease Agent. "ADS Lessor Notes" means the promissory notes dated December 11, 1996 in the aggregate principal amount of $58,200,000 issued by the ADS Lessor in favor of the ADS Lease Banks. "ADS Mortgaged Properties" means, collectively, each of the Health Care Facilities leased under the ADS Synthetic Lease, the real Property on which each such Health Care Facility is located and all other interests in real Property related thereto. "ADS Mortgages" means, collectively, (a) the Open-End Mortgages dated as of December 11, 1996 delivered by the ADS Lessees and the ADS Lessor in favor of the Collateral Agent and (b) the other mortgages that may from time to time be delivered to the Collateral Agent under the Participation Agreement. "ADS/Multicare" means ADS/Multicare, Inc., a Delaware corporation and a wholly-owned Subsidiary of the Borrower. "ADS Owner Parties" means, collectively, Alan D. Solomont, David Solomont of Brookline, Ahron M. Solomont, Jay H. Solomont, David Solomont of Lowell, Meyer Solomont and Susan S. Bailis. "ADS Participation Agreement" means that certain Participation Agreement dated as of December 11, 1996 among the Borrower, the ADS Lessees, the ADS Lessor, the ADS Lease Banks, the ADS Lease Agent and the Collateral Agent. "ADS Seller Entities" means, collectively, Academy Nursing Home, Inc., Academy Realty Associates, ADS Apple Valley, Inc., ADS Apple Valley Limited Partnership, ADS Consulting, Inc., ADS Hingham Limited Partnership, ADS Hingham Nursing Facility, Inc., ADS Management, Inc., ADS Palm Chelmsford, Inc., ADS Recuperative Center, Inc., ADS Recuperative Center Limited Partnership, ADS Reservoir Waltham, Inc., ADS Senior Housing, Inc., Arcadia Associates (but only if and when the Heritage Health Care Facility is purchased or leased by ADS/Multicare), ASL, Inc. (but only if and when the Heritage Health Care Facility is purchased or leased by ADS/Multicare), Encare of Massachusetts, Inc., North Andover Associates, Nursing and Retirement Center of the Andovers, Inc., Prescott Nursing Home Associates, Prescott Nursing Home, Inc., Senior Source, Inc., Solomont Brookline Limited Partnership, Solomont Family Brookline Venture, Inc., Solomont Family Brookline Venture Limited Partnership, Solomont Family Fall River Venture, Inc., Solomont Family Medford Venture, Inc., The ADS Group, Inc., Westford Nursing and Retirement Center, Inc., Westford Nursing and Retirement Center Limited Partnership and Willow Manor Nursing Home, Inc. "ADS Synthetic Lease" means the Master Lease dated as of December 11, 1996 among the ADS Lessor and the ADS Lessees, pursuant to which certain Health Care Facilities previously owned by certain of the ADS Seller Entities are being leased under a Synthetic Lease. "ADS Synthetic Lease Documents" means (a) the ADS Synthetic Lease, (b) the ADS Participation Agreement, (c) the ADS Lessor Loan Agreement, (d) the ADS Lessor Notes, (e) the ADS Mortgages, (f) the ADS Assignment of Lease and (g) each of the other agreements and instruments to be executed pursuant to the terms of each such ADS Synthetic Lease Document. "Affected Loans" shall have the meaning assigned to such term in Section 4.04. "Affected Type" shall have the meaning assigned to such term in Section 4.04. "Affiliate" means any Person (other than an Obligor): (a) which directly or indirectly controls, or is controlled by, or is under common control with, any Consolidated Entity; (b) which directly or indirectly beneficially owns or holds 10% or more of any class of voting stock of any Consolidated Entity; (c) 10% or more of the voting stock of which is directly or indirectly beneficially owned or held by any Consolidated Entity; or (d) which is a partnership in which any Consolidated Entity is a general partner. The term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract, or otherwise. "Agreement" means this Third Amended and Restated Credit Agreement, as amended or supplemented from time to time. References to Articles, Sections, Exhibits, Schedules and the like refer to the Articles, Sections, Exhibits, Schedules and the like of this Agreement unless otherwise indicated. "Applicable Margin" means, with respect to each type of Loan, the commitment fee under Section 2.11 and the Letter of Credit fee under Section 3.09, the applicable percentage for such Senior Obligation set forth opposite the range for the applicable Pricing Level then in effect as determined as of the last day of each fiscal quarter of the Consolidated Entities: Mixed Margin Margin Margin Fixed Rate Variable Rate Commitment Letter of Loans Loans Fee Credit Fee Pricing Level I 0.75% 0.00% .200% 0.75% Pricing Level II 1.00% 0.00% .250% 1.00% Pricing Level III 1.25% 0.00% .250% 1.25% Pricing Level IV 1.50% 0.00% .375% 1.50%
The initial Applicable Margin shall be determined by reference to Pricing Level II. The Applicable Margin shall be adjusted on and effective from and after the date that is three Banking Days after the receipt by the Administrative Agent of the most recent financial statements required to be furnished under Section 7.08(a) or Section 7.08(b). No adjustments to the Applicable Margin shall be made prior to the date that is three Banking Days after the receipt of the Administrative Agent of the financial statements for the fiscal period ending on December 31, 1996. If the Borrower fails to deliver the financial statements required to be furnished under Section 7.08(a) or Section 7.08(b) within the due date thereof, the Applicable Margin shall be determined by reference to Pricing Level IV until three Banking Days after delivery of the same. For the purposes of the definition of Applicable Margin, the following terms have the following meanings: "Pricing Level" means Pricing Level I, Pricing Level II, Pricing Level III or Pricing Level IV. "Pricing Level I" means the Interest Coverage Ratio is greater than 4.00 to 1.00 and the Senior Leverage Ratio is less than 2.50 to 1.00. "Pricing Level II" means (a) the Interest Coverage Ratio is greater than 3.25 to 1.00 and the Senior Leverage Ratio is less than 3.25 to 1.00 and (b) no better Pricing Level applies. "Pricing Level III" means (a) the Interest Coverage Ratio is greater than 2.50 to 1.00 and the Senior Leverage Ratio is less than 3.75 to 1.00 and (b) no better Pricing Level applies. "Pricing Level IV" means no other Pricing Level applies. Notwithstanding the foregoing, the Pricing Level determined as of December 31, 1996 shall be determined solely in reference to the Interest Coverage Ratio and without regard to the Senior Leverage Ratio. "Assumption Agreements" means, collectively, the Assumption Agreements in the form of Exhibit K to be delivered in accordance with Section 7.09. "Banking Day" means any day on which commercial banks are not authorized or required to close in New York, New York or Charlotte, North Carolina and whenever such day relates to a Fixed Rate Loan or notice with respect to any Fixed Rate Loan, a day on which dealings in Dollar deposits are also carried out in the London interbank market. "Banks" shall have the meaning assigned to such term in the introductory paragraph hereof. "Borrower" shall have the meaning assigned to such term in the introductory paragraph hereof. "Capital Expenditures" means, with respect to any Person, any expenditure of such Person to acquire or construct fixed assets, plant and equipment (including renewals, improvements, replacements and incurrence of obligations under Capital Leases but excluding repairs and Acquisitions) which has been or should be capitalized on the books of such Person in accordance with GAAP. "Capital Lease" means any lease which has been or should be capitalized on the books of the lessee in accordance with GAAP. "Cash Equivalents" means: (a) direct obligations of, or obligations fully guarantied or insured by, the United States of America or any agency or instrumentality thereof with maturities of one year or less from the date of acquisition; (b) commercial paper of a domestic issuer rated at least "A-1" by Standard & Poor's Corporation or "P-1" by Moody's Investors Service, Inc.; (c) time deposits or certificates of deposit with maturities of one year or less from the date of acquisition issued by any commercial bank operating within the United States of America having capital and surplus in excess of $500,000,000; and (d) money market or mutual funds whose sole investments are comprised of investments permitted under the foregoing clauses (a) through (c). "Class of Loans" shall have the meaning assigned to such term in Section 2.01(c). "Closing Date" means the date upon which the initial borrowing or the initial issuance of a Letter of Credit under this Third Amended and Restated Credit Agreement occurs. "Code" means the Internal Revenue Code of 1986, as amended from time to time. "Collateral" means all of each Obligation Party's right, title and interest in and to Property in which such Obligation Party has granted a Lien to the Collateral Agent under any Senior Obligation Document. "Collateral Agent" means NationsBank, N.A., in its capacity as Collateral Agent under the terms of the Intercreditor Agreement, together with its successors in such capacity. "Commitment" means any Revolving Credit Commitment or Term Loan Commitment. "Compliance Certificate" means the compliance certificate in the form of Exhibit D to be delivered by the Borrower under the terms of this Agreement. "Consolidated Capital Expenditures" means, with respect to any fiscal period, the aggregate amount of Capital Expenditures made by the Consolidated Entities for such period, as determined on a consolidated basis in accordance with GAAP. "Consolidated Debt" means, at any date of determination thereof, the aggregate amount of Debt of the Consolidated Entities (but in any event excluding the obligations of ADS Apple Valley, Inc., Solomont Family Fall River Venture, Inc., Solomont Family Medford Venture, Inc., ADS Hingham Nursing Facility, Inc. and ADS Recuperative Center, Inc. described in Schedule IV in which such Person is solely liable on account of its status as a general partner of The Apple Valley Limited Partnership, Charlton Nursing Care Center, Courtyard Nursing Care Center Partnership, Hingham Healthcare Limited Partnership and Recuperative Center Limited Partnership, respectively), as determined on a consolidated basis in accordance with GAAP. "Consolidated EBIT" means, with respect to any fiscal period, the sum of (a) Consolidated Net Income From Continuing Operations Before Extraordinary Items for such period, plus (b) the aggregate amount of (i) income taxes and (ii) Consolidated Interest Expense, to the extent that such aggregate amount was deducted in the computation of Consolidated Net Income From Continuing Operations Before Extraordinary Items for such period. "Consolidated EBITDA" means, with respect to any fiscal period, the sum of (a) Consolidated EBIT for such period, plus (b) the aggregate amount of depreciation, amortization and other non-cash charges, to the extent that such amount was deducted in the computation of Consolidated EBIT for such period. "Consolidated EBITDAR" means, with respect to any fiscal period, the sum of (a) Consolidated EBITDA for such period, plus (b) the aggregate amount of Consolidated Rental Expense, to the extent that such amount was deducted in the computation of Consolidated EBITDA for such period. "Consolidated Entity" means the Borrower or any Subsidiary of the Borrower whose accounts are or are required to be consolidated or included with the accounts of the Borrower in accordance with GAAP. "Consolidated Fixed Charges" means, with respect to any fiscal period, the sum of (a) Consolidated Interest Expense during such period, plus (b) Consolidated Principal Payments due during such period, plus (c) Consolidated Rental Expense during such period. "Consolidated Funded Debt" means, at any date of determination thereof, the aggregate amount of Funded Debt of the Consolidated Entities (but in any event excluding the obligations of ADS Apple Valley, Inc., Solomont Family Fall River Venture, Inc., Solomont Family Medford Venture, Inc., ADS Hingham Nursing Facility, Inc. and ADS Recuperative Center, Inc. described in Schedule IV in which such Person is solely liable on account of its status as a general partner of The Apple Valley Limited Partnership, Charlton Nursing Care Center, Courtyard Nursing Care Center Partnership, Hingham Healthcare Limited Partnership and Recuperative Center Limited Partnership, respectively), as determined on a consolidated basis in accordance with GAAP;. "Consolidated Interest Expense" means, with respect to any fiscal period, the amount of interest accrued on, and with respect to, Consolidated Debt (including, without limitation, amortization of debt discount and imputed interest on Capital Leases but excluding rent under Synthetic Leases) during such period, as determined on a consolidated basis in accordance with GAAP (it being understood that for the purposes of all calculations and definitions hereunder rent under Synthetic Leases shall in all events be excluded from the definition of "Consolidated Interest Expense" regardless of GAAP). "Consolidated Net Income" means, with respect to any fiscal period, net income for the Consolidated Entities for such fiscal period, as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Income From Continuing Operations Before Extraordinary Items" means, with respect to any fiscal period, net income from continuing operations before extraordinary items for the Consolidated Entities for such fiscal period, as determined on a consolidated basis in accordance with GAAP. "Consolidated Net Worth" means, at any date of determination thereof, all amounts which would be included under stockholders' equity on a consolidated balance sheet of the Consolidated Entities, as determined on a consolidated basis in accordance with GAAP. "Consolidated Principal Payments" means, with respect to any fiscal period, all scheduled principal payments made or required to be made on Consolidated Debt during such period (including, without limitation, imputed principal on Capital Leases but excluding rent under Synthetic Leases), as determined on a consolidated basis in accordance with GAAP (it being understood that for the purposes of all calculations and definitions hereunder rent under Synthetic Leases shall in all events be excluded from the definition of "Consolidated Principal Payments" regardless of GAAP). "Consolidated Rental Expense" means, with respect to any fiscal period, the aggregate amount of rental expense of the Consolidated Entities incurred during such period (including, without limitation, all rental expense incurred under Synthetic Leases), as determined on a consolidated basis in accordance with GAAP (it being understood that for the purposes of all calculations and definitions hereunder rent under Synthetic Leases shall in all events be included in the definition of "Consolidated Rentals" regardless of GAAP). "Consolidated Senior Funded Debt" means, at any date of determination thereof, the result of (a) Consolidated Funded Debt minus (b) Consolidated Subordinated Debt. "Consolidated Subordinated Debt" means, at any date of determination thereof, the Multicare Subordinated Notes, the Multicare Subordinated Debentures and any other Debt of the Borrower which is subordinated to all obligations owed to the Banks on terms and conditions respecting subordination and events of default substantially similar to the Multicare Subordinated Debentures. "Converted Synthetic Lease Commitments" means, with respect to each Bank, the obligation of such Bank to make capital contributions, loans or other advances to a lessor for the purpose of acquiring Properties or constructing improvements on Properties to be leased to a Consolidated Entity under the Converted Synthetic Lease upon the optional election by such Bank to convert all or a portion of its Revolving Credit Commitment in accordance with Section 2.14. "Converted Synthetic Leases" means the Synthetic Leases funded in accordance with the Converted Synthetic Lease Commitments (which may include the ADS Synthetic Lease to the extent so funded). "Credit Arrangements" shall have the meaning assigned to such term in Section 6.10. "Debt" means, with respect to any Person: (a) indebtedness of such Person for borrowed money; (b) indebtedness for the deferred purchase price of Property or services (except trade payables and accrued expenses in the ordinary course of business); (c) the face amount of any outstanding letters of credit issued for the account of such Person; (d) obligations arising under acceptance facilities; (e) Guaranties of such Person; (f) obligations secured by any Lien on Property of such Person other than obligations secured by Liens permitted under clauses (b) through (h) of Section 8.03, inclusive; (g) obligations of such Person as lessee under Capital Leases; and (h) all amounts funded under Synthetic Leases as to which such Person is lessee. "Default" means any event which with the giving of notice or lapse of time, or both, would become an Event of Default. "Default Rate" means, with respect to the principal of any Loan and, to the extent permitted by law, any other amount payable by any Obligor under this Agreement or any other Facility Document, or any Note that is not paid when due (whether at stated maturity, by acceleration or otherwise), a rate per annum during the period from and including the due date, to, but excluding the date on which such amount is paid in full equal to one percent (1%) above the Variable Rate as in effect from time to time plus the Applicable Margin (if any); provided that, if the amount so in default is principal of a Fixed Rate Loan and the due date thereof is a day other than the last day of the Interest Period therefor, the "Default Rate" for such principal shall be, for the period from and including the due date and to but excluding the last day of the Interest Period therefor, two percent (2%) above the interest rate for such Loan as provided in Section 2.10 hereof and, thereafter, the rate provided for above in this definition. "Dollars" and the sign "$" mean lawful money of the United States of America. "Environmental Laws" means any and all federal, state, local and foreign statutes, laws, regulations, ordinances, rules, judgments, orders, decrees, permits, licenses, agreements with Governmental Authorities or other governmental restrictions relating to the environment or to emissions, discharges, releases or threatened releases of pollutants, contaminants, or industrial, toxic or hazardous substances or wastes into the environment including, without limitation, ambient air, surface water, ground water, or land, or otherwise relating to the manufacture, processing, distribution, use, treatment, storage, disposal, transport, or handling of pollutants, contaminants, or industrial, toxic or hazardous substances or wastes. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, including any rules and regulations promulgated thereunder. "ERISA Affiliate" means any corporation or trade or business which is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which any Consolidated Entity is a member, or (ii) solely for purposes of potential liability under Section 302(c)(11) of ERISA and Section 412(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which any Consolidated Entity is a member. "Event of Default" shall have the meaning assigned to such term in Section 10.01. "Existing Credit Agreement" shall have the meaning assigned to such term in the recitals hereof. "Existing Notes" shall have the meaning assigned to such term in the recitals hereof. "Facility Documents" means, collectively, this Agreement, the Notes, the Letters of Credit, the Intercreditor Agreement, the Assumption Agreements, the Interest Rate Protection Agreements and the Security Documents, as each may be amended from time to time. "Federal Funds Rate" means, for any day, the rate per annum (expressed on a 360 day basis of calculation, if the rate on Variable Rate Loans is so calculated) equal to the weighted average of the rates on overnight federal funds transactions as published by the Federal Reserve Bank of New York for such day (or for any day that is not a Banking Day, for the immediately preceding Banking Day). "Fee Owner" means any Consolidated Entity which holds legal title to any Health Care Facility which is operated and managed by another Consolidated Entity. "Fiscal Quarter Net Worth Increase Amounts" means, with respect to each fiscal quarter of the Consolidated Entities, the sum of (a) the greater of (i) Zero Dollars ($0) and (ii) 50% of Consolidated Net Income for such fiscal quarter plus (b) 75% of the cash and noncash proceeds (net of underwriting commissions and discounts and reasonable fees and expenses) from the issuance of capital stock of the Borrower (including, without limitation, capital stock issued upon the conversion of Consolidated Subordinated Debt and in connection with Acceptable Acquisitions). "Fixed Base Rate" means with respect to any Interest Period for a Fixed Rate Loan: the rate per annum (rounded upwards, if necessary, to the nearest 1/16 of one percent (1%)) quoted at approximately 11:00 a.m. London time by the principal London branch of the Reference Bank two Banking Days prior to the first day of such Interest Period for the offering to leading banks in the London interbank market of Dollar deposits in immediately available funds, for a period, and in an amount, comparable to the Interest Period and principal amount of the Fixed Rate Loan which shall be made. "Fixed Charge Coverage Ratio" means, at any date of determination thereof, the ratio of (a) Consolidated EBITDAR for the most recently ended four (4) fiscal quarters to (b) Consolidated Fixed Charges for such most recently ended four (4) fiscal quarters. "Fixed Rate" means, for any Fixed Rate Loan for any Interest Period therefor, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of one percent (1%)) determined by the Administrative Agent to be equal to the quotient of (i) the Fixed Base Rate for such Loan for such Interest Period, divided by (ii) one minus the Reserve Requirement for such Loan for such Interest Period. "Fixed Rate Loan" means any Loan when and to the extent the interest rate therefor is determined on the basis of the definition "Fixed Rate." "Forfeiture Proceeding" means any action, proceeding or investigation affecting any Consolidated Entity or any of its Affiliates before any Governmental Authority, or the receipt of notice by any such party that any of them is a suspect in or a target of any governmental inquiry or investigation, which may result in an indictment of any of them or the seizure or forfeiture of any of their respective Properties. "Funded Debt" means, with respect to any Person, at any date of determination thereof, (a) indebtedness of such Person for borrowed money, other than indebtedness payable on demand or within one year from such date unless the repayment of such indebtedness shall have been accelerated other than at the option of such Person; provided that, in any event, Funded Debt shall include all principal outstanding under the Notes, (b) indebtedness for the deferred purchase price of Property or services (except trade payables and accrued expenses in the ordinary course of business), other than indebtedness payable on demand or within one year from such date, (c) liabilities under Guaranties of Funded Debt of any other Person, (d) obligations secured by any Lien on the Property of such Person, other than obligations payable on demand or within one year from such date and other than obligations secured by Liens permitted under clauses (b) through (h) of Section 8.03, inclusive, (e) obligations of such Person as lessee under Capital Leases, other than obligations payable on demand or within one year from such date, (f) all amounts funded under Synthetic Leases as to which such Person is lessee (other than amounts funded under the Synthetic Lease contemplated in Item 8 of Schedule IV on the terms and conditions set forth therein) and (g) any other obligations that are required by GAAP to be shown as long term liabilities on its balance sheet. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in Section 6.05 (except for immaterial changes determined preferable by the Consolidated Entities' independent public accountants). "Glenmark Partnerships" shall have the meaning assigned to such term in Section 7.09. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Guaranty" means, with respect to any Person, guaranties, endorsements (other than for collection in the ordinary course of business) and other contingent obligations of such Person with respect to the obligations of any other Person (including, but not limited to, an agreement to purchase any obligation, stock, assets, goods or services or to supply or advance any funds, assets, goods or services, or an agreement to maintain or cause such Person to maintain a minimum working capital or net worth or otherwise to assure the creditors of any such other Person against loss). "Hazardous Materials" means any and all pollutants, contaminants, toxic or hazardous wastes or any other substances, the removal of which is required or the generation, manufacture, refining, production, processing, treatment, storage, handling, transportation, transfer, use, disposal, release, discharge, spillage, seepage, or filtration of which is restricted, prohibited or penalized by any applicable Environmental Law. "Health Care Facility" means a long term or specialized health care facility owned or leased by any Consolidated Entity or any Managed Company. "Initial Closing Date" means April 1, 1994. "Initial Revolving Credit Commitment" means, with respect to each Bank, the obligation of such Bank as of the date hereof to make its Revolving Credit Loans to the Borrower under this Agreement in the aggregate principal amount set forth in Schedule I. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement in the form of Exhibit G among the Borrower, the Subsidiary Guarantors, the Banks, the Administrative Agent, the ADS Lease Banks, the ADS Lease Agent, the ADS Lessor and the Collateral Agent, as amended or supplemented from time to time. "Interest Coverage Ratio" means, at any date of determination thereof, the ratio of (a) Consolidated EBITDA for the most recently ended four (4) fiscal quarters to (b) Consolidated Interest Expense for such most recently ended four (4) fiscal quarters. "Interest Period" means, with respect to any Fixed Rate Loan, the period commencing on the date such Loan is made, converted from another type of Loan or renewed, as the case may be, and ending, as the Borrower may select pursuant to Section 2.06: on the numerically corresponding day in the first, second, third, or sixth calendar month thereafter, provided that each such Interest Period which commences on the last Banking Day of a calendar month (or on any day for which there is no numerically corresponding day in the appropriate subsequent calendar month) shall end on the last Banking Day of the appropriate calendar month. "Interest Rate Protection Agreement" means, with respect to any Person, an interest rate swap, cap or collar agreement or similar arrangement between one or more Banks and a Consolidated Entity providing for the transfer or mitigation of interest risks either generally or under specific contingencies. "Issuing Bank" means NationsBank, N.A., a national banking association organized under the laws of the United States of America, acting in its capacity as a Bank hereunder. "Lending Office" means, for each Bank and for each type of Loan, the lending office of such Bank (or of an affiliate of such Bank) designated as such for such type of Loan on its signature page hereof or such other office of such Bank (or of an affiliate of such Bank) as such Bank may from time to time specify to the Administrative Agent and the Borrower as the office by which its Loans of such type are to be made and maintained. "Lessor Amount" shall have the meaning assigned to such term in the ADS Participation Agreement. "Letter of Credit Availability" means, at any date of determination thereof, the amount by which (a) the lesser of (i) the result of (A) the aggregate amount of the Revolving Credit Commitments as of such date, minus (B) the unpaid aggregate principal amount of the Revolving Credit Loans then outstanding and (ii) $15,000,000 exceeds (b) the aggregate amount of the Letter of Credit Obligations at such date. "Letter of Credit Funding" shall have the meaning assigned to such term in Section 3.05(b) hereof. "Letter of Credit Obligations" means, at any date of determination thereof, all liabilities of the Borrower with respect to Letters of Credit, whether or not any liability is contingent, including (without limitation) the sum (without duplication) of (a) the aggregate amount available to be drawn under the Letters of Credit then outstanding plus (b) the aggregate amount of all unpaid Reimbursement Obligations. "Letters of Credit" shall have the meaning assigned to such term in Section 3.01(a) hereof. "Licenses" means any and all licenses, certificate of need, operating permits, franchises, and other licenses, authorizations, certifications, permits, or approvals issued by, or on behalf of, any Governmental Authority, now existing or at any time hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing, ownership or operation of any Health Care Facility or related facilities or the participation or eligibility for participation in any third party payment or reimbursement programs, including, without limitation, any and all operating licenses issued by any state Governmental Authority, any and all pharmaceutical licenses and other licenses related to the purchase, dispensing, storage, prescription or use of drugs, medications, and other "controlled substances", any and all licenses relating to the operation of food or beverage facilities or amenities, if any, and any and all certifications and eligibility for participation in Medicare, Medicaid, CHAMPUS, Blue Cross or Blue Shield, or any of the Managed Care Plans, as the same may from time to time be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified. "Lien" means any lien (statutory or otherwise), security interest, mortgage, deed of trust, priority, pledge, charge, conditional sale, title retention agreement, financing lease or other similar encumbrance or right of others, or any agreement to give any of the foregoing. "Loan" means any loan made by a Bank pursuant to Section 2.01. "Managed Care Plans" means any health maintenance organization, preferred provider organization, individual practice association, competitive medical plan, or similar arrangement, entity, organization, or Person. "Managed Company" means any Person not a Consolidated Entity receiving management services under Operating Agreements from time to time. "Management Fees" means, with respect to any fiscal period, all fees and other amounts payable to the Consolidated Entities under Operating Agreements with Managed Companies during such period. "Material Adverse Effect" means any material adverse effect on (a) the business, profits, properties or condition of the Consolidated Entities, taken as a whole, (b) the ability of the Borrower to perform its obligations under each of the Facility Documents to which it is a party or (c) the ability of the Secured Parties to collect the aggregate amount of the Senior Obligations. "Modified Leverage Ratio" means, at any date of determination thereof, the ratio of (a) the sum of (i) Consolidated Funded Debt at such date, plus (ii) the product of (A) Consolidated Rental Expense for the most recently ended four (4) fiscal quarters (exclusive of rental expense incurred under the ADS Synthetic Lease and under the Converted Synthetic Leases) times (B) eight (8), to (b) Consolidated EBITDAR for such most recently ended four (4) fiscal quarters. For the purposes of determining Consolidated EBITDAR in the Modified Leverage Ratio, (a) there shall be included in Consolidated Net Income From Continuing Operations Before Extraordinary Items net income of any Person accrued from the beginning of the period in which Consolidated Net Income From Continuing Operations Before Extraordinary Items is being measured to the date it became a Consolidated Entity, or to the date it merged into or consolidated with any Consolidated Entity, or to the date substantially all of its assets were acquired by any Consolidated Entity and (b) there shall be excluded from Consolidated Net Income From Continuing Operations Before Extraordinary Items net income of any Consolidated Entity, accrued from the beginning of such period to the date it ceases to be a Consolidated Entity, or to the date it merged into or consolidated with any other Person other than another Consolidated Entity, or to the date substantially all of its assets were sold to any Person other than another Consolidated Entity. For the purposes of determining Consolidated Rental Expense in the Modified Leverage Ratio, (a) there shall be included in Consolidated Rental Expense rental expense of any Person accrued from the beginning of the period in which Consolidated Rental Expense is being measured to the date it became a Consolidated Entity, or to the date it merged into or consolidated with any Consolidated Entity, or to the date substantially all of its assets were acquired by any Consolidated Entity and (b) there shall be excluded from Consolidated Rental Expense rental expense of any Consolidated Entity, accrued from the beginning of such period to the date it ceases to be a Consolidated Entity, or to the date it merged into or consolidated with any other Person other than another Consolidated Entity, or to the date substantially all of its assets were sold to any Person other than another Consolidated Entity. "Modified Senior Leverage Ratio" means, at any date of determination thereof, the ratio of (a) the sum of (i) Consolidated Senior Funded Debt at such date, plus (ii) the product of (A) Consolidated Rental Expense (exclusive of rental expense incurred under the ADS Synthetic Lease and under the Converted Synthetic Leases) for the most recently ended four (4) fiscal quarters times (B) eight (8), to (b) Consolidated EBITDAR for such most recently ended four (4) fiscal quarters. For the purposes of determining Consolidated EBITDAR in the Modified Senior Leverage Ratio, (a) there shall be included in Consolidated Net Income From Continuing Operations Before Extraordinary Items net income of any Person accrued from the beginning of the period in which Consolidated Net Income From Continuing Operations Before Extraordinary Items is being measured to the date it became a Consolidated Entity, or to the date it merged into or consolidated with any Consolidated Entity, or to the date substantially all of its assets were acquired by any Consolidated Entity and (b) there shall be excluded from Consolidated Net Income From Continuing Operations Before Extraordinary Items net income of any Consolidated Entity, accrued from the beginning of such period to the date it ceases to be a Consolidated Entity, or to the date it merged into or consolidated with any other Person other than another Consolidated Entity, or to the date substantially all of its assets were sold to any Person other than another Consolidated Entity. For the purposes of determining Consolidated Rental Expense in the Modified Senior Leverage Ratio, (a) there shall be included in Consolidated Rental Expense rental expense of any Person accrued from the beginning of the period in which Consolidated Rental Expense is being measured to the date it became a Consolidated Entity, or to the date it merged into or consolidated with any Consolidated Entity, or to the date substantially all of its assets were acquired by any Consolidated Entity and (b) there shall be excluded from Consolidated Rental Expense rental expense of any Consolidated Entity, accrued from the beginning of such period to the date it ceases to be a Consolidated Entity, or to the date it merged into or consolidated with any other Person other than another Consolidated Entity, or to the date substantially all of its assets were sold to any Person other than another Consolidated Entity. "Mortgages" means the Second Amended and Restated Open-End Mortgages in the form of Exhibit J hereto to be delivered by PHC Operating Corp. and Providence Health Care, Inc. in accordance with the terms hereof, as amended or supplemented from time to time. "Multicare Fiscal Agency Agreement" means the Fiscal Agency Agreement dated as of March 16, 1995 between the Borrower and The Chase Manhattan Bank, N.A., as Fiscal Agent, as in effect on the Closing Date. "Multicare Guaranty" means the Unconditional Guaranty in the form of Exhibit C to be delivered by each of the Obligors in accordance with the terms hereof, as amended or supplemented from time to time. "Multicare Indenture" means the Indenture dated as of November 18, 1992 between the Borrower and United Jersey Bank, as Trustee, as in effect on the Closing Date. "Multicare Subordinated Debentures" means the $86,250,000 7% Convertible Subordinated Debentures due 2003 issued pursuant to the Multicare Fiscal Agency Agreement. "Multicare Subordinated Notes" means the $100,000,000 12.5% Senior Subordinated Notes due 2002 issued pursuant to the Multicare Indenture. "Multiemployer Plan" means a Plan defined as such in Section 3(37) of ERISA to which contributions have been made by the Consolidated Entities or any ERISA Affiliate and which is covered by Title IV of ERISA. "Notes" means the Revolving Credit Notes and the Term Notes. "Obligation Party" means the Borrower, each ADS Lessee, each Subsidiary Co-Borrower, each Subsidiary Guarantor and the ADS Lessor (in its capacity as issuer of the ADS Lessor Notes under the ADS Lessor Loan Agreement, mortgagor under the ADS Mortgages and assignor under the ADS Assignment of Lease), as the case may be. "Obligor" means, collectively, the Borrower and the Subsidiary Guarantors. "Operating Agreements" shall have the meaning assigned to such term in Section 6.12. "Participating Interest" means, with respect to each Letter of Credit, (a) in the case of the Issuing Bank, its interest in such Letter of Credit after giving effect to the granting of any participating interest therein pursuant hereto and (b) in the case of each Participating Bank, its undivided participating interest in such Letter of Credit. "Participating Bank" means, with respect to any Letter of Credit, any Bank (other than the Issuing Bank) with respect to its Participating Interest in each Letter of Credit. "Participation Agreements" means any and all third party payor participation or reimbursement agreements now or at any time hereafter existing for the benefit of any Consolidated Entity relating to rights to payments or reimbursement from, and claims against, private insurers, Managed Care Plans, employee assistance programs, Blue Cross or Blue Shield, federal, state and local Governmental Authorities, or other public or quasi-public insurers and third party payors, as the same may from time to time be amended, restated, extended, supplemented or modified. "Payor" shall have the meaning assigned to such term in Section 11.13. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Permitted Acquisition Debt" means Debt of any Person, and any renewals, extensions or refinancings thereof, secured by Purchase Money Liens permitted under Section 8.01(g) (other than Debt secured by Purchase Money Liens incurred in connection with any conditional sale or other title retention agreement or a Capital Lease) that is secured by all or substantially all of the Property of such Person. "Permitted Adjustment Amount" means, with respect to each Bank, the sum of the principal amounts of each Term Loan made by such Bank to the Borrower and the respective Subsidiary Co-Borrower that has been prepaid in full in connection with the sale of the Health Care Facility owned by such Subsidiary Co-Borrower to a Person other than an Affiliate. "Permitted Mortgage Debt" means Debt of any Person (other than Debt secured by Purchase Money Liens), and any renewals, extensions or refinancings thereof, permitted under Section 8.01(f) (a) the net proceeds of which are used to prepay Senior Obligations, (b) that is secured by all or substantially all of the Property of such Person, (c) that has a scheduled final maturity that is at least six months subsequent to the maturity of the Notes and (d) that requires no more than 20% of the principal of such Debt to be paid prior to the maturity of the Notes. "Person" means an individual, partnership, corporation, business trust, joint stock company, trust, unincorporated association, joint venture, Governmental Authority or other entity of whatever nature. "Plan" means any employee benefit or other plan established or maintained, or to which contributions have been made, by the Consolidated Entities or any ERISA Affiliate and which is covered by Title IV of ERISA, other than a Multiemployer Plan. "Pledge Agreement" means the Second Amended and Restated Pledge Agreement in the form of Exhibit I to be delivered by each of the Obligors in accordance with the terms hereof, as amended or supplemented from time to time. "Primary Obligor" shall have the meaning assigned to such term in the introductory paragraph. "Prime Rate" means that rate of interest from time to time announced by the Reference Bank at its principal office as its prime commercial lending rate. "Principal Office" means the principal office of the Administrative Agent, presently located at 100 North Tryon Street, Charlotte, North Carolina 28255. "Property" means any interest in any kind of property or asset, whether real, personal or mixed, and whether tangible or intangible. "Purchase Money Lien" means a Lien on any Property acquired by any Consolidated Entity or placed on any Property in order to finance the acquisition or construction of such Property or the construction of improvements located on such Property, or the assumption of any Lien on Property existing at the time of the acquisition of such Property or of the Person holding such Property or a Lien incurred in connection with any conditional sale or other title retention agreement or a Capital Lease. "Reference Bank" means NationsBank, N.A. (or if NationsBank, N.A. no longer quotes on the London interbank market, such successor leading bank in the London interbank market which shall be reasonably appointed by the Administrative Agent). "Regulation D" means Regulation D of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulation U" means Regulation U of the Board of Governors of the Federal Reserve System as the same may be amended or supplemented from time to time. "Regulatory Change" means any change after the date of this Agreement in United States federal, state, municipal or foreign laws or regulations (including without limitation Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks of which such bank is a member, of or under any United States, federal, state, municipal or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Reimbursement Obligation" means the obligation of the Borrower to reimburse the Issuing Bank in accordance with the terms of this Agreement for the payment made by the Issuing Bank under any Letter of Credit. "Rent" shall have the meaning assigned to such term in Appendix A to the Participation Agreement. "Required Banks" means, at any time while any Loans or Letters of Credit are outstanding, Banks holding at least 51% of the aggregate principal amount of the Loans and the Letter of Credit Obligations and, at any time while no Loan or Letter of Credit is outstanding, Banks holding at least 51% of the Commitments. "Required Secured Parties" means (a) at any time prior to the occurrence of an Acceleration Event, Secured Parties holding at least 51% of the Secured Party Commitments and (b) at any time after the occurrence of an Acceleration Event, Secured Parties holding at least 51% of the aggregate outstanding principal amount of the Senior Principal Obligations. "Required Payment" shall have the meaning assigned to such term in Section 11.13. "Reserve Requirement" means, for any Fixed Rate Loan for any Interest Period therefor, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding $1,000,000,000 against in the case of Fixed Rate Loans, "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the Reserve Requirement shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the Fixed Base Rate for Fixed Rate Loans is to be determined as provided in the definition of "Fixed Base Rate" in this Section 1.01 or (ii) any category of extensions of credit or other assets which include Fixed Rate Loans. "Revolving Credit Commitment" means, with respect to each Bank, the obligation of such Bank to make its Revolving Credit Loans to the Borrower under this Agreement in the aggregate principal amount equal to the sum of (a) the amount of the Initial Revolving Credit Commitment of such Bank plus (b) the Permitted Adjustment Amount of such Bank, as such amount may be reduced or otherwise modified from time to time. "Revolving Credit Commitment Percentage" means, as to any Bank at any date of determination thereof, the percentage of the aggregate Revolving Credit Commitments constituted by such Bank's Revolving Credit Commitment at such date. "Revolving Credit Loans" shall have the meaning assigned to such term in Section 2.01(a). "Revolving Credit Notes" means the promissory notes of the Borrower in the form of Exhibit A hereto evidencing the Revolving Credit Loans made by a Bank hereunder and all promissory notes delivered in substitution or exchange therefor, as amended or supplemented from time to time. "Revolving Credit Termination Date" means February 28, 2000. "Secured Party" means the Collateral Agent, the Administrative Agent, the ADS Lease Agent, each Bank, each ADS Lease Bank and the ADS Lessor (in its capacity as lessor under the ADS Lease), as the case may be. "Secured Party Commitment" means (a) any Commitment, (b) any Converted Synthetic Lease Commitment, (c) any "Loan Commitment" or "Lessor Commitment" (each as defined in Appendix A to the Participation Agreement) or (d) any other commitment by any Secured Party to extend credit through any Senior Obligation to any Obligation Party. "Security Agreement" means the Second Amended and Restated Security Agreement in the form of Exhibit H to be delivered by each of the Obligors in accordance with the terms hereof, as amended or supplemented from time to time. "Security Documents" means the Multicare Guaranty, the Security Agreement, the Pledge Agreement, the Mortgages, the ADS Mortgages, the ADS Assignment of Lease and each other security document that may from time to time be delivered to the Collateral Agent in connection herewith or therewith (including all financing statements, fixture filings, mortgages, assignments and stock certificates delivered to the Collateral Agent). "Senior Leverage Ratio" means, at any date of determination thereof, the ratio of (a) Consolidated Senior Funded Debt at such date, to (b) the sum of (i) Consolidated EBITDA for the most recently ended four (4) fiscal quarters, plus (ii) rental expense incurred under Synthetic Leases for such most recently ended four (4) fiscal quarters to the extent that such amount was deducted in the computation of Consolidated EBITDA for such period. For the purposes of determining Consolidated EBITDA in the Senior Leverage Ratio, (a) there shall be included in Consolidated Net Income From Continuing Operations Before Extraordinary Items net income of any Person accrued from the beginning of the period in which Consolidated Net Income From Continuing Operations Before Extraordinary Items is being measured to the date it became a Consolidated Entity, or to the date it merged into or consolidated with any Consolidated Entity, or to the date substantially all of its assets were acquired by any Consolidated Entity and (b) there shall be excluded from Consolidated Net Income From Continuing Operations Before Extraordinary Items net income of any Consolidated Entity, accrued from the beginning of such period to the date it ceases to be a Consolidated Entity, or to the date it merged into or consolidated with any other Person other than another Consolidated Entity, or to the date substantially all of its assets were sold to any Person other than another Consolidated Entity. For the purposes of determining Consolidated Rental Expense in the Senior Leverage Ratio, (a) there shall be included in Consolidated Rental Expense rental expense of any Person accrued from the beginning of the period in which Consolidated Rental Expense is being measured to the date it became a Consolidated Entity, or to the date it merged into or consolidated with any Consolidated Entity, or to the date substantially all of its assets were acquired by any Consolidated Entity and (b) there shall be excluded from Consolidated Rental Expense rental expense of any Consolidated Entity, accrued from the beginning of such period to the date it ceases to be a Consolidated Entity, or to the date it merged into or consolidated with any other Person other than another Consolidated Entity, or to the date substantially all of its assets were sold to any Person other than another Consolidated Entity. "Senior Obligation Documents" means, collectively, the Facility Documents, the ADS Lessor Loan Agreement, the ADS Participation Agreement, the ADS Synthetic Lease, the ADS Lessor Notes, the Converted Synthetic Leases and each other document made, delivered or given in connection therewith or herewith and each other document that replaces, renews, extends, refinances or refunds indebtedness under any of the foregoing. "Senior Obligations" means the unpaid principal of, interest on and Yield on (including interest and Yield accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Notes, the ADS Lessor Notes, the Lessor Amount, the Letter of Credit Obligations, the obligations under the Interest Rate Protection Agreements, the obligations under the Converted Synthetic Leases and all other obligations and liabilities of any Obligation Party to any Secured Party, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, this Agreement, the ADS Lessor Loan Agreement, the ADS Participation Agreement, the ADS Synthetic Lease, the Notes, the ADS Lessor Notes, the Letters of Credit, the Interest Rate Protection Agreements, the Multicare Guaranty, the Converted Synthetic Leases and the other Senior Obligation Documents, whether on account of principal, interest, Yield, rentals (including Rent), guaranties, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to any Secured Party) or otherwise. "Senior Principal Obligations" means, collectively, the aggregate of (a) the outstanding principal amounts of the Notes, (b) the outstanding "Lessor Amounts" (as defined in Appendix A to the ADS Participation Agreement) and the outstanding principal amounts of the ADS Lessor Notes, (c) all outstanding amounts funded under the Converted Synthetic Leases, (d) all Reimbursement Obligations and (e) all net amounts due under Interest Rate Protection Agreements. "Significant Recent Acquisitions" shall have the meaning assigned to such term in Section 6.05(c). "Subsidiary" means, with respect to any Person, any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by such Person. "Subsidiary Co-Borrowers" shall have the meaning assigned to such term in the introductory paragraph hereof. "Subsidiary Guarantor" means, collectively, the Subsidiaries of the Borrower that are parties to the Multicare Guaranty (including, without limitation, the Subsidiary Co-Borrowers). "Synthetic Lease" means any lease which is intended to be treated as an operating lease under GAAP but which under tax law or commercial law may be treated as secured Debt of such Person and not as a true lease. "Term Loan Commitments" means, with respect to each Bank, the obligation of such Bank to make its Term Loans under this Agreement to the Borrower and the respective Subsidiary Co-Borrowers set forth on Schedule I in the aggregate principal amount set forth in Schedule I, as such amount may be reduced or otherwise modified from time to time. "Term Loan Termination Date" means February 28, 2000. "Term Loans" shall have the meaning assigned to such term in Section 2.01(b). "Term Notes" means the promissory notes of the Borrower and the respective Subsidiary Co-Borrower in the form of Exhibit B hereto evidencing the Term Loans made by a Bank hereunder and all promissory notes delivered in substitution or exchange therefor, as amended or supplemented from time to time. "Termination Date" means, with respect to any Revolving Credit Loan, the Revolving Credit Termination Date and, with respect to any Term Loan, the Term Loan Termination Date. " type' of Loans" shall have the meaning assigned to such term in Section 2.01(c). "UCP" means the Uniform Customs and Practice for Documentary Credits (1993 Revision), International Chamber of Commerce, Publication No. 500. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of Section 4001(a)(16) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of any Consolidated Entity or any ERISA Affiliate under Title IV of ERISA. "Variable Rate" means, for any day, the higher of (a) the Federal Funds Rate for such day plus 1/4 of one percent and (b) the Prime Rate for such day. "Variable Rate Loan" means any Loan when and to the extent the interest rate for such Loan is determined in relation to the Variable Rate. "Yield" shall have the meaning assigned to such term in Appendix A to the ADS Participation Agreement. Section 1.02. Accounting Terms. All accounting terms not specifically defined herein shall be construed in accordance with GAAP, and all financial data required to be delivered hereunder shall be prepared in accordance with GAAP. ARTICLE 2. THE CREDIT. Section 2.01. Loans. (a) Subject to the terms and conditions of this Agreement, each of the Banks severally agrees to make revolving credit loans (the "Revolving Credit Loans") to the Borrower from time to time from and including the date hereof to and including the Revolving Credit Termination Date, in such amounts that the sum of (i) the aggregate principal amount of such Bank's Revolving Credit Loans at any one time outstanding plus (ii) such Bank's pro rata share of the Letter of Credit Obligations then outstanding, does not exceed the amount of its Revolving Credit Commitment. The Revolving Credit Loans shall be due and payable on the Revolving Credit Termination Date. (b) Subject to the terms and conditions of this Agreement, each of the Banks severally agrees to make term loans (the "Term Loans") to the Borrower and the respective Subsidiary Co-Borrower on the Closing Date, up to but not exceeding in the aggregate principal amount, the amount of its respective Term Loan Commitments. The Term Loans shall be due and payable on the Term Loan Termination Date. (c) The Loans may be outstanding as Variable Rate Loans or Fixed Rate Loans (each a "type" of Loans) and as Revolving Credit Loans or Term Loans (each a "class" of Loans). Each type of Loans of each Bank shall be made and maintained at such Bank's Lending Office for such type of Loans. Section 2.02. The Notes. The Revolving Credit Loans of each Bank shall be evidenced by a single promissory note in favor of such Bank in the form of Exhibit A, dated the Closing Date, duly completed and executed by the Borrower. The Term Loans of each Bank shall each be evidenced by a promissory note in favor of such Bank in the form of Exhibit B, dated the Closing Date, duly completed and executed by the Borrower and the respective Subsidiary Co-Borrower. Section 2.03. Purpose. The Borrower and the Subsidiary Co-Borrowers shall use the proceeds of the Loans for general corporate purposes (including, without limitation, working capital and to finance Acceptable Acquisitions). Such proceeds shall not be used for the purpose, whether immediate, incidental or ultimate, of buying or carrying "margin stock" in violation of Regulation U. Section 2.04. Borrowing Procedures. The Borrower shall give the Administrative Agent notice of each borrowing to be made hereunder as provided in Section 2.08, not later than 12:00 noon New York, New York time on the date of such borrowing in the case of a Variable Rate Loan or 12:00 noon New York, New York time on the Banking Day three Banking Days prior to the date of such borrowing in the case of a Fixed Rate Loan. Each Bank shall, through its Lending Office and subject to the conditions of this Agreement, make the amount of the Loan to be made by it on such day available to the Administrative Agent at the Principal Office and in immediately available funds for the account of the Administrative Agent. The amount so received by the Administrative Agent shall, subject to the conditions of this Agreement, be made available to the Borrower, in immediately available funds, by the Administrative Agent crediting an account of the Borrower designated by the Borrower and maintained with the Administrative Agent at the Principal Office. Section 2.05. Prepayments and Conversions. The Borrower shall have the right to make prepayments of principal, or to convert one type of Loans into another type of Loans, at any time or from time to time; provided that: (a) the Borrower shall give the Administrative Agent notice of each such prepayment or conversion as provided in Section 2.08; and (b) Fixed Rate Loans may be prepaid or converted only on the last day of an Interest Period for such Loans unless the Borrower agrees to provide to the Administrative Agent for the account of each Bank compensation in accordance with Section 4.05. Section 2.06. Interest Periods; Renewals. (a) In the case of each Fixed Rate Loan, the Borrower shall select an Interest Period of any duration in accordance with the definition of Interest Period in Section 1.01, subject to the following limitations: (i) no Interest Period may extend beyond the respective Termination Dates for such class of Loans; (ii) notwithstanding clause (i) above, no Interest Period shall have a duration less than one month, and if any such proposed Interest Period would otherwise be for a shorter period, such Interest Period shall not be available; (iii) if an Interest Period would end on a day which is not a Banking Day, such Interest Period shall be extended to the next Banking Day, unless such Banking Day would fall in the next calendar month in which event such Interest Period shall end on the immediately preceding Banking Day; and (iv) no more than fifteen Interest Periods may be outstanding at any one time. (b) Upon notice to the Administrative Agent as provided in Section 2.08, the Borrower may renew any Fixed Rate Loan on the last day of the Interest Period therefor as the same type of Loan with an Interest Period of the same or different duration in accordance with the limitations provided above. If the Borrower shall fail to give notice to the Administrative Agent of such a renewal, such Fixed Rate Loan shall automatically become a Variable Rate Loan on the last day of the current Interest Period. Section 2.07. Changes of Commitments. (a) The Borrower shall have the right to reduce or terminate the amount of unused Revolving Credit Commitments at any time or from time to time, provided that: (i) the Borrower shall give notice of each such reduction or termination to the Administrative Agent as provided in Section 2.08; and (ii) each partial reduction shall be in an aggregate amount at least equal to $1,000,000. The Revolving Credit Commitments once reduced or terminated may not be reinstated. (b) The Term Loan Commitments shall be terminated on the Closing Date and shall not be reinstated. Section 2.08. Certain Notices. Notices by the Borrower to the Administrative Agent of each borrowing pursuant to Section 2.04, and each prepayment or conversion pursuant to Section 2.05 and each renewal pursuant to Section 2.06(b), and each reduction or termination of the Revolving Credit Commitments pursuant to Section 2.07(a) shall be irrevocable and shall be effective only if received by the Administrative Agent not later than 12:00 noon New York, New York time, and (a) in the case of borrowings and prepayments of, conversions into and (in the case of Fixed Rate Loans) renewals of (i) Variable Rate Loans, given the same Banking Day; and (ii) Fixed Rate Loans, given three Banking Days prior thereto; and (b) in the case of reductions or termination of the Revolving Credit Commitments, given the same Banking Day. Each such notice shall specify the Loans to be borrowed, prepaid, converted or renewed and the amount (subject to Section 2.09) and type and class of the Loans to be borrowed, or converted, or prepaid or renewed (and, in the case of a conversion, the type of Loans to result from such conversion and, in the case of a Fixed Rate Loan, the Interest Period therefor) and the date of the borrowing or prepayment, or conversion or renewal (which shall be a Banking Day). Each such notice of reduction or termination shall specify the amount of the Revolving Credit Commitments to be reduced or terminated. The Administrative Agent shall promptly notify the Banks of the contents of each such notice. Section 2.09. Minimum Amounts. Except for borrowings which exhaust the full remaining amount of the Commitments, prepayments or conversions which result in the prepayment or conversion of all Loans of a particular type or conversions made pursuant to Section 3.04, each borrowing, prepayment, conversion and renewal of principal of Loans of a particular type shall be in an amount not less than (i) $100,000 in the aggregate for all Banks in the case of Variable Rate Loans and (ii) $1,000,000 in the aggregate and in increments of $100,000 in the case of Fixed Rate Loans unless such minimum amount is waived by the Required Banks (borrowings, prepayments, conversions or renewals of or into Loans of different types or, in the case of Fixed Rate Loans, having different Interest Periods at the same time hereunder to be deemed separate borrowings, prepayments, conversions and renewals for the purposes of the foregoing, one for each type of Interest Period). Anything in this Agreement to the contrary notwithstanding, the aggregate principal amount of Fixed Rate Loans of each type having concurrent Interest Periods shall be at least equal to $1,000,000. Section 2.10. Interest. (a) Interest shall accrue on the outstanding and unpaid principal amount of each Loan for the period from and including the date of such Loan to but excluding the date such Loan is due at the following rates per annum: (i) for a Variable Rate Loan, at a variable rate per annum equal to the Variable Rate plus the Applicable Margin and (ii) for a Fixed Rate Loan, at a fixed rate equal to the Fixed Rate plus the Applicable Margin. If the principal amount of any Loan and any other amount payable by any Obligor hereunder, under the Notes or under the other Facility Documents shall not be paid when due (at stated maturity, by acceleration or otherwise), interest shall accrue on such amount to the fullest extent permitted by law from and including such due date to but excluding the date such amount is paid in full at the Default Rate. (b) The interest rate on each Variable Rate Loan shall change when the Variable Rate changes and interest on each such Loan shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Interest on each Fixed Rate Loan shall be calculated on the basis of a year of 360 days for the actual number of days elapsed. Promptly after the determination of any interest rate provided for herein or any change therein, the Administrative Agent shall notify the Borrower and the Banks. (c) Accrued interest shall be due and payable in arrears upon any full payment of principal or conversion and (i) for each Variable Rate Loan, on the 1st day of each month commencing the first such date after the making of such Loan; and (ii) for each Fixed Rate Loan, on the last day of the Interest Period with respect thereto and, in the case of an Interest Period greater than three months or 90 days, at three-month intervals after the first day of such Interest Period; provided that interest accruing at the Default Rate shall be due and payable from time to time on demand of the Administrative Agent. Section 2.11. Fees. (a) The Borrower shall pay to the Administrative Agent for the account of each Bank a commitment fee on the daily average of the result of the unused Revolving Credit Commitments of such Bank minus such Bank's pro rata share of the Letter of Credit Obligations, for the period from and including the date hereof to the earlier of the date the Revolving Credit Commitments are terminated or the Revolving Credit Termination Date at a rate per annum equal to the Applicable Margin calculated in each case on the basis of a year of 360 days for the actual number of days elapsed. The accrued commitment fee shall be due and payable in arrears upon any reduction or termination of the Revolving Credit Commitments and on the 1st day of each March, June, September and December, commencing on the first such date after the Closing Date. (b) The Borrower shall pay to the Administrative Agent for its own account the fees set forth in the fee letter dated November 7, 1996 between the Borrower and the Administrative Agent. Section 2.12. Payments Generally. All payments under this Agreement, the Notes and the other Facility Documents shall be made in Dollars in immediately available funds not later than 12:00 noon New York, New York time on the relevant dates specified above or in such Facility Document (each such payment made after such time on such due date to be deemed to have been made on the next succeeding Banking Day) to the Administrative Agent's account number 136621-22506 maintained at the Principal Office for the account of the applicable Lending Office of each Bank. The Administrative Agent, or any Bank for whose account any such payment is to be made, may (but shall not be obligated to) debit the amount of any such payment which is not made by such time to any ordinary deposit account of the Borrower with the Administrative Agent or such Bank, as the case may be, and any Bank so doing shall promptly notify the Administrative Agent. The Borrower shall, at the time of making each payment under this Agreement, any Note or any other Facility Document, specify to the Administrative Agent the principal or other amount payable by the Borrower under this Agreement, such Note or such other Facility Document to which such payment is to be applied (and in the event that it fails to so specify, or if a Default or Event of Default has occurred and is continuing, the Administrative Agent may apply such payment as it may elect in its sole discretion (subject to Section 11.16)). If the due date of any payment under this Agreement, any Note or any other Facility Document would otherwise fall on a day which is not a Banking Day, such date shall be extended to the next succeeding Banking Day (unless such succeeding Banking Day falls in a subsequent calendar month, in which case such payment shall be due on the preceding Banking Day) and interest shall be payable for any principal so extended for the period of such extension. Each payment received by the Administrative Agent under this Agreement, any Note or any other Facility Document for the account of a Bank shall be paid promptly to such Bank, in immediately available funds, for the account of such Bank's Lending Office. Section 2.13. Restatement. The terms and conditions of, and the agreements, representations and warranties set forth in the Existing Credit Agreement are hereby replaced and superseded in their entirety by the terms, conditions, agreements, representations and warranties set forth in this Agreement and the other Facility Documents and the Existing Credit Agreement shall be of no further force and effect. Nothing contained herein or in any of the other Facility Documents shall impair, limit or affect the continuation of the liability of each Obligor for the Senior Obligations heretofore incurred and the security interests, Liens and other collateral interests heretofore granted, pledged and assigned to the Administrative Agent by such Obligor. All loans, advances and other financial accommodations under the Existing Credit Agreement and all other Senior Obligations of the Obligors to the Banks outstanding and unpaid as of the date hereof pursuant to the Existing Credit Agreement shall be deemed to be Senior Obligations pursuant to the terms hereof and shall constitute and be deemed a Loan by the Banks to the Borrower and the Subsidiary Co-Borrowers and shall be repayable in accordance with the terms of this Agreement. Section 2.14. Optional Conversion of Revolving Credit Commitments to Synthetic Lease Commitments. The Borrower shall have the right to offer to the Banks the right to convert up to $30,000,000 of Revolving Credit Commitments to Converted Synthetic Lease Commitments. Each Bank shall have the right to convert a portion of its Revolving Credit Commitment to a Converted Synthetic Lease Commitment, such portion to be equal to the amount requested to be converted multiplied by such Bank's Revolving Credit Commitment Percentage. The Banks shall have a right of oversubscription such that, if any Bank fails to accept the offer as to its pro rata share of the Converted Synthetic Lease Commitments, the remaining Banks shall among them have the right to convert their Revolving Credit Commitments up to the balance of Converted Synthetic Lease Commitments requested to be converted. If, as a result thereof, such oversubscriptions exceed the maximum amount of Converted Synthetic Lease Commitments, the oversubscriptions shall be cut back on a pro rata basis in accordance with the respective Revolving Credit Commitment Percentages of the Banks participating in such oversubscription. Upon any conversion of Revolving Credit Commitments of any Bank to Converted Synthetic Lease Commitments pursuant to this Section 2.14, the Revolving Credit Commitment of such Bank shall be permanently reduced in an amount equal to the amount so converted. ARTICLE 3. THE LETTERS OF CREDIT. Section 3.01. Letters of Credit. (a) Subject to the terms and conditions of this Agreement, the Issuing Bank, on behalf of the Banks, and in reliance on the agreement of the Banks set forth in Section 3.04, agrees to issue on any Banking Day prior to the Revolving Credit Termination Date, for the account of the Borrower, irrevocable standby letters of credit in such form as may from time to time be approved by the Issuing Bank acting reasonably (together with the applications therefor, the "Letters of Credit"); provided that on the date of the issuance of any Letter of Credit, and after giving effect to such issuance, the Letter of Credit Obligations shall not exceed the Letter of Credit Availability. (b) Each Letter of Credit shall (i) have an expiry date no later than the earlier of (A) one year from the date of issuance provided that such Letter of Credit may automatically renew for subsequent one year terms upon the failure of the Issuing Bank to provide sixty days' prior written notice of termination to the Borrower and (B) the Revolving Credit Termination Date, (ii) be denominated in Dollars, (iii) be in a minimum face amount of $100,000 and (iv) provide for the payment of sight drafts when presented for honor thereunder in accordance with the terms thereof and when accompanied by the documents described therein or when such documents are presented, as the case may be. Section 3.02. Purposes. The Borrower shall use the Letters of Credit for the purpose of securing obligations incurred in the ordinary course of business. Section 3.03. Procedures for Issuance of Letters of Credit. The Borrower may from time to time request that the Issuing Bank issue a Letter of Credit by delivering to the Issuing Bank at its address for notices specified herein an application therefor in such form as may from time to time be approved by the Issuing Bank acting reasonably, completed to the reasonable satisfaction of the Issuing Bank, and such other certificates, documents and other papers and information as the Issuing Bank may reasonably request. Upon receipt of any application, the Issuing Bank will process such application and the certificates, documents and other papers and information delivered to it in connection therewith in accordance with its customary procedures and shall promptly issue the requested Letter of Credit in such customized form as may reasonably be requested by the Borrower (but in no event shall the Issuing Bank issue any Letter of Credit later than five Banking Days after receipt of the application therefor and all such other certificates, documents and other papers and information relating thereto) by issuing the original of such Letter of Credit to the beneficiary thereof or as otherwise may be agreed by the Issuing Bank and the Borrower. The Issuing Bank shall furnish a copy of such Letter of Credit to the Borrower promptly following the issuance thereof. Section 3.04. Participating Interests. In the case of each Letter of Credit, effective as of the date of the issuance thereof, the Issuing Bank agrees to allot and does allot to each other Bank, and each such Bank severally and irrevocably agrees to take and does take a Participating Interest in such Letter of Credit in a percentage equal to such Bank's pro rata share of the Letter of Credit Obligations (calculated based on its Revolving Credit Commitment Percentage). On the date that any Bank becomes a party to this Agreement in accordance with Section 12.05, Participating Interests in any outstanding Letter of Credit held by the transferor Bank from which such transferee Bank acquired its interest hereunder shall be proportionately reallotted between such transferee Bank and such transferor Bank. Each Participating Bank hereby agrees that its obligation to participate in each Letter of Credit, and to pay or to reimburse the Issuing Bank for its participating share of the drafts drawn thereunder, is absolute, irrevocable and unconditional and shall not be affected by any circumstances whatsoever, including, without limitation, the occurrence and continuance of any Default or Event of Default, and that each such payment shall be made without any offset, abatement, withholding or other reduction whatsoever. Upon request of any Participating Bank, the Issuing Bank shall provide to such Participating Bank a monthly statement of all Letters of Credit and all Letter of Credit Obligations outstanding as of such time. Section 3.05. Payments. (a) In order to induce the Issuing Bank to issue the Letters of Credit, the Borrower hereby agrees to reimburse the Issuing Bank, unless such Reimbursement Obligation has been accelerated pursuant to Section 10.02, by not later than 12:00 noon, New York City time, on each date that the Borrower has been notified by the Issuing Bank that any draft presented under any Letter of Credit is paid by the Issuing Bank, for (i) the amount of the draft paid by the Issuing Bank and (ii) the amount of any taxes, fees, charges or other reasonable costs or expenses whatsoever incurred by the Issuing Bank in connection with any payment made by the Issuing Bank under, or with respect to, such Letter of Credit. Each such payment shall, subject to the next sentence hereof, be made to the Issuing Bank at its office specified in Section 12.06, in lawful money of the United States and in immediately available funds by not later than 12:00 noon, New York City time, on the day that payment is made by the Issuing Bank (or, if such drawing occurs after 12:00 noon New York City time, on the next succeeding Banking Day). If such payment is not made in full, all amounts remaining unpaid by the Borrower under this Section 3.05 shall, to the extent otherwise permitted hereunder, automatically be deemed to be a borrowing as Revolving Credit Loans bearing interest at the Variable Rate plus the Applicable Margin. Except as otherwise permitted by the preceding sentence, interest on any and all amounts remaining unpaid by the Borrower under this Section 3.05 at any time from the date such amounts become payable (whether at stated maturity, by acceleration or otherwise) until payment in full shall be payable to the Issuing Bank on demand at a fluctuating rate per annum equal to the Default Rate. (b) In the event that the Issuing Bank makes a payment (a "Letter of Credit Funding") under any Letter of Credit and is not reimbursed in full therefor on the date of such Letter of Credit Funding, in accordance with the terms hereof, the Issuing Bank will promptly through the Administrative Agent notify each Participating Bank that acquired its Participating Interest in such Letter of Credit from the Issuing Bank. No later than the close of business on the date such notice is given if such notice is given prior to 12:00 noon New York City time (or, if such notice is sent after 12:00 noon New York City time, on the next succeeding Banking Day), each such Participating Bank will transfer to the Administrative Agent, for the account of the Issuing Bank, in immediately available funds, an amount equal to such Participating Bank's pro rata share of the unreimbursed portion of such Letter of Credit Funding (calculated based on its Revolving Credit Commitment Percentage), together with interest, if any, accrued thereon from and including the date of such Letter of Credit Funding at a rate per annum equal to the Federal Funds Rate and, if such date of transfer is more than three Banking Days subsequent to such notice, plus two percent (2%). (c) Whenever, at any time after the Issuing Bank has made a Letter of Credit Funding and has received from any Participating Bank such Participating Bank's pro rata share of the unreimbursed portion of such Letter of Credit Funding, the Issuing Bank receives any reimbursement on account of such unreimbursed portion or any payment of interest on account thereof, the Issuing Bank will distribute to the Administrative Agent, for the account of such Participating Bank, its pro rata share thereof; provided, however, that in the event that the receipt by the Issuing Bank of such reimbursement or such payment of interest (as the case may be) is required to be returned, such Participating Bank will promptly return to the Administrative Agent, for the account of the Issuing Bank, any portion thereof previously distributed by the Issuing Bank to it. Section 3.06. Further Assurances. The Borrower hereby agrees to do and perform any and all acts and to execute any and all further instruments from time to time reasonably requested by the Issuing Bank more fully to effect the purposes of this Agreement and the issuance of the Letters of Credit hereunder. Section 3.07. Obligations Absolute. The payment obligations of the Borrower under Section 3.05 shall be unconditional and irrevocable and shall be paid strictly in accordance with the terms of this Agreement under all circumstances, including, without limitation, the following circumstances: (a) the existence of any claim, set-off, defense or other right which the Borrower may have at any time against any beneficiary, or any transferee, of any Letter of Credit (or any Persons for whom any such beneficiary or any such transferee may be acting), the Issuing Bank or any Participating Bank, or any other Person, whether in connection with this Agreement, any other Facility Document, the transactions contemplated herein, or any unrelated transaction; (b) any statement or any other document presented under any Letter of Credit proving to be forged, fraudulent, invalid or insufficient in any respect or any statement therein being untrue or inaccurate in any respect; (c) payment by the Issuing Bank under any Letter of Credit against presentation of a draft or certificate which does not comply with the terms of such Letter of Credit; or (d) any other circumstances or happening whatsoever, whether or not similar to any of the foregoing. Section 3.08. Cash Collateral Account. If the Commitments are duly terminated and all amounts owing under this Agreement, the Notes and the Reimbursement Obligations become due and payable pursuant to Section 10, the Borrower shall deposit with the Administrative Agent, on the date such obligations become due and payable, an amount in cash equal to the Letter of Credit Obligations as of such date and the Letter of Credit fees in accordance with Section 3.09. Such amount shall be deposited in a cash collateral account to be established by the Administrative Agent, for the benefit of the Issuing Bank and the Participating Banks, and shall constitute collateral security for the Letter of Credit Obligations and other amounts owing hereunder. All amounts in such cash collateral account shall be maintained pursuant to a cash collateral account agreement which shall grant to the Administrative Agent a security interest in all such funds and in any investments made therewith or proceeds thereof to secure payment to the Administrative Agent of Reimbursement Obligations with respect to outstanding Letters of Credit. In the event that the Administrative Agent makes any Letter of Credit Funding, the Administrative Agent may withdraw funds on deposit to make reimbursement of such Letter of Credit Funding, in an amount equal to such Letter of Credit Funding. Upon payment by the Borrower of all Reimbursement Obligations with respect to Letters of Credit or the termination or other expiration of all Letters of Credit, remaining funds on deposit in the cash collateral account shall be returned promptly to the Borrower. Section 3.09. Letter of Credit Fees. (a) The Borrower agrees to pay the Administrative Agent, for the account of the Issuing Bank and the Participating Banks, a non-refundable letter of credit fee computed at a rate per annum equal to the Applicable Margin of the aggregate undrawn amount under each standby Letter of Credit, calculated on the basis of a year of 360 days for the actual number of days elapsed, payable in arrears on the 1st day of each March, June, September and December, commencing on the first such date after the Closing Date. (b) The Borrower agrees to pay the Issuing Bank, for its own account, its normal and customary administration, amendment, transfer, payment and negotiation fees charged in connection with its issuance and administration of letters of credit. ARTICLE 4. YIELD PROTECTION; ILLEGALITY; ETC. Section 4.01. Additional Costs. (a) The Borrower and each respective Subsidiary Co-Borrower (as applicable) shall pay directly to each Bank from time to time on demand such amounts as such Bank may determine to be necessary to compensate it for any costs which such Bank determines are attributable to its making or maintaining any Fixed Rate Loans to the Borrower and/or such Subsidiary Co-Borrower under this Agreement or its Notes of the Borrower and/or such Subsidiary Co-Borrower or its obligation to make any such Loans hereunder, or any reduction in any amount receivable by such Bank hereunder in respect of any such Loans or such obligation (such increases in costs and reductions in amounts receivable being herein called "Additional Costs"), resulting from any Regulatory Change which: (i) changes the basis of taxation of any amounts payable to such Bank under this Agreement or its Notes in respect of any of such Loans (other than taxes imposed on the overall net income or profits of such Bank or of its Lending Office for any of such Loans by the jurisdiction in which such Bank has its principal office or such Lending Office, or any branch or franchise tax applicable thereto); or (ii) imposes or modifies any reserve, special deposit, deposit insurance or assessment, minimum capital, capital ratio or similar requirements relating to any extensions of credit or other assets of, or any deposits with or other liabilities of, such Bank (including any of such Loans or any deposits referred to in the definition of "Fixed Base Rate" in Section 1.01); or (iii) imposes any other condition affecting this Agreement or its Notes (or any of such extensions of credit or liabilities). Each Bank will notify the Borrower of any event occurring after the date of this Agreement which will entitle such Bank to compensation pursuant to this Section 4.01(a) as promptly as practicable after it obtains knowledge thereof and determines to request such compensation. If any Bank requests compensation from the Borrower or any Subsidiary Co-Borrower under this Section 4.01(a), or under Section 4.01(c), the Borrower may, by notice to such Bank (with a copy to the Administrative Agent), require that such Bank's Loans of the type with respect to which such compensation is requested be converted in accordance with Section 4.04. (b) Without limiting the effect of the foregoing provisions of this Section 4.01, in the event that, by reason of any Regulatory Change, any Bank either (i) incurs Additional Costs based on or measured by the excess above a specified level of the amount of a category of deposits or other liabilities of such Bank which includes deposits by reference to which the interest rate on Fixed Rate Loans is determined as provided in this Agreement or a category of extensions of credit or other assets of such Bank which includes Fixed Rate Loans or (ii) becomes subject to restrictions on the amount of such a category of liabilities or assets which it may hold, then, if such Bank so elects by notice to the Borrower (with a copy to the Administrative Agent), the obligation of such Bank to make or renew, and to convert Loans of any other type into, Loans of such type hereunder shall be suspended until the date such Regulatory Change ceases to be in effect (and all Loans of such type held by such Bank then outstanding shall be converted in accordance with Section 4.04). (c) Without limiting the effect of the foregoing provisions of this Section 4.01 (but without duplication), the Borrower and each respective Subsidiary Co-Borrower (as applicable) shall pay directly to each Bank from time to time on request such amounts as such Bank may determine to be necessary to compensate such Bank for any costs which it determines are attributable to the maintenance by it or any of its affiliates pursuant to any law or regulation of any jurisdiction or any interpretation, directive or request (whether or not having the force of law and whether in effect on the date of this Agreement or thereafter) of any court or governmental or monetary authority of capital in respect of its Loans to the Borrower and/or such Subsidiary Co-Borrower hereunder or its obligation to make Loans hereunder or its obligation to issue, or participate in, any Letters of Credit (such compensation to include, without limitation, an amount equal to any reduction in return on assets or equity of such Bank to a level below that which it could have achieved but for such law, regulation, interpretation, directive or request). Each Bank will notify the Borrower if it is entitled to compensation pursuant to this Section 4.01(c) as promptly as practicable after it determines to request such compensation. (d) Determinations and allocations by a Bank for purposes of this Section 4.01 of the effect of any Regulatory Change pursuant to subsections (a) or (b), or of the effect of capital maintained pursuant to subsection (c), on its costs of making or maintaining Loans or its obligation to make Loans, or on amounts receivable by, or the rate of return to, it in respect of Loans or such obligation, and of the additional amounts required to compensate such Bank under this Section 4.01, shall be conclusive absent manifest error, provided that such determinations and allocations are made on a reasonable basis. Section 4.02. Limitation on Types of Loans. Anything herein to the contrary notwithstanding, if: (a) the Administrative Agent determines (which determination shall be conclusive) that quotations of interest rates for the relevant deposits referred to in the definition of "Fixed Base Rate" in Section 1.01 are not being provided in the relevant amounts or for the relevant maturities for purposes of determining the rate of interest for any type of Fixed Rate Loans as provided in this Agreement; or (b) the Required Banks determine (which determination shall be conclusive) and notify the Administrative Agent that the relevant rates of interest referred to in the definition of "Fixed Base Rate" in Section 1.01 upon the basis of which the rate of interest for any type of Fixed Rate Loans is to be determined do not adequately cover the cost to the Banks of making or maintaining such Loans; then the Administrative Agent shall give the Borrower and each Bank prompt notice thereof, and so long as such condition remains in effect, the Banks shall be under no obligation to make or renew Loans of such type or to convert Loans of any other type into Loans of such type and the Borrower and each respective Subsidiary Co-Borrower (as applicable) shall, on the last day(s) of the then current Interest Period(s) for the outstanding Loans of the affected type, either prepay such Loans or convert such Loans into another type of Loans in accordance with Section 2.05. Section 4.03. Illegality. Notwithstanding any other provision in this Agreement, in the event that it becomes unlawful for any Bank or its Lending Office to (a) honor its obligation to make or renew Fixed Rate Loans hereunder or convert Loans of any type into Loans of such type, or (b) maintain Fixed Rate Loans hereunder, then such Bank shall promptly notify the Borrower thereof (with a copy to the Administrative Agent) and such Bank's obligation to make or renew Fixed Rate Loans and to convert other types of Loans into Loans of such type hereunder shall be suspended until such time as such Bank may again make, renew, or convert and maintain such affected Loans and such Bank's outstanding Fixed Rate Loans, as the case may be, shall be converted in accordance with Section 4.04. Section 4.04. Certain Conversions pursuant to Sections 4.01 and 4.03. If the Loans of any Bank of a particular type (Loans of such type being herein called "Affected Loans" and such type being herein called the "Affected Type") are to be converted pursuant to Section 4.01 or 4.03, such Bank's Affected Loans shall be automatically converted into Variable Rate Loans on the last day(s) of the then current Interest Period(s) for the Affected Loans (or, in the case of a conversion required by Section 4.01(b) or 4.03, on such earlier date as such Bank may specify to the Borrower with a copy to the Administrative Agent) and, unless and until such Bank gives notice as provided below that the circumstances specified in Section 4.01 or 4.03 which gave rise to such conversion no longer exist: (a) to the extent that such Bank's Affected Loans have been so converted, all payments and prepayments of principal which would otherwise be applied to such Bank's Affected Loans shall be applied instead to its Variable Rate Loans; (b) all Loans which would otherwise be made or renewed by such Bank as Loans of the Affected Type shall be made instead as Variable Rate Loans and all Loans of such Bank which would otherwise be converted into Loans of the Affected Type shall be converted instead into (or shall remain as) Variable Rate Loans; and (c) if Loans of other Banks of the Affected Type are subsequently converted into Loans of another type (other than Variable Rate Loans), such Bank's Variable Rate Loans shall be automatically converted on the conversion date into Loans of such other type to the extent necessary so that, after giving effect thereto, all Loans held by such Bank and the Banks whose Loans are so converted are held pro rata (as to principal amounts, types and Interest Periods) in accordance with their respective Commitments. If such Bank gives notice to the Borrower (with a copy to the Administrative Agent) that the circumstances specified in Section 4.01 or 4.03 which gave rise to the conversion of such Bank's Affected Loans pursuant to this Section 4.04 no longer exist (which such Bank agrees to do promptly upon such circumstances ceasing to exist) at a time when Loans of the Affected Type are outstanding, such Bank's Variable Rate Loans shall be automatically converted, on the first day(s) of the next succeeding Interest Period(s) for such outstanding Loans of the Affected Type to the extent necessary so that, after giving effect thereto, all Loans held by the Banks holding Loans of the Affected Type and by such Bank are held pro rata (as to principal amounts, types and Interest Periods) in accordance with their respective Commitments. Section 4.05. Certain Compensation. The Borrower and each respective Subsidiary Co-Borrower (as applicable) shall pay to the Administrative Agent for the account of each Bank, upon the request of such Bank through the Administrative Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Bank) to compensate it for any loss, cost or expense which such Bank determines is attributable to: (a) any payment, prepayment, conversion or renewal of a Fixed Rate Loan to the Borrower and/or such Subsidiary Co-Borrower made by such Bank on a date other than the last day of an Interest Period for such Loan (whether by reason of acceleration or otherwise); or (b) any failure by the Borrower and/or such Subsidiary Co-Borrower to borrow, convert into, prepay or renew a Fixed Rate Loan to be made, converted into, prepaid or renewed by such Bank on the date specified therefor in the relevant notice under Sections 2.04, 2.05 or 2.06, as the case may be. Without limiting the foregoing, such compensation shall include an amount equal to the excess, if any, of: (i) the amount of interest which otherwise would have accrued on the principal amount so paid, prepaid, converted or renewed or not borrowed, converted, prepaid or renewed for the period from and including the date of such payment, prepayment or conversion or failure to borrow, convert, prepay or renew to but excluding the last day of the then current Interest Period for such Loan (or, in the case of a failure to borrow, convert, prepay or renew, to but excluding the last day of the Interest Period for such Loan which would have commenced on the date specified therefor in the relevant notice) at the applicable rate of interest for such Loan provided for herein; over (ii) the amount of interest (as reasonably determined by such Bank) such Bank would have bid in the London interbank market (if such Loan is a Fixed Rate Loan) for Dollar deposits for amounts comparable to such principal amount and maturities comparable to such period. A determination of any Bank as to the amounts payable pursuant to this Section 4.05 shall be conclusive absent manifest error; provided that such determination is made on a reasonable basis. ARTICLE 5. CONDITIONS PRECEDENT. Section 5.01. Documentary Conditions Precedent. The obligations of the Banks to make the Loans constituting the initial borrowing and of the Issuing Bank to issue the initial Letter of Credit are subject to the condition precedent that the Administrative Agent shall have received on or before the Closing Date each of the following, in form and substance satisfactory to the Administrative Agent and its counsel: (a) counterparts of this Agreement duly executed by each of the Borrower, the Subsidiary Co-Borrowers, the Banks and the Administrative Agent; (b) the Revolving Credit Notes duly executed by the Borrower; (c) the Term Notes duly executed by the Borrower and the respective Subsidiary Co-Borrower; (d) the Multicare Guaranty duly executed by each of the Obligors; (e) the Intercreditor Agreement duly executed by each of the Borrower, the Subsidiary Guarantors, the Banks, the Administrative Agent, the ADS Lease Banks, the ADS Lease Agent, the ADS Lessor and the Collateral Agent; (f) the Mortgages duly executed by PHC Operating Corp. or Providence Health Care, Inc., respectively; (g) the Security Agreement and the Pledge Agreement duly executed by each of the Obligors and the Collateral Agent; (h) [Intentionally Omitted]; (i) commitments to issue endorsements to each policy of mortgagee title insurance with respect to each of the Health Care Facilities owned by PHC Operating Corp. or Providence Health Care, Inc. insuring the fully perfected and first priority Lien of the Collateral Agent in such Health Care Facility; (j) (i) executed copies of the financing statements (UCC-1) duly filed or to be filed under the Uniform Commercial Code of all jurisdictions necessary or, in the opinion of the Secured Parties, desirable to perfect the security interests created by the Security Agreement and the Pledge Agreement; (ii) executed copies of the assignment statements (UCC-3) to be filed under the Uniform Commercial Code of all jurisdictions necessary to assign the security interest of The Chase Manhattan Bank, N.A., as Agent, in and to the Collateral to the Collateral Agent; (iii) executed copies of the termination statements (UCC-3) to be filed under the Uniform Commercial Code of all jurisdictions necessary to terminate the security interests of all other Persons in and to the Collateral; and (iv) copies of searches identifying all of the financing statements on file with respect to each of the Obligors in all jurisdictions referred to under (i) of this Section 5.01(j); (k) (i) stock certificates representing all of the outstanding capital stock held by each Obligor in each other Person in which such Obligor holds an interest together with undated stock powers executed in blank; (ii) evidence of the registration of the pledge of all partnership interests and limited liability company interests held by each Obligor in each other Person in which such Obligor holds an interest (to the extent that such interest is pledged under the Pledge Agreement); and (iii) promissory notes or other instruments held by each Obligor in suitable form for transfer by endorsement and delivery; (l) certificates or other evidence of casualty insurance policies with appropriate loss payable endorsements indicating assignment of proceeds thereunder to the Collateral Agent for the ratable benefit of the Secured Parties and certificates or other evidence of liability insurance with appropriate endorsements indicating the coverage of the Collateral Agent for the ratable benefit of the Secured Parties as an additional insured; (m) (i) the ADS Mortgages duly executed by each of the ADS Lessees and the ADS Lessor and the ADS Assignment of Lease duly executed by the ADS Lessor; (ii) commitments to issue policies of mortgagee title insurance with respect to each ADS Mortgaged Property insuring the fully perfected and first priority Lien of the Collateral Agent in such ADS Mortgaged Property; (iii) a survey of each ADS Mortgaged Property certified to the Secured Parties by a surveyor reasonably satisfactory to the Secured Parties containing the Minimum Standard Detail Requirements for ALTA/ASCM Land Title Surveys; (iv) an independent appraisal from a state certified appraiser engaged by the Secured Parties indicating the fair market value of each ADS Mortgaged Property; and (v) an environmental site assessment report certified to the Secured Parties by a consultant reasonably satisfactory to the Secured Parties with respect to each ADS Mortgaged Property; (n) certificates of the Secretary or Assistant Secretary of each of the Consolidated Entities, dated the Closing Date, (i) attesting to all corporate, partnership or limited liability company action taken by such Consolidated Entity, including resolutions of its Board of Directors, the Board of Directors of its general partner or its Board of Managers authorizing the execution, delivery and performance of each of the Facility Documents to which it is a party and each other document to be delivered pursuant to this Agreement, (ii) certifying the names and true signatures of the officers of such Consolidated Entity authorized to sign the Facility Documents to which it is a party and the other documents to be delivered by such Consolidated Entity under this Agreement and (iii) verifying that the charter and by-laws or partnership or operating agreement of such Consolidated Entity attached thereto are true, correct and complete as of the date thereof; (o) a certificate of a duly authorized officer of each of the Obligors, dated the Closing Date, stating that the representations and warranties in Article 6 are true and correct in all material respects on such date as though made on and as of such date and that no event has occurred and is continuing which constitutes a Default or Event of Default; (p) a certificate of a duly authorized officer of the Borrower, dated the Closing Date, attaching true and complete copies of all material consents, authorizations and filings made under any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any indenture, agreement, lease or instrument relating to the ADS Acquisition or the ADS Synthetic Lease, as reasonably requested by the Administrative Agent; (q) good standing certificates with respect to each Consolidated Entity issued by the Secretary of State of its jurisdiction of organization and evidence that each of the Consolidated Entities is qualified as a foreign corporation, partnership or limited liability company in every other jurisdiction in which it does business; (r) a favorable opinion of Paul, Weiss, Rifkind, Wharton & Garrison, outside counsel to each of the Consolidated Entities, dated the Closing Date, in substantially the form of Exhibit E and as to such other matters as the Administrative Agent or any Bank may reasonably request; (s) favorable opinions of (i) Benesch, Friedlander, Coplan & Aronoff, (ii) Duane, Morris & Heckscher, (iii) Katten, Muchin & Zavis, (iv) Miller, Eggleston & Cramer, Ltd., (v) Murphy & Desmond, S.C., (vi) Ropes & Gray, (vii) Steptoe & Johnson, (viii) Susman, Duffy & Segaloff and (ix) Wolff & Samson, local counsel to each of the Consolidated Entities, dated the Closing Date, in substantially the form of Exhibit F and as to such other matters as the Secured Parties may request; (t) certified complete and correct copies of each of the financial statements referred to in Section 6.05; (u) evidence that all actions to consummate, complete and effectuate the ADS Acquisition and the ADS Synthetic Lease shall have been taken to be accompanied by favorable opinions of Goulston & Storrs, counsel to the ADS Seller Entities and the ADS Owner Parties; (v) evidence of the repayment of all Debt outstanding to any ADS Seller Entity (other than the Debt described in Schedule IV) and the release of all collateral granted in connection therewith including, without limitation, all amounts owed to (i) BayBank Boston, N.A., (ii) Fleet Bank of Massachusetts, N.A. (now known as Fleet National Bank), (iii) Northmark Bank and (iv) Enterprise Bank and Trust Company; (w) certified complete and correct copies of the ADS Acquisition Documents, the ADS Synthetic Lease Documents and all Credit Arrangements, Operating Agreements, Participation Agreements and Licenses of the ADS Seller Entities; and (x) a borrowing notice of the Borrower relating to the Loans to be made and the Letters of Credit to be issued on the Closing Date together with a letter from the Borrower containing wire transfer instructions and account information relating to the funds to be made available by the Banks to the Borrower on the Closing Date. On the Closing Date, the Banks party to the Existing Credit Agreement shall surrender to the Borrower the Existing Notes held by them under the Existing Credit Agreement, in each case marked "Replaced". Section 5.02. Additional Conditions Precedent. The obligations of the Banks to make any Loans pursuant to a borrowing which increases the amount outstanding hereunder (including the initial borrowing) or of the Issuing Bank to issue any Letters of Credit shall be subject to the further conditions precedent that on the date of such Loans or the issuance of such Letters of Credit, the following statements shall be true: (i) in the case of the initial borrowing or the initial issuance of a Letter of Credit, the representations and warranties contained in Article 6, in Article 2 of the Multicare Guaranty, in Article 3 of the Security Agreement and in Article 3 of the Pledge Agreement are true and correct as of the Closing Date, (ii) in the case of subsequent borrowings and issuances of Letters of Credit, such representations and warranties are true and correct as of the date of such Loans or the issuance of such Letter of Credit as though made on and as of such date unless the failure of such representations and warranties to be true and correct could not reasonably be expected to have a Material Adverse Effect; provided that if any such representation or warranty is expressly stated to have been made as of a specific date, as of such specific date; and (iii) no Default or Event of Default has occurred and is continuing, or would result from such Loans or the issuance of Letters of Credit. Section 5.03. Deemed Representations. Each notice of borrowing or request for the issuance of a Letter of Credit hereunder and acceptance by the Borrower of the proceeds of such borrowing or the benefit of such Letter of Credit shall constitute a representation and warranty that the statements contained in Section 5.02 are true and correct both on the date of such notice or request and, unless the Borrower otherwise notifies the Administrative Agent prior to such borrowing or such issuance (in which case the Banks shall be under no obligation to make available the proceeds of such borrowing and the Issuing Bank shall be under no obligation to issue such Letter of Credit), as of the date of such borrowing or such issuance. ARTICLE 6. REPRESENTATIONS AND WARRANTIES. Each of the Borrower and the Subsidiary Co-Borrowers (as to itself and its Subsidiaries) hereby represents and warrants that (after giving effect to the ADS Acquisition): Section 6.01. Organization, Good Standing and Due Qualification. Each of the Consolidated Entities is a corporation, partnership or limited liability company duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, has the corporate, partnership or limited liability company power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged, and is duly qualified as a foreign corporation, partnership or limited liability company and in good standing under the laws of each other jurisdiction in which such qualification is required and where such failure to qualify could reasonably be expected to have a Material Adverse Effect. Section 6.02. Power and Authority; No Conflicts. The execution, delivery and performance by each of the Obligors of the Facility Documents to which it is a party have been duly authorized by all necessary corporate, partnership or limited liability company action and do not and will not: (a) require any consent or approval of its stockholders, partners or members; (b) contravene its charter or by-laws or partnership or operating agreement; (c) violate any provision of, or require any filing (other than the filings required under the Security Documents), registration, consent or approval under, any law, rule, regulation (including, without limitation, Regulation U), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to any Consolidated Entity; (d) result in a breach of or constitute a default or require any consent under any indenture or loan or credit agreement or any other agreement, lease or instrument to which any Consolidated Entity is a party or by which it or its properties may be bound or affected if such breach, default or failure to obtain consent could reasonably be expected to have a Material Adverse Effect; (e) result in, or require, the creation or imposition of any Lien (other than as created under the Security Documents), upon or with respect to any of the properties now owned or hereafter acquired by any Consolidated Entity; or (f) cause any Consolidated Entity to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or, if such default could reasonably be expected to have a Material Adverse Effect, any such indenture, agreement, lease or instrument. Section 6.03. Legally Enforceable Agreements. Each Facility Document to which any Obligor is a party is, or when delivered under this Agreement will be, a legal, valid and binding obligation of such Obligor enforceable against such Obligor in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. Section 6.04. Litigation. Except as set forth on Schedule II hereto, there are no actions, suits or proceedings pending or, to the knowledge of any Obligor, threatened, against or affecting any Consolidated Entity before any court, Governmental Authority or arbitrator which could reasonably be expected to have a Material Adverse Effect. Section 6.05. Financial Statements. (a) The consolidated balance sheets of the Consolidated Entities as at December 31, 1995, 1994, 1993, 1992 and 1991 and the consolidating balance sheets of each of the Subsidiary Co-Borrowers as at December 31, 1995, and the related consolidated income statements and statements of cash flows and changes in stockholders' equity of the Consolidated Entities and consolidating income statements of each of the Subsidiary Co-Borrowers, for the fiscal years then ended, and the accompanying footnotes, together with the opinion on the consolidated statements of KPMG Peat Marwick LLP, independent certified public accountants, and the interim consolidated balance sheet of the Consolidated Entities as at September 30, 1996, and the related consolidated income statement and statements of cash flows and changes in stockholders' equity of the Consolidated Entities, for the nine month period then ended, copies of which have been furnished to each of the Banks, are complete and correct and fairly present the financial condition of the Consolidated Entities at such dates and the results of the operations of the Consolidated Entities for the periods covered by such statements, all in accordance with GAAP consistently applied (subject to year-end adjustments). (b) To the best knowledge of the Borrower, the combined balance sheet of the ADS Seller Entities at December 31, 1995 and the related combined income statements and statements of cash flows and changes in stockholders' equity of the ADS Seller Entities, for the fiscal year then ended, and the accompanying footnotes, together with the opinion thereon of Landa & Altsher, P.C., independent certified public accountants, and the interim consolidated balance sheet of the Consolidated Entities as at September 30, 1996, and the related consolidated income statement and statements of cash flows and changes in stockholders' equity of the Consolidated Entities, for the nine month period then ended, copies of which have been furnished to each of the Banks, are complete and correct and fairly present the financial condition of the ADS Seller Entities at such dates and the results of the operations of the ADS Seller Entities for periods covered by such statements, all in accordance with GAAP consistently applied (subject to year-end adjustments). (c) After giving effect to (i) the ADS Acquisition, (ii) the Acquisition of Concord Health Group, Inc. and its Subsidiaries, and (iii) the Acquisition of Glenmark Associates, Inc. and its Subsidiaries (the "Significant Recent Acquisitions"), the pro forma condensed consolidated balance sheet of the Consolidated Entities as at September 30, 1996 and as at December 31, 1995 and the related pro forma condensed consolidated income statements of the Consolidated Entities for the fiscal periods then ended, copies of which have been furnished to each of the Banks, are complete and correct and fairly present the financial condition of the Consolidated Entities at such dates and the results of the operations of the Consolidated Entities for periods covered by such statements, all in accordance with GAAP consistently applied. (d) As of the date thereof, the projections and pro forma financial information provided by the Borrower giving effect to the Significant Recent Acquisitions are based on good faith estimates and assumptions by the management of the Borrower, it being recognized by the Banks, however, that projections as to future events are not to be viewed as fact and that actual results during the period or periods covered by any such projections may differ from the projected results and that the differences may be material. After reviewing historical financial statements of the ADS Sellers, Concord Health Group, Inc. and its Subsidiaries and Glenmark Associates, Inc. and its Subsidiaries and considering the pro forma position of the Consolidated Entities subsequent to the Significant Recent Acquisitions, the Borrower believes in good faith that the Consolidated Entities will continue to be in compliance with the financial covenants contained in Article 9. (e) Except as set forth on the pro forma condensed consolidated balance sheet of the Consolidated Entities as at September 30, 1996, there are no liabilities of any Consolidated Entity, fixed or contingent, which are material but are not reflected in the consolidated financial statements or in the notes thereto and which would be required to be recorded in such financial statements or notes in accordance with GAAP. No written information, exhibit or report furnished by any Consolidated Entity to the Banks in connection with the negotiation of this Agreement (after giving effect to information so furnished that corrects, supplements or supersedes information previously furnished) contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not materially misleading in each case as determined as of the date of the provision of such information, exhibit or report. Since September 30, 1996, there has been no change which could reasonably be expected to have a Material Adverse Effect. Section 6.06. Ownership and Liens. Each of the Consolidated Entities has title to, or valid leasehold interests in, all of its Property, including the Property reflected in the financial statements referred to in Section 6.05 (other than any Property disposed of in the ordinary course of business), and none of the Property owned by any Consolidated Entity and none of its leasehold interests is subject to any Lien, except as may be permitted hereunder and except for the Liens created by the Security Documents; provided that no Obligor is making any representation or warranty with respect to Liens affecting the fee interest in real Property leased to any Consolidated Entity and not owned by another Consolidated Entity. Section 6.07. Taxes. Each of the Consolidated Entities has filed (or obtained extensions for) all tax returns (federal, state and local) required to be filed and has paid all taxes, assessments and governmental charges and levies shown thereon to be due, including interest and penalties. Section 6.08. ERISA. Each Plan and, to the best knowledge of each Obligor, Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or state law, and no event or condition is occurring or exists concerning which any Consolidated Entity would be under an obligation to furnish a report to the Bank in accordance with Section 7.08(g) hereof. As of the most recent valuation date for each Plan, each Plan other than The Breyut Convalescent Center, Inc. Pension Fund was "fully funded", which for purposes of this Section 6.08 shall mean that the fair market value of the assets of the Plan is not less than the present value of the accrued benefits of all participants in the Plan, computed on a Plan termination basis. To the best knowledge of each Obligor, no such Plan has ceased being fully funded as of the date these representations are made with respect to any Loan under this Agreement. With respect to The Breyut Convalescent Center, Inc. Pension Fund, benefit accruals were frozen as of December 31, 1990 and the Unfunded Benefit Liabilities as projected by such Plan's enrolled actuary as of August 1, 1993 were $1,139,854. Section 6.09. Subsidiaries and Ownership of Stock. As of the date hereof and as of the Closing Date, Schedule III sets forth the name of (a) each Subsidiary of the Borrower and (b) each Affiliate that is owned by a Consolidated Entity, that has an ownership interest in a Consolidated Entity or that has entered into a transaction with any Consolidated Entity, in each case showing the jurisdiction of its incorporation or organization and showing the percentage of each Person's ownership of the outstanding stock or partnership interests of such Subsidiary or Affiliate. All of the outstanding shares of capital stock and all of the partnership and limited liability company interests of each Subsidiary owned by the Borrower, either directly or indirectly, are validly issued, fully paid and nonassessable, and all such shares or interests are owned free and clear of all Liens (other than as created under the Security Documents). As of the date hereof and as of the Closing Date, except as set forth in Schedule III, no Consolidated Entity owns or holds the right to acquire any shares of stock or any other security or interest in any other Person. Section 6.10. Credit Arrangements. As of the date hereof and as of the Closing Date, Schedule IV is a complete and correct list of all credit agreements, indentures, note purchase agreements, guaranties, Capital Leases and other investments, agreements and arrangements constituting Debt (the "Credit Arrangements") providing for or relating to extensions of credit (including agreements and arrangements for the issuance of letters of credit or for acceptance financing) in respect of which any Consolidated Entity is in any manner directly or contingently obligated; and the maximum principal or face amounts of the credit in question, outstanding and which can be outstanding, are correctly stated, and all Liens of any nature given or agreed to be given as security therefor are correctly described or indicated in such Schedule. Section 6.11. Operation of Business. (a) Each of the Consolidated Entities possesses all certificates of need and licenses necessary to operate the Health Care Facilities as long term or specialized health care facilities and all Medicare and Medicaid provider agreements relating to the operation of such Health Care Facilities and all other Licenses, permits, franchises, patents, copyrights, trademarks and trade names, or rights thereto, to conduct its business substantially as now conducted and as presently proposed to be conducted and where the failure to possess such other Licenses, permits, franchises, patents, copyrights, trademarks and trade names could have a Material Adverse Effect, and no Consolidated Entity is in material violation of any valid rights of others with respect to any of the foregoing where such violation could have a Material Adverse Effect. As of the date hereof and as of the Closing Date, Schedule V is a complete and correct list of all certificates of need and licenses necessary to operate the Health Care Facilities owned or leased by any Consolidated Entity as long term or specialized health care facilities and all Medicare and Medicaid provider agreements relating to the operation of such Health Care Facilities. (b) Except for revocations, suspensions, terminations, probations, restrictions, limitations or non-renewals which, individually or in the aggregate, could not reasonably be expected to have a Material Adverse Effect, there is no threatened or pending revocation, suspension, termination, probation, restriction, limitation, or non-renewal of any material License, Participation Agreement (including, Medicare, Medicaid, CHAMPUS, Blue Cross and Blue Shield, and all current private commercial insurance and employee assistance programs in which any Consolidated Entity presently participates) or accreditation or certification by any accreditation or approval organization or Governmental Authority for health care providers, including, without limitation, of any provisional License or other License with a term of less than twelve (12) months with respect to any Consolidated Entity. (c) Each of the Consolidated Entities has caused there to be prepared and filed (or obtained extensions for) all applicable cost reports to Medicare, Medicaid, CHAMPUS, Blue Cross, Blue Shield and such other third party payors that are material to conduct its business substantially as now conducted. Section 6.12. Operating Agreements and Leases. As of the date hereof and as of the Closing Date, Schedule VI is a complete and correct list of all management agreements and leases (collectively, the "Operating Agreements") relating to the operation and management of each Health Care Facility and to the operation or management of each Health Care Facility owned by a Person other than a Consolidated Entity. Section 6.13. Health Care Facilities. As of the date hereof and as of the Closing Date, Schedule VII is a complete and correct list of all Health Care Facilities and the locations thereof. Section 6.14. Hazardous Materials. Each of the Consolidated Entities is in compliance in all material respects with all Environmental Laws in effect in each jurisdiction where it is presently doing business. No Consolidated Entity is subject to any material liability under any Environmental Law. In addition, no Consolidated Entity has received any (i) notice from any Governmental Authority by which any of its present or previously-owned or leased real Properties has been designated, listed, or identified in any manner by any Governmental Authority charged with administering or enforcing any Environmental Law as a Hazardous Material disposal or removal site, "Super Fund" clean-up site, or candidate for removal of Hazardous Materials or closure of a Hazardous Material disposal site pursuant to any Environmental Law, (ii) notice of any Lien arising under or in connection with any Environmental Law that has attached to any revenues of, or to, any of its owned or leased real Properties, or (iii) summons, citation, notice, directive, letter, or other written communication from any Governmental Authority concerning any intentional or unintentional action or omission by such Consolidated Entity in connection with its ownership or leasing of any real Property resulting in the releasing, spilling, leaking, pumping, pouring, emitting, emptying, dumping, or otherwise disposing of any Hazardous Material into the environment resulting in any violation of any Environmental Law. Section 6.15. No Default on Outstanding Judgments or Orders. Each of the Consolidated Entities has satisfied all judgments and no Consolidated Entity is in default with respect to any final judgment (except such as have been appropriately stayed), writ, injunction or decree of any Governmental Authority. Section 6.16. No Defaults on Other Agreements. No Consolidated Entity is a party to any indenture, loan or credit agreement or any lease or other agreement or instrument or subject to any charter or corporate restriction which could have a Material Adverse Effect. No Consolidated Entity is in default in any material respect in the performance, observance or fulfillment of any of the obligations, covenants or conditions contained in any agreement or instrument material to its business to which it is a party. Section 6.17. Labor Disputes and Acts of God. Neither the business nor the properties of any Consolidated Entity are affected by any fire, explosion, accident, strike, lockout or other labor dispute, drought, storm, hail, earthquake, embargo, act of God or of the public enemy or other casualty (whether or not covered by insurance), which could have a Material Adverse Effect. Section 6.18. Governmental Regulation. No Consolidated Entity is subject to regulation under the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act, the Federal Power Act or any statute or regulation limiting its ability to incur indebtedness for money borrowed as contemplated hereby. Section 6.19. No Forfeiture. Neither any Consolidated Entity nor any of its Affiliates is engaged in or proposes to be engaged in the conduct of any business or activity which could result in a Forfeiture Proceeding which could reasonably be expected to have a Material Adverse Effect and no Forfeiture Proceeding against any of them is pending or threatened. Section 6.20. Solvency. The present fair saleable value of the assets of each Obligor after giving effect to all the transactions contemplated by the Facility Documents and the funding of the Commitments and the issuance of Letters of Credit hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of such Obligor as they mature. The Property of each Obligor does not constitute unreasonably small capital for such Obligor to carry out its business as now conducted and as proposed to be conducted including the capital needs of such Obligor. Each Obligor does not intend to, nor does such Obligor believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by such Obligor, and of amounts to be payable on or in respect of debt of such Obligor). The cash available to such Obligor after taking into account all other anticipated uses of the cash of such Obligor, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Obligor when such amounts are required to be paid. Each Obligor does not believe that final judgments against it in actions for money damages will be rendered at a time when, or in an amount such that, such Obligor will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash available to such Obligor after taking into account all other anticipated uses of the cash of such Obligor (including the payments on or in respect of debt referred to in this Section 6.20), is anticipated to be sufficient to pay all such judgments promptly in accordance with their terms. Section 6.21. Security Documents. The Security Documents are effective to create in favor of the Collateral Agent for the ratable benefit of the Secured Parties a legal, valid and enforceable Lien on and security interest in all right, title and interest of each Obligor in the Collateral securing the Senior Obligations. Except for Liens permitted under Section 8.03 entitled to priority by law, the Collateral Agent has a fully perfected and continuing first priority Lien on and security interest in the Collateral, free from all Liens other than Liens permitted under Section 8.03. Section 6.22. Senior Indebtedness. The obligations of the Borrower hereunder and under the other Facility Documents constitute "Senior Indebtedness" under and as defined in (a) the Multicare Indenture with respect to the Multicare Subordinated Notes and (b) the Multicare Fiscal Agency Agreement with respect to the Multicare Subordinated Debentures. Section 6.23. Representations and Warranties in the ADS Acquisition Documents. The Administrative Agent has received a complete and correct copy of the ADS Acquisition Documents and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof. The ADS Acquisition Agreement has been duly executed and delivered by ADS/Multicare, and to the best knowledge of the Borrower, each of the ADS Owner Parties and the ADS Seller Entities. Each of the ADS Acquisition Documents is in full force and effect. Each of the representations and warranties of ADS/Multicare and, to the best knowledge of the Borrower, of each of the ADS Owner Parties and the ADS Seller Entities set forth in the ADS Acquisition Agreement is true and correct in all material respects. Except as otherwise disclosed in Schedule 6.1.3 to the ADS Acquisition Agreement, the execution, delivery and performance of the ADS Acquisition Agreement by ADS/Multicare, and to the best knowledge of the Borrower, each of the ADS Owner Parties and the ADS Seller Entities do not and will not violate any provision of, or require any filing, registration, consent or approval under any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any indenture, agreement, lease or instrument to which such Person is a party or by which they or their Properties may be bound or affected. All transactions contemplated by the ADS Acquisition Documents consummated on or prior to the Closing Date have been consummated without any material amendment, waiver or modification of the terms thereof. Section 6.24. Representations and Warranties in the ADS Synthetic Lease Documents. The Administrative Agent has received a complete and correct copy of the ADS Synthetic Lease Documents and all amendments thereto, waivers relating thereto and other side letters or agreements affecting the terms thereof. The ADS Participation Agreement has been duly executed and delivered by each of the Borrower and the ADS Lessees. Until such time as the ADS Lessees shall have exercised their "Purchase Option" or "Remarketing Option" (as each such term is defined in Appendix A to the ADS Participation Agreement) as to the ADS Mortgaged Properties under the ADS Synthetic Lease, each of the ADS Synthetic Lease Documents is in full force and effect. Each of the representations and warranties of each of the Borrower and the ADS Lessees set forth in the ADS Participation Agreement is true and correct in all material respects. The execution, delivery and performance of the ADS Participation Agreement by each of the Borrower and the ADS Lessees do not and will not violate any provision of, or require any filing (other than the filings required under the Security Documents), registration, consent or approval under any law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or any indenture, agreement, lease or instrument to which such Person is a party or by which they or their Properties may be bound or affected. All transactions contemplated by the ADS Participation Agreement consummated on or prior to the Closing Date have been consummated without amendment, waiver or modification of the terms thereof. ARTICLE 7. AFFIRMATIVE COVENANTS. So long as any Note shall remain unpaid, any Letter of Credit shall remain outstanding or any Bank shall have any Commitment under this Agreement, the Borrower shall: Section 7.01. Maintenance of Existence. Preserve and maintain, and cause each of its Subsidiaries to preserve and maintain, its corporate, partnership or limited liability company existence and good standing in the jurisdiction of its incorporation, and qualify and remain qualified as a foreign corporation or partnership in each jurisdiction in which such qualification is required except with respect to sales or other dispositions by the Borrower or such Subsidiary permitted under Section 8.07. Section 7.02. Conduct of Business. Continue, and cause each of its Subsidiaries to continue, to engage in the business of the same general type as conducted by it on the date of this Agreement; except where such failure to so participate could not reasonably be expected to have a Material Adverse Effect, continue, and cause each of its Subsidiaries to continue, its participation in any and all plans and programs for third party payment and reimbursement from, and claims against, private insurers and employee assistance programs, and plans or programs for payment and reimbursement from federal, state or local governmental agencies, or private or quasi-public insurers, including, without limitation, Managed Care Plans, Medicaid, Medicare, CHAMPUS, Blue Cross and Blue Shield; except where such failure to so comply could not reasonably be expected to have a Material Adverse Effect, comply, and cause each of its Subsidiaries to comply, with any and all rules, regulations, standards, procedures and decrees necessary to maintain its or any of its participation in any such third party payment or reimbursement programs or plans; and prepare and file, and cause each of its Subsidiaries to prepare and file, all applicable cost reports to all third party payors to the extent required by third party payors. Section 7.03. Maintenance of Properties. Maintain, keep and preserve, and cause each of its Subsidiaries to maintain, keep and preserve, all of its Property (including, without limitation, all Licenses, accreditations, rights, privileges and franchises) necessary or useful in the proper conduct of its business in good working order and condition, ordinary wear and tear excepted and except for sales, leases, assignments, transfers or other dispositions of Property permitted under Section 8.07. Section 7.04. Maintenance of Records. Keep, and cause each of its Subsidiaries to keep, adequate records and books of account, in which complete entries will be made in accordance with GAAP, reflecting all financial transactions of the Consolidated Entities. Section 7.05. Maintenance of Insurance. Maintain, and cause each of its Subsidiaries to maintain, insurance with financially sound and reputable insurance companies or associations in such amounts and covering such risks as are usually carried by companies engaged in the same or a similar business and similarly situated, which insurance may provide for reasonable deductibility from coverage thereof; provided that the Borrower or such Subsidiary may maintain a system of self-insurance with respect to health insurance for its employees so long as such system is in accord with sound financial practices of similar businesses maintaining similar systems and so long as the Borrower or such Subsidiary shall maintain adequate insurance reserves in accordance with GAAP and in accordance with sound actuarial and insurance principles. Section 7.06. Compliance with Laws. Comply, and cause each of its Subsidiaries to comply, in all material respects with all applicable laws, rules, regulations and orders (including, without limitation, any Environmental Law), such compliance to include, without limitation, paying before the same become delinquent all taxes, assessments and governmental charges imposed upon it or upon its Property; provided that items of the foregoing description need not be paid while being contested in good faith and by appropriate proceedings diligently pursued as long as adequate book reserves have been established with respect thereto. Section 7.07. Right of Inspection. At any reasonable time and from time to time, and upon reasonable advance notice but no advance notice shall be required if a Default or an Event of Default then exists, permit the Administrative Agent or any Bank or any agent or representative thereof, to examine and make copies and abstracts from the records and books of account of, and visit the properties of, any Consolidated Entity, and to discuss the affairs, finances and accounts of such Consolidated Entity with any of their respective officers and directors and independent accountants. Section 7.08. Reporting Requirements. Furnish directly to each of the Banks: (a) as soon as available and in any event within 90 days after the end of each fiscal year of the Consolidated Entities, a consolidated balance sheet of the Consolidated Entities and consolidating balance sheets of each of the Subsidiary Co-Borrowers as of the end of such fiscal year and a consolidated income statement and statement of cash flows and changes in stockholders' equity of the Consolidated Entities and consolidating income statements of each of the Subsidiary Co-Borrowers for such fiscal year, all in reasonable detail and stating in comparative form the respective consolidated figures for the corresponding date and period in the prior fiscal year and all prepared in accordance with GAAP and as to the consolidated statements accompanied by an opinion thereon acceptable to the Administrative Agent and each of the Banks by KPMG Peat Marwick or other independent accountants of national standing selected by the Consolidated Entities; provided that delivery within the period specified above of copies of the Annual Report on Form 10-K of the Borrower filed with the Securities and Exchange Commission, together with the adjustments to such consolidated statements necessary to provide consolidating information for each of the Subsidiary Co-Borrowers, shall be deemed to satisfy the requirements of this Section 7.08(a) so long as such Form 10-K as so adjusted shall contain the information referred to in this Section 7.08(a); (b) 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 the Consolidated Entities, a consolidated balance sheet of the Consolidated Entities as of the end of such quarter and a consolidated income statement and statement of cash flows and changes in stockholders' equity of the Consolidated Entities for the period commencing at the end of the previous fiscal year and ending with the end of such quarter, all in reasonable detail and stating in comparative form the respective consolidated figures for the corresponding date and period in the previous fiscal year and all prepared in accordance with GAAP and certified by a senior officer of the Consolidated Entities (subject to year-end adjustments); provided that delivery within the period specified above of copies of the Quarterly Report on Form 10-Q of the Borrower filed with the Securities and Exchange Commission shall be deemed to satisfy the requirements of this Section 7.08(b) so long as such Form 10-Q shall contain the information referred to in this Section 7.08(b); (c) simultaneously with the delivery of the financial statements referred to above, a Compliance Certificate of a senior officer of the Borrower (i) certifying that to the best of his knowledge no Default or Event of Default has occurred and is continuing or, if a Default or Event of Default has occurred and is continuing, a statement as to the nature thereof and the action which is proposed to be taken with respect thereto, and (ii) with computations demonstrating compliance with the covenants contained in Article 9; (d) simultaneously with the delivery of the annual financial statements referred to in Section 7.08(a), a certificate of the independent public accountants who audited such statements to the effect that, in making the examination necessary for the audit of such statements, they have obtained no knowledge of any condition or event which constitutes a Default or Event of Default, or if such accountants shall have obtained knowledge of any such condition or event, specifying in such certificate each such condition or event of which they have knowledge and the nature and status thereof; (e) promptly after the commencement thereof, notice of all actions, suits, and proceedings before any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, affecting any Consolidated Entity which, if determined adversely to such Consolidated Entity, could have a Material Adverse Effect; (f) as soon as possible and in any event within 10 days after becoming aware of or having reason to become aware of the occurrence of each Default or Event of Default a written notice setting forth the details of such Default or Event of Default and the action which is proposed to be taken by the Consolidated Entities with respect thereto; (g) as soon as possible, and in any event within ten days after any Consolidated Entity knows or has reason to know that any of the events or conditions specified below with respect to any Plan or Multiemployer Plan have occurred or exist, a statement signed by a senior officer of such Consolidated Entity setting forth details respecting such event or condition and the action, if any, which such Consolidated Entity or an ERISA Affiliate proposes to take with respect thereto (and a copy of any report or notice required to be filed with or given to PBGC by such Consolidated Entity or an ERISA Affiliate with respect to such event or condition): (i) any reportable event, as defined in Section 4043(b) of ERISA, with respect to a Plan, as to which PBGC has not by regulation waived the requirement of Section 4043(a) of ERISA that it be notified within 30 days of the occurrence of such event (provided that a failure to meet the minimum funding standard of Section 412 of the Code or Section 302 of ERISA including, without limitation, the failure to make on or before its due date a required installment under Section 412(m) of the Code or Section 302(e) of ERISA, shall be a reportable event regardless of the issuance of any waivers in accordance with Section 412(d) of the Code) and any request for a waiver under Section 412(d) of the Code for any Plan; (ii) the distribution under Section 4041 of ERISA of a notice of intent to terminate any Plan or any action taken by such Consolidated Entity or an ERISA Affiliate to terminate any Plan; (iii) the institution by PBGC of proceedings under Section 4042 of ERISA for the termination of, or the appointment of a trustee to administer, any Plan, or the receipt by such Consolidated Entity or any ERISA Affiliate of a notice from a Multiemployer Plan that such action has been taken by PBGC with respect to such Multiemployer Plan; (iv) the complete or partial withdrawal from a Multiemployer Plan by such Consolidated Entity or any ERISA Affiliate that results in liability under Section 4201 or 4204 of ERISA (including the obligation to satisfy secondary liability as a result of a purchaser default) or the receipt of such Consolidated Entity or any ERISA Affiliate of notice from a Multiemployer Plan that it is in reorganization or insolvency pursuant to Section 4241 or 4245 of ERISA or that it intends to terminate or has terminated under Section 4041A of ERISA; (v) the institution of a proceeding by a fiduciary or any Multiemployer Plan against such Consolidated Entity or any ERISA Affiliate to enforce Section 515 of ERISA, which proceeding is not dismissed within 30 days; (vi) the adoption of an amendment to any Plan that pursuant to Section 401(a)(29) of the Code or Section 307 of ERISA would result in the loss of tax-exempt status of the trust of which such Plan is a part if such Consolidated Entity or an ERISA Affiliate fails to timely provide security to the Plan in accordance with the provisions of said Sections; (vii) any event or circumstance exists which may reasonably be expected to constitute grounds for such Consolidated Entity or any ERISA Affiliate to incur liability under Title IV of ERISA or under Sections 412(c)(11) or 412(n) of the Code with respect to any Plan; and (viii) the Unfunded Benefit Liabilities of one or more Plans increase after the date of this Agreement in an amount which is material in relation to the financial condition of the Consolidated Entities; provided, however, that such increase shall not be deemed to be material so long as it does not exceed during any consecutive 3 year period $500,000; (h) promptly after the request of any Bank, copies of each annual report filed pursuant to Section 104 of ERISA with respect to each Plan (including, to the extent required by Section 104 of ERISA, the related financial and actuarial statements and opinions and other supporting statements, certifications, schedules and information referred to in Section 103) and each annual report filed with respect to each Plan under Section 4065 of ERISA; provided, however, that in the case of a Multiemployer Plan, such annual reports shall be furnished only if they are available to such Consolidated Entity or an ERISA Affiliate; (i) promptly after the sending or filing thereof, copies of all proxy statements, financial statements and reports which any Consolidated Entity sends to its stockholders, and copies of all regular, periodic and special reports, and all registration statements which such Consolidated Entity files with the Securities and Exchange Commission or any Governmental Authority which may be substituted therefor, or with any national securities exchange; (j) promptly after becoming aware of the existence of any violation or alleged violation in any material respect of any law, rule, regulation or order (including, without limitation, any Environmental Law) by any Consolidated Entity and with respect to any Health Care Facility, prompt written notice of and a description of the nature of such violation or alleged violation, what action such Consolidated Entity is taking or proposes to take with respect thereto and, when known, any action taken, or proposed to be taken, by any Governmental Authority with respect thereto; (k) promptly after the commencement thereof or promptly after any Consolidated Entity knows of the commencement or threat thereof, notice of any Forfeiture Proceeding; and (l) such other information respecting the condition or operations, financial or otherwise, of any Consolidated Entity as the Administrative Agent or any Bank may from time to time reasonably request. Section 7.09. Additional Subsidiary Guarantors. Cause each of its Subsidiaries acquired or formed after the date hereof to become a "Subsidiary Guarantor" under the Multicare Guaranty and thereby an "Obligor" hereunder pursuant to an Assumption Agreement, and shall deliver such proof of corporate action, incumbency of officers, opinions of counsel and other documents as is consistent with those delivered by the Obligors pursuant to Article 5 hereof upon the Closing Date or as the Administrative Agent shall have reasonably requested; provided that (a) each of Berkeley Haven Limited Partnership, Canterbury of Shepherdstown Limited Partnership, Care Haven Associates Limited Partnership, Glenmark Properties I, Limited Partnership and Marlinton Associates Limited Partnership (collectively, the "Glenmark Partnerships") shall not be required to become a "Subsidiary Guarantor" hereunder until such time as such Glenmark Partnership shall become a wholly-owned Subsidiary of any Obligor and (b) any Subsidiary acquired or formed after the date hereof shall not be required to become a "Subsidiary Guarantor" under the Multicare Guaranty and an "Obligor" hereunder if such Subsidiary shall be liable with respect to Permitted Acquisition Debt provided that (i) the original principal amount of such Permitted Acquisition Debt shall not be less than 66 2/3% of the value of all Property held by such Subsidiary (such value to be reasonably determined by the Administrative Agent and, unless such valuation shall be unreasonable, such value shall be deemed to be the acquisition price), (ii) the aggregate value of all Property held by such Subsidiary and all other Consolidated Entities who are liable for Permitted Acquisition Debt (such value to be reasonably determined by the Administrative Agent and, unless such valuation shall be unreasonable, such value shall be deemed to be the respective acquisition prices) shall not exceed the result of (A) $30,000,000 minus (B) the product of (x) 1.50 times (y) the value of all Property subject to any conditional sale or other title retention agreement or a Capital Lease entered into after the Initial Closing Date (such value to be reasonably determined by the Administrative Agent and, unless such valuation shall be unreasonable, such valuation shall be deemed to be the acquisition price), (iii) no Default or Event of Default exists or would exist after giving effect to such Acquisition and (iv) if such Subsidiary shall cease to be liable for such Permitted Acquisition Debt, it shall then become a "Subsidiary Guarantor" and an "Obligor" hereunder. ARTICLE 8. NEGATIVE COVENANTS. So long as any Note shall remain unpaid, any Letter of Credit shall remain outstanding or any Bank shall have any Commitment under this Agreement, the Borrower shall not: Section 8.01. Debt. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Debt, except: (a) Debt of the Obligors under this Agreement, the Notes, the Letters of Credit, the Interest Rate Protection Agreements and the other Facility Documents; (b) Debt described in Schedule IV and, to the extent indicated on Schedule IV, any renewals, extensions or refinancings thereof, provided that the principal amount thereof does not increase; (c) Debt consisting of Guaranties permitted pursuant to Section 8.02; (d) Debt of any Obligor to any other Obligor so long as (i) if such Debt is secured, such Debt is evidenced by a promissory note and such note together with such security is pledged as collateral for the Loans and the other obligations under the Facility Documents and (ii) if such Debt is evidenced by a promissory note or other instrument, such note or other instrument is pledged to the Administrative Agent as collateral for the Loans and the other obligations under the Facility Documents; (e) accounts payable to trade creditors for goods or services and current operating liabilities (other than for borrowed money), in each case incurred in the ordinary course of business and paid within prescribed time limits that are in the ordinary course of business, unless contested in good faith and by appropriate proceedings; (f) Permitted Mortgage Debt of any Consolidated Entity other than a Subsidiary Co-Borrower incurred pursuant to this Section 8.01(f) provided that the aggregate principal amount of such Debt for all Consolidated Entities does not exceed at any time $26,000,000; (g) Debt of any Consolidated Entity other than a Subsidiary Co-Borrower incurred pursuant to this Section 8.01(g) secured by Purchase Money Liens permitted by Section 8.03(k) provided that the aggregate principal amount of such Debt for all Consolidated Entities does not exceed at any time $20,000,000; (h) Debt under the ADS Synthetic Lease Documents so long as the aggregate principal amount of such Debt does not exceed $60,000,000; (i) Debt under the Converted Synthetic Lease so long as the aggregate principal amount of such Debt does not exceed $30,000,000; (j) Debt of the Borrower under documentary and standby letters of credit so long as the aggregate reimbursement obligations under such letters of credit does not exceed at any time $15,000,000; (k) Consolidated Subordinated Debt; and (l) Debt of each of the Glenmark Partnerships in favor of Century Care Management, Inc. so long as (i) the aggregate amount of such Debt of each such Glenmark Partnership does not exceed $2,500,000 and (ii) such Debt is evidenced by a promissory note on terms reasonably acceptable to the Administrative Agent which shall be secured by a first priority Lien on all of the personal Property of such Glenmark Partnership and pledged to the Administrative Agent as collateral for the Senior Obligations. Section 8.02. Guaranties, Etc. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Guaranty, except: (a) the Multicare Guaranty; (b) Guaranties by endorsement of negotiable instruments for deposit or collection or similar transactions in the ordinary course of business; (c) Guaranties by the Borrower of Debt permitted under Section 8.01 and leases permitted under Section 8.04; and (d) Guaranties constituting Debt so long as such Debt is permitted under Section 8.01. Section 8.03. Liens. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any Lien upon or with respect to any of its Property, now owned or hereafter acquired, except: (a) Liens in favor of the Collateral Agent on behalf of the Secured Parties securing the Senior Obligations; (b) Liens for taxes or assessments or other government charges or levies if not yet due and payable or if due and payable if they are being contested in good faith by appropriate proceedings and for which appropriate reserves are maintained; (c) Liens imposed by law, such as mechanic's, materialmen's, landlord's, warehousemen's and carrier's Liens, and other similar Liens, securing obligations incurred in the ordinary course of business which are not past due for more than 90 days, or which are being contested in good faith by appropriate proceedings and for which appropriate reserves have been established; (d) Liens under workmen's compensation, unemployment insurance, social security or similar legislation (other than ERISA); (e) Liens, deposits or pledges to secure the performance of bids, tenders, contracts (other than contracts for the payment of money), leases (permitted under the terms of this Agreement), public or statutory obligations, surety, stay, appeal, indemnity, performance or other similar bonds, or other similar obligations arising in the ordinary course of business; (f) judgment and other similar Liens arising in connection with court proceedings; provided that the execution or other enforcement of such Liens is effectively stayed and the claims secured thereby are being actively contested in good faith and by appropriate proceedings; (g) easements, rights-of-way, restrictions and other similar encumbrances which, in the aggregate, do not materially interfere with the occupation, use and enjoyment by any Consolidated Entity of the Property encumbered thereby in the normal course of its business or materially impair the value of the Property subject thereto; (h) Liens securing obligations of any Obligor to any other Obligor; (i) Liens described on Schedule IV and, to the extent such Lien secures Debt permitted under Section 8.01(b), Liens that secure any renewals, extensions or refinancings of such Debt, but not the extension of such Lien to other Property; and (j) Liens securing Permitted Mortgage Debt; provided that the obligations secured by each such Lien are permitted by the provisions of Section 8.01(f); (k) Purchase Money Liens; provided that: (i) the Person owning any Property subject to such Lien is acquired or any Property subject to such Lien is acquired or constructed by any Consolidated Entity and the Lien on any such Property is created within 180 days of such acquisition or construction; (ii) the obligation secured by any Lien so created, assumed or existing shall not exceed 100% of the lesser of cost or fair market value as of the time of acquisition or construction of the Property covered thereby to such Consolidated Entity acquiring or constructing the same; (iii) each such Lien shall attach, in the case of an acquisition, only to the Property so acquired, personal Property associated with such Property and fixed improvements thereon and, in the case of construction, only to the Property so constructed, personal Property associated with such Property, the land thereunder and the fixed improvements attached thereto; and (iv) the obligations secured by such Lien are permitted by the provisions of Section 8.01(g) and the related expenditure is permitted under Section 8.13; and (l) Liens in any Health Care Facility, including, without limitation, in all real Property or personal Property used or to be used in connection with such Health Care Facility (other than any "accounts" as such term is defined in the Uniform Commercial Code as in effect in the jurisdiction in which such security interest is to be perfected), all equipment and fixtures therein and thereon and all general intangibles, including, without limitation, all Operating Agreements and Licenses related thereto, granted in connection with the sale and simultaneous leaseback of such Health Care Facility otherwise permitted hereunder by any Subsidiary of the Borrower to any Person other than an Affiliate, which Liens secure the obligations of such Subsidiary under such lease. Section 8.04. Leases. Create, incur, assume or suffer to exist, or permit any of its Subsidiaries to create, incur, assume or suffer to exist, any obligation as lessee for the rental or hire of any Property, except: (a) leases (other than Capital Leases and Synthetic Leases) which do not in the aggregate require the Consolidated Entities on a consolidated basis to make payments (excluding taxes, insurance, maintenance and similar expense which any Consolidated Entity is required to pay under the terms of any lease) in any fiscal year of the Consolidated Entities in excess of $25,000,000; (b) leases between any Obligor and any other Obligor so long as such lease is subordinated to the Liens of the Collateral Agent under the Security Documents; and (c) Capital Leases and Synthetic Leases permitted by Section 8.01, Section 8.03 and Section 8.13. Section 8.05. Investments. Make, or permit any of its Subsidiaries to make, any loan or advance to any Person or purchase or otherwise acquire, or permit any of its Subsidiaries to purchase or otherwise acquire, any capital stock, assets, obligations or other securities of, make any capital contribution to, or otherwise invest in, or acquire any interest in, any Person, except: (a) cash or Cash Equivalents; (b) Property to be used or useful in the ordinary course of business of the Consolidated Entities; (c) for stock, obligations or securities received in settlement of debts (created in the ordinary course of business) owing to any Consolidated Entity and stock, obligations or securities received in connection with sales and leases of Property to the extent permitted under Section 8.07(d); (d) to or in any Obligor or in any corporation that concurrently with such investment becomes an Obligor; (e) in connection with an Acceptable Acquisition; (f) Guaranties permitted by Section 8.02; (g) Capital Expenditures permitted by Section 8.13; (h) in connection with acquisition of the ownership interests in ADS Palm Chelmsford, Inc., ADS Reservoir Waltham, Inc., Hingham Healthcare Limited Partnership, The Apple Valley Limited Partnership, The Recuperative Center Limited Partnership, Courtyard Nursing Care Center Partnership and Charlton Nursing Care Center pursuant to the terms to the ADS Acquisition Documents; and (i) for other investments not listed in clauses (a) through (h), inclusive, provided that the aggregate amount of such investments for all Consolidated Entities does not exceed at any time $10,000,000. Section 8.06. Dividends. Declare or pay any dividends, purchase, redeem, retire or otherwise acquire for value any of its capital stock now or hereafter outstanding, or make any distribution of assets to its stockholders as such whether in cash, assets or in obligations of the Borrower, or allocate or otherwise set apart any sum for the payment of any dividend or distribution on, or for the purchase, redemption or retirement of any shares of its capital stock, or make any other distribution by reduction of capital or otherwise in respect of any shares of its capital stock, or make, or permit any of its Subsidiaries to make, payments of interest on, or payments or prepayments of principal of, or payments (or setting apart of money for a sinking or other analogous fund) for the purchase, redemption, retirement or other acquisition of principal or interest, on Consolidated Subordinated Debt, except that so long as no Default or Event of Default exists or would exist after giving effect to such payment: (a) the Borrower may declare and deliver dividends and make distributions payable solely in its common stock; (b) the Borrower may purchase or otherwise acquire shares of its capital stock by exchange for or out of the proceeds received from a substantially concurrent issue of new shares of its capital stock; (c) the Borrower may prepay, redeem, retire or otherwise acquire Multicare Subordinated Notes and Multicare Subordinated Debentures by exchange for or out of the proceeds received from a substantially concurrent issue of new shares of its capital stock or from a substantially concurrent incurrence of new Consolidated Subordinated Debt; (d) the Borrower may prepay, redeem, retire or otherwise acquire Multicare Subordinated Notes so long as for each fiscal year of the Consolidated Entities, the aggregate face amount of Multicare Subordinated Notes subject to acquisition for such fiscal year does not exceed (i) with respect to the fiscal year ending on December 31, 1996, $7,500,000 and (ii) with respect to each fiscal year ending thereafter, 25% of Consolidated Net Income for the immediately preceding fiscal year; (e) the Borrower may make payments of interest on the Multicare Subordinated Notes in accordance with the terms of the Multicare Indenture; and (f) the Borrower may make payments of interest on the Multicare Subordinated Debentures in accordance with the terms of the Multicare Fiscal Agency Agreement. Section 8.07. Sale of Assets. Sell, lease, assign, transfer or otherwise dispose of, or permit any of its Subsidiaries to sell, lease, assign, transfer or otherwise dispose of, any of its now owned or hereafter acquired Property (including, without limitation, shares of stock and indebtedness, receivables and leasehold interests); except: (a) for inventory disposed of in the ordinary course of business; (b) the sale or other disposition of Property no longer used or useful in the conduct of its business; (c) any Obligor other than a Subsidiary Co-Borrower may sell, lease, assign, or otherwise transfer its Property to any other Obligor; (d) any Consolidated Entity (including, without limitation, any Subsidiary Co-Borrower so long as the Term Note to which it is a party is paid off in connection with any such sale or lease) may sell or lease any Property to a Person other than an Affiliate for consideration consisting of not less then 80% cash provided that (i) the fair market value of such Property together with the fair market value of all other Property sold or leased during the same fiscal year of the Consolidated Entities does not exceed $40,000,000, (ii) such sale or lease has been approved in good faith by the Board of Directors of such Consolidated Entity, (iii) no Default or Event of Default exists or would exist after giving effect to such disposition and (iv) the Borrower believes in good faith that the Consolidated Entities will continue to be in compliance with the financial covenants contained in Article 9 on a pro forma basis; (e) leases of portions of the Health Care Facilities to tenants which use such leased premises for specialty use or uses incidental to the operation of a Health Care Facility (including, without limitation, a pharmacy, gift shop, or physical or occupational therapy and rehabilitation); and (f) transfer of Property in connection with an investment permitted under Section 8.05. Section 8.08. Stock of Subsidiaries, Etc. Except as permitted by Section 8.07 or Section 8.10, sell or otherwise dispose of any shares of capital stock of any of its Subsidiaries, or permit any such Subsidiary to issue any additional shares of its capital stock, except directors' qualifying shares. Section 8.09. Transactions with Affiliates. Enter, or permit any Subsidiary to enter, into any transaction, including, without limitation, the purchase, sale or exchange of Property or the rendering of any service, with any Affiliate, except in the ordinary course of and pursuant to the reasonable requirements of the Borrower's or such Subsidiary's business and upon fair and reasonable terms no less favorable to the Borrower or such Subsidiary than would obtain in a comparable arm's length transaction with a Person not an Affiliate. Without limiting the generality of the foregoing, this Section 8.09 shall not prohibit any transaction described on Schedule VIII. Section 8.10. Mergers, Etc. Except as permitted under Section 8.07, merge or consolidate with, or sell, assign, lease or otherwise dispose of (whether in one transaction or in a series of transactions) all or substantially all of its assets (whether now owned or hereafter acquired) to, any Person, or acquire all or substantially all of the assets or the business of any Person (or enter into any agreement to do any of the foregoing), or permit any of its Subsidiaries to do so, except that: (a) any Obligor other than a Subsidiary Co-Borrower may merge into or consolidate with or transfer assets to any other Obligor; and (b) any Consolidated Entity may effect any Acquisition not prohibited by Section 8.11. Section 8.11. Acquisitions. Make, or permit any of its Subsidiaries to make, any Acquisition other than an Acceptable Acquisition. Section 8.12. No Activities Leading to Forfeiture. Engage in or propose to be engaged in, or permit any of its Subsidiaries to engage in or propose to be engaged in, the conduct of any business or activity which could result in a Forfeiture Proceeding which could have a Material Adverse Effect. Section 8.13. Capital Expenditures. Make or commit to make, or permit any of its Subsidiaries to make or commit to make, any Capital Expenditure if the aggregate amount of Consolidated Capital Expenditures incurred during any fiscal year of the Consolidated Entities would exceed (a) during the fiscal year ending on December 31, 1997, $70,000,000, (b) during the fiscal year ending on December 31, 1998, $75,000,000, (c) during the fiscal year ending on December 31, 1999, $80,000,000 or (d) during the fiscal year ending on December 31, 2000, $85,000,000. Section 8.14. Amendments or Waivers of Certain Documents. (a) Defease or make, or permit any of its Subsidiaries to defease or make, any payments the effect of which is to defease, or make any voluntary or optional payment or prepayment on, or redemption of, any Permitted Mortgage Debt (except in connection with dispositions of any Health Care Facility permitted under Section 8.07 or refinancings of Permitted Mortgage Debt permitted hereunder) or Consolidated Subordinated Debt (except as permitted under Section 8.06) in whole or in part or (b) amend, supplement or otherwise change (or agree to any amendment or other change of), or permit any of its Subsidiaries to amend, supplement or otherwise change (or agree to any amendment or other change of), the terms of any Permitted Mortgage Debt or Consolidated Subordinated Debt, if the effect of such amendment, supplement or change is to increase the interest rate on such Consolidated Subordinated Debt, advance the dates upon which payments of principal or interest are due on such Permitted Mortgage Debt or such Consolidated Subordinated Debt (including any change that adds or modifies mandatory prepayments), change, in a manner materially adverse to the Consolidated Entities or which confers additional rights on the holders thereof, any event of default or covenant (or any definition relating thereto) with respect to such Consolidated Subordinated Debt, change the redemption or repurchase provisions with respect to such Permitted Mortgage Debt or Consolidated Subordinated Debt in a manner materially adverse to the Consolidated Entities or which confers additional rights on the holders thereof, change the subordination provisions of such Consolidated Subordinated Debt or otherwise increase the obligations of the obligor or confer additional rights on the holders of any Permitted Mortgage Debt or Consolidated Subordinated Debt without, in each case, obtaining the prior written consent of the Required Banks to such amendment or change. Section 8.15. Rights under Other Agreements. Amend, waive or otherwise relinquish, or permit any of its Subsidiaries to amend, waive or otherwise relinquish, any of its rights or causes of action under or arising out of, any material provisions, if such amendment, waiver or relinquishment could reasonably be expected to have a Material Adverse Effect, of any Operating Agreement. Section 8.16. Restrictions. Enter into, or suffer to exist, or permit any of its Subsidiaries to enter into, or suffer to exist, any agreement with any Person other than the Banks that (a) prohibits, requires the consent of such Person for or limits the ability of (i) any Obligor to pay dividends or make other distributions or pay Debt owed to any other Obligor, make loans or advances to any other Obligor or transfer any of its Property which constitute Collateral under the Security Documents to any other Obligor, (ii) any Obligor to create, incur, assume or suffer to exist any Lien upon any of its Property or revenues which constitute Collateral under the Security Documents, whether now owned or hereafter acquired, or (iii) any Obligor to enter into any modification or supplement of the Facility Documents; or (b) contains financial covenants which, taken as a whole, are more restrictive on the Consolidated Entities than the financial covenants contained in Article 9. Notwithstanding Section 8.16(a)(ii) and (a)(iii), the Subsidiaries of the Borrower may enter into or suffer to exist (w) encumbrances permitted under Section 8.03 or restrictions binding upon any Person at the time such Person becomes a Subsidiary so long as such encumbrances or restrictions were not incurred or assumed in contemplation of such Person becoming a Subsidiary, (x) restrictions contained in security agreements or mortgages permitted under this Agreement, (y) customary anti-assignment and encumbrance clauses in contracts or leases prohibiting the assignment of such leases or contracts or (z) encumbrances or restrictions in effect on the date of this Agreement and renewals thereof. ARTICLE 9. FINANCIAL COVENANTS. So long as any Note shall remain unpaid, any Letter of Credit shall remain outstanding or any Bank shall have any Commitment under this Agreement and as determined as of the end of each fiscal quarter of the Consolidated Entities: Section 9.01. Fixed Charge Coverage Ratio. The Borrower shall maintain at all times a Fixed Charge Coverage Ratio of not less than 2.00 to 1.00. Section 9.02. Modified Senior Leverage Ratio. The Borrower shall maintain at all times a Modified Senior Leverage Ratio of not greater than (a) if such time is before December 31, 1997, 4.00 to 1.00, (b) if such time is on or after December 31, 1997 and before December 31, 1998, 3.75 to 1.00 or (c) if such time is on or after December 31, 1998, 3.50 to 1.00. Section 9.03. Modified Leverage Ratio. The Borrower shall maintain at all times a Modified Leverage Ratio of not greater than (a) if such time is before December 31, 1997, 5.00 to 1.00, (b) if such time is on or after December 31, 1997 and before December 31,1998, 4.75 to 1.00 or (c) if such time is on or after December 31, 1998, 4.50 to 1.00. Section 9.04. Interest Coverage Ratio. The Borrower shall maintain at all times an Interest Coverage Ratio of not less than 3.00 to 1.00. Section 9.05. Minimum Net Worth. The Borrower shall maintain at all times Consolidated Net Worth of not less than the sum of (a) $185,000,000 plus (b) the aggregate sum of the Fiscal Quarter Net Worth Increase Amounts calculated for each fiscal quarter of the Consolidated Entities ending after December 31, 1996. ARTICLE 10. EVENTS OF DEFAULT. Section 10.01. Events of Default. Any of the following events shall be an "Event of Default": (a) the Borrower shall: (i) fail to pay the principal of any Note or any Reimbursement Obligation on or before the date when due and payable; or (ii) fail to pay interest on any Note or any fee or other amount due hereunder on or before five (5) days after the date when due and payable; (b) any representation or warranty made or deemed made by any Consolidated Entity in this Agreement or in any other Facility Document or which is contained in any certificate, document, opinion, financial or other statement furnished at any time under or in connection with any Facility Document shall prove to have been incorrect in any material respect on or as of the date made; (c) (i) the Borrower shall fail to perform or observe any term, covenant or agreement contained in Section 2.03 or 3.02 or Articles 8 or 9; or (ii) any Obligor shall fail to perform or observe any term, covenant or agreement on its part to be performed or observed (other than the obligations specifically referred to elsewhere in this Section 10.01) in any Facility Document to which it is a party and such failure shall continue for 30 consecutive days; (d) any Consolidated Entity shall: (i) fail to pay any Debt and/or obligations under any lease aggregating in excess of 5% of Consolidated Net Worth (other than the payment obligations described in (a) above), or any interest or premium thereon, when due (whether by scheduled maturity, required prepayment, acceleration, demand or otherwise); (ii) fail to perform or observe any term, covenant or condition on its part to be performed or observed under any agreement or instrument relating to any such Debt or any such lease, when required to be performed or observed, if the effect of such failure to perform or observe is to accelerate, or to permit the acceleration of, after the giving of notice or passage of time, or both, the maturity of such Debt or of the obligations under such lease; or any such Debt or any such obligations shall be declared to be due and payable, or required to be prepaid (other than by a regularly scheduled required prepayment), prior to the stated maturity thereof; or (iii) a "Default" or "Event of Default" shall have occurred under and as defined in the ADS Synthetic Lease Documents; (e) any Consolidated Entity: (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; or (ii) shall make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (iii) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (iv) shall have had any such petition or application filed or any such proceeding shall have been commenced, against it, in which an adjudication or appointment is made or order for relief is entered, or which petition, application or proceeding remains undismissed for a period of 30 days or more; or shall be the subject of any proceeding under which its assets may be subject to seizure, forfeiture or divestiture (other than a proceeding in respect of a Lien permitted under Section 8.03(b)); or (v) by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or any substantial part of its Property; or (vi) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more; (f) one or more judgments, decrees or orders for the payment of money in excess of 5% of Consolidated Net Worth in the aggregate shall be rendered against any Consolidated Entity and such judgments, decrees or orders shall continue unsatisfied and in effect for a period of 60 consecutive days without being vacated, discharged, satisfied or stayed or bonded pending appeal; (g) any event or condition shall occur or exist with respect to any Plan or Multiemployer Plan concerning which any Consolidated Entity is under an obligation to furnish a report to the Bank in accordance with Section 7.08(g) hereof and as a result of such event or condition, together with all other such events or conditions, such Consolidated Entity or any ERISA Affiliate has incurred or in the opinion of the Banks is reasonably likely to incur a liability to a Plan, a Multiemployer Plan, the PBGC, or a Section 4042 Trustee (or any combination of the foregoing) which is material in relation to the financial position of the Consolidated Entities; provided, however, that any such amount shall not be deemed to be material so long as all such amounts do not exceed $500,000 in the aggregate during the term of this Agreement; (h) the Unfunded Benefit Liabilities of one or more Plans have increased after the date of this Agreement in an amount which is material (as specified in Section 7.08(g)(viii) hereof); (i) (i) any Person (other than Daniel Straus or Moshael Straus) or two or more Persons acting in concert shall have acquired beneficial ownership (within the meaning of Rules 13d-3 of the Securities and Exchange Commission under the Securities Exchange Act of 1934) of 25% or more of the outstanding shares of voting stock of the Borrower; (ii) Daniel Straus or Moshael Straus shall have ceased to continue to serve as an executive officer and director of the Borrower and shall have ceased to continue in the operational and managerial capacities in which he now serves or in enhanced operational or managerial capacities with the Borrower; provided the Borrower shall have 180 days to replace Daniel Straus or Moshael Straus with an appropriate executive officer and director who shall be satisfactory in all respects to the Required Banks or otherwise satisfy the Required Banks with respect to the continuity of management; or (iii) during any period of 12 consecutive months, commencing before or after the date of this Agreement, individuals who at the beginning of such 12-month period were directors (or persons nominated by such individuals) of the Borrower cease for any reason to constitute a majority of the board of directors of the Borrower; (j) any Forfeiture Proceeding shall have been commenced or any Consolidated Entity shall have given any Bank written notice of the commencement of any Forfeiture Proceeding as provided in Section 7.08(k) which, in either case, could reasonably be expected to have a Material Adverse Effect; (k) (i) any of the Security Documents shall at any time after its execution and delivery and for any reason cease to create a valid and perfected first priority security interest in and to the Property purported to be subject to such Agreement; or (ii) any Facility Document shall cease to be in full force and effect or shall be declared null and void, or the validity or enforceability thereof shall be contested by any Obligor or any Obligor shall deny it has any further liability or obligation under the Security Documents or any Obligor shall fail to perform any of its obligations thereunder; (l) any of the Fee Owners shall at any time (i) own any asset except for a Health Care Facility; (ii) create, incur, assume or have outstanding any Debt or other liabilities or obligations except for (A) Debt permitted by Section 8.01, (B) liabilities as lessor arising under leases of such Health Care Facility to another Obligor plus related liabilities that arise solely from the interest of such Fee Owner in real Property and (C) Permitted Mortgage Debt; (iii) enter into any transaction of merger, consolidation or amalgamation other than with or into another Obligor, or liquidate, wind up or dissolve itself (or suffer any liquidation or dissolution) except as otherwise permitted under this Agreement; or (iv) engage in any other business other than the holding of title to the Health Care Facilities; or (m) Management Fees during any fiscal year of the Consolidated Entities shall exceed 40% of Consolidated EBITDA for such year. Section 10.02. Remedies. If any Event of Default shall occur and be continuing, the Administrative Agent shall, upon request of the Required Banks, by notice to the Borrower (a) declare the Commitments to be terminated, whereupon the same shall forthwith terminate and so shall the obligations of the Issuing Bank to issue any Letters of Credit, (b) declare the outstanding principal of the Notes, all interest thereon and all other amounts payable under this Agreement and the Notes to be forthwith due and payable, whereupon the Notes, all such interest and all such amounts shall become and be forthwith due and payable, without presentment, demand, protest or further notice of any kind, all of which are hereby expressly waived by the Borrower and the Subsidiary Co-Borrowers and (c) direct the Borrower to pay to the Administrative Agent an amount, to be held as cash security in the cash collateral account held by the Administrative Agent under Section 3.08 equal to the Letter of Credit Obligations then outstanding; provided that, in the case of an Event of Default referred to in Section 10.01(e) or Section 10.01(i)(i) above, the Commitments shall be immediately terminated, and the Notes, all interest thereon and all other amounts payable under this Agreement shall be immediately due and payable without notice, presentment, demand, protest or other formalities of any kind, all of which are hereby expressly waived by the Borrower and the Subsidiary Co-Borrowers. If an Event of Default shall occur and be continuing, the Administrative Agent and each Bank may exercise all of the rights and remedies conferred in this Agreement and in each of the other Facility Documents; it being expressly understood that no such remedy is intended to be exclusive of any other remedy or remedies; but each and every remedy shall be cumulative and shall be in addition to every other remedy given in this Agreement or the other Facility Documents or now or hereafter existing at law or in equity or by statute, and may be exercised from time to time as often as may be deemed expedient by the Administrative Agent and such Bank. ARTICLE 11. THE ADMINISTRATIVE AGENT. Section 11.01. Appointment, Powers and Immunities of Administrative Agent. Each Bank hereby irrevocably (but subject to removal by the Required Banks pursuant to Section 11.09) appoints and authorizes the Administrative Agent to act as its Administrative Agent hereunder and under any other Facility Document with such powers as are specifically delegated to the Administrative Agent by the terms of this Agreement and any other Facility Document, together with such other powers as are reasonably incidental thereto. The Administrative Agent shall have no duties or responsibilities except those expressly set forth in this Agreement and any other Facility Document, and shall not by reason of this Agreement be a trustee for any Bank. The Administrative Agent shall not be responsible to the Banks for any recitals, statements, representations or warranties made by any Consolidated Entity or any officer or official of such Consolidated Entity or any other Person contained in this Agreement or any other Facility Document, or in any certificate or other document or instrument referred to or provided for in, or received by any of them under, this Agreement or any other Facility Document, or for the value, legality, validity, effectiveness, genuineness, enforceability or sufficiency of this Agreement or any other Facility Document or any other document or instrument referred to or provided for herein or therein, for the perfection or priority of any collateral security for the Senior Obligations or for any failure by any Obligor to perform any of its obligations hereunder or thereunder. The Administrative Agent may employ agents and attorneys-in-fact and shall not be responsible, except as to money or securities received by it or its authorized agents, for the negligence or misconduct of any such agents or attorneys-in-fact selected by it with reasonable care. Neither the Administrative Agent nor any of its directors, officers, employees or agents shall be liable or responsible for any action taken or omitted to be taken by it or them hereunder or under any other Facility Document or in connection herewith or therewith, except for its or their own gross negligence or willful misconduct. Section 11.02. Reliance by Administrative Agent. The Administrative Agent shall be entitled to rely upon any certification, notice or other communication (including any thereof by telephone, telex, telegram or cable) believed by it to be genuine and correct and to have been signed or sent by or on behalf of the proper Person or Persons, and upon advice and statements of legal counsel, independent accountants and other experts selected by the Administrative Agent. The Administrative Agent may deem and treat each Bank as the holder of the Senior Obligations attributable to it for all purposes hereof unless and until a notice of the assignment or transfer thereof satisfactory to the Administrative Agent signed by such Bank shall have been furnished to the Administrative Agent but the Administrative Agent shall not be required to deal with any Person who has acquired a participation in any Senior Obligation from a Bank. As to any matters not expressly provided for by this Agreement or any other Facility Document, the Administrative Agent shall in all cases be fully protected in acting, or in refraining from acting, hereunder in accordance with instructions signed by the Required Banks, and such instructions of the Required Banks and any action taken or failure to act pursuant thereto shall be binding on all of the Banks and any other holder of all or any portion of any Senior Obligation. Section 11.03. Defaults. The Administrative Agent shall not be deemed to have knowledge of the occurrence of a Default or Event of Default (other than the non-payment of principal of or interest on the Loans to the extent the same is required to be paid to the Administrative Agent for the account of the Banks) unless the Administrative Agent has received notice from a Bank or any Obligor specifying such Default or Event of Default and stating that such notice is a "Notice of Default." In the event that the Administrative Agent receives such a notice of the occurrence of a Default or Event of Default, the Administrative Agent shall give prompt notice thereof to the Banks (and shall give each Bank prompt notice of each such non-payment). The Administrative Agent shall (subject to Section 11.08) take such action with respect to such Default or Event of Default which is continuing as shall be directed by the Required Banks; provided that, unless and until the Administrative Agent shall have received such directions, the Administrative Agent may take such action, or refrain from taking such action, with respect to such Default or Event of Default as it shall deem advisable in the best interest of the Banks; and provided further that the Administrative Agent shall not be required to take any such action which it determines to be contrary to law. Section 11.04. Rights of Administrative Agent as a Bank. With respect to its Commitment and the Senior Obligations held by it, NationsBank, N.A. in its capacity as a Bank hereunder shall have the same rights and powers hereunder as any other Bank and may exercise the same as though it were not acting as the Administrative Agent, and the term "Bank" or "Banks" shall, unless the context otherwise indicates, include NationsBank, N.A. in its capacity as a Bank. NationsBank, N.A. and its affiliates may (without having to account therefor to any Bank) accept deposits from, lend money to (on a secured or unsecured basis), and generally engage in any kind of banking, trust or other business with, any Consolidated Entity (and any of its affiliates) as if it were not acting as the Administrative Agent, and NationsBank, N.A. may accept fees and other consideration from any Consolidated Entity for services in connection with this Agreement or otherwise without having to account for the same to the Banks. Although NationsBank, N.A. and its affiliates may in the course of such relationships and relationships with other Persons acquire information about any Consolidated Entity, its Affiliates and such other Persons, the Administrative Agent shall have no duty to disclose such information to the Banks. Section 11.05. Indemnification of Administrative Agent. The Banks agree to indemnify the Administrative Agent (to the extent not reimbursed under Section 12.03 or under the applicable provisions of any other Facility Document, but without limiting the obligations of the Primary Obligors under Section 12.03 or such provisions), ratably in accordance with the aggregate unpaid amount of the Senior Obligations held by the Banks (without giving effect to any participations, in all or any portion of such Senior Obligations, sold by them to any other Person) (or, if no Senior Obligations are at the time outstanding, ratably in accordance with their respective Commitments), for any and all liabilities, obligations, losses, damages, penalties, actions, judgments, suits, costs, expenses or disbursements of any kind and nature whatsoever which may be imposed on, incurred by or asserted against the Administrative Agent in any way relating to or arising out of this Agreement, any other Facility Document or any other documents contemplated by or referred to herein or the transactions contemplated hereby or thereby (including, without limitation, the costs and expenses which the Primary Obligors are obligated to pay under Section 12.03 or under the applicable provisions of any other Facility Document but excluding, unless a Default or Event of Default has occurred, normal administrative costs and expenses incident to the performance of its agency duties hereunder) or the enforcement of any of the terms hereof or thereof or of any such other documents or instruments; provided that no Bank shall be liable for any of the foregoing to the extent they arise from the gross negligence or willful misconduct of the party to be indemnified. Section 11.06. Documents. The Administrative Agent will forward to each Bank, promptly after the Administrative Agent's receipt thereof, a copy of each report, notice or other document required by this Agreement or any other Facility Document to be delivered to the Administrative Agent for such Bank. Section 11.07. Non-Reliance on Administrative Agent and Other Banks. Each Bank agrees that it has, independently and without reliance on the Administrative Agent or any other Bank, and based on such documents and information as it has deemed appropriate, made its own credit analysis of the Consolidated Entities and decision to enter into this Agreement and that it will, independently and without reliance upon the Administrative Agent or any other Bank, and based on such documents and information as it shall deem appropriate at the time, continue to make its own analysis and decisions in taking or not taking action under this Agreement or any other Facility Document. The Administrative Agent shall not be required to keep itself informed as to the performance or observance by the Consolidated Entities of this Agreement or any other Facility Document or any other document referred to or provided for herein or therein or to inspect the properties or books of any Consolidated Entity. Except for notices, reports and other documents and information expressly required to be furnished to the Banks by the Administrative Agent hereunder, the Administrative Agent shall not have any duty or responsibility to provide any Bank with any credit or other information concerning the affairs, financial condition or business of any Consolidated Entity (or any of their Affiliates) which may come into the possession of the Administrative Agent or any of its affiliates. The Administrative Agent shall not be required to file this Agreement, any other Facility Document or any document or instrument referred to herein or therein, for record or give notice of this Agreement, any other Facility Document or any document or instrument referred to herein or therein, to anyone. Section 11.08. Failure of Administrative Agent to Act. Except for action expressly required of the Administrative Agent hereunder, the Administrative Agent shall in all cases be fully justified in failing or refusing to act hereunder unless it shall have received further assurances (which may include cash collateral) of the indemnification obligations of the Banks under Section 11.05 in respect of any and all liability and expense which may be incurred by it by reason of taking or continuing to take any such action. Section 11.09. Resignation or Removal of Administrative Agent. Subject to the appointment and acceptance of a successor Administrative Agent as provided below, the Administrative Agent may resign at any time by giving written notice thereof to the Banks and the Borrower, and the Administrative Agent may be removed at any time with or without cause by the Required Banks; provided that the Borrower and the other Banks shall be promptly notified thereof. Upon any such resignation or removal, the Required Banks shall have the right to appoint a successor Administrative Agent. If no successor Administrative Agent shall have been so appointed by the Required Banks and shall have accepted such appointment within 30 days after the retiring Administrative Agent's giving of notice of resignation or the Required Banks' removal of the retiring Administrative Agent, then the retiring Administrative Agent may, on behalf of the Banks, appoint a successor Administrative Agent, which shall be a bank which has an office in the State of New Jersey or the State of New York. The Required Banks or the retiring Administrative Agent, as the case may be, shall upon the appointment of a successor Administrative Agent promptly so notify the Borrower and the other Banks. Upon the acceptance of any appointment as Administrative Agent hereunder by a successor Administrative Agent, such successor Administrative Agent shall thereupon succeed to and become vested with all the rights, powers, privileges and duties of the retiring Administrative Agent, and the retiring Administrative Agent shall be discharged from its duties and obligations hereunder. After any retiring Administrative Agent's resignation or removal hereunder as Administrative Agent, the provisions of this Article 11 shall continue in effect for its benefit in respect of any actions taken or omitted to be taken by it while it was acting as the Administrative Agent. Section 11.10. Amendments Concerning Agency Function. The Administrative Agent shall not be bound by any waiver, amendment, supplement or modification of this Agreement or any other Facility Document which affects its duties hereunder or thereunder unless it shall have given its prior consent thereto. Section 11.11. Liability of Administrative Agent. The Administrative Agent shall not have any liabilities or responsibilities to any Obligor on account of the failure of any Bank to perform its obligations hereunder or to any Bank on account of the failure of any Obligor to perform its obligations hereunder or under any other Facility Document. Section 11.12. Transfer of Agency Function. Without the consent of the Obligor or any Bank, the Administrative Agent may at any time or from time to time transfer its functions as Administrative Agent hereunder to any of its offices in the United States wherever located, provided that the Administrative Agent shall promptly notify the Borrower and the Banks thereof. Section 11.13. Non-Receipt of Funds by the Administrative Agent. Unless the Administrative Agent shall have been notified by a Bank, the Borrower or any Subsidiary Co-Borrower (any as appropriate being the "Payor") prior to (or, if the Payor is a Bank making a Variable Rate Loan, on) the date on which such Bank is to make payment hereunder to the Administrative Agent of the proceeds of a Loan or the Borrower or any Subsidiary Borrower is to make payment to the Administrative Agent, as the case may be (either such payment being a "Required Payment"), which notice shall be effective upon receipt, that the Payor does not intend to make the Required Payment to the Administrative Agent, the Administrative Agent may assume that the Required Payment has been made and may, in reliance upon such assumption (but shall not be required to), make the amount thereof available to the intended recipient on such date and, if the Payor has not in fact made the Required Payment to the Administrative Agent, the recipient of such payment (and, if such recipient is the Borrower or any Subsidiary Co-Borrower and the Payor Bank fails to pay the amount thereof to the Administrative Agent forthwith upon demand, the Borrower or such Subsidiary Co-Borrower) shall, on demand, repay to the Administrative Agent the amount made available to it together with interest thereon for the period from the date such amount was so made available by the Administrative Agent until the date the Administrative Agent recovers such amount at a rate per annum equal to the average daily Federal Funds Rate for such period. Section 11.14. Withholding Taxes. Each Bank represents that as of the Closing Date it is entitled to receive any payments to be made to it hereunder without the withholding of any tax and will furnish to the Administrative Agent such forms, certifications, statements and other documents as the Administrative Agent may request from time to time to evidence such Bank's exemption from the withholding of any tax imposed by any jurisdiction or to enable the Administrative Agent to comply with any applicable laws or regulations relating thereto. Without limiting the effect of the foregoing, if any Bank is not created or organized under the laws of the United States of America or any state thereof, in the event that the payment of interest by the Borrower is treated for U.S. income tax purposes as derived in whole or in part from sources from within the U.S., such Bank will furnish to the Administrative Agent Form 4224 or Form 1001 of the Internal Revenue Service, or such other forms, certifications, statements or documents, duly executed and completed by such Bank as evidence of such Bank's exemption from the withholding of U.S. tax with respect thereto. The Administrative Agent shall not be obligated to make any payments hereunder to such Bank in respect of any Senior Obligation or such Bank's Commitment until such Bank shall have furnished to the Administrative Agent the requested form, certification, statement or document. Each Primary Obligor agrees to pay to any such Bank such additional amounts as are necessary in order that the net payment of any amount due to such Bank in respect of any U.S. tax imposed with respect to such payment will not be less than the amount stated herein to be then due and payable. Section 11.15. Several Obligations and Rights of Banks. The failure of any Bank to make any Loan to be made by it on the date specified therefor shall not relieve any other Bank of its obligation to make its Loan on such date, but no Bank shall be responsible for the failure of any other Bank to make a Loan to be made by such other Bank. The amounts payable at any time hereunder to each Bank shall be a separate and independent debt, and each Bank shall be entitled to protect and enforce its rights arising out of this Agreement, and it shall not be necessary for any other Bank to be joined as an additional party in any proceeding for such purpose. Section 11.16. Pro Rata Treatment of Loans, Etc. Except to the extent otherwise provided: (a) each borrowing under Section 2.04 shall be made from the Banks, each reduction or termination of the amount of the Commitments under Section 2.07 shall be applied to the Commitments of the Banks (except as otherwise provided under Section 2.14), and each payment of commitment fee accruing under Section 2.11 shall be made for the account of the Banks, pro rata according to the amounts of their respective unused Commitments; (b) each conversion under Section 2.05 of Loans of a particular type (but not conversions provided for by Section 4.04), shall be made pro rata among the Banks holding Loans of such type according to the respective principal amounts of such Loans by such Banks; (c) each prepayment and payment of principal of or interest on Loans of a particular type, particular class and a particular Interest Period shall be made to the Administrative Agent for the account of the Banks holding Loans of such type and Interest Period pro rata in accordance with the respective unpaid principal amounts of such Loans of such Interest Period held by such Banks; and (d) each prepayment and payment of fees under Section 3.09(a) and Letter of Credit Obligations shall be made pro rata in accordance with the pro rata share of the Banks in the Letter of Credit Obligations held by each of them. Section 11.17. Sharing of Payments Among Banks. If a Bank shall obtain payment of any principal of or interest on any Senior Obligation made by it through the exercise of any right of setoff, banker's lien, counterclaim, or by any other means, it shall promptly purchase from the other Banks participations in (or, if and to the extent specified by such Bank, direct interests in) the Senior Obligations made by the other Banks in such amounts, and make such other adjustments from time to time as shall be equitable to the end that all the Banks shall share the benefit of such payment (net of any expenses which may be incurred by such Bank in obtaining or preserving such benefit) pro rata in accordance with the unpaid amount of the Senior Obligations held by each of them. To such end the Banks shall make appropriate adjustments among themselves (by the resale of participations sold or otherwise) if such payment is rescinded or must otherwise be restored. The Primary Obligors agree that any Bank so purchasing a participation (or direct interest) in the Senior Obligations held by other Banks may exercise all rights of setoff, banker's lien, counterclaim or similar rights with respect to such participation (or direct interest). Nothing contained herein shall require any Bank to exercise any such right or shall affect the right of any Bank to exercise, and retain the benefits of exercising, any such right with respect to any other indebtedness of any Obligor. Section 11.18. Co-Agents. Each of the Borrower, the Administrative Agent and the Banks agree that each of Summit Bank, The Bank of Montreal, Credit Lyonnais New York Branch, CoreStates Bank, N.A. and PNC Bank, National Association are appointed as "co-agents" hereunder. None of Summit Bank, The Bank of Montreal, Credit Lyonnais New York Branch, CoreStates Bank, N.A. and PNC Bank, National Association, as a "co-agent", shall have any right, power, obligation, liability, responsibility or duty hereunder or under any other Facility Document other than those applicable to all Banks. Each Bank acknowledges that it has not relied, and will not rely, on any of the Banks so identified as co-agents in taking or not taking action hereunder or under the other Facility Documents. ARTICLE 12. MISCELLANEOUS. Section 12.01. Amendments and Waivers. Except as otherwise expressly provided in this Agreement, any provision of this Agreement may be amended or modified only by an instrument in writing signed by the Borrower (and if such amendment or waiver affects the Term Note to which it is a party, the affected Subsidiary Co-Borrowers), the Administrative Agent and the Required Secured Parties, or by the Borrower (and if such amendment or waiver affects the Term Note to which it is a party, the affected Subsidiary Co-Borrowers) and the Administrative Agent acting with the consent of the Required Secured Parties and any provision of this Agreement may be waived by the Required Secured Parties or by the Administrative Agent acting with the consent of the Required Secured Parties; provided that no amendment, modification or waiver shall, unless by an instrument signed by all of the Banks or by the Administrative Agent acting with the consent of all of the Banks: (a) increase or extend the term, or extend the time or waive any requirement for the reduction or termination, of the Commitments (provided that the Banks acknowledge that Revolving Credit Commitments may be converted into Converted Synthetic Lease Commitments in accordance with Section 2.14), (b) extend the date fixed for the payment of principal of or interest on any Loan, any Letter of Credit Obligation or any fee payable hereunder, (c) reduce the amount of any payment of principal thereof or the rate at which interest is payable thereon or any fee payable hereunder, (d) reduce, modify, amend or waive fees or indemnities, including amounts payable pursuant to Section 2.11, Section 3.09, Article 4 or Section 12.03, (e) alter the terms of this Section 12.01, (f) amend the definition of the term "Required Banks", the term "Required Secured Parties" or the term "Senior Obligations" or amend, waive or modify any provision of any Senior Obligation Document requiring action by the "Required Banks" or the "Required Secured Parties", (g) waive any of the conditions precedent set forth in Section 5.01 or, only with respect to Defaults or Events of Default arising under Section 10.01(a) or Section 10.01(e), Section 5.02, (h) discharge any Subsidiary Guarantor from the Multicare Guaranty or release any Primary Obligor from its obligations hereunder (except for releases otherwise required under the Intercreditor Agreement), (i) consent to the assignment or transfer by any Obligation Party of its rights or obligations hereunder or under any Facility Document or (j) release all or any part of the "Collateral" under and as defined in each of the Security Documents (except for releases otherwise required under the Intercreditor Agreement) and provided, further, that any amendment of Article 11 hereof or any amendment which increases the obligations of the Administrative Agent hereunder shall require the consent of the Administrative Agent. No failure on the part of the Administrative Agent or any Bank to exercise, and no delay in exercising, any right hereunder shall operate as a waiver thereof or preclude any other or further exercise thereof or the exercise of any other right. The remedies herein provided are cumulative and not exclusive of any remedies provided by law. Section 12.02. Usury. Anything herein to the contrary notwithstanding, the obligations of the Borrower and the Subsidiary Co-Borrowers under this Agreement, the Notes and the other Facility Documents shall be subject to the limitation that payments of interest shall not be required to the extent that receipt thereof would be contrary to provisions of law applicable to a Bank limiting rates of interest which may be charged or collected by such Bank. Section 12.03. Expenses. The Borrower (and, insofar it is responsible for such expenses, each Subsidiary Co-Borrower) shall reimburse the Administrative Agent and the Banks on demand for all reasonable costs, expenses, and charges (including, without limitation, fees and charges of external legal counsel) incurred by the Administrative Agent in connection with the preparation and the performance, or by the Administrative Agent or any Bank in connection with the enforcement of this Agreement or the other Facility Documents. The Borrower (and, insofar it is responsible for such expense, each Subsidiary Co-Borrower) agrees to indemnify the Administrative Agent and each Bank and their respective directors, officers, employees, affiliates and agents from, and hold each of them harmless against, any and all losses, liabilities, claims, damages or expenses incurred by any of them arising out of or by reason of any investigation or litigation or other proceedings (including any threatened investigation or litigation or other proceedings) relating to or arising out of this Agreement or the other Facility Documents or to any actual or proposed use by the Borrower and the Subsidiary Co-Borrowers of the proceeds of the Loans or the Letters of Credit, including without limitation, the reasonable fees and disbursements of counsel incurred in connection with any such investigation or litigation or other proceedings (but excluding any such losses, liabilities, claims, damages or expenses incurred by reason of the gross negligence or wilful misconduct of the Person to be indemnified). Section 12.04. Survival. The obligations of the Primary Obligors under Sections 4.01, 4.05 and 12.03 shall survive the repayment of the Senior Obligations and the termination of the Commitments and the Letters of Credit. Section 12.05. Assignment; Participations. (a) This Agreement shall be binding upon, and shall inure to the benefit of, the Borrower, the Subsidiary Co-Borrowers, the Administrative Agent, the Banks and their respective successors and assigns, except that the Primary Obligors may not assign or transfer their rights or obligations hereunder. Each Bank may assign, or sell participations in, all or any part of any Senior Obligation to another bank or other entity provided that any assignment or participation by any Bank of its rights and obligations in respect of the Letters of Credit shall require the prior consent of the Issuing Bank, such consent not to be unreasonably withheld, in which event (i) in the case of an assignment, upon notice thereof by the Bank to the Borrower with a copy to the Administrative Agent, the assignee shall have, to the extent of such assignment (unless otherwise provided therein), the same rights, benefits and obligations as it would have if it were a Bank hereunder; and (ii) in the case of a participation, the participant shall have no rights under the Facility Documents and all amounts payable by the Borrower and the Subsidiary Co-Borrowers under Article 4 shall be determined as if such Bank had not sold such participation. The agreement executed by such Bank in favor of the participant shall not give the participant the right to require such Bank to take or omit to take any action hereunder except action directly relating to (i) the extension of a payment date with respect to any portion of the principal of or interest on any amount outstanding hereunder allocated to such participant, (ii) the reduction of the principal amount outstanding hereunder or (iii) the reduction of the rate of interest payable on such amount or any amount of fees payable hereunder to a rate or amount, as the case may be, below that which the participant is entitled to receive under its agreement with such Bank. Such Bank may furnish any information concerning the Consolidated Entities in the possession of such Bank from time to time to assignees and participants (including prospective assignees and participants); provided that such Bank shall require any such prospective assignee or such participant (prospective or otherwise) to agree in writing to maintain the confidentiality of such information. In connection with any assignment pursuant to this paragraph (a), the assigning Bank shall pay the Administrative Agent an administrative fee for processing such assignment in the amount of $3,500. (b) In addition to the assignments and participations permitted under paragraph (a) above, any Bank may assign and pledge all or any portion of the Senior Obligations held by it to (i) any affiliate of such Bank or (ii) any Federal Reserve Bank as collateral security pursuant to Regulation A of the Board of Governors of the Federal Reserve System and any Operating Circular issued by such Federal Reserve Bank. No such assignment shall release the assigning Bank from its obligations hereunder. Section 12.06. Notices. Unless the party to be notified otherwise notifies the other party in writing as provided in this Section, and except as otherwise provided in this Agreement, notices shall be given to the Administrative Agent by telephone, confirmed by telex, telecopy or other writing, and to the Banks and to the Primary Obligor by ordinary mail or telecopier addressed to such party at its address on the signature page of this Agreement. Notices shall be effective: (a) if given by mail, 72 hours after deposit in the mails with first class postage prepaid, addressed as aforesaid; and (b) if given by telecopier, when the telecopy is transmitted to the telecopier number as aforesaid; provided that notices to the Administrative Agent and the Banks shall be effective upon receipt. Section 12.07. Setoff. Each Primary Obligor agrees that, in addition to (and without limitation of) any right of setoff, banker's lien or counterclaim a Bank may otherwise have, each Bank shall be entitled, at its option, to offset balances (general or special, time or demand, provisional or final) held by it for the account of such Primary Obligor at any of such Bank's offices, in Dollars or in any other currency, against any amount payable by such Primary Obligor to such Bank under this Agreement, such Bank's Note, any Letter of Credit or any other Facility Document which is not paid when due (regardless of whether such balances are then due to such Primary Obligor), in which case it shall promptly notify such Primary Obligor and the Administrative Agent thereof; provided that such Bank's failure to give such notice shall not affect the validity thereof. Payments by the Primary Obligors hereunder shall be made without setoff or counterclaim. Section 12.08. JURISDICTION; IMMUNITIES. (a) EACH OF THE PRIMARY OBLIGORS, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY OVER ANY ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT ANY NOTE, ANY LETTER OF CREDIT OR ANY OTHER FACILITY DOCUMENT, AND EACH OF THE PRIMARY OBLIGORS, THE ADMINISTRATIVE AGENT AND THE BANKS HEREBY IRREVOCABLY AGREES THAT ALL CLAIMS IN RESPECT OF SUCH ACTION OR PROCEEDING MAY BE HEARD AND DETERMINED IN SUCH NEW YORK STATE OR FEDERAL COURT. EACH OF THE PRIMARY OBLIGORS, THE ADMINISTRATIVE AGENT AND THE BANKS IRREVOCABLY CONSENTS TO THE SERVICE OF ANY AND ALL PROCESS IN ANY SUCH ACTION OR PROCEEDING BY THE MAILING OF COPIES OF SUCH PROCESS TO SUCH PERSON AT ITS ADDRESS SPECIFIED IN SECTION 12.06. EACH OF THE PRIMARY OBLIGORS, THE ADMINISTRATIVE AGENT AND THE BANKS AGREES THAT A FINAL JUDGMENT IN ANY SUCH ACTION OR PROCEEDING SHALL BE CONCLUSIVE AND MAY BE ENFORCED IN OTHER JURISDICTIONS BY SUIT ON THE JUDGMENT OR IN ANY OTHER MANNER PROVIDED BY LAW. EACH OF THE PRIMARY OBLIGORS FURTHER AGREES THAT TO THE EXTENT AN ACTION OR PROCEEDING BROUGHT AGAINST THE ADMINISTRATIVE AGENT OR ANY BANK MAY BE BROUGHT IN NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY, THEN SUCH ACTION OR PROCEEDING SHALL BE BROUGHT ONLY IN NEW YORK STATE OR UNITED STATES FEDERAL COURT SITTING IN NEW YORK COUNTY. EACH OF THE PRIMARY OBLIGORS, THE ADMINISTRATIVE AGENT AND THE BANKS FURTHER WAIVES ANY OBJECTION TO VENUE IN SUCH STATE AND ANY OBJECTION TO AN ACTION OR PROCEEDING IN SUCH STATE ON THE BASIS OF FORUM NON CONVENIENS. EACH OF THE PRIMARY OBLIGORS, THE ADMINISTRATIVE AGENT AND THE BANKS WAIVES ANY RIGHT IT MAY HAVE TO JURY TRIAL. (b) Nothing in this Section 12.08 shall affect the right of the Administrative Agent, any Bank or any Primary Obligor to serve legal process in any other manner permitted by law or affect the right of the Administrative Agent or any Bank to bring any action or proceeding against any Primary Obligor or its Property in the courts of any other jurisdictions. (c) To the extent that the Administrative Agent, any Bank or any Primary Obligor has or hereafter may acquire any immunity from jurisdiction of any court or from any legal process (whether from service or notice, attachment prior to judgment, attachment in aid of execution, execution or otherwise) with respect to itself or its Property, the Administrative Agent, such Bank or such Primary Obligor hereby irrevocably waives such immunity in respect of its obligations under this Agreement, the Notes and the other Facility Documents. Section 12.09. Table of Contents; Headings. Any table of contents and the headings and captions hereunder are for convenience only and shall not affect the interpretation or construction of this Agreement. Section 12.10. Severability. The provisions of this Agreement are intended to be severable. If for any reason any provision of this Agreement shall be held invalid or unenforceable in whole or in part in any jurisdiction, such provision shall, as to such jurisdiction, be ineffective to the extent of such invalidity or unenforceability without in any manner affecting the validity or enforceability thereof in any other jurisdiction or the remaining provisions hereof in any jurisdiction. Section 12.11. Counterparts. This Agreement may be executed in any number of counterparts, all of which taken together shall constitute one and the same instrument, and any party hereto may execute this Agreement by signing any such counterpart. Section 12.12. Integration. The Facility Documents set forth the entire agreement among the parties hereto relating to the transactions contemplated thereby and supersede any prior oral or written statements or agreements with respect to such transactions. Section 12.13. GOVERNING LAW. EACH OF THIS AGREEMENT AND THE NOTES SHALL BE GOVERNED BY, AND INTERPRETED AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS. EACH LETTER OF CREDIT SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED IN ACCORDANCE WITH, THE LAWS OR RULES DESIGNATED IN SUCH LETTER OF CREDIT, OR IF NO SUCH LAWS OR RULES ARE DESIGNATED, THE UCP AND AS TO MATTERS NOT GOVERNED BY THE UCP, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICT OF LAWS. Section 12.14. Confidentiality. Each Bank and the Administrative Agent agrees (on behalf of itself and each of its affiliates, directors, officers, employees and representatives) to use reasonable precautions to keep confidential, in accordance with safe and sound banking practices, any non-public information supplied to it by the Consolidated Entities pursuant to this Agreement which is identified by the Consolidated Entities as being confidential at the time the same is delivered to the Banks or the Administrative Agent, provided that nothing herein shall limit the disclosure of any such information (i) to the extent required by statute, rule, regulation or judicial process, (ii) to counsel for any of the Banks or the Administrative Agent, (iii) to bank examiners, auditors or accountants, (iv) in connection with any litigation to which any one or more of the Banks is a party or (v) to any assignee or participant (or prospective assignee or participant) so long as such assignee or participant (or prospective assignee or participant) agrees to use reasonable precautions to keep such information confidential; and provided finally that in no event shall any Bank or the Administrative Agent be obligated or required to return any materials furnished by the Consolidated Entities. Section 12.15. Treatment of Certain Information. The Primary Obligors (a) acknowledge that services may be offered or provided to it (in connection with this Agreement or otherwise) by each Bank or by one or more of their respective subsidiaries or affiliates and (b) acknowledge that information delivered to each Bank by the Consolidated Entities may be provided to each such subsidiary and affiliate. Section 12.16. Certain Subsidiary Co-Borrower Waivers and Releases. To the fullest extent permitted by law, each Subsidiary Co-Borrower does hereby waive: notice of any borrowings under this Agreement; notice of adverse change in the financial condition of any Obligation Party or any other fact that might increase such Subsidiary Co-Borrower's risk hereunder; notice of presentment for payment, demand, protest, and notice thereof as to the Notes or any other instrument; notice of any Default or Event of Default; all other notices and demands to which such Subsidiary Co-Borrower might otherwise be entitled (except if such notice or demand is specifically otherwise required to be given to such Subsidiary Co-Borrower hereunder or under the other Facility Documents); the right by statute or otherwise to require any Secured Party to institute suit against any Obligation Party or to exhaust the rights and remedies of any Secured Party or any Obligation Party; any defense arising by reason of any disability or other defense (other than the defense that the Senior Obligations shall have been fully and finally performed and indefeasibly paid) of any Obligation Party or by reason of the cessation from any cause whatsoever of the liability of any Obligation Party in respect thereof; and any stay (except in connection with a pending appeal), valuation, appraisal, redemption or extension law now or at any time hereafter in force which, but for this waiver, might be applicable to any sale of Property of such Subsidiary Co-Borrower made under any judgment, order or decree based on this Agreement, and such Subsidiary Co-Borrower covenants that it will not at any time insist upon or plead, or in any manner claim or take the benefit or advantage of such law. Until all of the Senior Obligations shall have been paid in full, none of the Subsidiary Co-Borrowers shall have any right of subrogation, reimbursement, or indemnity whatsoever in respect thereof and no right of recourse to or with respect to any assets or Property of any Obligation Party. Each Subsidiary Co-Borrower consents and agrees that, without notice to or by such Subsidiary Co-Borrower and without affecting or impairing the obligations of such Subsidiary Co-Borrower hereunder, each Secured Party, in the manner provided herein, by action or inaction, may: compromise or settle, extend the period of duration or the time for the payment, or discharge the performance of, or may refuse to, or otherwise not, enforce, or may, by action or inaction, release all or any one or more parties to, any one or more of the Notes or the other Facility Documents; grant other indulgences to any Obligation Party in respect thereof; amend or modify in any manner and at any time (or from time to time) any one or more of the Notes, the Letters of Credit and the other Facility Documents in accordance with Section 12.01 or otherwise; release or substitute any one or more of the endorsers or guarantors of the Senior Obligations whether parties hereto or not; and exchange, enforce, waive, or release, by action or inaction, any security for the Senior Obligations (including, without limitation, any of the collateral therefor) or any other guaranty of any of the Senior Obligations. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed as of the day and year first above written. BORROWER: THE MULTICARE COMPANIES, INC., a Delaware corporation By BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President SUBSIDIARY CO-BORROWERS: BREYUT CONVALESCENT CENTER, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President ENCARE OF MENDHAM, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF CEDAR GROVE, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF CINNAMINSON, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF EMERY, INC., a Delaware corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF EWING, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF FAIR LAWN, INC., a Delaware corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF MORRISTOWN, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF RIDGEWOOD, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HEALTH RESOURCES OF WEST ORANGE, INC., a Delaware corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President HOLLY MANOR ASSOCIATES OF NEW JERSEY, L.P., a Delaware limited partnership By Encare of Mendham, Inc., its General Partner By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President MERCERVILLE ASSOCIATES OF NEW JERSEY, L.P., a Delaware limited partnership By Breyut Convalescent Center, Inc., its General Partner By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President POMPTON ASSOCIATES L.P., a New Jersey limited partnership By Pompton Care, Inc., its General Partner By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President POMPTON CARE, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President ROEPHEL CONVALESCENT CENTER, INC., a New Jersey corporation By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President THE STRAUS GROUP-OLD BRIDGE, L.P., a New Jersey limited partnership By Health Resources of Emery, Inc., its General Partner By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President THE STRAUS GROUP-RIDGEWOOD L.P., a New Jersey limited partnership By Health Resources of Ridgewood, Inc., its General Partner By: BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President ADMINISTRATIVE AGENT: NATIONSBANK, N.A. By_____________________________________ Name: Title: Address for Notices: NationsBank Corporate Center 100 North Tryon Street Charlotte, NC 28255 Attention: Agency Services Telecopier No.: (704) 386-9923 with a copy to: 767 Fifth Avenue New York, NY 10153 Attention: Karim T. Assef Telecopier No.: (212) 751-6909 BANKS: NATIONSBANK, N.A. By_____________________________________ Name: Title: Lending Office and Address for Notices: 767 Fifth Avenue New York, NY 10153 Attention: Karim T. Assef Telecopier No.: (212) 751-6909 BANKS: SUMMIT BANK By_____________________________________ Name: Title: Lending Office and Address for Notices: 214 Main Street, 2nd Floor Hackensack, NJ 07602 Attn: James Andersen Telecopier No.: (201) 646-9497 BANKS: FLEET BANK, N.A. By_____________________________________ Name: Title: Lending Office and Address for Notices: 1133 Sixth Avenue, 40th Floor New York, NY 10036 Attn: Pauline McHugh Telecopier No.: (212) 703-1744 BANKS: THE BANK OF MONTREAL By_____________________________________ Name: Title: Lending Office and Address for Notices: 115 S. Lasalle Street 12 West Chicago, IL 60603 Attention: Daniel Brown Telecopier No.: (312) 750-3783 BANKS: CREDIT LYONNAIS NEW YORK BRANCH By_____________________________________ Name: Title: Lending Office and Address for Notices: Credit Lyonnais Building 1301 Avenue of the Americas New York, NY 10019-6022 Attention: Marty Golden Telecopier No.: (212) 261-3440 BANKS: MELLON BANK, N.A. By_____________________________________ Name: Title: Lending Office and Address for Notices: 610 West Germantown Pike Room 19E-0246, Suite 200 Plymouth Meeting, PA 19462 Attention: Colleen Cunniffe Telecopier No.: (610) 941-4136 BANKS: KEY BANK By_____________________________________ Name: Title: Lending Office and Address for Notices: 127 Public Square Cleveland, OH 44114 Attention: Angela Mago Telecopier No.: (216) 689-5970 BANKS: THE FIRST NATIONAL BANK OF CHICAGO By_____________________________________ Name: Title: Lending Office and Address for Notices: Public Banking Department One First National Plaza Mail Suite 0091 Chicago, IL 60670-0091 Attention: Patricia Schneeberger Telecopier No.: (312) 732-2016 BANKS: THE BANK OF NOVA SCOTIA By_____________________________________ Name: Title: Lending Office and Address for Notices: Suite 2700 600 Peachtree Street, N.E. Atlanta, GA 30308 Attention: Carolyn Lopez Telecopier No.: (404) 888-8998 BANKS: CORESTATES BANK, N.A. By_____________________________________ Name: Title: Lending Office and Address for Notices: 1339 Chestnut Street P.O. Box 7618, FC 1-8-3-22 Philadelphia, PA 19107-7618 Attention: Geoffrey Smith Telecopier No.: (215) 973-8448 BANKS: FIRST UNION NATIONAL BANK OF NORTH CAROLINA By_____________________________________ Name: Title: Lending Office and Address for Notices: Capital Markets Group 301 South College Street Charlotte, North Carolina 28288-0735 Attention: Sharon Mack Telecopier No.: (704) 383-9144 BANKS: TORONTO DOMINION (NEW YORK), INC. By_____________________________________ Name: Title: Lending Office: The Toronto Dominion Bank Houston Agency 909 Fannin Street, 17th Floor Houston, Texas 77010 Attention: Debbie Greene Telecopier: (713) 951-9921 Address for Notices: Health Care Finance, U.S.A. Division 31 West 52nd Street New York, NY 10019-6101 Attention: Sara Tirner Telecopier No.: (212) 974-0396 with a copy to: The Toronto Dominion Bank Houston Agency 909 Fannin Street, 17th Floor Houston, Texas 77010 Attention: Debbie Greene Telecopier: (713) 951-9921 BANKS: PNC BANK, NATIONAL ASSOCIATION By_____________________________________ Name: Title: Lending Office and Address for Notices: MS: J2-JTTC-16-1 2 Tower Center East Brunswick, NJ 08816 Attention: Karen Voight Telecopier No.: (908) 220-3233 BANKS: LTCB TRUST COMPANY By_____________________________________ Name: Title: Lending Office and Address for Notices: 165 Broadway New York, NY 10006 Attention: Yoshihide Nakagawa Telecopier No.: (212) 608-2371 BANKS: THE SANWA BANK, LIMITED (NEW YORK BRANCH) By_____________________________________ Name: Title: Lending Office and Address for Notices: Park Avenue Plaza 55 East 52nd Street New York, NY 10055 Attention: Paul Judicke Telecopier No.: (212) 754-1304 EX-10 6 MASTER LEASE, OPEN END MORTGAGE AND PURCHASE OPTION THIS DOCUMENT SECURES FUTURE ADVANCES dated as of December 11, 1996 among ACADEMY NURSING HOME, INC. NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC. PRESCOTT NURSING HOME, INC. WILLOW MANOR NURSING HOME, INC. ADS/MULTICARE, INC. AND EACH OTHER PERSON AS A LESSEE IDENTIFIED HEREIN each as a Lessee and SELCO SERVICE CORPORATION, as the Lessor. This Master Lease, Open End Mortgage and Purchase Option is subject to a lien in favor of the Collateral Agent for the benefit of each of the Secured Parties. This Master Lease, Open End Mortgage and Purchase Option has been executed in several counterparts. To the extent, if any, that this Master Lease, Open End Mortgage and Purchase Option constitutes chattel paper (as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction), no lien on this Master Lease, Open End Mortgage and Purchase Option may be created through the transfer or possession of any counterpart other than the original counterpart containing the receipt therefor executed by NATIONSBANK, N.A., as the Collateral Agent for the Secured Parties, on or following the signature page hereof. This counterpart is [not] the original counterpart. MASTER LEASE, OPEN END MORTGAGE AND PURCHASE OPTION THIS DOCUMENT SECURES FUTURE ADVANCES THIS MASTER LEASE, OPEN END MORTGAGE AND PURCHASE OPTION (this "Master Lease"), dated as of December 11, 1996, between SELCO SERVICE CORPORATION, an Ohio corporation, as the Lessor, and ACADEMY NURSING HOME, INC., a Massachusetts corporation, NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC., a Massachusetts corporation, PRESCOTT NURSING HOME, INC., a Massachusetts corporation, WILLOW MANOR NURSING HOME, INC., a Massachusetts corporation, ADS/MULTICARE, INC., a Delaware corporation, and each other Subsidiary of the Company that may from time to time become a Lessee under this Master Lease and the other Operative Documents pursuant to the terms of Section 14.2 of the Participation Agreement (each as a "Lessee"; and collectively, the "Lessees"). W I T N E S S E T H: WHEREAS, pursuant to a Participation Agreement dated as of the date hereof (as amended, modified, restated or supplemented from time to time, the "Participation Agreement"), among The MultiCare Companies, Inc., a Delaware corporation, as the Company, the Lessees, the Lessor, the various financial institutions (the "Lenders") as are or may from time to time become Lenders under the Loan Agreement, and NationsBank, N.A. as the Collateral Agent, the Lessor and the Lenders have agreed to finance the Lessor's acquisition of each Property and each Equity Interest; WHEREAS, on each Acquisition Date, the Lessor will purchase a Property or Properties or the Equity Interest or Equity Interests related thereto, as described in the relevant Lease Supplement from one or more third parties designated by the Company as agent for the Lessees; WHEREAS, the Lessor desires to lease to each Lessee, and each Lessee desires to lease from the Lessor, the Property described in the Lease Supplement executed by such Lessee; and WHEREAS, each Property will be subject to the terms of this Master Lease; WHEREAS, additional Properties, Equity Interests and Improvements may be financed from time to time up to the respective Commitments of the Participants; NOW, THEREFORE, in consideration of the foregoing, and of other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS 1.1. Definitions; Interpretation. Capitalized terms used but not otherwise defined in this Master Lease have the respective meanings specified in Appendix A to this Master Lease; and the rules of interpretation set forth in Appendix A to this Master Lease shall apply to this Master Lease. ARTICLE II MASTER LEASE 2.1. Acceptance and Lease of Property. Subject to the conditions set forth in the Participation Agreement, including without limitation the satisfaction or waiver of the conditions set forth in Article VI thereof, the Lessor hereby agrees to accept pursuant to the terms of the Participation Agreement delivery on each Acquisition Date of the Property or Equity Interest to be delivered by the seller thereof on such Acquisition Date and simultaneously to demise and lease to the applicable Lessee hereunder and under the Lease Supplement for the Term, the Lessor's interest in such Property, and the Lessees hereby agree, expressly for the direct benefit of the Lessor, to lease from the Lessor for the Term, the Lessor's interest in each Property. 2.2. Acceptance Procedure. Each Lessee hereby agrees that the execution and delivery by any Lessee on each Acquisition Date of an appropriately completed Lease Supplement in the form of Exhibit A hereto covering the Property to be acquired by the Lessor on such Acquisition Date, shall, without further act, constitute the irrevocable acceptance by such Lessee and all other Lessees of all of the Property which is the subject of such Lease Supplement for all purposes of this Master Lease and the other Operative Documents on the terms set forth therein and herein, and that such Property shall be deemed to be included in the leasehold estate of this Master Lease and shall be subject to the terms and conditions of this Master Lease as of such Acquisition Date. 2.3. Term. The Term (the "Term") of this Master Lease with respect to any Property shall begin on the Acquisition Date therefor and shall end on the fifth anniversary of the Initial Acquisition Date, unless earlier terminated in accordance with the provisions of this Master Lease or the Operative Documents. 2.4. Title. Each Property is leased to the respective Lessee without any representation or warranty, express or implied, by the Lessor and subject to the rights of parties in possession, the existing state of title (including, without limitation, all Liens other than Lessor Liens) and all applicable Requirements of Law and Property Legal Requirements. No Lessee shall in any event have any recourse against the Lessor for any defect in or exception to title to any Property other than resulting from Lessor Liens. ARTICLE III PAYMENT OF RENT 3.1. Rent. (a) During the Term, the Lessees shall pay in arrears Basic Rent (Interest/Yield on each Basic Rent Payment Date and on any date on which this Master Lease shall terminate with respect to a Property leased by it or all Properties. On each date that Basic Rent (Interest/Yield) is due hereunder, each Lessee shall pay a portion of the Basic Rent (Interest/Yield) then due equal to such Lessee's Allocation Percentage multiplied by the amount of Basic Rent (Interest/Yield) due and owing on such date. (b) Neither a Lessee's inability or failure to take possession of all or any portion of a Property when timely delivered by the Lessor, whether or not attributable to any act or omission of a Lessee or any act or omission of the Lessor, or for any other reason whatsoever, shall delay or otherwise affect such Lessee's obligation to pay Rent for such Property in accordance with the terms of this Master Lease. 3.2. Payment of Rent. Rent shall be paid absolutely net to the Lessor, so that this Master Lease shall yield to the Lessor the full amount thereof, without setoff, deduction or reduction; provided, however, that this Section 3.2 shall not affect the Lessees' right to initiate independent legal action, in equity or at law, to enforce the obligations of the Lessor under this Master Lease. 3.3. Supplemental Rent. Each Lessee shall pay any and all Supplemental Rent to (i) the Collateral Agent or the Lease Agent (as specified in Section 3.6), for the benefit of the Person entitled thereto (if the Person entitled to such Supplemental Rent is a Secured Party) or (ii) directly to the Person entitled thereto (if such Person is not a Secured Party), promptly as the same shall become due and payable, and if such Lessee fails to pay any Supplemental Rent, the Lessor shall have all rights, powers and remedies provided for herein or by law or equity or otherwise in the case of nonpayment of Basic Rent (Interest/Yield). Receipt of such amount by the Collateral Agent or the Lease Agent, as applicable, shall be deemed to be receipt by the Person entitled thereto, whereupon the Lessees shall be relieved of their obligation to make any further payments to such Person with respect to such amount of Supplemental Rent. Each Lessee shall pay to the Collateral Agent (or the Lease Agent, if applicable), as Supplemental Rent, among other things, on demand, to the extent permitted by applicable Requirements of Law, interest at the applicable Overdue Rate on any installment of Basic Rent (Interest/Yield) not paid when due for the period for which the same shall be overdue and on any payment of Supplemental Rent not paid when due (other than Supplemental Rent payments due with respect to Sections 13.7, 13.8, 13.9 and 13.10 of the Participation Agreement which are due within five (5) days of demand by the Collateral Agent or the Lease Agent, as applicable), for the period from the due date until the same shall be paid. The expiration or other termination of such Lessee's obligations to pay Basic Rent (Interest/Yield) hereunder shall not limit or modify the obligations of such Lessee with respect to indemnity obligations payable as Supplemental Rent. Unless expressly provided otherwise in this Master Lease, in the event of any failure on the part of such Lessee to pay and discharge any Supplemental Rent as and when due, such Lessee shall also promptly pay and discharge any fine, penalty, interest or cost which may be assessed or added under any agreement with a third party for nonpayment or late payment of such Supplemental Rent, all of which shall also constitute Supplemental Rent. 3.4. Method of Payment. Each payment of Rent shall be made by the Lessee to the Collateral Agent, as assignee of the Lessor under the Assignment of Lease and Rent, until such time as all obligations of the Company and the Subsidiary Co-Borrowers owing to the Credit Facility Banks under the Credit Facility Documents have been paid in full and all commitments of the Credit Facility Banks thereunder have been permanently terminated (at which time such payments shall be made to the Lease Agent in accordance with Section 3.6), prior to 11:00 a.m., New York City time to the Collateral Agent's (or the Lease Agent's, as the case may be) account specified on Schedule I to the Participation Agreement in funds consisting of lawful currency of the United States of America which shall be immediately available on the scheduled date when such payment shall be due, unless such scheduled date shall not be a Business Day, in which case such payment shall be made on the next succeeding Business Day. Payments received after 12:00 p.m., New York City time on the date due shall for the purpose of Section 16.1 hereof be deemed received on such day; provided, however, that for the purposes of the second sentence of Section 3.3 hereof, such payments shall be deemed received on the next succeeding Business Day and, unless the Collateral Agent (or the Lease Agent, as applicable) is otherwise able to invest or employ such funds on the date received, subject to interest at the Overdue Rate as provided in such Section 3.3. 3.5. Payments of Rent Constitute Senior Debt. Each party hereto acknowledges that each payment of Rent (including without limitation Purchase Option Rent) hereunder shall constitute "Senior Debt", as such term is used in the Multicare Subordinated Debentures (as defined in the Credit Agreement). 3.6. Payments After Termination of Credit Agreement, etc. Each of the parties hereto acknowledges and agrees that, after payment in full of all obligations of the Company and the Subsidiary Co-Borrowers owing to the Credit Facility Banks under the Credit Facility Documents and the permanent termination of all commitments of the Credit Facility Banks thereunder, the assignment of payments and rights made under the Assignment of Lease and Rent shall inure to the benefit of the Lease Agent on behalf of the Lenders and, in furtherance of the foregoing, all payments to be made under this Master Lease or any other Operative Document to the Collateral Agent shall instead be made to the Lease Agent. ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT 4.1. Quiet Enjoyment. Subject to Sections 2.4, 4.2 and 17.1 and subject to the rights of the Lessor contained in Articles XV and XVI, each Lessee shall peaceably and quietly have, hold and enjoy the Property leased by it for the Term, free of any claim or other action by the Lessor or anyone claiming by, through or under the Lessor (other than a Lessee). Such right of quiet enjoyment is independent of, and shall not affect the Lessor's rights otherwise to initiate legal action to enforce, the obligations of a Lessee under this Master Lease. 4.2. Right to Inspect. During the Term, but not more than once each calendar month and upon at least 30 days prior written notice from the Lessor (except that no notice shall be required, and no limitations as to the frequency of inspections shall apply, if a Lease Event of Default has occurred and is continuing), each Lessee shall permit the Lessor, the Lenders and their respective authorized representatives to inspect the Property leased to such Lessee and subject to this Master Lease during normal business hours, provided that such inspections shall not unreasonably interfere with such Lessee's business operations at such Property. ARTICLE V NET LEASE, ETC. 5.1. Net Lease. This Master Lease shall constitute a net lease. Any present or future law to the contrary notwithstanding, this Master Lease shall not terminate, nor shall the Lessee be entitled to any abatement, suspension, deferment, reduction, setoff, counterclaim, or defense with respect to the Rent, nor shall the obligations of a Lessee hereunder be affected (except as expressly herein permitted and by performance of the obligations in connection therewith) by reason of: (i) any defect in the condition, merchantability, design, construction, quality or fitness for use of any Property or any part thereof, or the failure of any Property to comply with all Requirements of Law and Property Legal Requirements, including any inability to occupy or use any such Property by reason of such non-compliance; (ii) any damage to, removal, abandonment, salvage, loss, contamination of or Release from, scrapping or destruction of or any requisition or taking of any Property or any part thereof; (iii) any restriction, prevention or curtailment of or interference with any use of any Property or any part thereof; (iv) any defect in title to or rights to any Property or any Lien on such title or rights or on any Property (other than Lessor Liens); (v) any change, waiver, extension, indulgence or other action or omission or breach in respect of any obligation or liability of or by the Lessor, any Participant, the Lease Agent or the Collateral Agent; (vi) any bankruptcy, insolvency, reorganization, composition, adjustment, dissolution, liquidation or other like proceedings relating to a Lessee, the Lessor, any Participant, the Lease Agent, the Collateral Agent or any other Person, or any action taken with respect to this Master Lease by any trustee or receiver of a Lessee, the Lessor, any Participant, the Lease Agent, the Collateral Agent or any other Person, or by any court, in any such proceeding; (vii) any claim that a Lessee has or might have against any Person, including without limitation the Lessor, any Participant, the Lease Agent, the Collateral Agent or any vendor, manufacturer, contractor of or for any Property; (viii) any failure on the part of the Lessor to perform or comply with any of the terms of this Master Lease (other than performance by Lessor of its obligations set forth in Section 2.1 hereof), of any other Operative Document or of any other agreement; (ix) any invalidity or unenforceability or illegality or disaffirmance of this Master Lease against or by a Lessee or any provision hereof or any of the other Operative Documents or any provision of any thereof; (x) the impossibility or illegality of performance by a Lessee, the Lessor or both; (xi) any action by any court, administrative agency or other Governmental Authority; (xii) any restriction, prevention or curtailment of or interference with the construction on or any use of any Property or any part thereof; or (xiii) any other cause or circumstances whether similar or dissimilar to the foregoing and whether or not a Lessee shall have notice or knowledge of any of the foregoing. Each Lessee's agreement in the preceding sentence shall not affect any claim, action or right such Lessee may have against the Lessor, any Participant, the Lease Agent or theCollateral Agent. The parties intend that the obligations of each Lessee hereunder shall be covenants and agreements that are separate and independent from any obligations of the Lessor hereunder or under any other Operative Documents and the obligations of each Lessee shall continue unaffected unless such obligations shall have been modified or terminated in accordance with an express provision of this Master Lease. 5.2. No Termination or Abatement. Each Lessee shall remain obligated under this Master Lease in accordance with its terms and shall not take any action to terminate, rescind or avoid this Master Lease (except as provided herein), notwithstanding any action for bankruptcy, insolvency, reorganization, liquidation, dissolution, or other proceeding affecting the Lessor or any Participant, or any action with respect to this Master Lease which may be taken by any trustee, receiver or liquidator of the Lessor or any Participant or by any court with respect to the Lessor or any Participant. Each Lessee hereby waives all right (i) to terminate or surrender this Master Lease (except as provided herein) or (ii) to avail itself of any abatement, suspension, deferment, reduction, setoff, counterclaim (other than compulsory counterclaims) or defense with respect to any Rent. Each Lessee shall remain obligated under this Master Lease in accordance with its terms and such Lessee hereby waives any and all rights now or hereafter conferred by statute or otherwise to modify or to avoid strict compliance with its obligations under this Master Lease. Notwithstanding any such statute or otherwise, each Lessee shall be bound by all of the terms and conditions contained in this Master Lease. 5.3. No Bar. The provisions of this Article V shall not affect the Lessees' right to initiate independent legal action, in equity or at law, to enforce the obligations of the Lessor under this Master Lease. ARTICLE VI SUBLEASES 6.1. Subletting. Each Lessee may sublease any Property leased to it or any portion thereof to any Person; provided, however, that no sublease or other relinquishment of possession of any Property shall in any way discharge or diminish any of such Lessee's obligations to the Lessor hereunder and such Lessee shall remain directly and primarily liable under this Master Lease as to the Property, or portion thereof, so sublet. Each sublease of any Property shall expressly be made subject to and subordinated to this Master Lease and to the rights of the Lessor hereunder. ARTICLE VII LESSEE ACKNOWLEDGMENTS 7.1. Condition of the Properties. EACH LESSEE ACKNOWLEDGES AND AGREES THAT IT IS LEASING THE PROPERTY DESCRIBED IN THE LEASE SUPPLEMENT EXECUTED BY IT "AS IS" WITHOUT REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) BY THE LESSOR, ANY LENDER, THE LEASE AGENT OR THE COLLATERAL AGENT AND IN EACH CASE SUBJECT TO (A) THE EXISTING STATE OF TITLE (EXCLUDING LESSOR LIENS), (B) THE RIGHTS OF ANY PARTIES IN POSSESSION THEREOF, (C) ANY STATE OF FACTS WHICH AN ACCURATE SURVEY OR PHYSICAL INSPECTION MIGHT SHOW, AND (D) VIOLATIONS OF REQUIREMENTS OF LAW AND PROPERTY LEGAL REQUIREMENTS WHICH MAY EXIST ON THE DATE HEREOF OR ON THE ACQUISITION DATE FOR SUCH PROPERTY. NONE OF THE LESSOR, ANY LENDER, THE LEASE AGENT OR THE COLLATERAL AGENT HAS MADE OR SHALL BE DEEMED TO HAVE MADE ANY REPRESENTATION, WARRANTY OR COVENANT (EXPRESS OR IMPLIED) OR SHALL BE DEEMED TO HAVE ANY LIABILITY WHATSOEVER AS TO THE TITLE (OTHER THAN FOR LESSOR LIENS), VALUE, HABITABILITY, USE, CONDITION, DESIGN, OPERATION, OR FITNESS FOR USE OF ANY PROPERTY (OR ANY PART THEREOF), OR ANY OTHER REPRESENTATION, WARRANTY OR COVENANT WHATSOEVER, EXPRESS OR IMPLIED, WITH RESPECT TO ANY PROPERTY (OR ANY PART THEREOF) AND NONE OF THE LESSOR OR THE LENDERS SHALL BE LIABLE FOR ANY LATENT, HIDDEN, OR PATENT DEFECT THEREIN (OTHER THAN FOR LESSOR LIENS) OR THE FAILURE OF ANY PROPERTY, OR ANY PART THEREOF, TO COMPLY WITH ANY REQUIREMENT OF LAW OR PROPERTY LEGAL REQUIREMENT. 7.2. Risk of Loss. During the Term the risk of loss of or decrease in the enjoyment and beneficial use of the Properties as a result of the damage or destruction thereof by fire, the elements, casualties, thefts, riots, wars or otherwise is assumed by the respective Lessee, and the Lessor shall in no event be answerable or accountable therefor. ARTICLE VIII POSSESSION AND USE OF THE PROPERTIES, ETC. 8.1. Utility Charges. Each Lessee shall pay or cause to be paid all charges for electricity, power, gas, oil, water, telephone, sanitary sewer service and other utilities used in or on the Property leased by it during the Term. Such Lessee shall be entitled to receive any credit or refund with respect to any utility charge paid by such Lessee. Any Lessee may, prior to the payment of any such charges, contest the imposition of such charges if, in its good faith determination, it has concluded that the payment thereof in the amounts charged is not required, provided, that such nonpayment shall not jeopardize such Lessee's ability to use and maintain such Property in accordance with this Master Lease or impair the value of such Property. 8.2. Possession and Use of the Property. Each Property shall be used as a long-term or specialized health care facility in a manner not less than the standards applied by a Lessee and the Company for other comparable properties owned or leased by such Lessee and the Company. Each Lessee shall pay, or cause to be paid, all charges and costs required in connection with the use of the Property leased by it as and to the extent required by this Master Lease. Each Lessee shall not commit or permit any waste or abandonment of the Property leased by it or any part thereof. 8.3. Compliance with Requirements of Law, Property Legal Requirements and Insurance Requirements. Subject to the terms of Article XII relating to permitted contests, each Lessee, at its sole cost and expense, shall (a) comply in all material respects with all Requirements of Law (including all Environmental Laws), Property Legal Requirements and Insurance Requirements relating to the Property leased by it, including the use, construction, operation, maintenance, repair and restoration thereof and the remarketing thereof pursuant to Article XX, whether or not compliance therewith shall require structural or extraordinary changes in the Improvements or interfere with the use and enjoyment of the Properties, and (b) procure, maintain and comply in all material respects with all licenses, permits, orders, approvals, consents and other authorizations required for the construction, use, maintenance and operation of such Property and for the use, operation, maintenance, repair and restoration of the Improvements. Notwithstanding the preceding sentence, each Lessee shall be deemed to be in compliance with all Environmental Laws for purposes of this Master Lease notwithstanding any Environmental Violation if the severity of such Environmental Violation is less than Federal, state or local standards requiring remediation or removal or, if such standards are exceeded, remediation or removal is proceeding in accordance with all applicable Environmental Laws. 8.4. Assignment by Lessee. No Lessee may assign this Master Lease or any of its rights or obligations hereunder in whole or in part to any Person, except that (i) a Lessee may assign its interest hereunder to any of its Affiliates so long as the Company executes and delivers a confirmation of the Guaranty in form and substance reasonably satisfactory to the Participants of all of such Affiliates' obligations hereunder, and (ii) a Lessee may Sublease its Property or portion thereof as permitted under Section 6.1. ARTICLE IX MAINTENANCE AND REPAIR; RETURN 9.1. Maintenance and Repair; Return. (a) Each Lessee, at its sole cost and expense, shall maintain its Property in good condition (ordinary wear and tear excepted) and make all necessary repairs thereto, of every kind and nature whatsoever, whether interior or exterior, ordinary or extraordinary, structural or nonstructural or foreseen or unforeseen, in each case in all material respects as required by all Requirements of Law, Property Legal Requirements and Insurance Requirements and on a basis and in no event less than the standards applied by such Lessee and its Affiliates in the operation and maintenance of other comparable properties owned or leased by such Lessee or its Affiliates. (b) The Lessor shall under no circumstances be required to build any improvements on any Property, make any repairs, replacements, alterations or renewals of any nature or description to any Property, make any expenditure whatsoever in connection with this Master Lease (other than for Advances made in accordance with and pursuant to the terms of the Participation Agreement) or maintain any Property in any way. Each Lessee waives any right to (i) require the Lessor to maintain, repair, or rebuild all or any part of any Property or (ii) make repairs at the expense of the Lessor pursuant to any Requirement of Law, Property Legal Requirement, Insurance Requirement, contract, agreement, or covenant, condition or restriction in effect at any time during the Term. (c) Each Lessee shall, upon the expiration or earlier termination of this Master Lease with respect to any Property (other than as a result of such Lessee's purchase of such Property from the Lessor as provided herein), vacate and surrender such Property to the Lessor in its then-current, "AS IS" condition, subject to such Lessee's obligations under Sections 8.3, 9.1(a), 10.1, 11.1, 14.1(d), 14.2 and 20.1. ARTICLE X MODIFICATIONS, ETC. 10.1. Modifications, Substitutions and Replacements. During the Term, each Lessee, at its sole cost and expense, may at any time and from time to time make alterations, renovations, improvements and additions to the Property leased by it or any part thereof and substitutions and replacements therefor (collectively, "Modifications"); provided, however, that: (i) except for any Modification required to be made pursuant to a Requirement of Law or Property Legal Requirement (a "Required Modification"), no Modification shall materially adversely affect the value or useful life of such Property or any part thereof from that which existed immediately prior to such Modification; (ii) the Modification shall be done in a good and workmanlike manner; (iii) such Lessee shall comply in all material respects with all Requirements of Law (including all Environmental Laws), Property Legal Requirements and Insurance Requirements applicable to the Modification, including the obtaining of all permits and certificates of occupancy; and (iv) subject to the terms of Article XII relating to permitted contests, such Lessee shall pay all costs and expenses and shall discharge (or cause to be insured or bonded over) within sixty (60) days after receiving notice thereof any Liens arising with respect to the Modification. All Modifications shall remain part of the realty and shall be subject to this Master Lease and title thereto shall immediately vest in the Lessor; provided, however, that Modifications that (x) are not Required Modifications, (y) were not financed by the Lessor and (z) are readily removable without impairing the value, utility or remaining useful life of the applicable Property, shall be the property of the respective Lessee and shall not be subject to this Master Lease. So long as no Lease Event of Default has occurred and is continuing, each Lessee may place upon its Property any trade fixtures, machinery, equipment, inventory or other property belonging to such Lessee or third parties and may remove the same at any time during the Term, subject, however, to the terms of Section 9.1(a); provided, however, that such trade fixtures, machinery, equipment, inventory or other property do not impair the value or useful life of the applicable Property. 10.2. Notice to the Lessor. If any Lessee reasonably expects the cost of any Modification to its Property to exceed $1,000,000, such Lessee shall deliver to the Lessor a brief written narrative of the work to be performed in connection with such Modification prior to making such Modification. ARTICLE XI WARRANT OF TITLE; EASEMENTS 11.1. Warrant of Title. (a) Each Lessee agrees that except as otherwise provided herein and subject to the terms of Article XII relating to permitted contests, such Lessee shall not directly or indirectly create or allow to remain, and shall, within sixty (60) days of receiving notice of same, discharge at its sole cost and expense, any Lien (other than any Lessor Lien or Agent Lien), defect, attachment, levy, title retention agreement or claim upon its Property or any Lien, attachment, levy or claim not created by the Lessor with respect to the Rent or with respect to any Lien or Agent Lien), defect, attachment, levy, title retention agreement or claim upon its Property or any Lien, attachment, levy or claim not created by the Lessor with respect to the Rent or with respect to any or with respect to any amounts held by the Lessor, any other Participant, the Lease Agent or the Collateral Agent pursuant to the Loan Agreement or the other Operative Documents, other than Permitted Property Liens. (b) Nothing contained in this Master Lease shall be construed as constituting the consent or request of the Lessor, expressed or implied, to or for the performance by any contractor, mechanic, laborer, materialman, supplier or vendor of any labor or services or for the furnishing of any materials for any construction, alteration, addition, repair or demolition of or to any Property or any part thereof. NOTICE IS HEREBY GIVEN THAT NONE OF THE LESSOR OR THE LENDERS IS OR SHALL BE LIABLE FOR ANY LABOR, SERVICES OR MATERIALS FURNISHED OR TO BE FURNISHED TO THE LESSEE, OR TO ANYONE HOLDING A PROPERTY OR ANY PART THEREOF THROUGH OR UNDER THE LESSEE, AND THAT NO MECHANIC'S OR OTHER LIENS FOR ANY SUCH LABOR, SERVICES OR MATERIALS SHALL ATTACH TO OR AFFECT THE INTEREST OF THE LESSOR OR ANY LENDER IN AND TO ANY PROPERTY. 11.2. Grants and Releases of Easements; Lessor's Waivers. Provided that no Lease Event of Default shall have occurred and be continuing and subject to the provisions of Articles VII, IX and X and Section 8.3, the Lessor hereby consents in each instance to the following actions by each Lessee, in the name and stead of the Lessor, but at such Lessee's sole cost and expense: (a) the granting of easements, licenses, rights-of-way and other rights and privileges in the nature of easements reasonably necessary or desirable for the use, repair, or maintenance of its Property as herein provided; (b) the release of existing easements or other rights in the nature of easements which are for the benefit of its Property; (c) if required by applicable Governmental Authority, the dedication or transfer of unimproved portions of its Property for road, highway or other public purposes; (d) the execution of amendments to any covenants and restrictions affecting its Property; (e) such Lessee's obtaining all necessary Governmental Actions or third party agreements necessary for the performance and completion of any Modifications; and (f) such Lessee's taking any other action or entering into any other agreement with respect to its Property that such Lessee deems necessary or desirable; provided, however, that in each case (i) such grant, release, dedication, transfer or amendment does not materially impair the value or remaining useful life of the applicable Property, (ii) such grant, release, dedication, transfer or amendment in such Lessee's judgment is reasonably necessary or desirable in connection with the use, maintenance, alteration or improvement of the applicable Property, (iii) such grant, release, dedication, transfer or amendment will not cause the applicable Property or any portion thereof to fail to comply in any material respect with the provisions of this Master Lease or any other Operative Documents and all Property Legal Requirements (including, without limitation, all applicable zoning, planning, building and subdivision ordinances, all applicable restrictive covenants and all applicable architectural approval requirements), (iv) all governmental consents or approvals required prior to such grant, release, dedication, transfer, annexation or amendment have been obtained, and all filings required prior to such action have been made, (v) such Lessee shall remain obligated under this Master Lease and under any instrument executed by such Lessee consenting to the assignment of the Lessor's interest in this Master Lease as security for indebtedness, in each such case in accordance with their terms, as though such grant, release, dedication, transfer or amendment had not been effected except to the extent that such Lessee's obligations hereunder are obviated with respect to such grant, release, dedication, transfer or amendment and (vi) such Lessee shall pay and perform any obligations of the Lessor under such grant, release, dedication, transfer or amendment. The Lessor acknowledges each Lessee's right to finance and to secure under the Uniform Commercial Code, inventory, furnishings, furniture, equipment, machinery, leasehold improvements and other personal property located at the Property leased by it, and the Lessor agrees to execute Lessor waiver forms and release of Lessor's Liens in favor of any purchase money seller, lessor or lender which has financed or may finance in the future such items. Without limiting the effectiveness of the foregoing, provided that no Lease Event of Default shall have occurred and be continuing, the Lessor shall, upon the request of such Lessee, and at such Lessee's sole cost and expense, execute and deliver any instruments, and shall take such other action reasonably requested by such Lessee as may be necessary or appropriate to confirm or effect any such grant, release, dedication, transfer, annexation or amendment to any Person or other action permitted under this Section 11.2 including landlord waivers with respect to any of the foregoing. ARTICLE XII PERMITTED CONTESTS 12.1. Permitted Contests in Respect of Applicable Law; Liens; Property Taxes. If, to the extent and for so long as (a) a test, challenge, appeal or proceeding for review of any Applicable Law, Lien or any Imposition described in clauses (i) and (vi) of the first paragraph of the definition thereof (a "Property Tax") relating to any Property shall be prosecuted diligently and in good faith in appropriate proceedings by a Lessee or (b) compliance with such Applicable Law or payment of such Property Tax shall have been excused or exempted by a valid nonconforming use, variance permit, waiver, extension or forbearance, the Lessee shall not be required to comply with such Applicable Law, promptly discharge such Lien or pay such Property Tax, but only if and so long as any such test, challenge, appeal, proceeding, waiver, extension, forbearance, noncompliance, non-payment or non-discharge shall not reasonably involve (A) any risk of criminal liability being imposed on the Lessor or any Lender or (B) any risk of (1) imminent foreclosure, forfeiture or loss of such Property, or any material part thereof, or (2) the nonpayment of Rent or (C) any substantial risk of (1) the imminent sale of, or the creation of any Lien (other than a Permitted Property Lien) on, any part of such Property, (2) civil liability being imposed on the Lessor, any Lender or such Property, or (3) enjoinment of, or interference with, the use, possession or disposition of such Property in any material respect. The Lessor will not be required to join in any proceedings pursuant to this Section 12.1 unless a provision of any Applicable Law requires that such proceedings be brought by or in the name of the Lessor; and in that event the Lessor will join in the proceedings or permit them or any part thereof to be brought in its name if and so long as (i) the Lessee has not elected the Remarketing Option and (ii) the Lessee pays all related expenses and indemnifies the Lessor, the Participants and the other Indemnitees with respect to such proceedings. ARTICLE XIII INSURANCE 13.1. Public Liability and Workers' Compensation Insurance. (a) During the Term, each Lessee shall procure and carry, or cause to be procured and carried, at such Lessee's sole cost and expense, commercial general liability insurance for claims for injuries or death sustained by persons or damage to property while on its Property and such other public liability coverages as are ordinarily procured by such Lessee or its Affiliates who own or operate similar properties, but in any case shall provide liability coverage of at least $1,000,000 per occurrence and $2,000,000 in aggregate. Such insurance shall be on terms and in amounts that are no less favorable than insurance maintained by such Lessee or such Affiliates with respect to similar properties that they own and that are in accordance with normal industry practice. The policy shall be endorsed to name the Lessor, each Participant, the Lease Agent and the Collateral Agent as additional insureds. The policy shall also specifically provide that the policy shall be considered primary insurance which shall apply to any loss or claim before any contribution by any insurance which the Lessor or any Participant may have in force. (b) Each Lessee shall, in the construction of any Improvements on any Property (including in connection with any Modifications thereof) and the operation of the Properties, comply with the applicable workers' compensation laws. 13.2. Hazard and Other Insurance. During the Term, each Lessee shall keep, or cause to be kept, its Property insured against loss or damage by fire, earthquake, flood and other risks on terms and in amounts that are no less favorable than insurance covering other similar properties owned by such Lessee or its Affiliates and that are in accordance with normal industry practices. All insurance proceeds in respect of any loss or occurrence for which the proceeds related thereto, in the absence of the occurrence and continuance of an Event of Default and (if applicable) upon certification by such Lessee that the applicable Property can be restored in accordance with the terms and conditions of this Lease, are payable to a Lessee shall be adjusted by and paid to such Lessee for application toward the reconstruction, repair or refurbishment of the applicable Property, and if an Event of Default has occurred and is continuing or (if applicable) such Lessee has not timely made such certification, such proceeds shall be adjusted solely by the Collateral Agent and held by the Collateral Agent for application in accordance with Article XIV (or, if all obligations owing to the Credit Facility Banks under the Credit Facility Documents have been paid in full and all commitments of the Credit Facility Banks thereunder have been permanently terminated, such proceeds shall be adjusted solely by the Lease Agent and held by the Lease Agent for application in accordance with Article XIV). In addition, each Lessee shall at all times during the Term maintain business interruption insurance covering, for a period of no less than thirty (30) days, actual losses for any period during which the earnings of such Lessee are impaired as a result of any property damage or other casualty. 13.3. Insurance Coverage. (a) Each Lessee shall furnish or cause to be furnished to the Lessor and the Lenders certificates showing the insurance required under Sections 13.1 and 13.2 to be in effect and naming the Lessor, the Lenders, the Lease Agent and the Collateral Agent as additional insureds with respect to liability coverage (excluding worker's compensation insurance), naming the Collateral Agent and such Lessee as their interests may appear with respect to casualty coverage, and naming the Collateral Agent as loss payee with respect to casualty coverage, and showing the mortgagee endorsement required by Section 13.3(c) with respect to such coverage. All such insurance shall be at the cost and expense of such Lessee. Such certificates shall include a provision for no less than thirty (30) days' advance written notice by the insurer to the Collateral Agent in the event of cancellation or reduction of such insurance. (b) Each Lessee agrees that the insurance policy or policies required by Section 13.2 shall include an appropriate clause pursuant to which such policy shall provide that it will not be invalidated should such Lessee waive, in writing, prior to a loss, any or all rights of recovery against any party for losses covered by such policy, and that the insurance in favor of the Lessor and the Collateral Agent and their respective rights under and interests in said policies shall not be invalidated or reduced by any act or omission (including breach of warranty) or negligence of such Lessee or any other Person having any interest in its Property other than the Lessor and the Collateral Agent. The Lessee hereby waives any and all such rights against the Lessor and the Collateral Agent to the extent of payments made under such policies. (c) All such insurance shall be written by reputable insurance companies that are financially sound and solvent and otherwise reasonably appropriate considering the amount and type of insurance being provided by such companies. Any insurance company selected by a Lessee which is rated in Best's Insurance Guide or any successor thereto (or if there be none, an organization having a similar national reputation) shall have a general policyholder rating of "A" and a financial rating of at least "12" or be otherwise acceptable to the Lenders. All insurance policies required by Section 13.2 shall include a standard form mortgagee endorsement in favor of the Collateral Agent. (d) The Lessor shall not carry separate insurance concurrent in kind or form or contributing in the event of loss with any insurance required under this Article XIII except that the Lessor may, at the Lessor's expense, carry separate liability insurance so long as (i) a Lessee's insurance is designated as primary and in no event excess or contributory to any insurance the Lessor may have in force which would apply to a loss covered under the Lessee's policy and (ii) each such insurance policy will not cause such Lessee's insurance required under this Article XIII to be subject to a coinsurance exception of any kind. (e) Each Lessee shall pay as they become due all premiums for the insurance required by Section 13.1 and Section 13.2, and shall renew or replace each policy prior to the expiration date thereof. Throughout the Term, at the time each of such Lessee's insurance policies is renewed (but in no event less frequently than once each year), such Lessee shall deliver to the Lessor and the Collateral Agent certificates of insurance evidencing that all insurance required by this Article XIII is being maintained by the Lessee and is in effect. ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS 14.1. Casualty and Condemnation. (a) Subject to the provisions of this Article XIV, if all or a portion of a Property is damaged or destroyed in whole or in part by a Casualty or if the use, access, occupancy, easement rights or title to a Property or any part thereof, is the subject of a Condemnation, then in either case (i) if the cost of restoration of such Property is, in the reasonable judgment of the Lessor, less than or equal to $3,000,000, all awards, compensation or insurance proceeds in respect of such Casualty or Condemnation, in the absence of the occurrence and continuance of an Event of Default, shall be paid over to the Lessee of the affected Property for application toward the reconstruction, repair or refurbishment of such Property, and (ii) if the cost of restoration of such Property is, in the reasonable judgment of the Collateral Agent (or, if all obligations owing to the Credit Facility Banks under the Credit Facility Documents have been paid in full and all commitments of the Credit Facility Banks thereunder have been permanently terminated, the Lease Agent), more than $3,000,000, then all awards, compensation or insurance proceeds in respect of such Casualty or Condemnation, in the absence of the occurrence and continuance of an Event of Default, shall be held by the Collateral Agent (or the Lease Agent, as applicable) in trust for the Lessee of the affected Property and, only upon certification by such Lessee that the applicable Property can be restored in accordance with the terms and conditions of this Lease, shall be adjusted by and paid in a lump sum to such Lessee for application toward the reconstruction, repair or refurbishment of the applicable Property, and if such Lessee has not timely made such certification, such proceeds shall be adjusted solely by the Collateral Agent (or the Lease Agent, as applicable) and held by the Collateral Agent (or the Lease Agent, as applicable) for application in the reasonable discretion of the Lenders and the Lessor to the restoration of such Property or toward the payment of the Lease Balance; provided, however, that, in any case, if a Lease Event of Default shall have occurred and be continuing, such award, compensation or insurance proceeds shall be paid directly to the Collateral Agent (or the Lease Agent, as applicable) for the benefit of the Secured Parties or, if received by such Lessee, shall be held in trust for the Secured Parties, and shall be paid over by such Lessee to the Collateral Agent (or the Lease Agent, as applicable) to be distributed by the Collateral Agent (or the Lease Agent) in accordance with Section 7.7 of the Participation Agreement. All amounts held by the Collateral Agent or the Lease Agent during the continuation of a Lease Event of Default on account of any award, compensation or insurance proceeds either paid directly to the Collateral Agent or the Lease Agent or turned over to the Collateral Agent or the Lease Agent shall be applied in accordance with Section 7.7 of the Participation Agreement and at the option of the Lessor either be (i) paid to the Lessee of the affected Property for the repair of damage caused by such Casualty or Condemnation in accordance with clause (d) of this Section 14.1, or (ii) applied to the purchase price of the related Property on the Termination Date with respect to such Property in accordance with Article XV, with any Excess Casualty/Condemnation Proceeds being payable to such Lessee. (b) Each Lessee may appear in any proceeding or action to negotiate, prosecute, adjust or appeal any claim for any award, compensation or insurance payment on account of any such Casualty or Condemnation and shall pay all expenses thereof. At such Lessee's reasonable request, and at each Lessee's sole cost and expense, the Lessor and the Lenders shall participate in any such proceeding, action, negotiation, prosecution or adjustment. The Lessor and each Lessee agree that this Master Lease shall control the rights of the Lessor and such Lessee in and to any such award, compensation or insurance payment. (c) If the Lessor or any Lessee shall receive notice of a Casualty for which the reasonable anticipated cost of restoration equals or exceeds $500,000 or of an actual, pending or threatened Condemnation of any Property or any interest therein, the Lessor or such Lessee, as the case may be, shall give notice thereof to the other and to the Lenders promptly after the receipt of such notice. (d) If pursuant to this Section 14.1 and Section 15.1 this Master Lease shall continue in full force and effect following a Casualty or Condemnation with respect to any Property, the Lessee thereof shall, at its sole cost and expense (and, if any award, compensation or insurance payment is not sufficient to restore such Property in accordance with this clause (d), such Lessee shall pay the shortfall), promptly and diligently repair any damage to such Property caused by such Casualty or Condemnation in conformity with the requirements of Sections 9.1 and 10.1 so as to restore such Property as close as is reasonably practicable to its condition, operation, function and value as existed immediately prior to such Casualty or Condemnation with such Modifications as such Lessee may elect in accordance with Section 10.1 and such change in operation and function as is not prohibited under this Master Lease. In such event, title to such Property shall remain with the Lessor subject to the terms of this Master Lease. Upon completion of such restoration, such Lessee shall furnish the Lessor an architect's certificate of substantial completion and a Responsible Officer's Certificate confirming that such restoration has been completed pursuant to this Master Lease. (e) In no event shall a Casualty or Condemnation affect the Lessee's obligations to pay Rent pursuant to Section 3.1 or to perform its obligations and pay any amounts due on the Expiration Date or pursuant to Articles XVIII and XXI. (f) Any Excess Casualty/Condemnation Proceeds received by the Lessor, the Lenders, the Collateral Agent or Lease Agent in respect of a Casualty or Condemnation shall be turned over to the Lessee of the affected Property. 14.2. Environmental Matters. Promptly upon each Lessee's acquiring actual knowledge of the existence of a material Environmental Violation with respect to its Property, such Lesseeshall notify the Lessor in writing of such Environmental Violation. If the Lessor elects not to terminate this Master Lease with respect to such Property pursuant to Section 15.1, at such Lessee's sole cost and expense, such Lessee shall promptly and diligently commence any response, clean up, remedial or other action necessary to remove, clean up or remediate the Environmental Violation in accordance with the terms of Section 8.3 (including the last sentence thereof). Such Lessee shall provide to the Lessor all material and relevant reports, assessments, sampling results and correspondence with Governmental Authorities concerning the Environmental Violation and shall, upon completion of remedial action by such Lessee, cause to be prepared by an environmental consultant reasonably acceptable to the Lessor a statement by the consultant that the Environmental Violation has been remedied in compliance in all material respects with applicable Environmental Laws. Each such Environmental Violation shall be remedied prior to the Expiration Date unless each Property with respect to which an Environmental Violation has occurred but has not been remedied has been purchased by the Lessee in accordance with Section 18.1 or 18.2. Nothing in this Article XIV shall reduce or limit such Lessee's obligations under Sections 13.1, 13.2 or 13.3 of the Participation Agreement. 14.3. Notice of Environmental Matters. Promptly, but in any event within sixty (60) Business Days from the date a Lessee has actual knowledge thereof, such Lessee shall provide to the Lessor written notice of any pending or threatened claim of which such Lessee has received written notice, action or proceeding involving any Environmental Laws or any Release on or in connection with the Property leased by it which, if determined adversely to the Lessee, could (i) have a Material Adverse Effect or (ii) result in an obligation to remediate the cost of which would exceed $1,000,000. All such notices shall describe in reasonable detail the nature of the claim, action or proceeding and such Lessee's proposed response thereto. In addition, such Lessee shall provide to the Lessor, within sixty (60) Business Days of receipt, copies of all written communications with any Governmental Authority relating to any Environmental Violation in connection with such Property. Such Lessee shall also promptly provide such detailed reports of any Material environmental claims as may reasonably be requested by the Lessor or the Lenders. ARTICLE XV TERMINATION OF LEASE 15.1. Partial Termination upon Certain Events. If any of the following occurs with respect to any Property: (i) a Significant Condemnation occurs; or (ii) a Significant Casualty occurs; or (iii) an Environmental Violation occurs or is discovered the cost of remediation of which would exceed $5,000,000, and the Lessor shall have given written notice (a "Termination Notice") to the applicable Lessee that, as a consequence of such event, (x) the Lease Supplement relating to such Property is to be terminated and (y) this Master Lease is to be terminated with respect to such Property, then such Lessee shall be obligated to purchase the Lessor's interest in such affected Property on or prior to the next Basic Rent Payment Date occurring not less than twenty (20) days after the giving of such Termination Notice, by paying the Lessor an amount equal to the Property Balance for such affected Property. 15.2. Termination Procedures. On the date of the payment by a Lessee of the Property Balance with respect to the Property leased by it in accordance with Section 15.1 (such date, the "Termination Date"), the Lease Supplement relating to each affected Property shall terminate and this Master Lease shall terminate with respect to each such Property and, concurrent with the Lessor's receipt of such payment, (a) the Lessor shall take the actions described in Section 21.1(a) hereof; and (b) in the case of a termination pursuant to clause (i) or (ii) of Section 15.1, the Lessor shall convey, or direct the Lease Agent or Collateral Agent to convey, to such Lessee any Net Proceeds with respect to the Casualty or Condemnation giving rise to the termination of this Master Lease with respect to such Property theretofore received by the Lessor, Lease Agent or Collateral Agent or at the request of such Lessee, such amounts shall be applied against sums due hereunder. ARTICLE XVI EVENTS OF DEFAULT 16.1. Lease Events of Default. The occurrence and continuance of any one or more of the following events shall constitute a "Lease Event of Default": (a) (i) any Lessee shall fail to make payment of (X) any Basic Rent (Interest/Yield) within five (5) Business Days after the same has become due and payable, or (Y) any Property Balance, Purchase Option Rent, Loan Balance, Lease Recourse Amount or Lease Balance, including, without limitation, amounts due pursuant to Section 15.1, 18.1, 18.2, or 20.1, on the date due therefor under the Master Lease, or (ii) the Company or any Subsidiary Guarantor shall have failed to make any payment due under the Multicare Guaranty after the same has become due and payable; or (b) any Lessee shall fail to make payment of any Supplemental Rent due with respect to Sections 13.7, 13.8, 13.9 and 13.10 of the Participation Agreement within five (5) Business Days after receipt of notice thereof or any Lessee shall fail to make payment of any other Supplemental Rent within five (5) Business Days after the expiration of thirty (30) days from the date of receipt of notice by the Lessees or the Company that such Supplemental Rent is due and payable; or (c) any Event of Default (as defined in the Credit Agreement) shall have occurred and be continuing; or (d) any Lessee shall fail to maintain insurance as required by Article XIII of this Master Lease and such failure shall continue for ten (10) days; or (e) any Lessee or the Company, as the case may be, shall fail to observe or perform any term, covenant or condition of such Lessee or the Company, as the case may be, under this Master Lease or the Operative Documents to which it is party other than those described in Section 16.1(a), (b), or (d) hereof, and, in each such case, such failure shall have continued for thirty (30) days after the earlier of (i) delivery to such Lessee or the Company, as applicable, of written notice thereof from the Lessor or (ii) a Responsible Officer of such Lessee or the Company, as the case may be, shall have actual knowledge of such failure; provided, however, that if such failure is capable of cure but cannot be cured by the payment of money or cannot be cured by diligent efforts within such thirty (30) day period but such diligent efforts shall be properly commenced within the cure period and the applicable Lessee or the Company is diligently pursuing, and shall continue to pursue diligently, remedy of such failure, the cure period shall be extended for an additional period of time as may be necessary to cure, not to exceed an additional ninety (90) days and not to extend beyond the Expiration Date; provided further, that failure by the applicable Lessee to fully comply with the requirements of Section 20.1 hereof shall not be subject to any cure period; or (f) any representation or warranty made by any Lessee or the Company, as the case may be, in any of the Operative Documents to which it is a party shall prove to have been inaccurate at the time made, and if such inaccuracy can be cured, it shall not have been cured within forty-five (45) days after the earlier of (i) delivery to such Lessee or the Company, as the case may be, of written notice thereof from the Lessor or (ii) a Responsible Officer of such Lessee or the Company, as the case may be, shall have actualknowledge of such inaccuracy; or (g) any Lessee or Consolidated Entity (i) shall be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; or (ii) shall make an assignment for the benefit of creditors, petition or apply to any tribunal for the appointment of a custodian, receiver or trustee for it or a substantial part of its assets; or (iii) shall commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect; or (iv) shall have had any such petition or application filed or any such proceeding shall have been commenced, against it, in which an adjudication or appointment is made or order for relief is entered, or which petition, application or proceeding remains undismissed for a period of 60 days or more; or shall be the subject of any proceeding under which its assets may be subject to seizure, forfeiture or divestiture (other than a proceeding in respect of a Lien permitted under Section 8.3(b) of the Credit Agreement); or (v) by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a custodian, receiver or trustee for all or any substantial part of its Property; or (vi) shall suffer any such custodianship, receivership or trusteeship to continue undischarged for a period of 30 days or more; or (h) any Lien granted by any Obligor to the Lessor, the Collateral Agent or the Lease Agent under any Operative Document shall, in whole or in part, terminate, cease to be effective against, or cease to be the legal, valid, binding and enforceable obligation of, such Obligor; or (i) any Obligor shall directly or indirectly contest the validity (as opposed to the interpretation of the terms) of any Operative Document in any manner in any court of competent jurisdiction or any lien granted by any Operative Document; or (j) any Lessee shall cease to be 100% owned (directly or indirectly) Subsidiary of the Company; or (k) there shall be a breach of the STATUTORY CONDITION. 16.2. Remedies. During the continuance of any Lease Event of Default, the Lessor may do one or more of the following as the Lessor in its sole discretion shall determine, without limiting any other right or remedy the Lessor may have on account of such Lease Event of Default: (a) The Lessor may, by notice to the Lessees, rescind or terminate this Master Lease as to any Property or all of the Properties as of the date specified in such notice; however, (i) no reletting, reentry or taking of possession of any Property (or any portion thereof) by the Lessor will be construed as an election on the Lessor's part to terminate this Master Lease unless a written notice of such intention is given to the applicable Lessee, (ii) notwithstanding any reletting, reentry or taking of possession, the Lessor may at any time thereafter elect to terminate this Master Lease for a continuing Lease Event of Default and (iii) no act or thing done by the Lessor or any of its agents, representatives or employees and no agreement accepting a surrender of the Properties shall be valid unless the same be made in writing and executed by the Lessor; (b) The Lessor may (i) demand that any Lessee, and each Lessee shall upon the written demand of the Lessor, return any Property promptly to the Lessor in the manner and condition required by, and otherwise in accordance with all of the provisions of, Articles VII and IX and Section 8.3 hereof as if such Property were being returned at the end of the Term, and the Lessor shall not be liable for the reimbursement of any Lessee for any costs and expenses incurred by such Lessee in connection therewith and (ii) without prejudice to any other remedy which the Lessor may have for possession of any Property, and to the extent and in the manner permitted by Applicable Law, enter upon such Property and take immediate possession of (to the exclusion of such Lessee) such Property or any part thereof and expel or remove such Lessee and any other Person who may be occupying such Property, by summary proceedings or otherwise, all without liability to such Lessee for or by reason of such entry or taking of possession, whether for the restoration of damage to property caused by such taking or otherwise and, in addition to the Lessor's other damages, such Lessee shall be responsible for all costs and expenses incurred by the Lessor and/or the Lenders in connection with any reletting, including, reasonable brokers' fees and all costs of any alterations or repairs reasonably made by the Lessor; (c) The Lessor may (i) sell all or any part of any one or more Properties at public or private sale, as the Lessor may determine, free and clear of any rights of any Lessee (except that Excess Sales Proceeds are payable to and shall be paid to the Company as agent for the Lessees) with respect thereto (except to the extent required by clause (ii) below if the Lessor shall elect to exercise its rights thereunder) in which event the applicable Lessee's obligation to pay Basic Rent (Interest/Yield) hereunder for periods commencing after the date of such sale shall be terminated or proportionately reduced, as the case may be; and (ii) if the Lessor shall so elect, demand that such Lessee pay to the Lessor, and such Lessee shall pay to the Lessor, on the date of such sale, as liquidated damages for loss of a bargain and not as a penalty (the parties agreeing that the Lessor's actual damages would be difficult to predict, but the aforementioned liquidated damages represent a reasonable approximation of such amount) (in lieu of Basic Rent (Interest/Yield) due for periods commencing on or after the Basic Rent Payment Date coinciding with such date of sale (or, if the sale date is not a Basic Rent Payment Date, the Basic Rent Payment Date next preceding the date of such sale)), an amount equal to (A) the excess, if any, of (1) the Lease Balance calculated as of such Basic Rent Payment Date (including all Rent due and unpaid to and including such Basic Rent Payment Date), over (2) the net proceeds of such sale (that is, after deducting all reasonable costs and expenses incurred by the Lessor or any Lender incident to such conveyance, including, without limitation, repossession costs, brokerage commissions, prorations, transfer taxes, fees and expenses for counsel, title insurance fees, survey costs, recording fees, and any repair costs); plus (B) interest at the Overdue Rate on the foregoing amount from such Basic Rent Payment Date until the date of payment; (d) The Lessor may, at its option, elect not to terminate this Master Lease with respect to any Property or all of the Properties and continue to collect all Basic Rent (Interest/Yield), Supplemental Rent, and all other amounts due the Lessor (together with all costs of collection) and enforce a Lessee's obligations under this Master Lease as and when the same become due, or are to be performed, and at the option of the Lessor, upon any abandonment of any Property by a Lessee or re-entry of same by the Lessor, the Lessor may, in its sole and absolute discretion, elect not to terminate this Master Lease and may make the necessary repairs in order to relet such Property, and relet such Property or any part thereof for such term or terms (which may be for a long term extending beyond the Term of this Master Lease) and at such rental or rentals and upon such other terms and conditions as the Lessor in its reasonable discretion may deem advisable; and upon each such reletting all rentals actually received by the Lessor from such reletting shall be applied to such Lessee's obligations hereunder and the other Operative Documents in such order, proportion and priority as the Lessor may elect in the Lessor's sole and absolute discretion. If such rentals received from such reletting during any period are less than the Rent with respect to such Property to be paid during that period by the applicable Lessee hereunder, such Lessee shall pay such deficiency, to the Lessor on the next Basic Rent Payment Date; (e) Unless all of the Properties have been sold in their entirety, the Lessor may, whether or not the Lessor shall have exercised or shall thereafter at any time exercise any of its rights under clause (b), (c) or (d) of this Section 16.2 with respect to any Properties or any portions thereof, demand, by written notice to each Lessee specifying a date (a "Termination Date") not earlier than twenty (20) days after the date of such notice, that the Lessees purchase, on such Termination Date, all unsold Properties and all unsold portions of Properties in accordance with the provisions of Section 18.2; (f) The Lessor may exercise any other right or remedy that may be available to it under Applicable Law, or proceed by appropriate court action (legal or equitable) to enforce the terms hereof or to recover damages for the breach hereof. Separate suits may be brought to collect any such damages for any period(s), and such suits shall not in any manner prejudice the Lessor's right to collect any such damages for any subsequent period(s), or the Lessor may defer any such suit until after the expiration of the Term, in which event such suit shall be deemed not to have accrued until the expiration of the Term; (g) The Lessor may retain and apply against the Lease Balance all sums which the Lessor would, absent such Lease Event of Default, be required to pay to, or turn over to, any Lessee pursuant to the terms of this Master Lease; (h) The Lessor shall have the STATUTORY POWER OF SALE; (i) The Lessor, to the extent permitted by Applicable Law, as a matter of right and with notice to the Lessee, shall have the right to apply to any court having jurisdiction to appoint a receiver or receivers of any Property, and each Lessee hereby irrevocably consents to any such appointment. Any such receiver(s) shall have all of the usual powers and duties of receivers in like or similar cases and all of the powers and duties of the Lessor in case of entry, and shall continue as such and exercise such powers until the date of confirmation of the sale of such Property unless such receivership is sooner terminated; (j) To the maximum extent permitted by law, each Lessee hereby waives the benefit of any appraisement, valuation, stay, extension, reinstatement and redemption laws now or hereafter in force and all rights of marshalling in the event of any sale of any Property or any interest therein; or (k) The Lessor shall be entitled to enforce payment and performance of the obligations secured hereby and to exercise all rights and powers under this instrument or under any of the other Operative Documents or other agreement or any laws now or hereafter in force, notwithstanding some or all of the obligations secured hereby may now or hereafter be otherwise secured, whether by mortgage, security agreement, pledge, lien, assignment or otherwise. Neither the acceptance of this instrument nor its enforcement, shall prejudice or in any manner affect the Lessor's right to realize upon or enforce any other security now or hereafter held by the Lessor, it being agreed that the Lessor shall be entitled to enforce this instrument and any other security now or hereafter held by the Lessor in such order and manner as the Lessor may determine in its absolute discretion. No remedy herein conferred upon or reserved to the Lessor is intended to be exclusive of any other remedy herein or by law provided or permitted, but each shall be cumulative and shall be in addition to every other remedy given hereunder or now or hereafter existing at law or in equity or by statute. Every power or remedy given by any of the Operative Documents to the Lessor or to which it may otherwise be entitled, may be exercised, concurrently or independently, from time to time and as often as may be deemed expedient by the Lessor. In no event shall the Lessor, in the exercise of the remedies provided in this instrument (including, without limitation, in connection with the assignment of rents to Lessor, or the appointment of a receiver and the entry of such receiver onto all or any part of the Properties), be deemed a "mortgagee in possession", as to a specific Property unless the Lessor shall have taken possession of such Property, or any substantial portion thereof, and the Lessor shall not in any way be made liable for any act, either of commission or omission, in connection with the exercise of such remedies so long as the Lessor shall have acted in good faith and without gross negligence or willful misconduct. If, pursuant to the exercise by the Lessor of its remedies pursuant to this Section 16.2, the Lease Balance and all other amounts due and owing from the Lessees under this Master Lease and the other Operative Documents have been paid in full, then the Lessor, the Collateral Agent or the Lease Agent, as the case may be, shall remit to the Company, as agent for the Lessees, any excess amounts received by the Lessor. 16.3. Waiver of Certain Rights. If this Master Lease shall be terminated pursuant to Section 16.2, each Lessee waives, to the fullest extent permitted by law, (a) any notice of re-entry or the institution of legal proceedings to obtain re-entry or possession; (b) any right of redemption, re-entry or repossession; (c) the benefit of any laws now or hereafter in force exempting property from liability for rent or for debt or limiting the Lessor with respect to the election of remedies; and (d) any other rights which might otherwise limit or modify any of the Lessor's rights or remedies under this Article XVI. ARTICLE XVII LESSOR'S RIGHT TO CURE 17.1. The Lessor's Right to Cure a Lessee's Lease Defaults. The Lessor, without waiving or releasing any obligation or Lease Event of Default, may (but shall be under no obligation to) remedy any Lease Event of Default for the account and at the sole cost and expense of the applicable Lessee, including the failure by such Lessee to maintain the insurance required by Article XIII, and may, to the fullest extent permitted by law, and notwithstanding any right of quiet enjoyment in favor of such Lessee, enter upon any Property for such purpose and take all such action thereon as may be necessary or appropriate therefor. No such entry shall be deemed an eviction of such Lessee. All reasonable out-of-pocket costs and expenses so incurred (including reasonable fees and expenses of counsel), together with interest thereon at the Overdue Rate from the date on which such sums or expenses are paid by the Lessor, shall be paid by such Lessee to the Lessor as Supplemental Rent. ARTICLE XVIII PURCHASE PROVISIONS 18.1. Optional Purchase of the Properties. (a) Purchase of All of the Properties. Subject to the conditions contained herein, and without limitation of the Lessees' purchase obligation pursuant to Section 18.2, the Lessees, jointly and not severally, shall have the irrevocable option on any Business Day to purchase all, but not less than all, of the Properties subject to this Master Lease at a price equal to the Lease Balance on the date of such purchase. The exercise by the Lessees of their option pursuant to this Section 18.1(a) shall be subject to the following conditions: (i) no Lease Event of Default shall have occurred and be continuing; (ii) the Lessees (or the Company acting as agent for all of the Lessees) shall have delivered a Purchase Notice to the Lessor not less than thirty (30) days prior to such purchase, specifying the date of such purchase; and (iii) no Lessee (or the Company acting as their agent) shall have given notice of its intention to exercise the Remarketing Option. (b) Purchase of Individual Properties. Subject to the conditions contained herein, and without limitation of the Lessees' purchase obligation pursuant to Section 18.2, each Lessee shall have the irrevocable option on any Business Day to purchase the particular Property that is leased to it hereunder at a price equal to the Property Balance for such Property on the date of such purchase. The exercise by any Lessee of its option pursuant to this Section 18.1(b) shall be subject to the following conditions: (i) No Lease Event of Default shall have occurred and be continuing; (ii) the applicable Lessee shall have delivered a Purchase Notice to the Lessor not less than thirty (30) days prior to such purchase, specifying the date of such purchase and certifying that either (v) such Property or all of the capital stock or other equity interests of the Lessee leasing such Property is to be transferred on the date of such purchase to a third party that is not an Affiliate of any Lessee or the Company and, at all times after such transfer, neither the applicable Lessee, the Company nor any Affiliate of such Lessee or the Company will manage or maintain any other involvement with such Property, (w) such Property is to cease operation as a long-term or specialized health care facility within one hundred and eighty (180) days of such purchase, (x) failure to purchase such Property would cause a violation of a Requirement of Law related to operation of the Property as a long-term or specialized healthcare facility, (y) Lessor's continued ownership of the Property and the lease thereof to the applicable Lessee would cause a Rate Setting Commission Trigger Event to occur or (z) an Environmental Violation, the cost of which would exceed $1,000,000, has occurred with respect to such Property, and in each case a Responsible Officer of the Company shall have certified to the Lessor that the foregoing conditions have been satisfied; (iii) after giving effect to any such purchase, no less than three Propertie shall remain subject to this Master Lease; and (iv) no Lessee (or the Company acting as their agent) shall have given notice of its intention to exercise the Remarketing Option. (c) Transfer Procedures. If the Lessees exercise their Purchase Option pursuant to Section 18.1(a) or if any Lessee exercises its Purchase Option pursuant to Section 18.1(b) then, upon the Lessor's receipt of all amounts due in connection therewith, the Lessor shall transfer to the Lessees or such Lessee, as applicable, or their/its designee(s) or any other Person which, with the consent of the Lessor, has been assigned the right to purchase the Properties, all of the Lessor's right, title and interest in and to all of the Properties in accordance with the procedures set forth in Section 21.1(a), such transfer to be effective as of the date specified in the Purchase Notice. The Lessees or such Lessee, as applicable, may designate, in a notice given to the Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the Lessees of the respective Properties), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee or designees); provided, however, that such designation of a transferee or transferees shall not cause any Lessee to be released, fully or partially, from any of its obligations under this Master Lease, including the obligation to pay the Lessor the Lease Balance on such date. 18.2. Expiration Date Purchase Obligation. Unless (a) the Lessees shall have properly exercised their Purchase Option pursuant to Section 18.1(a) and purchased all of the Properties pursuant thereto, or (b) the Lessees shall have properly exercised the Remarketing Option and shall have fulfilled all of the conditions of clauses (a) through (l) of Section 20.1 hereof and the Lessor shall have sold its interest in all of the Properties pursuant thereto, then, subject to the terms, conditions and provisions set forth in this Article, and in accordance with the terms of Section 21.1(a), each Lessee shall purchase from the Lessor, and the Lessor shall convey to the applicable Lessee, on the Expiration Date all of the Lessor's interest in the Property (including all of the Lessor's interest in this Master Lease to the extent relating to such Property) leased by such Lessee for an amount equal to the Lease Balance with respect to such Property. The applicable Lessee may designate, in a notice given to the Lessor not less than ten (10) Business Days prior to the closing of such purchase (time being of the essence), the transferee or transferees to whom the conveyance shall be made (if other than to the Lessee), in which case such conveyance shall (subject to the terms and conditions set forth herein) be made to such designee; provided, however, that such designation of a transferee or transferees shall not cause the applicable Lessee to be released, fully or partially, from any of its obligations under this Master Lease, including, without limitation, the obligation to pay the Lessor the Lease Balance relating to such Property on such Expiration Date. ARTICLE XIX INTENTIONALLY OMITTED ARTICLE XX REMARKETING OPTION 20.1. Option to Remarket. Subject to the fulfillment of each of the conditions set forth in this Section 20.1, each Lessee shall have the option (the "Remarketing Option") to market and complete the sale of all of the Properties for the Lessor. The effective exercise and consummation of the Remarketing Option shall be subject to the due and timely fulfillment of each of the following provisions as to each of the Properties as of the dates set forth below. (a) Not later than one year prior to the Expiration Date, the Lessees shall give to the Lessor written notice of the exercise of the Remarketing Option, which exercise shall be irrevocable. Failure by a Lessee to give timely notice shall be deemed to be an election without further act thereby, of the Purchase Option. (b) Not later than one hundred and twenty (120) days prior to the Expiration Date, the Lessees shall deliver to the Lessor an Environmental Audit for each of the Properties. Such Environmental Audit shall be prepared by an environmental consultant selected by the Lessor in the Lessor's reasonable discretion and shall contain conclusions reasonably satisfactory to the Lessor as to the environmental status of the Properties. If any such Environmental Audit indicates any exceptions, the applicable Lessee shall have also delivered prior to the Expiration Date a Phase Two environmental assessment by such environmental consultant and a written statement by such environmental consultant indicating that all such exceptions have been remedied in compliance with Applicable Law. (c) On the date of the notice to the Lessor of the exercise of the Remarketing Option, no Lease Event of Default or Lease Default shall exist. (d) The Lessees shall have completed in all material respects all Modification (other than Modifications first required by a Governmental Authority after the date that s one year prior to the Expiration Date, which Modifications shall be completed not later than 180 days after the Expiration Date), restoration and rebuilding of the affected Properties pursuant to Sections 10.1 and 14.1 (as the case may be) and shall have fulfilled in all material respects all of the conditions and requirements in connection therewith pursuant to said Sections, in each case prior to the date on which the Lessor receives notice of the Lessee's intention to exercise the Remarketing Option (time being of the essence), regardless of whether the same shall be within the Lessee's control. The Lessee shall have also paid the cost of or completed all Modifications commenced prior to the Expiration Date. The Lessee shall not have been excused pursuant to Section 12.1 from complying with any Applicable Law, discharge of Lien (other than Lessor Liens and Agent Liens) or payment of Property Tax that involved the extension of the ultimate imposition of such Applicable Law, discharge of Lien or payment of Property Tax beyond the Expiration of the Term. Any Permitted Property Liens (other than Lessor Liens and other Liens attributable to the other parties to the Operative Documents) on any Property that were contested by the Lessee shall have been removed prior to the Expiration Date. (e) During the Marketing Period, the Lessees shall, as nonexclusive agents for the Lessor, use commercially reasonable best efforts to sell the Lessor's interest in the Properties and will attempt to obtain the highest purchase price therefor and for not less than the Fair Market Sales Value. The Lessees will be responsible for hiring brokers and making the Properties available for inspection by prospective purchasers. During the Marketing Period the Lessees shall promptly upon reasonable notice and during regular business hours permit inspection of any Property and any maintenance records relating to any Property by the Lessor to the extent such inspection does not cause material interruption of the Lessees' business activities, the Lenders and any potential purchasers, and shall otherwise do all things necessary to sell and deliver possession of the Properties to any purchaser. All such marketing of the Properties shall be at the Lessees' sole expense. During the Marketing Period the Lessees shall allow the Lessor and any potential qualified purchaser reasonable access to the Properties for the purpose of inspecting the same. (f) No such purchaser shall be a Lessee or any Subsidiary or Affiliate of a Lessee. (g) All bids shall be submitted to the Lessor and the Lenders, and the Lessor will have the right to submit any one or more bids. Any sale shall be for the highest cash bid submitted to the Lessor. The determination of the highest bid shall be made by the Lessor and the Tranche B Lenders prior to the end of the Marketing Period, but in any event, the Lessor shall have no obligation to approve any bid for any Property unless each highest bid for each of the respective Properties, in the aggregate, equal or exceed the Lease Balance. All bids shall be on an all-cash basis unless the Lessor and the Tranche B Lenders shall otherwise agree in their sole discretion. (h) In connection with any such sale of any Property, the applicable Lessee will provide to the purchaser all customary "seller's" indemnities, representations and warranties regarding title, absence of Liens (except Lessor Liens and Agent Liens) and the condition of such Property, including an environmental indemnity, in each case to the extent the same are reasonably required by the purchaser. The applicable Lessee shall have obtained, at its cost and expense, all required governmental and regulatory consents and approvals and shall have made all filings as required by Applicable Law in order to carry out and complete the transfer of each of the Properties but shall grant or assign all assignable licenses necessary for the operation and maintenance of such Property and cooperate reasonably in seeking or obtaining all necessary Governmental Action to enable the purchaser to operate the Property to the extent any such cooperation is required to lawfully effect a transfer of operating rights. As to the Lessor, any such sale shall be made on an "as is, with all faults" basis without representation or warranty by the Lessor other than as to the absence of Lessor Liens. Any agreement as to such sale shall be made subject to the Lessor's rights hereunder. (i) The Lessees shall pay directly, and not from the sale proceeds, all prorations, credits, costs and expenses of the sale of the Properties, whether incurred by the Lessor or the Lessees, including, without limitation, the cost of all title insurance, surveys, environmental reports, appraisals, transfer taxes, the Lessor's reasonable attorneys' fees, the Lessees' attorneys' fees, commissions, escrow fees, recording fees, and all applicable documentary and other transfer taxes. (j) The Lessees shall pay to the Lessor on or prior to the Expiration Date (or in the case of Supplemental Rent, to the Person entitled thereto) an amount equal to the Lease Recourse Amount plus all accrued and unpaid Rent (including accrued and unpaid Supplemental Rent, if any) and all other amounts hereunder which have accrued or will accrue prior to or as of the Expiration Date, in the type of funds specified in Section 3.1(b) hereof. (k) The Lessees shall pay to the Lessor on or prior to the Expiration Date the amounts, if any, required to be paid pursuant to Section 13.2 of the Participation Agreement. (l) The gross proceeds of the sale of the Properties (less any marketing, closing or other costs, prorations or commissions incurred by the Collateral Agent, the Lease Agent or the Lessor in connection therewith) (the "Gross Remarketing Proceeds") shall be paid directly to the Lessor; provided, however, that if the sum of (x) the Gross Remarketing Proceeds from such sale plus (y) the Lease Recourse Amount and other amounts received by the Collateral Agent or the Lease Agent, as applicable, pursuant to this Section 20.1 exceeds the Lease Balance as of such date, then the excess shall be paid to the Company as agent for the Lessees on the Expiration Date. If one or more of the foregoing provisions shall not be fulfilled as of the applicable date set forth above with respect to any Property, then the Lessor shall declare by written notice to the Lessees the Remarketing Option to be null and void (whether or not it has been theretofore exercised by any Lessee) as to all of the Properties, in which event all of each Lessee's rights under this Section 20.1 shall immediately terminate and the Lessees shall be obligated to purchase all of the Properties pursuant to Section 18.2 on the Expiration Date. In the event that the sale of all of the Properties is not consummated on the Expiration Date, but such sale is consummated any time thereafter, the Lessor shall remit to the Company, as agent for the Lessees, promptly after the consummation of the sale of the last Property, any excess remaining after deducting the then outstanding Lease Balance plus the Imputed Equity Return thereon plus an amount equivalent to the Overdue Rate thereon accruing from and after the Expiration Date from the Gross Remarketing Proceeds. If the Lessee effectively elects the Remarketing Option and no sale of any Property is consummated prior to the end of the Marketing Period, each Lessee shall, in addition to making the payment required pursuant to Section 20.1(j) above, do each of the following: (i) execute and deliver to Lessor and the Lessor's title insurance company at its own cost and expense an affidavit as to the absence of any Liens (other than Permitted Property Liens of the type described in clause (i), (viii) or (x) of the definition thereof), and shall execute and deliver to the Lessor a statement of termination of this Master Lease to the extent relating to such Property; and (ii) for a period of up to one year after the Expiration Date (the "Extended Marketing Period"), cooperate reasonably with the Lessor and/or any Person designated by the Lessor to receive such Property, which cooperation shall include reasonable efforts with respect to the following, all of which the Lessees shall do at their own cost and expense on or before the Expiration Date for such Property or as soon thereafter as is reasonably practicable: providing copies of all books and records regarding the maintenance and ownership of such Property and all know-how, data and technical information relating thereto; granting or assigning all assignable licenses necessary for the operation and maintenance of such Property; and cooperating reasonably, at the Lessee's or a purchaser's expense, in the Lessor's or a purchaser's efforts to obtain the necessary Governmental Action to operate the Property. The obligations of the Lessees under this paragraph shall survive the expiration or termination of this Master Lease. Except as expressly set forth herein, the Lessees shall have no right, power or authority to bind the Lessor in connection with any proposed sale of any Property. 20.2. Certain Obligations Continue. During the Marketing Period, the obligation of the Lessees to pay Rent with respect to each Property (including the installment of Rent due on the Expiration Date) shall continue undiminished until payment in full of the Lease Recourse Amount and all other amounts due to the Lessor with respect to the Properties under the Operative Documents to which each Lessee is a party. The Lessor and the Tranche B Lenders shall have the right, but shall be under no duty, to solicit bids, to inquire into the efforts of the Lessees to obtain bids or otherwise to take action in connection with any such sale, other than as expressly provided in this Article XX. ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING 21.1. Provisions Relating to the Exercise of Purchase Option or Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events. (a) In connection with any termination of this Master Lease with respect to any Property pursuant to the terms of Article XV, in connection with any purchase or in connection with the purchase of any Property in accordance with Section 18.1 or in connection with the Expiration Date Purchase Obligation or obligations under Section 16.2(e), then, upon the date on which this Master Lease is to terminate with respect to the applicable Property and upon tender of the amounts set forth in Article XV, Section 16.2(e), 18.1 or 18.2, as applicable: (i) the Lessor shall execute and deliver to the applicable Lessee (or to the Lessee's designee) at such Lessee's cost and expense a quitclaim deed with respect to such Property or Properties containing representations and warranties of grantor to such Lessee regarding Lessor Liens and an assignment of the Lessor's entire interest in such Property or Properties (which shall include an assignment of all of the Lessor's right, title and interest in and to any Net Proceeds with respect to such Property or Properties not previously received by the Lessor and an assignment of leases of the Properties), in each case in recordable form and otherwise in conformity with local custom and free and clear of the Lien of the applicable Lease Facility Mortgage and any Lessor Liens and any Liens created by the Operative Documents attributable to it; (ii) such Property or Properties shall be conveyed to such Lessee (or its designee) "AS IS" and in its then present physical condition; and (iii) the Lessor shall execute and deliver to such Lessee and such Lessee's title insurance company (or to the designee of the Lessee and its title insurance company) an affidavit in customary form as to the Lessor's title and Lessor Liens and a FIRPTA affidavit and shall execute and deliver to Lessee a statement of termination of this Master Lease and a termination of the Assignment of Lease and Rent, in each case to the extent such Operative Documents relate to such Property or Properties. (b) If the Lessees properly exercises the Remarketing Option, then the Lessees shall, on the Expiration Date, and at their own cost, surrender possession of all of the Properties to the Lessor or the independent purchaser (s) thereof, in each case by surrendering the same into the possession of the Lessor or such purchaser(s), as the case may be, free and clear of all Liens other than Lessor Liens and the lien of the applicable Lease Facility Mortgage, in the condition required under this Master Lease (as modified by Modifications permitted by this Master Lease), ordinary wear and tear excepted, and in compliance with Applicable Law. ARTICLE XXII ESTOPPEL CERTIFICATES 22.1. Estoppel Certificates. At any time and from time to time upon not less than ten (10) Business Days' prior request by the Lessor or any Lessee (the "Requesting Party"), the other party (whichever party shall have received such request, the "Certifying Party") shall furnish to the Requesting Party a certificate signed by an individual having the office of vice president or higher in the Certifying Party certifying that this Master Lease is in full force and effect (or that this Master Lease is in full force and effect as modified and setting forth the modifications); the dates to which the Basic Rent (Interest/Yield) and Supplemental Rent have been paid; to the best knowledge of the signer of such certificate, whether or not the Requesting Party is in default under any of its obligations hereunder (and, if so, the nature of such alleged default); and such other matters under this Master Lease as the Requesting Party may reasonably request. Any such certificate furnished pursuant to this Article XXII may be relied upon by the Requesting Party, and any existing or prospective mortgagee, purchaser or lender, and any accountant or auditor, of, from or to the Requesting Party (or any Affiliate thereof). ARTICLE XXIII ACCEPTANCE OF SURRENDER 23.1. Acceptance of Surrender. No surrender to the Lessor of this Master Lease or of all or any of the Properties or of any part of any thereof or of any interest therein shall be valid or effective unless agreed to and accepted in writing by the Lessor and, prior to the payment or performance of all obligations under the Loan Agreement and termination of the Commitments, the Lenders, and no act by the Lessor or any Lender or any representative or agent of the Lessor or any Lender, other than a written acceptance, shall constitute an acceptance of any such surrender. ARTICLE XXIV NO MERGER OF TITLE 24.1. No Merger of Title. There shall be no merger of this Master Lease or of the leasehold estate created hereby by reason of the fact that the same Person may acquire, own or hold, directly or indirectly, in whole or in part, (a) this Master Lease or the leasehold estate created hereby or any interest in this Master Lease or such leasehold estate, (b) the fee or ground leasehold estate in any Property, except as may expressly be stated in a written instrument duly executed and delivered by the appropriate Person and/or (c) a beneficial interest in the Lessor. ARTICLE XXV INTENT OF THE PARTIES 25.1. Nature of Transaction. (a) It is the intent of the parties that: (a) the Lease constitutes an operating lease from Lessor to the Lessees for purposes of the Lessees' financial reporting, (b) the Lease and other transactions contemplated hereby preserve ownership in the Properties in the Lessees for Federal and state income tax and bankruptcy purposes, (c) each Lease Supplement grants to the Collateral Agent, for the benefit of the Participants and the other Secured Parties, a Lien on the Property covered thereby, and (d) the obligations of the Lessees to pay Basic Rent (Interest/Yield) and any part of the Property Balance (other than accrued and unpaid interest and Yield related thereto) shall be treated as payments of interest and principal, respectively, for Federal and state income tax and bankruptcy purposes. The Collateral Agent shall be deemed to have a valid and binding security interest in and Lien on the Properties, free and clear of all Liens other than Permitted Property Liens, as security for the obligations of the Lessees under the Operative Documents (it being understood and agreed that the Lessees do hereby grant a Lien, and convey, transfer, assign, mortgage and warrant, WITH MORTGAGE COVENANTS, to the Collateral Agent and its successors, transferees and assigns, for the benefit of the Participants and the other Secured Parties and its successors, transferees and assigns, the Properties and any proceeds or products thereof, to have and hold the same as collateral security for the payment and performance of the obligations of the Lessees under the Operative Documents), and each of the parties hereto agrees that it will not, nor will it permit any Affiliate to at any time, take any action or fail to take any action with respect to the preparation or filing of any income tax return, including an amended income tax return, to the extent that such action or such failure to take action would be inconsistent with the intention of the parties expressed in this Section 25.1. This mortgage is granted upon the STATUTORY CONDITION, for any breach of which Lessor shall have the STATUTORY POWER OF SALE. (b) Specifically, without limiting the generality of clause (a) of this Section 25.1, the parties hereto intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting a Lessee, the Company, the Lessor, any Participant or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Participants to the Lessees. ARTICLE XXVI MISCELLANEOUS 26.1. Survival; Severability; Etc. Anything contained in this Master Lease to the contrary notwithstanding, all claims against and liabilities of the Lessees or the Lessor arising from events commencing prior to the expiration or earlier termination of this Master Lease shall survive such expiration or earlier termination for a period of one year except as to indemnification which shall continue to survive. If any term or provision of this Master Lease or any application thereof shall be declared invalid or unenforceable, the remainder of this Master Lease and any other application of such term or provision shall, to the full extent permitted law, not be affected thereby. If any right or option of the Lessees provided in this Master Lease, including any right or option described in Article XIV, XV, XVIII or XX, would, in the absence of the limitation imposed by this sentence, be invalid or unenforceable as being in violation of the rule against perpetuities or any other rule of law relating to the vesting of an interest in or the suspension of the power of alienation of property, then such right or option shall be exercisable only during the period which shall end twenty-one (21) years after the date of death of the last survivor of the descendants of Franklin D. Roosevelt, the former President of the United States, Henry Ford, the deceased automobile manufacturer, and John D. Rockefeller, the founder of the Standard Oil Company, known to be alive on the date of the execution, acknowledgement and delivery of this Master Lease. 26.2. Amendments and Modifications. Subject to the requirements, restrictions and conditions set forth herein and in the Participation Agreement, neither this Master Lease nor any provision hereof may be amended, waived, discharged or terminated except by an instrument in writing in recordable form signed by the Lessor and the Lessees. 26.3. No Waiver. No failure by the Lessor or the Lessees to insist upon the strict performance of any term hereof or to exercise any right, power or remedy upon a default hereunder, and no acceptance of full or partial payment of Rent during the continuance of any such default, shall constitute a waiver of any such default or of any such term. To the fullest extent permitted by law, no waiver of any default shall affect or alter this Master Lease, and this Master Lease shall continue in full force and effect with respect to any other then existing or subsequent default. 26.4. Notices. All notices, demands, requests, consents, approvals and other communications hereunder shall be in writing and directed to the address described in, and deemed received in accordance with the provisions of, Section 14.3 of the Participation Agreement. 26.5. Successors and Assigns. All the terms and provisions of this Master Lease shall inure to the benefit of the parties hereto and their respective successors and permitted assigns. 26.6. Headings and Table of Contents. The headings and table of contents in this Master Lease are for convenience of reference only and shall not limit or otherwise affect the meaning hereof. 26.7. Counterparts. This Master Lease may be executed in any number of counterparts, each of which shall be an original, but all of which shall together constitute one and the same instrument. 26.8. GOVERNING LAW. THIS MASTER LEASE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAW PRINCIPLES, EXCEPT AS TO MATTERS RELATING TO THE CREATION AND PERFECTION OF THE LEASEHOLD ESTATES HEREUNDER AND THE EXERCISE OF RIGHTS AND REMEDIES WITH RESPECT THERETO, WHICH SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED. WITHOUT LIMITING THE FOREGOING, IN THE EVENT THAT THIS MASTER LEASE IS DEEMED TO CONSTITUTE A FINANCING, THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO CONFLICTS OF LAWS PRINCIPLES, SHALL GOVERN THE CREATION, TERMS AND PROVISIONS OF THE INDEBTEDNESS EVIDENCED HEREBY, BUT THE LIEN CREATED HEREBY AND THE CREATION, PERFECTION AND THE ENFORCEMENT OF SAID LIEN SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAW OF THE STATES IN WHICH SUCH ESTATES ARE LOCATED. 26.9. Limitations on Recourse. The parties hereto agree that except as specifically set forth in the Lease or in any other Operative Document, the Lessor shall have no personal liability whatsoever to the Lessees or their respective successors and assigns for any claim based on or in respect of this Master Lease or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and the recourse shall be solely had against the Lessor's interest in the Properties or Equity Interests and any and all proceeds thereof; provided, however, that the Lessor shall be liable in its individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) breach of any of its representations, warranties or covenants under the Operative Documents, or (c) for any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents. It is understood and agreed that, except as provided in the preceding sentence: (i) the Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents; (ii) all obligations of the Lessor to the Lessees are solely nonrecourse obligations except to the extent that it has received payment from others; and (iii) all such personal liability of the Lessor is expressly waived and released as a condition of, and as consideration for, the execution and delivery of the Operative Documents by the Lessor. 26.10. Original Lease. The single executed original of this Master Lease marked "THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART" on the signature page thereof and containing the receipt thereof of NationsBank, N.A., as Collateral Agent for the Secured Parties therefor on or following the signature page thereof shall be the Original Executed Counterpart of this Master Lease (the "Original Executed Counterpart"). To the extent that this Master Lease constitutes chattel paper, as such term is defined in the Uniform Commercial Code as in effect in any applicable jurisdiction, no security interest in this Master Lease may be created through the transfer or possession of any counterpart other than the Original Executed Counterpart. IN WITNESS WHEREOF, the parties have caused this Master Lease be duly executed and delivered as of the date first above written. ACADEMY NURSING HOME, INC., as Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC., as Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President PRESCOTT NURSING HOME, INC., as Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President WILLOW MANOR NURSING HOME, INC., as Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President ADS/MULTICARE, INC., as Lessee By BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President SELCO SERVICE CORPORATION, as Lessor By Name: Title: THIS COUNTERPART IS THE ORIGINAL EXECUTED COUNTERPART. Receipt of this original counterpart of the foregoing Lease is hereby acknowledged as of thebdate hereof. NATIONSBANK, N.A., as Collateral Agent for the Secured Parties By Name: Title: TABLE OF CONTENTS Section Page ARTICLE I DEFINITIONS 1.1. Definitions; Interpretation . . . . . . . . . . . . . . . 2 ARTICLE II MASTER LEASE 2.1. Acceptance and Lease of Property. . . . . . . . . . . . 2 2.2. Acceptance Procedure. . . . . . . . . . . . . . . . . . 2 2.3. Term. . . . . . . . . . . . . . . . . . . . . . . . . . 2 2.4. Title . . . .. . . . . . . . . . . . . . . . . . . . . . 3 ARTICLE III PAYMENT OF RENT 3.1. Rent. . . . . . . . . . . . . . . . . . . . . . . . . . 3 3.2. Payment of Rent . . . . . . . . . . . . . . . . . . . . 3 3.3. Supplemental Rent . . . . . . . . . . . . . . . . . . . 4 3.4. Method of Payment . . . . . . . . . . . . . . . . . . . 4 3.5. Payments of Rent Constitute Senior Debt .. . . . . . . . 5 3.6. Payments After Termination of Credit Agreement, etc . . 5 ARTICLE IV QUIET ENJOYMENT; RIGHT TO INSPECT 4.1. Quiet Enjoyment . . . . . . . . . . . . . . . . . . . . 5 4.2. Right to Inspect. . . . . . . . . . . . . . . . . . . . 6 ARTICLE V NET LEASE, ETC. 5.1. Net Lease . . . . . . . . . . . . . . . . . . . . . . . 6 5.2. No Termination or Abatement . . . . . . . . . . . . . . 7 5.3. No Bar. . . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE VI SUBLEASES 6.1. Subletting. . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE VII LESSEE ACKNOWLEDGMENTS 7.1. Condition of the Properties . . . .. . . . . . . . . . . . . . 8 7.2. Risk of Loss. . . . . . . . . . . .. . . . . . . . . . . . . . 9 ARTICLE VIII POSSESSION AND USE OF THE PROPERTIES, ETC. 8.1. Utility Charges . . . . . . . . . . . . . . . . . . . . . . . 9 8.2. Possession and Use of the Property.. . . . . . . . . . . . . . 9 8.3. Compliance with Requirements of Law, Property Legal Requirements an Insurance Requirements . .. . . . . . . . . . 10 8.4. Assignment by Lessee. . . . . . . . . . . . . . . . . . . . . 10 ARTICLE IX MAINTENANCE AND REPAIR; RETURN 9.1. Maintenance and Repair; Return. . . . . . . . . . . . . . . . 10 ARTICLE X MODIFICATIONS, ETC. 10.1. Modifications, Substitutions and Replacements. . .. . . . . . 11 10.2. Notice to the Lessor . . . . . . . . . . . . . . .. . . . . . 12 ARTICLE XI WARRANT OF TITLE; EASEMENTS 11.1. Warrant of Title . . . . . . . . . . . . . . . . .. . . . . . 12 11.2. Grants and Releases of Easements; Lessor's Waivers. . . . . . 13 ARTICLE XII PERMITTED CONTESTS 12.1. Permitted Contests in Respect of Applicable Law; Liens; Property Taxes 14 ARTICLE XIII INSURANCE 13.1. Public Liability and Workers' Compensation Insurance . . . . 15 13.2. Hazard and Other Insurance . . . . . . . . . . . . . . . . . 16 13.3. Insurance Coverage . . . . . . . . . . . . . . . . . . . . . 16 ARTICLE XIV CASUALTY AND CONDEMNATION; ENVIRONMENTAL MATTERS 14.1. Casualty and Condemnation. . . . . . . .. . . . . . . . . . . 18 14.2. Environmental Matters. . . . . . . . . .. . . . . . . . . . . 20 14.3. Notice of Environmental Matters. . . . .. . . . . . . . . . . 21 ARTICLE XV TERMINATION OF LEASE 15.1. Partial Termination upon Certain Events. . .. . . . . . . . . 21 15.2. Termination Procedures . . . . . . . . . . .. . . . . . . . . 22 ARTICLE XVI EVENTS OF DEFAULT 16.1. Lease Events of Default. . . . . . . . . . . . . . . . . . . 22 16.2. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . 25 16.3. Waiver of Certain Rights . . . . . . . . . . . . . . . . . . 29 ARTICLE XVII LESSOR'S RIGHT TO CURE 17.1. The Lessor's Right to Cure a Lessee's Lease Defaults . .. . . 29 ARTICLE XVIII PURCHASE PROVISIONS 18.1. Optional Purchase of the Properties. . . .. . . . . . . . . . 30 (a) Purchase of All of the Properties. . . . . .. . . . . . . . . . 30 (b) Purchase of Individual Properties.. 30 (c) Transfer Procedures. . . . . . . .. 31 18.2. Expiration Date Purchase Obligation. . . . . . . . . . . . . 32 ARTICLE XIX INTENTIONALLY OMITTED ARTICLE XX REMARKETING OPTION 20.1. Option to Remarket . . . . . . .. . . . . . . . . . . . . . . 32 20.2. Certain Obligations Continue . .. . . . . . . . . . . . . . . 37 ARTICLE XXI PROCEDURES RELATING TO PURCHASE OR REMARKETING 21.1. Provisions Relating to the Exercise of Purchase Option or Obligation and Conveyance Upon Remarketing and Conveyance Upon Certain Other Events 37 ARTICLE XXII ESTOPPEL CERTIFICATES 22.1. Estoppel Certificates. . . . . . . . . . . . . . . . . . . . 39 ARTICLE XXIII ACCEPTANCE OF SURRENDER 23.1. Acceptance of Surrender. . . . . . . . . . . . . . . . . . . 39 ARTICLE XXIV NO MERGER OF TITLE 24.1. No Merger of Title . . .. . . . . . . . . . . . . . . . . . . 39 ARTICLE XXV INTENT OF THE PARTIES 25.1. Nature of Transaction. . . . . . . . . . . . . . . . . . . . 40 ARTICLE XXVI MISCELLANEOUS 26.1. Survival; Severability; Etc. . . . . . . . . . . . . . . . . 41 26.2. Amendments and Modifications . . . . . . . . . . . . . . . . 41 26.3. No Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . 42 26.4. Notices. . . . . . . . . . . . . . . . . . . . . . . . . . . 42 26.5. Successors and Assigns . . . . . . . . . . . . . . . . . . . 42 26.6. Headings and Table of Contents . . . . . . . . . . . . . . . 42 26.7. Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 42 26.8. GOVERNING LAW. . . . . . . . . . . . . . . . . . . . . . . . 42 26.9. Limitations on Recourse. . . . . . . . . . . . . . . . . . . 43 26.10. Original Lease. . . . . . . . . . . . . . . . . . . . . . . 43 EXHIBIT A Form of Lease Supplement EX-10 7 APPENDIX A to Participation Agreement, Master Lease, Lease Supplements Loan Agreement, and Lease Facility Mortgages DEFINITIONS AND INTERPRETATION A. Interpretation. In each Operative Document, unless a clear contrary intention appears: (i) the singular number includes the plural number and vice versa; (ii) reference to any Person includes such Person's successors and assigns but, if applicable, only if such successors and assigns are permitted by the Operative Documents, and reference to a Person in a particular capacity excludes such Person in any other capacity or individually; (iii) reference to any gender includes each other gender; (iv) reference to any agreement (including any Operative Document), document or instrument means such agreement, document or instrument as amended or modified and in effect from time to time in accordance with the terms thereof and, if applicable, the terms of the other Operative Documents and reference to any promissory note includes any promissory note which is an extension or renewal thereof or a substitute or replacement therefor; (v) reference to any Applicable Law means such Applicable Law as amended, modified, codified, replaced or reenacted, in whole or in part, and in effect from time to time, including rules and regulations promulgated thereunder and reference to any section or other provision of any Applicable Law means that provision of such Applicable Law from time to time in effect and constituting the substantive amendment, modification, codification, replacement or reenactment of such section or other provision; (vi) reference in any Operative Document to any Article, Section, Appendix, Schedule or Exhibit means such Article or Section thereof or Appendix, Schedule or Exhibit thereto; (vii) "hereunder", "hereof", "hereto" and words of similar import shall be deemed references to an Operative Document as a whole and not to any particular Article, Section or other provision thereof; (viii)"including" (and with correlative meaning "include") means including without limiting the generality of any description preceding such term; and (ix) relative to the determination of any period of time, "from" means "from and including" and "to" means "to but excluding". B. Accounting Terms. In each Operative Document, unless expressly otherwise provided, accounting terms shall be construed and interpreted, and accounting determinations and computations shall be made, in accordance with GAAP. C. Conflict in Operative Documents. If there is any conflict between any Operative Documents, such Operative Document shall be interpreted and construed, if possible, so as to avoid or minimize such conflict but, to the extent (and only to the extent) of such conflict, the Participation Agreement shall prevail and control. D. Legal Representation of the Parties. The Operative Documents were negotiated by the parties with the benefit of legal representation and any rule of construction or interpretation otherwise requiring the Operative Document to be construed or interpreted against any party shall not apply to any construction or interpretation hereof or thereof. E. Defined Terms. Unless a clear contrary intention appears, terms defined herein have the respective indicated meanings when used in each Operative Document. "ABR Amount" means any Loan or Lessor Amount which accrues interest or Yield, as the case may be, by reference to the Alternate Base Rate. "Acquisition Date" means any Business Day on which the Lessor acquires any Property (whether by acquiring the fee interest in such Property or by acquiring all of the outstanding capital stock (in the case of a corporation) or all of the partnership interests (in the case of a partnership) in any Person that owns directly the fee interest in such Property) pursuant to the provisions of the Participation Agreement and the other Operative Documents. "Advance" is defined in Section 3.1(a) of the Participation Agreement. "Affiliate" of any Person means any other Person which, directly or indirectly, controls, is controlled by or is under common control with such Person (excluding any trustee under, or any committee with responsibility for administering, any Plan). A Person shall be deemed to be "controlled by" any other Person if such other Person possesses, directly or indirectly, power (a) to vote 30% or more of the securities (on a fully diluted basis) having ordinary voting power for the election of directors or managing general partners; or (b) to direct or cause the direction of the management and policies of such Person whether by contract or otherwise. "After Tax Basis" means, with respect to any payment to be received, the amount of such payment increased so that, after deduction of the amount of all taxes required to be paid by the recipient (less any tax savings realized and the present value of any tax savings projected to be realized by the recipient as a result of the payment of the indemnified amount or the occurrence of the event giving rise to such indemnification) with respect to the receipt by the recipient of such amounts, such increased payment (as so reduced) is equal to the payment otherwise required to be made. "Agent Lien" means any Lien created by, or arising out of any claim against, the Collateral Agent or the Lease Agent, as the case may be, imposed on or with respect to any Property or the Lessor's interest therein, that is not expressly permitted under the terms of the Operative Documents. "Aggregate Commitment Amount" means $54,416,988, as such amount may be increased from time to time pursuant to a written agreement signed by the Lessor, each Lender and the Company. "Allocation Percentage" means, with respect to any Lessee as of any date of determination, the quotient (expressed as a percentage) of (a) the aggregate outstanding principal amount of the Loans and the portion of the Lessor Amount advanced with respect to the Property leased by such Lessee pursuant to the Master Lease divided by (b) the sum of the Loan Balance plus the Lessor Balance. "Alternate Base Rate" means, on any date, a fluctuating rate of interest per annum equal to the higher of (a) the rate of interest most recently announced by the Lease Agent in the United States as its prime rate for Dollar loans which rate is not necessarily intended to be the lowest rate of interest determined by the Lease Agent in connection with extensions of credit (the "Prime Rate"); or (b) the Federal Funds Rate most recently determined by the Lease Agent. Each change in any interest rate provided for herein based upon the Alternate Base Rate resulting from a change in the Alternate Base Rate shall take effect at the time of such change in the Alternate Base Rate. The Lease Agent shall give prompt notice to the Company, the Lessees, and each Participant of changes in the Alternate Base Rate. "Applicable Law" means all existing and future applicable laws, rules, regulations including Environmental Laws), statutes, treaties, codes, ordinances, permits, certificates, orders and licenses of and interpretations by, any Governmental Authority, and applicable judgments, decrees, injunctions, writs, orders or like action of any court, arbitrator or other administrative, judicial or quasi-judicial tribunal or agency of competent jurisdiction (including those pertaining to health, safety or the environment (including wetlands) and those pertaining to the construction, use or occupancy of any Property) and any restrictive covenant or deed restriction or easement of record, in each case directly affecting the Lessees, any Property or any material interests in any other kind of property or asset, whether real, personal or mixed, or tangible or intangible, of the Lessees. "Applicable Lease Margin" means on any date, the percentage set forth below opposite the applicable Pricing Level on such date: Applicable Pricing Level Lease Margin I 0.75% II 1.00% III 1.25% IV 1.50%
"Applicable Loan Margin" means on any date, with respect to the Tranche A Loans and Tranche B Loans, respectively, the percentage set forth below opposite the applicable Pricing Level on such date: Tranche A Tranche B Applicable Applicable Pricing Level Loan Margin Loan Margin I 0.75% 0.875% II 1.00% 1.125% III 1.25% 1.375% IV 1.50% 1.625%
"Applicable Rate" means as of any date of determination: (a) in the case of Loans and Lessor Amounts that are LIBO Rate Amounts, during each interest Period applicable thereto, a rate per annum equal to the LIBO Rate (Reserve Adjusted) determined by the Lease Agent for such Interest Period plus the Applicable Lease Margin determined for such date plus 1/8 of 1%; and (b) in the case of Loans and Lessor Amounts that are ABR Amounts, a rate per annum equal to the Alternate Base Rate for such date plus 1/8 of 1%. "Appraisal" means, with respect to each Property, an appraisal, prepared by a reputable appraiser selected by the Lessor, of such Property, which Appraisal, in the reasonable opinion of counsel to the Lessor and the Lenders, complies in all material respects with all of the provisions of the Financial Institutions Reform, Recovery and Enforcement Act of 1989, as amended, the rules and regulations adopted pursuant thereto, and all other applicable Requirements of Law addressed to the Lessor and the Lenders, and will appraise the Fair Market Sales Value of such Property as of the Acquisition Date and as of the Expiration Date. "Appurtenant Rights" means, with respect to any Land, (i) all agreements, easements, rights of way or use, rights of ingress or egress, privileges, appurtenances, tenements, hereditaments and other rights and benefits at any time belonging or pertaining to such Land or the Improvements thereon, including, without limitation, the use of any streets, ways, alleys, vaults or strips of land adjoining, abutting, adjacent or contiguous to such Land and (ii) all permits, licenses and rights, whether or not of record, appurtenant to such Land. "Assignment Agreement" is defined in Section 12.1 of the Participation Agreement. "Assignment of Lease and Rent" means the Assignment of Lease and Rent dated as of December 11, 1996, from the Lessor, as assignor, to the Collateral Agent for the benefit of each of the Secured Parties, as assignee. "Assumption Agreements" means, collectively, the Assumption Agreements in the form of Exhibit K to the Credit Agreement to be delivered in accordance with Section 7.09 of the Credit Agreement. "Bankruptcy Code" is defined in Section 6.1(e) of the Loan Agreement. "Basic Rent" means the sum of Basic Rent (Interest/Yield) plus all Loans due on the Maturity Date plus the Lessor Amount due on the Expiration Date. "Basic Rent (Interest/Yield)" means, as determined as of any Basic Rent Payment Date, the amounts payable on the outstanding Loans and outstanding Lessor Amount pursuant to Section 4.1 of the Participation Agreement. "Basic Rent Payment Date" means: (a) as to any LIBO Rate Amount, the last day of each applicable Interest Period (and, if any such Interest Period shall exceed three (3) months, on each date occurring every three (3) months after the first day of such Interest Period) and the Maturity Date; and (b) as to any ABR Amount, each Monthly Payment Date, any date on which such ABR Amount is converted into a LIBO Rate Amount and the Maturity Date. "Bill of Sale" is defined in Section 6.2(c) of the Participation Agreement. "Break Costs" means an amount equal to the amount, if any, required to compensate any Participant for any losses (including any loss, cost or expense incurred by reason of the liquidation or reemployment of deposits or funds acquired by such Participant to fund its obligations under the Operative Documents) it may reasonably incur as a result of (v) the payment of Rent other than on a Basic Rent Payment Date, (x) any Advance not being made on the date specified therefor in the applicable Funding Request (other than as a result of a breach by such Participant of its obligation under Section 3.1, 3.2 or 3.3, as the case may be, of the Participation Agreement to make Advances or make the Lessor Amount or Loans available to the Lessor), (y) the payment of the Lease Balance on any date other than a Basic Rent Payment Date, or (z) as a result of any conversion of the LIBO Rate in accordance with Section 13.7 or 13.8 of the Participation Agreement. A statement as to the amount of such loss, cost or expense, prepared in good faith and in reasonable detail and submitted by such Participant to the Lessee, shall be presumed correct. "Business Day" means each day which is not a day on which banks in New York, New York, are generally authorized or obligated, by law or executive order, to close and which is also a day on which dealings in Dollars are carried on in the London interbank eurodollar market. "Capital Lease" means any lease which has been or should be capitalized on the books of the Guarantor in accordance with GAAP. "Casualty" means any damage or destruction of all or any portion of a Property as a result of a fire or other casualty. "CERCLA" means the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, 42 U.S.C. SS 9601 et. seq., as amended by the Superfund Amendments and Reauthorization Act of 1986. "Certifying Party" is defined in Section 22.1 of the Master Lease. "Claims" means any and all obligations, liabilities, losses, actions, suits, judgments, penalties, fines, claims, demands, settlements, costs and out-of-pocket expenses (including, without limitation, reasonable legal fees and expenses) of any nature whatsoever. "Code" means the Internal Revenue Code of 1986, as amended from time to time, or any successor statute thereto. "Collateral" means the "Collateral", as defined in the Intercreditor Agreement. "Collateral Agent" means Nationsbank, N.A., in its capacity as Collateral Agent for the Secured Parties. "Commitment" means (i) as to any Lender, its Loan Commitment, and (ii) as to the Lessor, the Lessor Commitment. "Commitment Termination Date" means the earliest of (i) the date occurring one hundred eighty (180) days after the Initial Acquisition Date, (ii) the date specified in a written notice from the Company to the Lessor and each Lender as the Commitment Termination Date and (iii) such earlier date on which the Commitments shall terminate as provided in the Operative Documents. "Company" means The Multicare Companies, Inc., a Delaware corporation. "Compliance Certificate" means a certificate of a financial Responsible Officer of the Company substantially in the form of Exhibit D to the Credit Agreement. "Condemnation" means, with respect to any Property, any condemnation, requisition, confiscation, seizure or other taking or sale of the use, access, occupancy, easement rights or title to such Property or any part thereof, wholly or partially (temporarily or permanently), by or on account of any eminent domain proceeding or other taking of action by any Person having the power of eminent domain, including an action by a Governmental Authority to change the grade of, or widen the streets adjacent to, such Property or alter the pedestrian or vehicular traffic flow to such Property so as to result in change in access to such Property, or by or on account of an eviction by paramount title or any transfer made in lieu of any such proceeding or action. A "Condemnation" shall be deemed to have occurred on the earliest of the dates that use, occupancy or title vests in the condemning authority. "Consolidated Entity" has the meaning assigned to such term in the Credit Agreement. "Continuation/Conversion Notice" means a notice of continuation or conversion substantially in the form of Exhibit B to the Participation Agreement. "Credit Agreement" means the Third Amended and Restated Credit Agreement dated as of December 11, 1996, among the Company, the Subsidiary Co-Borrowers, the Credit Facility Banks and the Credit Facility Agent, as such Credit Agreement may be amended, supplemented, modified, replaced, renewed, extended, refinanced or refunded from time to time in accordance with the provisions of Section 3.01 of the Intercreditor Agreement. "Credit Facility Agent" means NationsBank, N.A., in its capacity as administrative agent under the Credit Agreement. "Credit Facility Banks" means, collectively, the various financial institutions party from time to time to the Credit Agreement as lenders thereunder. "Credit Facility Documents" means, collectively, the Credit Agreement, the Credit Facility Notes, the Letters of Credit, the Intercreditor Agreement, the Assumption Agreements, the Interest Rate Protection Agreements and the Security Documents, as each may be amended from time to time in accordance with the provisions of Section 3.01 of the Intercreditor Agreement. "Credit Facility Notes" means, collectively, the revolving credit and term notes issued by the Company and the Subsidiary Co-Borrowers under the Credit Agreement, as such notes may be amended, supplemented, modified, replaced, renewed, extended, refinanced or refunded from time to time in accordance with the provisions of Section 3.01 of the Intercreditor Agreement. "Deed" means a deed with respect to the real property comprising the applicable Property, in the form set forth in the purchase agreement applicable to such Property and in conformity with local custom and Applicable Law and appropriate for recording with the applicable Governmental Authorities, conveying fee simple title to such real property to the Lessor, subject only to Permitted Property Liens. "Default" means any condition, occurrence or event which, after notice or lapse of time or both, would constitute an Event of Default. "Documentation Date" is defined in Section 6.1 of the Participation Agreement. "Dollars" and "$" mean dollars in lawful currency of the United States of America. "End of the Term Report" is defined in Section 13.2(a) of the Participation Agreement. "Environmental Audit" means, with respect to each Property, a Phase One environmental site assessment (the scope and performance of which meets or exceeds the then most current ASTM Standard Practice E1527 for Environmental Site Assessments: Phase One Environmental Site Assessment Process) of such Property. "Environmental Law(s)" means all federal, state, regional, county or local laws, statutes, rules, regulations or ordinances concerning the generation, recycling, use, reuse, sale, storage, handling, transport, treatment, Release or disposal of Hazardous Materials, including CERCLA, RCRA, the Clean Air Act, 42 U.S.C. S 7401, et seq. ("CAA"), the Toxic Substances Control Act, 15 U.S.C. S 2601 et seq. ("TSCA") and any rules and regulations promulgated or published thereunder. "Environmental Violation" means any activity, occurrence or condition that violates or results in non-compliance with any Environmental Laws. "Equity Interest" means, with respect to any Property, all of the equity interest in any Person that owns directly the fee simple interest in such Property, including (if applicable): (a) all of the partnership interests in Academy Manor, Andover, Massachusetts, (b) all of the beneficial interest of the Academy Realty Trust in Heritage Nursing Care Center, Lowell, Massachusetts, (c) all of the partnership interests in Prescott House Nursing Home, North Andover, Massachusetts, (d) all of the partnership interests in Sutton Hill, North Andover, Massachusetts, (e) all of the partnership interests in Westford Nursing and Retirement Center, Westford, Massachusetts and (f) all of the outstanding capital stock in Willow Manor Nursing Home Inc., Lowell, Massachusetts. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended from time to time, including any rules and regulations promulgated thereunder. "ERISA Affiliate" means any corporation or trade or business which is a member of any group of organizations (i) described in Section 414(b) or (c) of the Code of which any Consolidated Entity is a member, or (ii) solely for purposes of potential liability under Section 302(c)(i 1) of ERISA and Section 41 2(c)(11) of the Code and the lien created under Section 302(f) of ERISA and Section 412(n) of the Code, described in Section 414(m) or (o) of the Code of which any Consolidated Entity is a member. "Event of Default" means a Lease Event of Default or a Loan Agreement Event of Default. "Excess Sales Proceeds" means, as of any date, the proceeds of the sale of the Properties minus any marketing, closing or other costs, prorations or commissions incurred by the Collateral Agent or any other Secured Party in connection therewith minus the Lease Balance and all other Secured Obligations. "Expiration Date" means, with respect to the Lease, unless the Lease shall have been earlier terminated in accordance with the provisions of the Intercreditor Agreement, the Lease or the other Operative Documents, the fifth anniversary of the Initial Acquisition Date. "Expiration Date Purchase Obligation" means the obligation of each Lessee, pursuant to Section 18.2 of the Master Lease, to purchase on the Expiration Date all (but not less than all) of the Property leased to such Lessee under the Master Lease and applicable Lease Supplement. "Extended Marketing Period" is defined in Section 20.1 of the Master Lease. "Facility Fees" is defined in Section 4.5 of the Participation Agreement. "Fair Market Sales Value" means, with respect to any Property, the amount, which in any event shall not be less than zero, that would be paid in cash in an arm's-length transaction between an informed and willing purchaser and an informed and willing seller, neither of whom is under any compulsion to purchase or sell, respectively, for the ownership of such Property. The Fair Market Sales Value of any Property shall be determined based on the assumption that, except for purposes of Article XVI of the Master Lease and Section 13.2 of the Participation Agreement, such Property is in the condition and state of repair required under Section 9.1 of the Master Lease, title is in the condition required or permitted under the Master Lease and the Lessee is in compliance with the other requirements of the Operative Documents relating to the condition of the Property. "Federal Funds Rate" means, for any day, the rate per annum (rounded upwards, if necessary, to the nearest 1/100th of 1%) equal to the weighted average of the rates on overnight federal funds transactions as published by the Federal Reserve Bank of New York for such day (or, if such day is not a Business Day, for the immediately preceding Business Day), plus 0.25%. "Fee Letter" means the letter agreement dated as of November 18, 1996 with respect to fees between the Company and Key Global Finance Ltd., as Structuring/Placement Agent. "F.R.S. Board" means the Board of Governors of the Federal Reserve System or any successor thereto. "Funding Office" means the office of each Participant identified on Schedule I to the Participation Agreement as its Funding Office. "Funding Percentage" means, as to any Participant, the percentage set forth opposite such Participant's name under the heading "Funding Percentage" on Annex A to the Participation Agreement, as such Annex may be amended from time to time. "Funding Request" is defined in Section 3.4(a) of the Participation Agreement. "GAAP" means generally accepted accounting principles in the United States of America as in effect from time to time, applied on a basis consistent with those used in the preparation of the financial statements referred to in Section 8.2(e) of the Participation Agreement (except for immaterial changes determined preferable by the Consolidated Entities' independent public accountants). "Governmental Action" means all Licenses, permits, authorizations, registrations, consents, approvals, waivers, exceptions, variances, orders, judgments, written interpretations, decrees, licenses, exemptions, publications, filings, notices to and declarations of or with, or required by, any Governmental Authority, or required by any Applicable Law, and shall include all environmental and operating permits and licenses that are required for the full use, occupancy, zoning and operation of any Property. "Governmental Authority" means any nation or government, any state or other political subdivision thereof and any entity exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government. "Gross Remarketing Proceeds" is defined in Section 20.1(l) of the Master Lease. "Guarantor" means, collectively, The MultiCare Companies, Inc., a Delaware corporation, and each Subsidiary Guarantor. "Hazardous Activity" means any activity, process or procedure that directly or indirectly (i) produces, generates or creates any Hazardous Material; (ii) causes or results in the Release of any Hazardous Material into the environment (including air, water vapor, surface water, groundwater, drinking water, land (including surface or subsurface), plant, aquatic and animal life); (iii) involves the containment or storage of any Hazardous Material; or (iv) would be regulated as hazardous waste treatment, storage or disposal within the meaning of any Environmental Laws. "Hazardous Materials" means any of the following: (i) any pollutant, contaminant, chemical, waste and any toxic, infectious, carcinogenic, reactive, corrosive, ignitible or flammable chemical or chemical compound or hazardous substance, material or waste whether solid, liquid or gas that is subject to regulation control or remediation under any Environmental Laws; (ii) any asbestos, polychlorinated biphenyls, petroleum, petroleum derivatives or by-products, or urea formaldehyde. "Impositions" means any and all taxes or levies, imposts, duties, charges, assessments or withholdings of a similar nature ("Taxes") (including (i) real and personal property taxes, including personal property taxes on any property covered by any Lease that is classified by Governmental Authorities as personal property, and real estate or ad valorem taxes in the nature of property taxes; (ii) sales taxes, use taxes and other similar taxes (including rent taxes and intangibles taxes); (iii) any excise taxes; (iv) real estate transfer taxes, conveyance taxes, mortgage taxes, intangible taxes, stamp taxes and documentary recording taxes and fees; (v) taxes that are or are in the nature of franchise, income, value added, gross receipts, privilege and doing business taxes, license and registration fees; and (vi) assessments on any Property, including all assessments for public improvements or benefits, whether or not such improvements are commenced or completed within the Lease Term), and in each case all interest, additions to tax and penalties thereon, which at any time may be levied, assessed or imposed by any Federal, state or local authority upon or with respect to (a) any Tax Indemnitee with respect to any Property or any part thereof or interest therein, or any Lessee or any sublessee or user of any Property; (b) the financing, refinancing, demolition, construction, substitution, subleasing, assignment, control, condition, occupancy, servicing, maintenance, repair, ownership, possession, purchase, rental, lease, activity conducted on, delivery, insuring, use, operation, improvement, transfer, return or other disposition of such Property or any part thereof or interest therein; (c) the Loans, Lessor Amount or other indebtedness with respect to any Property or any part thereof or interest therein; (d) the rentals, receipts or earnings arising from any Property or any part thereof or interest therein; (e) the Operative Documents or any payment made or accrued pursuant thereto; (f) the income or other proceeds received with respect to any Property or any part thereof or interest therein upon the sale or disposition thereof; (g) any contract relating to the construction, acquisition or delivery of the Improvements or any part thereof or interest therein; (h) the issuance of the Notes; or (i) otherwise in connection with the transactions contemplated by the Operative Documents. Notwithstanding anything in the first paragraph of this definition (except as provided in the final paragraph of this definition) the term "Imposition" shall not mean or include: (i) Taxes and impositions that are imposed by any Governmental Authority and that are based upon or measured by or with respect to the gross or net income, receipts, profits, gains, capital or net worth (including, without limitation, any minimum or alternative minimum Taxes, income or capital gains Taxes, excess profits Taxes, items of Tax preference, or capital stock, franchise, business privilege or doing business Taxes), or accumulated earnings Taxes or personal holding company Taxes, including Taxes collected by withholding, but Taxes described in this clause (i) shall not include Taxes that are, or are in the nature of, sales, use, rental, transfer or property Taxes) and any interest, additions to tax, penalties or other charges in respect thereof; provided that this clause (i) shall not be interpreted to prevent a payment from being made on an After Tax Basis if such payment is otherwise required to be so made; (ii) any Tax or imposition to the extent, but only to such extent, it relates to any act, event or omission that occurs, or relates to a period, prior to the commencement of the Master Lease (other than with respect to Taxes described in clause (iii) of the definition of Permitted Property Liens) or after the termination of the Lease (but not any Tax or imposition that relates to any period during the Term of the Master Lease but prior to the termination of the Master Lease with respect to the Property to which such Imposition relates); (iii) any Tax or imposition for so long as, but only for so long as, it is being contested in accordance with the provisions of Section 13.5(b) of the Participation Agreement or Section 12.1 of the Master Lease, provided that the foregoing shall not limit any obligation under Section 13.5(b) of the Participation Agreement or Section 12.1 of the Master Lease to advance to such Tax Indemnitee amounts with respect to Taxes that are being contested in accordance with Section 13.5(b) of the Participation Agreement or Section 12.1 of the Master Lease, as applicable, or any expenses incurred by such Tax Indemnitee in connection with such contest; (iv) any interest, additions to tax or penalties imposed as a result of a breach by a Tax Indemnitee of its obligations under Section 13.5(e) of the Participation Agreement or as a result of a Tax Indemnitee's failure to file any return or other documents timely and as prescribed by applicable law; provided that this clause (iv) shall not apply if such failure is attributable to a failure by any Lessee to fulfill its obligations under the Lease with respect to any such return; (v) any Taxes or impositions imposed with respect to any voluntary transfer, sale, financing or other voluntary disposition of any interest in any Property or any part thereof, or any interest therein or any interest or obligation under the Operative Documents or from any sale, assignment, transfer or other disposition of any interest in a Tax Indemnitee or any Affiliate thereof, (other than any transfer in connection with (1) the exercise by a Lessee of its Purchase Option or any termination option or other purchase of any Property by any Lessee (2) the occurrence of an Event of Default, (3) a Casualty or Condemnation affecting any Property, or (4) any sublease, modification or addition to any Property by any Lessee); (vi) any Taxes or impositions imposed on a Tax Indemnitee, to the extent such Tax Indemnitee actually receives a credit, deduction, allowance or arbitration (or otherwise has a reduction in a liability for Taxes) in respect thereof against Taxes (but only to the extent such credit is not taken into account in calculating the indemnity payment on an After Tax Basis); (vii) Taxes imposed on or with respect to, based on, or measured by any fees received by any Tax Indemnitee; (viii) Taxes resulting from, or that would not have been imposed but for, the gross negligence or willful misconduct of such Tax Indemnitee or Affiliate thereof; (ix) Taxes resulting from, or that would not have been imposed but for, a breach by the Tax Indemnitee or any Affiliate thereof of any representations, warranties or covenants set forth in the Operative Documents (unless such breach is caused by any Lessee's breach of its representations, warranties or covenants set forth in the Operative Documents); (x) Taxes arising out of or resulting from a Tax Indemnitee's failure to comply with the provisions of Section 13.5(b) of the Participation Agreement or Section 12.1 of the Master Lease, which failure precludes or materially adversely affects the ability to conduct a contest pursuant to Section 13.5(b) of the Participation Agreement or Section 12.1 of the Master Lease, as applicable (unless such failure is caused by any Lessee's breach of its obligations); (xi) with respect to each Property, Taxes which are included in applicable Property acquisition cost if and to the extent actually paid; (xii) Taxes that would have been imposed in the absence of the transactions contemplated by the Operative Documents, and Taxes arising out of, or imposed as a result of, activities of a Tax Indemnitee or Affiliate thereof unrelated to the transactions contemplated by the Operative Documents; (xiii) Taxes arising out of or resulting from, or that would not have been imposed but for the existence of, any Lessor Lien. (xiv) Any Tax imposed against or payable by a Tax Indemnitee to the extent that the amount of such Tax exceeds the amount of such Tax that would have been imposed against or payable by such Tax Indemnitee (or, if less, that would have been subject to indemnification under Section 13.5 of the Participation Agreement) if such Tax Indemnitee were not a direct or indirect successor, transferee or assign of one of the original Tax Indemnitees; provided, however, that this exclusion (xiv) shall not apply if such direct or indirect successor, transferee or assign acquired its interest as a result of transfer while an Event of Default shall have occurred and is continuing; (xv) Taxes that would not have been imposed but for an amendment, supplement, modification, consent or waiver to any Operative Document not initiated, requested or consented to by any Lessee unless such amendment, supplement, modification, consent or waiver (A) arises due to, or in connection with there having occurred, an Event of Default or (B) is required by the terms of the Operative Documents or is executed in connection with any amendment to the Operative Documents required by law; (xvi) Taxes in the nature of intangibles, stamp, documentary or similar Taxes; (xvii) Taxes imposed because any Tax Indemnitee or any Affiliate thereof is not a United States person within the meaning of Section 7701(a)(30) of the Code (whether paid by a Tax Indemnitee or an Affiliate or collected by withholding or otherwise); and (xviii) Any tax imposed in lieu of or in substitution for a Tax not subject to indemnity pursuant to the provisions of Section 13.5 of the Participation Agreement. Notwithstanding the foregoing, the exclusions from the definition of Impositions set forth in clauses (i), (ii), (v), (xvi) and (xviii) (to the extent that any such tax is imposed in lieu of or in substitution for a Tax set forth in clauses (i), (ii), (v) and (xvi)) above shall not apply (but the other exclusions shall apply) to any Taxes or any increase in Taxes imposed on a Tax Indemnitee net of any decrease in taxes realized by such Tax Indemnitee, to the extent that such tax increase or decrease would not have occurred if on each Funding Date the Lessor had advanced funds to any Lessee in the form of a loan secured by the applicable Property in an amount equal to the applicable Property Improvement Cost funded on such Funding Date, with debt service for such loan equal to the Basic Rent payable on each Payment Date and a principal balance at the maturity of such loan in an amount equal to the then outstanding amount of the Advances at the end of the term of the Master Lease. "Improvements" means all buildings, structures and other improvements of every kind existing at any time and from time to time on or under any Land, or any parcel of Land to be acquired pursuant to the terms of the Operative Documents, together with any and all appurtenances to such buildings, structures or improvements, including sidewalks, utility pipes, conduits and lines, parking areas and roadways, all licenses, if any, acquired or assigned to Lessor in respect of the Properties and the transactions contemplated by the Operative Documents, and including all Modifications and other additions to or changes in the Improvements at any time. "Imputed Equity Return" means (a) with respect to the Lessor, the amount of Yield the Lessor would have earned on its outstanding Lessor Balance had the Lease not terminated on the Expiation Date and (b) with respect to any Tranche B Lender, the amount of interest under the Loan Agreement such Tranche B Lender would have earned on its outstanding Tranche B Loans had the Lease not terminated on the Expiration Date, in each case, computed as provided in the Operative Documents, measured from such Expiration Date until the Lessor Balance or such Tranche B Loans, as applicable, shall have been paid in full. "Indemnitee" means each Lender, the Lessor, the Lease Agent, the Collateral Agent, their respective Affiliates and their respective successors, assigns, directors, shareholders, partners, officers, employees and agents. "Initial Acquisition Date" is defined in Section 6.2 of the Participation Agreement. "Insurance Requirements" means all terms and conditions of any insurance policy required by the Master Lease to be maintained by the Lessee and all requirements of the issuer of any such policy. "Intercreditor Agreement" means the Intercreditor and Collateral Agency Agreement dated as of December 11, 1996, among the Company, the Subsidiary Guarantors, the Lenders, the Lessor, the Credit Facility Banks, the Credit Facility Agent and the Collateral Agent. "Interest Coverage Ratio" means, at any date of determination thereof, the "Interest Coverage Ratio" as defined in the Credit Agreement. "Interest Period" means, (a) initially, the period commencing on the Acquisition Date and ending one, two, three or six months thereafter, as specified by the Guarantor (as agent for the Lessees) pursuant to an Interest Period Selection Continuation/Conversion Notice; and (b) thereafter, each period commencing on such Basic Rent Payment Date or the last day of the preceding Interest Period applicable to such Loan or Lessor Amount, as the case may be, and ending on the last day of the Interest Period selected pursuant to the next sentence; provided, however, that the foregoing provisions relating to Interest Periods are subject to the following: (i) if any Interest Period would otherwise end on a day that is not a Business Day, such Interest Period shall be extended to the next succeeding Business Day unless the result of such extension would be to carry such Interest Period into another calendar month in which event such Interest Period shall end on the immediately preceding Business Day; and (ii) any Interest Period that would otherwise extend beyond the Maturity Date shall end on the Maturity Date. "Interest Rate Protection Agreement" means, with respect to any Person, an interest rate swap, cap or collar agreement or similar arrangement between one or more Credit Facility Banks and a Consolidated Entity (as defined in the Credit Agreement) providing for the transfer or mitigation of interest risks either generally or under specific contingencies. "Investment Company Act" means the Investment Company Act of 1940, as amended, together with the rules and regulations promulgated thereunder. "Land" means each parcel of real property described on Schedule I to any Lease Supplement, and includes all Appurtenant Rights attached thereto. "Lease" means, collectively, the Master Lease and each Lease Supplement. "Lease Agent" means NationsBank, N.A., in its capacity as Lease Agent for the Lenders, or such successor Lease Agent as may be appointed by the Lenders pursuant to Section 8.9 of the Loan Agreement. "Lease and Credit Parties" means, collectively, the Lenders, the Lessor and the Credit Facility Banks. "Lease Balance" means, as of any date of determination, an amount equal to the sum of the Loan Balance and the Lessor Balance and all other amounts owing by the Lessees under the Operative Documents (including accrued and unpaid Rent and Supplemental Rent, if any). "Lease Default" means any event or condition which, with the lapse of time or the giving of notice, or both, would constitute a Lease Event of Default. "Lease Event of Default" is defined in Section 16.1 of the Master Lease. "Lease Facility Financing Statements" means UCC financing statements appropriately completed and executed for filing in the applicable jurisdiction in order to protect the security interest granted by the Lessees under the Lease Facility Mortgages to the Collateral Agent for the benefit of each of the Secured Parties. "Lease Facility Mortgage" means, with respect to any Property, a Mortgage of such Property, executed by the Lessee of such Property in favor of the Collateral Agent, and any and all other security instruments in appropriate recordable form in each relevant jurisdiction sufficient to grant to the Collateral Agent a first priority Lien on such Property. "Lease Facility Notes" is defined in Section 2.2 of the Loan Agreement, and includes the Tranche A Notes and the Tranche B Notes. "Lease Recourse Amount" means, with respect to each Lease Supplement, the amount designated as the "Lease Recourse Amount" in such Lease Supplement. "Lease Supplement" means each Lease Supplement and Memorandum of Lease, Mortgage and Purchase Option, substantially in the form of Exhibit A to the Master Lease, executed by the applicable Lessee, dated as of the Acquisition Date and covering the applicable Property located on the Land identified on Schedule I thereto. "Lenders" means, collectively, the Tranche A Lenders and the Tranche B Lenders. "Lessee" means any of (i) Academy Nursing Home, Inc., (ii) Nursing and Retirement Center of the Andovers, Inc., (iii) Prescott Nursing Home, Inc., (iv) Willow Manor Nursing Home, Inc., (v) ADS/Multicare, Inc. and (vi) each other Person as may from time to time become a Lessee under the Operative Documents in accordance with the provisions thereof, each as lessee under the Lease, and their respective successors and assigns expressly permitted under the Operative Documents. "Lessor" means SELCO Service Corporation, an Ohio corporation. "Lessor Amount" is defined at Section 3.2 of the Participation Agreement. "Lessor Balance" means as of any date of determination an amount equal to the sum of the outstanding Lessor Amounts together with all accrued and unpaid Yield thereon. "Lessor Commitment" means the Commitment of the Lessor in the amount set forth on Annex A of the Participation Agreement, as such Annex may be amended from time to time. "Lessor Lien" means any Lien, true lease or sublease, encumbrance or disposition of title affecting any one or more of the Properties, or any portion thereof, arising as a result of (a) any claim against any Participant not resulting from the transactions contemplated by the Operative Documents, (b) any act or omission of any Participant which is not required or permitted by the Operative Documents or is in violation of any of the terms of the Operative Documents, (c) any claim against any Participant with respect to Taxes or Transaction Expenses against which the Lessees are not required to indemnify any Participant, in its individual capacity, pursuant to Article XIII of the Participation Agreement or (d) any claim against the Lessor arising out of any transfer, encumbrance by the Lessor of all or any portion of the interest of the Lessor in the Properties or the Operative Documents other than the transfer of title to or possession of the Properties by the Lessor pursuant to and in accordance with the Master Lease, the Loan Agreement or the Participation Agreement or pursuant to the exercise of the remedies set forth in Section 16.2 of the Master Lease. "Letters of Credit" means the letters of credit issued by NationsBank, N.A. for the account of the Company pursuant to the Credit Agreement, as such letters of credit may be amended, supplemented, modified, replaced, renewed, extended, refinanced or refunded from time to time. "LIBO Rate" means, relative to any Loan or Lessor Amount for any Interest Period, the rate per annum (rounded upward, if necessary to the nearest multiple of one sixteenth of one percent) quoted at approximately 11:00 a.m. London time by the principal London branch of the Lease Agent two Business Days prior to the first day of such Interest Period for the offering to leading banks in the London interbank market of Dollar deposits in immediately available funds, for a period, and in an amount, comparable to the Interest Period and principal amount of the Loan or Lessor Amount which shall be made. "LIBO Rate Amount" means any Loan or Lessor Amount which accrues interest or Yield, as the case may be, by reference to the LIBO Rate (Reserve Adjusted). "LIBO Rate (Reserve Adjusted)" means, relative to any Loan or Lessor Amount for any Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest 1/16 of 1%) determined pursuant to the following formula: LIBO Rate = LIBO Rate (Reserve Adjusted) 1.00 - LIBOR Reserve Percentage The LIBO Rate (Reserve Adjusted) for any Interest Period will be determined by the Lease Agent, on the basis of the LIBOR Reserve Percentage in effect on, and the applicable LIBO Rate obtained by the Lease Agent, two Business Days before the first day of such Interest Period. "LIBOR Reserve Percentage" means, relative to any Interest Period, the average maximum rate at which reserves (including any marginal, supplemental or emergency reserves) are required to be maintained during such Interest Period under Regulation D by member banks of the Federal Reserve System in New York City with deposits exceeding $1,000,000,000 against in the case of LIBO Rate Amounts, "Eurocurrency liabilities" (as such term is used in Regulation D). Without limiting the effect of the foregoing, the LIBOR Reserve Percentage shall reflect any other reserves required to be maintained by such member banks by reason of any Regulatory Change against (i) any category of liabilities which includes deposits by reference to which the LIBO Rate for LIBO Rate Amounts is to be determined as provided in the definition of "LIBO Rate" in this Appendix A or (ii) any category of extensions of credit or other assets which include LIBO Rate Amounts. "Licenses" means any and all licenses, certificates of need, operating permits, franchises, and other licenses, authorizations, certifications, permits, or approvals issued by, or on behalf of, any Governmental Authority, now existing or at any time hereafter issued, with respect to the acquisition, construction, renovation, expansion, leasing, ownership or operation of any Property or related facilities or the participation or eligibility for participation in any third party payment or reimbursement programs, including, without limitation, any and all operating licenses issued by any state Governmental Authority, any and all pharmaceutical licenses and other licenses related to the purchase, dispensing, storage, prescription or use of drugs, medications, and other "controlled substances", any and all licenses relating to the operation of food or beverage facilities or amenities, if any, and any and all certifications and eligibility for participation in Medicare, Medicaid, CHAMPUS, Blue Cross or Blue Shield, or any of the Managed Care Plans, as the same may from time to time be amended, renewed, restated, reissued, restricted, supplemented or otherwise modified. "Lien" means any lien (statutory or otherwise), security interest, mortgage, deed of trust, priority, pledge, charge, conditional sale, title retention agreement, financing lease or other similar encumbrance or right of others, or any agreement to give any of the foregoing. "Loan Agreement" means the Loan Agreement, dated as of December 11, 1996, among the Lesser, as borrower thereunder, and the Lenders. "Loan Agreement Default" means any event, act or condition which with notice or lapse of time, or both, would constitute a Loan Agreement Event of Default. "Loan Agreement Event of Default" is defined in Section 6.1 of the Loan Agreement. "Loan Balance" means as of any date of determination an amount equal to the sum of the outstanding Loans together with all accrued and unpaid interest thereon. "Loan Commitment" means the Commitment of each Lender in the amount set forth on Annex A to the Participation Agreement, as such Annex may be amended from time to time. "Loan Documents" means the Loan Agreement and the Notes. "Loans" is defined in Section 2.2 of the Loan Agreement. "Managed Care Plans" means any health maintenance organization, preferred provider organization, individual practice association, competitive medical plan, or similar arrangement, entity, organization, or Person. "Marketing Period" means the period commencing on the date one year prior to the Expiration Date and ending on the Expiration Date. "Master Lease" means the Master Lease, Open End Mortgage and Purchase Option, dated as of December 11, 1996, among the Lessor and the Lessees, as it may be supplemented from time to time. "Material" and "Materially" mean material to (i) the ability of any Lessee to perform its obligations under the Operative Documents to which it is a party, or (ii) the value or condition of any Property. "Material Adverse Effect" means any material adverse effect on (a) the business, profits, properties or condition of the Guarantor and its subsidiaries, taken as a whole, or a Lessee, as applicable, or (b) the ability of a Lessee or the Guarantor to perform its obligations under each of the Operative Documents to which it is a party. "Maturity Date" means with respect to the Loans and the Lessor Amount, the fifth anniversary of the Initial Acquisition Date. "Modifications" is defined in Section 10.1 of the Master Lease. "Monthly Payment Date" means the first Business Day of each calendar month. "Multicare Guaranty" means the Unconditional Guaranty dated as of December 11, 1996, made by the Company and each Subsidiary of the Guarantor party thereto in favor of the Collateral Agent for the benefit of the Secured Parties. "Multiemployer Plan" means a Plan defined as such in Section 3(37) of ERISA to which contributions have been made by the Consolidated Entities or any ERISA Affiliate and which is covered by Title IV of ERISA. "Net Proceeds" means all amounts received by the Lessor in connection with any Casualty or Condemnation or any sale of the Property pursuant to the Lessor's exercise of remedies under Section 16.2 of the Master Lease or the exercise of the Remarketing Option under Article XX of the Master Lease, and all interest earned thereon, less the expense of claiming and collecting such amounts, including all costs and expenses in connection therewith for which the Lessor or any Participant is entitled to be reimbursed pursuant to the Lease to the extent such costs and expenses have not been reimbursed previously by a Lessee or the Guarantor. "Obligations" means, at any time, all then applicable obligations (monetary or otherwise) of any Lessee arising through or under the Lease. "Obligors" means, collectively, the Company, each Lessee, each Subsidiary Co-Borrower and each Subsidiary Guarantor. "Operative Documents" means the following: (a) the Participation Agreement; (b) the Master Lease; (c) each Lease Supplement; (d) the Loan Agreement; (e) the Notes; (f) the Assignment of Lease and Rent; (g) each Supplement to the Assignment of Lease and Rent; (h) each Deed; (i) each instrument of transfer conveying any Equity Interest to the Lessor pursuant to Section 6.3(b) of the Participation Agreement; (j) each Lease Facility Mortgage; (k) each Lease Facility Financing Statement; (l) each other Security Document; and (m) the Intercreditor Agreement. "Overdue Rate" means, with respect to any Loan or Lessor Amount or any other amount payable under any Operative Document, the Applicable Rate for ABR Amounts plus one percent (1%); provided, that if the amount so in default is a LIBO Rate Amount and the due date thereof is a day other than the last day of the Interest Period therefor, the "Overdue Rate" for such LIBO Rate Amount shall be the Applicable Rate for LIBO Rate Amounts plus two percent (2%) and, thereafter, the rate provided for above in this definition. "Participant Balance" means, with respect to any Participant as of any date of determination (i) with respect to any Lender, an amount equal to the aggregate outstanding Loans of such Lender, together with all accrued and unpaid interest thereon or (ii) with respect to the Lessor, an amount equal to the outstanding Lessor Amount, together with all amounts of accrued and unpaid Yield thereon. "Participants" means, collectively, each Lender and the Lessor. "Participation Agreement" means the Participation Agreement dated as of December 11, 1996 among the Guarantor, the Lessees, the Lessor, the Lenders and the Collateral Agent. "PBGC" means the Pension Benefit Guaranty Corporation and any entity succeeding to any or all of its functions under ERISA. "Permitted Property Liens" means, with respect to any Property, any of the following: (i) the respective rights and interests of the parties to the Operative Documents as provided in the Operative Documents; (ii) the rights of any sublessee under a sublease permitted by the terms of the Master Lease; (iii) Liens for Taxes that either are not yet due or are being contested in accordance with the provisions of Section 12.1 of the Master Lease; (iv) Liens arising by operation of law, materialmen's, mechanics', workers', repairmen's, employees', carriers', warehousemen's and other like Liens relating to or in connection with any Modifications or arising in the ordinary course of business for amounts that either are not more than 60 days past due or are being diligently contested in good faith by appropriate proceedings, so long as such proceedings satisfy the conditions for the continuation of proceedings to contest Taxes set forth in Section 12.1 of the Master Lease; (v) Liens of any of the types referred to in clause (iv) above that have been bonded for not less than the full amount in dispute (or as to which other security arrangements reasonably satisfactory to the Lessor have been made), which bonding (or arrangements) shall comply with applicable Requirements of Law, and has effectively stayed any execution or enforcement of such Liens; (vi) Liens arising out of judgments or awards with respect to which appeals or other proceedings for review are being prosecuted in good faith and for the payment of which adequate reserves have been provided as required by GAAP or other appropriate provisions have been made, so long as such proceedings have the effect of staying the execution of such judgments or awards and satisfy the conditions for the continuation of proceedings to contest set forth in Section 12.1 of the Master Lease; (vii) easements, rights of way and other encumbrances on title to real property permitted pursuant to Section 11.2 of the Master Lease; (viii) Lessor Liens; (ix) Liens created by a Lessee with the consent of the Lessor; and (x) Liens described on the title insurance policy delivered with respect to such Property pursuant to Section 6.3(m) of the Participation Agreement. "Person" means any individual, corporation, partnership, joint venture, association, joint-stock company, trust, unincorporated organization, Governmental Authority or any other entity. "PHC/Providence Mortgages" means the Second Amended and Restated Open-End Mortgages dated as of December 11, 1996, made by PHC Operating Corp. and Providence Health Care, Inc. in accordance with the terms of the Credit Agreement, as amended or supplemented from time to time in accordance with the provisions of Section 3.01 of the Intercreditor Agreement. "Plan" means any employee benefit or other plan established or maintained, or to which contributions have been made, by the Consolidated Entities or any ERISA Affiliate and which is covered by Title IV of ERISA, other than a Multiemployer Plan. "Pledge Agreement" means the Second Amended and Restated Pledge Agreement dated as of December 11, 1996, by the Company and the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of the Secured Parties. "Pricing Level" refers to the determination of which of the Pricing Level I, Pricing Level II, Pricing Level III or Pricing Level IV applies at any date (with adjustments to take effect three (3) Business Days after receipt by the Lease Agent of the financial statements referred to below); for purposes of determining which Pricing Level exists at any date, the Interest Coverage Ratio and Senior Leverage Ratio shall be deemed to be the Interest Coverage Ratio and Senior Leverage Ratio, respectively, as at the last day of the period covered by the most recent financial statements delivered pursuant to clauses (a) and (b) of Section 7.08 of the Credit Agreement (or, if the Credit Agreement has ceased to be in effect, the analogous clauses of Section 10.1 of the Participation Agreement); provided, however, that (a) if on any date the Company has not delivered all financial statements and Compliance Certificates required to be delivered on or before such date pursuant to clauses (a) and (b) of Section 7.08 of the Credit Agreement (or, if applicable, the analogous clauses of Section 8.1 of the Participation Agreement), the Pricing Level on such date shall be Pricing Level IV until three Business Days after delivery of such financial statements and Compliance Certificates and (b) subject to the preceding clause (a), for any date occurring on or prior to the date that is three Business Days after the receipt by the Lease Agent of the financial statements for the fiscal period ending on December 31, 1996, the Pricing Level on such date shall be Pricing Level II. "Pricing Level I" means any date on which the Interest Coverage Ratio is greater than 4.00 to 1.0 and the Senior Leverage Ratio is less than 2.50 to 1.0. "Pricing Level II" means any date on which (a) the Interest Coverage Ratio is greater than 3.25 to 1.0 and the Senior Leverage Ratio is less than 3.25 to 1.0 and (b) no better Pricing Level applies. "Pricing Level III" means any date on which (a) the Interest Coverage Ratio is greater than 2.50 to 1.0 and the Senior Leverage Ratio is less than 3.75 to 1.0 and (b) no better Pricing Level applies. "Pricing Level IV" means any date on which no other Pricing Level applies. "Property" means the Lessor's interest in (i) any Land, either as owner in fee simple or as owner of the Equity Interest in the Person that is the fee simple owner of such Land and (ii) all of the Improvements at any time located on or under such Land. "Property Balance" means, with respect to any Property, an amount equal to the outstanding principal amount of the Loans and the Lessor Amount related to such Property, and all accrued and unpaid interest and Yield thereon, and any Supplemental Rent related thereto payable to any Secured Party. "Property Cost" means, with respect to any Property, the amount of the Advance funded for the purpose of acquiring the Property or the Equity Interest related to such Property, as such amount is set forth in the Funding Request. "Property Legal Requirements" means all Federal, state, county, municipal and other governmental statutes, laws, rules, orders, regulations, ordinances, judgments, decrees and injunctions affecting any Property, the Improvements or the demolition, construction, use or alteration thereof, whether now or hereafter enacted and in force, including any that require repairs, modifications or alterations in or to any Property or in any way limit the use and enjoyment thereof (including all building, zoning and fire codes and the Americans with Disabilities Act of 1990, 42 U.S.C. S 1201 et. seq. and any other similar Federal, state or local laws or ordinances and the regulations promulgated thereunder) and any that may relate to environmental requirements (including all Environmental Laws), and all permits, certificates of occupancy, licenses, authorizations and regulations relating thereto, and all covenants, agreements, restrictions and encumbrances contained in any instruments which are either of record or known to the Lessee affecting any Property, the Appurtenant Rights and any easements, licenses or other agreements entered into pursuant to Section 11.2 of the Master Lease. "Purchase Notice" means an irrevocable written notice delivered to the Lessor by all of the Lessees (or the Company acting as agent for all of the Lessees) pursuant to Section 18.1(a) of the Master Lease or by one Lessee (or the Guarantor acting as agent for such Lessee) pursuant to Section 18.1(b) of the Master Lease, notifying the Lessor of the intention to exercise the Purchase Option under Section 18.1(a) or 18.1(b) of the Master Lease, as the case may be, and identifying the Property or Properties to be purchased in accordance therewith and the proposed purchase date therefor. "Purchase Option" means the option of the Lessees to purchase all of the Properties in accordance with the provisions of Section 18.1(a) of the Master Lease or purchase any Property in accordance with the provisions of Section 18.1(b) of the Master Lease. "Purchase Option Rent" means, with respect to any exercise by any Lessee of a Purchase Option, (a) in the case of an exercise of the Purchase Option pursuant to Section 18.1(a) of the Master Lease or purchase obligation pursuant to Section 16.2(e) or 18.2 of the Master Lease, the Lease Balance and (b) in the case of an exercise of the Purchase Option with respect to any individual Property pursuant to Section 18.1(b) of the Master Lease, the Property Balance for such Property. "Rate Setting Commission Trigger Event" shall occur if the Company has reasonable cause to believe the Lessor and the Lessee are or are likely to be determined to be "related parties" by the Commonwealth of Massachusetts Office of Health and Human Services, Division of Health Care Finance and Policy, acting through the Rate Setting Commission or any successor regulatory entity, and the result is that the rate of reimbursement obtainable by the Lessee for capital costs or rental or leasehold expenses is less than the rate that would otherwise have been payable if the Lessee and or the Lessor were not "related parties". "RCRA" means the Resource Conservation and Recovery Act of 1976, as amended by the Solid and Hazardous Waste Amendments of 1984, 42 U.S.C. S6901 et seq. "Regulatory Change" means any change after the Documentation Date in United States federal, state, municipal or foreign laws or regulations (including without limitation Regulation D) or the adoption or making after such date of any interpretations, directives or requests applying to a class of banks of which such bank is a member, of or under any United States, federal, state, municipal or foreign laws or regulations (whether or not having the force of law) by any court or governmental or monetary authority charged with the interpretation or administration thereof. "Release" means any pumping, pouring, emptying, injecting, escaping, leaching, dumping, spilling, leaking, discharging, disposing or emitting into the environment of a Hazardous Material. "Remarketing Option" is defined in Section 20.1 of the Master Lease. "Rent" means, collectively, the Basic Rent and the Supplemental Rent, in each case payable under the Master Lease. "Requesting Party" is defined in Section 27.1 of the Master Lease. "Required Lenders" means, at any time, (i) Lenders holding at least 51% of the aggregate outstanding principal amount of Loans or, if no such principal amount is then outstanding, Lenders having at least 51% of the aggregate Loan Commitments. "Required Modification" is defined in clause (i) of Section 10.1 of the Master Lease. "Required Participants" means, at any time, (i) Tranche A Lenders holding at least 51% of the aggregate outstanding principal amount of Tranche A Loans, together with (ii) all Tranche B Lenders and the Lessor. "Requirement of Law" means, as to any Person, (a) the partnership agreement, certificate of incorporation, bylaws or other organizational or governing documents of such Person, (b) any federal, state or local law, treaty, ordinance, rule or regulation and (c) any order, decree or determination of a court, arbitrator or other Governmental Authority, in each case applicable to or binding upon such Person or any of its property or to which such Person or any of its property is subject. "Responsible Officer" means any president, vice president or secretary of Lessee, and any executive vice president or senior vice president of the Company, as applicable. "Responsible Officer's Certificate" means a certificate signed by any Responsible Officer, which certificate shall certify as true and correct the subject matter being certified to in such certificate. "Secured Parties" means, collectively, the Collateral Agent, the Credit Facility Agent, each Credit Facility Bank, each Lender and the Lessor. "Securities Act" means the Securities Act of 1933, as amended, together with the rules and regulations promulgated thereunder. "Security Agreement" means the Second Amended and Restated Security Agreement dated as of December 11, 1996, by the Company and the Subsidiary Guarantors in favor of the Collateral Agent for the benefit of each of the Secured Parties. "Security Documents" means, collectively, the following: (a) the Multicare Guaranty; (b) the Security Agreement; (c) the Pledge Agreement; (d) the PHC/Providence Mortgages; (e) the Lease Facility Mortgages; and (f) each other security document that may from time to time be delivered to the Collateral Agent in connection with the foregoing (including all financing statements, fixture filings, mortgages, assignments and stock certificates delivered to the Collateral Agent). "Senior Leverage Ratio" means, at any date of determination thereof, the "Senior Leverage Ratio" as defined in the Credit Agreement. "Senior Obligation Documents" means, collectively: (a) the Credit Facility Documents; (b) the Operative Documents; and (c) each other document made, delivered or given in connection with the foregoing and each other document that replaces, renews, extends, refinances or refunds indebtedness under any of the foregoing. "Senior Obligations" means the unpaid principal of, interest on and Yield on (including interest and Yield accruing on or after the filing of any petition in bankruptcy, or the commencement of any insolvency, reorganization or like proceeding, whether or not a claim for post-filing or post-petition interest is allowed in such proceeding) the Credit Facility Notes, the Lease Facility Notes, the Lessor Amount, the obligations under the Letters of Credit, the obligations under the Interest Rate Protection Agreements and all other obligations and liabilities of the Lessor or any Obligor to any Secured Party, whether direct or indirect, absolute or contingent, due or to become due, or now existing or hereafter incurred, which may arise under, out of, or in connection with, the Credit Agreement, the Loan Agreement, the Participation Agreement, the Master Lease, the Credit Facility Notes, the Lease Facility Notes, the Letters of Credit, the Interest Rate Protection Agreements, the Multicare Guaranty or any other Senior Obligation Document, whether on account of principal, interest, Yield, rentals (including Rent), guaranties, reimbursement obligations, fees, indemnities, costs, expenses (including, without limitation, all fees and disbursements of counsel to any Secured Party) or otherwise. "Shortfall Amount" means, as of the Expiration Date, an amount equal to (i) the Lease Balance, minus (ii) the Lease Recourse Amount received by the Collateral Agent pursuant to Section 20.1(j) of the Master Lease, minus (iii) the aggregate amount of the highest, binding, written, unconditional, irrevocable offer to purchase each Property obtained by each Lessee pursuant to Section 20.1(e) of the Master Lease; provided, however, that if the sale of the Properties to the Person submitting such offer is not consummated on or prior to the Expiration Date, then the term "Shortfall Amount" shall mean an amount equal to (i) the Lease Balance, minus (ii) the Lease Recourse Amount received by the Collateral Agent pursuant to Section 20.1(j) of the Master Lease. "Significant Casualty" means a Casualty that in the reasonable, good faith judgment of the Lessor is so substantial in nature that restoration of the related Property to substantially its condition as existed immediately prior to such Casualty (or such a condition that such Property, as so restored and with such Modifications as the applicable Lessee may elect in accordance with Section 10.1 of the Master Lease, would have a use, value and utility substantially the same as that which existed immediately prior to such Casualty) would be impracticable or impossible. "Significant Condemnation" means (a) a Condemnation that involves a taking of the Lessor's entire title to the related Land, or (b) a Condemnation that in the reasonable, good faith judgment of the Lessor is such that restoration of the related Property to substantially its condition as existed immediately prior to such Condemnation (or such a condition that such Property, as so restored and with such Modifications as the applicable Lessee may elect in accordance with Section 10.1 of the Master Lease, would have a use, value and utility substantially the same as that which existed immediately prior to such Condemnation) would be impracticable or impossible. "Statutory Condition" means Mass. Gen. Laws Ann. Ch. 183 S20. "Structuring Agent" means Key Global Finance Ltd. "Sub-Participant" is defined in Section 12.2 of the Participation Agreement. "Subsidiary" means, with respect to any Person, any corporation or other entity of which at least a majority of the securities or other ownership interest having ordinary voting power for the election of directors or other persons performing similar functions are at the time owned directly or indirectly by such Person. "Subsidiary Co-Borrowers" means, collectively, the Subsidiary Co-Borrowers under, and as defined in, the Credit Agreement. "Subsidiary Guarantors" means, collectively, each of the Subsidiaries of the Company party to the Multicare Guaranty. "Supplemental Rent" means all amounts, liabilities and obligations (other than Basic Rent (Interest/Yield)) which each Lessee assumes or agrees to pay to Lessor or any other Person under the Master Lease, or under any of the other Operative Documents, including, without limitation, fees due under the Fee Letter, Break Costs, the Loan Balance (except where the payment thereof has been accelerated as a result of a default by the Lessor under the Loan Agreement in the absence of Lease Event of Default), the Lease Recourse Amount, amounts due pursuant to Section 13.2 of the Participation Agreement and payments pursuant to Sections 15.2 of the Master Lease and Articles XVIII and XX of the Master Lease. "Tax Indemnitee" means each Lender, the Lessor, the Collateral Agent, the Lease Agent and their respective Affiliates. "Taxes" is defined in the definition of Impositions. "Term" is defined in Section 2.3 of the Master Lease. "Termination Date" is defined in Section 15.2 and Section 16.2(e) of the Master Lease. "Termination Notice" is defined in Section 15.1 of the Master Lease. "Tranche A Lenders" means, collectively, the various financial institutions as are or may from time to time become Tranche A Lenders under the Loan Agreement. "Tranche A Loan" is defined in Section 2.1(a) of the Loan Agreement. "Tranche A Notes" is defined in Section 2.2 of the Loan Agreement. "Tranche B Lenders" means, collectively, the various financial institutions as are or may from time to time become Tranche B Lenders under the Loan Agreement. "Tranche B Loan" is defined in Section 2.1(b) of the Loan Agreement. "Tranche B Notes" is defined in Section 2.2 of the Loan Agreement. "Transaction Expenses" means all costs and expenses incurred by the Lessor, the Company, the Lessees, the Lease Agent and the Collateral Agent in connection with the preparation, execution and delivery of the Operative Documents and the transactions contemplated by the Operative Documents including: (a) the reasonable fees, out-of-pocket expenses and disbursements of Mayer, Brown & Platt, special counsel for the Lessor and the Lenders, and such other fees, expenses and disbursements of counsel for the Company and the Lessees in negotiating the terms of the Operative Documents and the other transaction documents, preparing for the closing under, and rendering opinions in connection with, such transactions and in rendering other services customary for counsel representing parties to transactions of the types involved in the transactions contemplated by the Operative Documents; (b) the reasonable fees, out-of-pocket expenses and disbursements of one special counsel and one special Massachusetts counsel, if any, for the Lessor, the Lenders and the Lease Agent in connection with (1) any amendment, supplement, waiver or consent with respect to any Operative Documents requested or approved by the Company as agent for the Lessees and (2) any successful enforcement of any rights or remedies against the Lessees in respect of the Operative Documents; (c) any and all Taxes and fees incurred in recording, registering or filing any Operative Document or any other transaction document, any deed, declaration, mortgage, security agreement, notice or financing statement with any public office, registry or governmental agency in connection with the transactions contemplated by the Operative Documents; (d) any title fees, premiums and escrow costs and other expenses relating to title insurance and the closings contemplated by the Operative Documents; (e) all expenses relating to all Environmental Audits; (f) fees and other expenses relating to Appraisals; and (g) the fees referred to in the Fee Letter. "Unfunded Benefit Liabilities" means, with respect to any Plan, the amount (if any) by which the present value of all benefit liabilities (within the meaning of Section 4001 (a)(1 6) of ERISA) under the Plan exceeds the fair market value of all Plan assets allocable to such benefit liabilities, as determined on the most recent valuation date of the Plan and in accordance with the provisions of ERISA for calculating the potential liability of any Consolidated Entity or any ERISA Affiliate under Title IV of ERISA. "Uniform Commercial Code" and "UCC" means the Uniform Commercial Code as in effect in any applicable jurisdiction. "Yield" is defined in Section 4.3 of the Participation Agreement. EX-10 8 PARTICIPATION AGREEMENT dated as of December 11, 1996 among THE MULTICARE COMPANIES, INC., as Guarantor, VARIOUS SUBSIDIARIES OF THE MULTICARE COMPANIES, INC. IDENTIFIED HEREIN, as Lessees, SELCO SERVICE CORPORATION, as Lessor, VARIOUS FINANCIAL INSTITUTIONS IDENTIFIED HEREIN, as Tranche A Lenders, VARIOUS FINANCIAL INSTITUTIONS IDENTIFIED HEREIN, as Tranche B Lenders, NATIONSBANK, N.A., as Lease Agent for the Lenders, and NATIONSBANK, N.A., as Collateral Agent for the Secured Parties. ____________________________________ Lease Financing of Long-Term Care Facilities PARTICIPATION AGREEMENT THIS PARTICIPATION AGREEMENT (this "Participation Agreement"), dated as of December 11, 1996, is entered into by and among THE MULTICARE COMPANIES, INC., a Delaware corporation, as Guarantor (together with its permitted successors and assigns, the "Company" or the "Guarantor"); ACADEMY NURSING HOME, INC., a Massachusetts corporation, NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC., a Massachusetts corporation, PRESCOTT NURSING HOME, INC., a Massachusetts corporation, WILLOW MANOR NURSING HOME, INC., a Massachusetts corporation, ADS/MULTICARE, INC., a Delaware corporation, and each other Subsidiary of the Company that may from time to time become a Lessee under the Master Lease and the other Operative Documents pursuant to the terms of Section 14.2, each as a Lessee (together with its permitted successors and assigns, each a "Lessee" and collectively, the "Lessees"); SELCO SERVICE CORPORATION, an Ohio corporation, as Lessor (together with its successors and assigns, the "Lessor"); TORONTO-DOMINION (NEW YORK), INC., BANQUE PARIBAS, CREDITANSTALT CORPORATE FINANCE, INC., MELLON BANK, N.A., and the other various financial institutions as are or may from time to time become Tranche A Lenders (collectively, the "Tranche A Lenders") under the Loan Agreement; FBTC LEASING CORP. and the other various financial institutions as are or may from time to time become Tranche B Lenders (collectively, the "Tranche B Lenders" and, together with the Tranche A Lenders, the "Lenders") under the Loan Agreement; and NATIONSBANK, N.A., as Lease Agent for the Lenders (in such capacity, the "Lease Agent") and as Collateral Agent for the Secured Parties (as defined below) (in such capacity, the "Collateral Agent"). W I T N E S S E T H: WHEREAS, on each Acquisition Date, the Lessor will purchase a Property or Properties or the Equity Interest or Equity Interests related thereto from one or more third parties designated by the Company as agent for the Lessees; WHEREAS, on or after each Acquisition Date on which the Lessor acquires an Equity Interest, the Lessor will dissolve the entity related to such Equity Interest and, thereafter, directly own fee title to the applicable Property; WHEREAS, the Lessees have appointed the Company to act as their agent with respect to certain matters set forth in this Participation Agreement and the Company has accepted such appointment; WHEREAS, the Lessor desires to lease to the Lessees, and the Lessees desire to lease from the Lessor, the Properties; WHEREAS, the Lessor is willing to provide from time to time on each Acquisition Date a portion of the funding of the costs of the acquisition directly or indirectly of the Property (or Equity Interest related thereto) to be acquired on such Acquisition Date; WHEREAS, the Lessor wishes to obtain, and the Lenders are willing to provide from time to time on each Acquisition Date, financing of the remaining portion of the costs of the acquisition of the Property (or Equity Interest related thereto) to be acquired on such Acquisition Date; WHEREAS, pursuant to the Credit Agreement, the Credit Facility Banks have extended commitments to make loans and issue letters of credit from time to time to the Company and the Subsidiary Co-Borrowers from time to time pursuant to the terms thereof; WHEREAS, pursuant to the Intercreditor Agreement, the Lenders, the Lessor, the Credit Facility Banks and the other Secured Parties have agreed to share ratably in the Collateral; WHEREAS, to secure the financing transactions contemplated by this Participation Agreement and the other Operative Documents (the "Lease Financing"), (a) the Lenders and the Lessor will, together with the Credit Facility Banks, have the benefit of a Lien on the right, title and interest of the Company and the Lessees in the Collateral (including the Properties), subject to the rights and priorities as set forth in the Intercreditor Agreement, (b) the Lenders will have the benefit of an assignment of certain of the Lessor's rights against the Lessees under the Master Lease and (c) the Company and the Subsidiary Guarantors will guarantee to the Lenders and the Lessor the payment and performance of all the obligations of the Lessees under the Operative Documents. In consideration of the mutual agreements contained in this Participation Agreement and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows: ARTICLE I DEFINITIONS; INTERPRETATION Unless the context shall otherwise require, capitalized terms used and not defined herein shall have the meanings assigned thereto in Appendix A hereto for all purposes hereof; and the rules of interpretation set forth in Appendix A hereto shall apply to this Participation Agreement. ARTICLE II INTENTIONALLY OMITTED ARTICLE III FUNDING OF ADVANCES SECTION 3.1. Lessor Acquisition. Subject to the conditions and terms hereof, the Lessor shall take the following actions at the written request of the Company, as agent for the Lessees, from time to time on each Acquisition Date prior to the Commitment Termination Date: (a) the Lessor shall apply the proceeds of the Loans made by the Lenders on such Acquisition Date and advance its own funds (not to exceed the Lessor's Funding Percentage of the Advance to be made on such Acquisition Date) for the purpose of financing the acquisition of each Property and/or each Equity Interest to be acquired on such Acquisition Date, and such proceeds shall be made to the payees designated in writing by the Company as agent for the Lessees (each such application of proceeds and funds, an "Advance"); (b) the Lessor shall acquire each Property and/or each Equity Interest to be acquired on such Acquisition Date (using the Advance); and (c) the Lessor shall lease the Properties acquired on such Acquisition Date to the Lessees under the Master Lease and the respective Lease Supplements. Notwithstanding any other provision hereof, the Lessor shall not be obligated to make any Advance if, after giving effect thereto, the aggregate outstanding amounts of the Loans and the Lessor Amounts would exceed the Aggregate Commitment Amount. SECTION 3.2. Lessor's Commitment. Subject to the conditions and terms hereof, the Lessor shall make the Lessor Commitment available to the Lessees by making available at the request of the Company, as agent for the Lessees, from time to time on each Acquisition Date prior to the Commitment Termination Date an amount (each, a "Lessor Amount") in immediately available funds equal to the Lessor's Funding Percentage of the Advance being made on such Acquisition Date. Notwithstanding any other provision hereof, the Lessor shall not be obligated to make available any Lessor Amount if, after giving effect to the proposed Lessor Amount, the aggregate outstanding amount of the Lessor Amounts would exceed the Lessor's Commitment. No amounts paid or prepaid with respect to the Lessor Amount may be readvanced. SECTION 3.3. Lenders' Commitments. Subject to the conditions and terms hereof, each Lender shall make its Loan Commitment available to the Lessees by making Loans to the Lessor at the request of the Company, as agent for Lessees, from time to time on each Acquisition Date prior to the Commitment Termination Date in an amount in immediately available funds equal to such Lender's Funding Percentage of the Advance being made on such Acquisition Date. Notwithstanding any other provision hereof, no Lender shall be obligated to make any Loan if, after giving effect to the proposed Loan, the aggregate outstanding amount of such Lender's Loans would exceed such Lender's Commitment. No amounts paid or prepaid with respect to the Loans may be readvanced. SECTION 3.4. Procedures for Advances. (a) With respect to the funding of each Advance, the Company, as agent for the Lessees, shall give the Lease Agent prior written notice pursuant to a Funding Request substantially in the form of Exhibit A (a "Funding Request"), which Funding Request shall be delivered not later than 12:00 noon (New York City time), three (3) Business Days prior to the proposed Acquisition Date specifying: (i) the proposed Acquisition Date, (ii) the amount of Advance requested, (iii) the Properties and Equity Interests to be acquired on the proposed Acquisition Date, (iv) the amount of the Advance allocated to each Property or Equity Interest, as the case may be, and (v) whether the Loans and Lessor Amounts comprising such Advance shall be made as ABR Amounts or LIBO Rate Amounts (and, if LIBO Rate Amounts are selected by the Company, specifying the duration of the initial Interest Period with respect thereto). The Lease Agent shall calculate the amounts of the Lessor Amount and the Loans required to fund each requested Advance as it relates to each Property based on the respective Funding Percentages of the Participants. (b) The proceeds of each Advance shall be used to pay the Property Cost of the Property being acquired on the applicable Acquisition Date. (c) All remittances made by the Lessor and the Lenders for the funding of any Advance shall be made on the applicable Acquisition Date in immediately available funds by wire transfer to the account of the Lease Agent, which shall disburse such proceeds as provided in Section 3.1(a). SECTION 3.5. Interest Period Selection/Continuation/ Conversion Elections. By delivering an Interest Period Selection/Continuation/Conversion Notice in the form of Exhibit B hereto to the Lease Agent, the Company, as agent for the Lessees, may from time to time irrevocably (as to the next succeeding Interest Period) elect, on not less than three (3) nor more than five (5) Business Days' notice, that the Applicable Rate for all Loans and the Lessor Amount be determined by reference to either the LIBO Rate (Reserve Adjusted) or the Alternate Base Rate and, in the case of an election of the LIBO Rate (Reserve Adjusted), select the duration for the next succeeding Interest Period; provided, however, that (a) in the absence of delivery of an Interest Period Selection/Continuation/Conversion Notice with respect to any LIBO Rate Amount at least three (3) Business Days before the last day of the then current Interest Period with respect thereto, such LIBO Rate Amount shall, on such last day, automatically continue as a LIBO Rate Amount with an Interest Period of one month's duration, (b) the outstanding Loans and Lessor Amount may not be continued as, or converted into, LIBO Rate Amounts when any Lease Default has occurred and is continuing. Each Interest Period Selection/Continuation/ Conversion Notice so delivered by the Company, as agent for the Lessees, shall be deemed an effective election by the Lessor of the method for computing interest on the Loans under the Loan Agreement, and (c) LIBO Rate Amounts may be converted only on the last day of an Interest Period for such LIBO Rate Amounts unless the Company, as agent for the Lessees, agrees to provide to the Lease Agent for the account of each Participant compensation in accordance with Section 13.10. SECTION 3.6. Funding of Certain Modifications; Construction Financings. The parties hereto contemplate that the Company, as agent on behalf of the Lessees, may from time to time request that the Participants make available Lessor Amounts or Loans, as applicable, in an aggregate amount of not less than $1,000,000 to finance the cost of certain modifications to the Properties. In such events, the parties anticipate negotiating amendments to the Operative Documents as necessary to accommodate such additional Advances. In addition, the Company, as agent for the Lessees, may request that the Participants finance the acquisition of certain parcels of land and the construction of improvements on such parcels and, if the Lessor and the Lenders agree, in their sole discretion, to finance such construction, the parties contemplate negotiating amendments to the Operative Documents as necessary to accommodate such construction financing. ARTICLE IV COMPUTATION OF BASIC RENT; INTEREST ON LOANS; FEES SECTION 4.1. Computation of Basic Rent (Interest/Yield). (a) Basic Rent (Interest/Yield) shall be payable with respect to the sum of (i) the amount of the Loans outstanding from time to time and (ii) the amount of the Lessor Amount outstanding from time to time in an amount equal to the Applicable Rate on such sum, calculated using the actual number of days elapsed and, subject to Section 3.5 hereof, when the Applicable Rate is based on the LIBO Rate (Reserve Adjusted), a 360-day year basis and, if calculated at the Alternate Base Rate, a 360-day year basis if the Alternate Base Rate is calculated at the Federal Funds Rate, and a 365-, or, if applicable, 366-, day year basis if the Alternate Base Rate is calculated at the Prime Rate. If all or any portion of any Loan, the Lessor Amount, any Basic Rent (Interest/Yield) payable on any Loan or the Lessor Amount, or any other amount payable hereunder shall not be paid when due (whether at stated maturity, acceleration thereof or otherwise), such overdue amount shall bear interest at a rate per annum which is equal to the Overdue Rate. (b) During the Term, Basic Rent (Interest/Yield) shall be payable in arrears with respect to all of the outstanding Loans and the outstanding Lessor Amount on each Basic Rent Payment Date. SECTION 4.2. Interest on Loans. (a) Each Loan shall accrue interest computed and payable in accordance with the terms of Section 3.5 hereof and the Loan Agreement. (b) The Collateral Agent (or, after payment in full of all obligations of the Company and the Subsidiary Co-Borrowers owing to the Credit Facility Banks under the Credit Facility Documents and the permanent termination of all commitments of the Credit Facility Banks thereunder, the Lease Agent) shall distribute to the Lenders, in accordance with the terms hereof and the terms of the Loan Agreement, the interest due on the Loans and all other amounts due with respect to the Loans, in each case, to the extent received by the Collateral Agent (or the Lease Agent, as applicable) from the Lessees from time to time under the Lease as Basic Rent (Interest/Yield). SECTION 4.3. Yield on Lessor Amount. (a) The Lessor Amount outstanding from time to time shall accrue yield ("Yield") equal to the excess of (i) the Basic Rent (Interest/Yield) payable by the Lessees from time to time under the Lease minus (ii) the interest due on the Loans from time to time pursuant to Section 2.4 of the Loan Agreement. (b) The Lessor shall be entitled to receive, as payment of Yield, all amounts described in clause (a). SECTION 4.4. Prepayments of Loans and Lessor Amount. In the event that a Lessee pays any amount equal to the subject Property Balance or the Lease Balance to the Lessor in connection with the purchase or sale of a Property in accordance with Section 15.1, 18.1(a) or 18.1(b) of the Master Lease, such Property Balance or Lease Balance, as the case may be, will be used to prepay on a pro rata basis the outstanding principal amount of the Loans and Lessor Amount related to the Property or Properties purchased or sold. In addition, in the event that the aggregate Commitments are reduced to an amount that is less than the aggregate outstanding Loans and Lessor Amounts as of such date of reduction, then the Company, as agent for the Lessees, shall prepay the outstanding Loans and Lessor Amounts in an aggregate amount equal to such excess, with such prepayment to be applied ratably among all outstanding Loans and Lessor Amounts. Each Lender and the Lessor hereby acknowledges that its Loans or Lessor Amount, as the case may be, may be prepaid as set forth inbut may not be readvanced. SECTION 4.5. Fees. The Company agree to pay the fees referred to in this Section 4.5. (a) Facility Fees. The Company agrees to pay to each Participant for its own account, a non-refundable facility fee (collectively, the "Facility Fees") equal to 0.125% of such Participant's Commitment, payable in full on the Initial Acquisition Date. (b) Structuring Agent's Fees. The Company agrees to pay the fees referred to in the Fee Letter. ARTICLE V CERTAIN INTENTIONS OF THE PARTIES SECTION 5.1. Nature of the Transaction. It is the intent of the parties that: (a) the Lease constitutes an operating lease from the Lessor to the Lessees for purposes of the Lessees' financial reporting, (b) the Lease and other transactions contemplated hereby preserve ownership in the Properties in the Lessees for Federal and state income tax and bankruptcy purposes, (c) each Lease Supplement grants to Lessor a Lien on the Property covered thereby, and (d) the obligations of the Lessees to pay Basic Rent (Interest/Yield) and any part of any Property Balance (other than Basic Rent (Interest/Yield)) shall be treated as payments of interest and principal, respectively, for Federal and state income tax and bankruptcy purposes. The Lessor shall be deemed to have a valid and binding security interest in and Lien on the Properties, free and clear of all Liens other than Permitted Property Liens, as security for the obligations of the Lessees under the Operative Documents, (it being understood and agreed that the Lessees do hereby grant a Lien, and convey, transfer, assign, mortgage and warrant to Lessor and its successors, transferees and assigns, for the benefit of the Lessor and its successors, transferees and assigns, the Properties and any proceeds or products thereof, to have and hold the same as collateral security for the payment and performance of the obligations of the Lessees under the Operative Documents). Each of the parties hereto agrees that it will not, nor will it permit any Affiliate to at any time, take any action or fail to take any action with respect to the preparation or filing of any income tax return, including an amended income tax return, to the extent that such action or such failure to take action would be inconsistent with the intention of the parties expressed in this Section 5.1. Specifically, without limiting the generality of the foregoing, the parties hereto intend and agree that in the event of any insolvency or receivership proceedings or a petition under the United States bankruptcy laws or any other applicable insolvency laws or statute of the United States of America or any State or Commonwealth thereof affecting a Lessee, the Company, Lessor, any Participant or any collection actions, the transactions evidenced by the Operative Documents shall be regarded as loans made by the Participants to the Lessees. SECTION 5.2. Amounts Due Under Lease. Anything else herein or elsewhere to the contrary notwithstanding, it is the intention of the Lessees, the Company, the Lessor and the Lenders that: (i) the amount and timing of installments of Basic Rent due and payable from time to time from the Lessees under the Lease shall be equal to the aggregate payments due and payable as interest on the Loans plus a yield on the Lessor Amount on each Basic Rent Payment Date; (ii) if a Lessee elects the Purchase Option or becomes obligated to purchase any of the Properties under the Lease, the Loans, the Lessor Amount, all interest, Yield and fees thereon and all other obligations of the Lessees with respect to such Property owing to the Lessor and the Lenders shall be paid in full by the Lessee; (iii) if any Lessee elects the Remarketing Option, the Lessee shall only be required to pay to the Lessor the amounts required pursuant to Article XX of the Master Lease and any amounts due pursuant to Article XIII hereof; and (iv) upon an Event of Default resulting in an acceleration of any Lessee's obligation to purchase the Properties under the Lease, the amounts then due and payable by the Lessee under the Lease shall include all amounts necessary to pay in full the Lease Balance, plus all other amounts then due from the Lessee to the Participants under the Operative Documents. ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Documentation Date. The Documentation Date (the "Documentation Date") shall occur on the earliest date on which the following conditions precedent shall have been satisfied or waived, in the reasonable discretion of the Participants: (a) Participation Agreement. This Participation Agreement shall have been duly authorized, executed and delivered by the parties hereto. (b) Master Lease. The Master Lease shall have been duly authorized, executed and delivered by the parties thereto. (c) Loan Agreement. The Loan Agreement shall have been duly authorized, executed and delivered by the parties thereto. (d) Assignment of Lease and Rent. The Assignment of Lease and Rent shall have been duly authorized, executed and delivered by the Lessor, as assignor, to the Collateral Agent for the benefit of each of the Secured Parties, as assignee, and the Assignment of Lease and Rent shall have been consented to and acknowledged by the Company and each Lessee party to the Operative Documents on the Documentation Date. (e) Intercreditor Agreement. The Intercreditor Agreement shall have been duly authorized, executed and delivered by the parties thereto. (f) Security Documents. Each of the Multicare Guaranty, the Pledge Agreement, the Security Agreement and the PHC/Providence Mortgages shall have been duly authorized, executed and delivered by the parties thereto, and the Lessor shall have received an executed counterpart of each of the foregoing. (g) [Intentionally Omitted]. (h) Certain Transaction Expenses. Counsel for the Lessor and the Lenders shall have received, to the extent then invoiced, payment in full in cash of all Transaction Expenses payable to such counsel pursuant to Section 9.1. All documents and instruments required to be delivered pursuant to this Section 6.1 shall be delivered at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York, or at such other location as may be determined by the Lessor, the Lenders and the Lessee. SECTION 6.2. Initial Acquisition Date. The occurrence of the initial Acquisition Date hereunder (the "Initial Acquisition Date") shall be subject to the prior satisfaction of all of the conditions precedent thereto set forth in this Section 6.2 (or waiver thereof by the applicable parties as set forth herein). The parties hereto agree that the Lessor's obligations to acquire any Property or Equity Interest shall not be subject to any conditions precedent set forth in this Section 6.2 to the extent such conditions are actions required of the Lessor. The obligation of the Lessor to acquire any Property or Equity Interest on the Initial Acquisition Date and to make the Advance in respect of the Property Costs on the Initial Acquisition Date, the obligation of the Lessor to fund any related Lessor Amount on the Initial Acquisition Date and the obligation of each Lender to make any related Loan on the Initial Acquisition Date, are subject to satisfaction or waiver of the following conditions precedent: (a) Lessees' Resolutions and Incumbency Certificate, etc. Each Lessee shall have delivered to the Lessor and the Lenders a certificate of its Secretary or an Assistant Secretary attaching and certifying as to (A) the resolutions of the Board of Directors or committee thereof duly authorizing the execution, delivery and performance by it of each Operative Document to which it is or will be a party, (B) its certificate of incorporation and by-laws, and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Documents to which it is a party and (ii) a certificate of good standing with respect to it issued by the Secretary of State of the jurisdiction of its incorporation no earlier than thirty (30) days prior to the Initial Acquisition Date or such earlier date as is acceptable to the Lessor. (b) Company's Resolutions and Incumbency Certificate, etc. The Company shall have delivered to the Lessor and the Lenders a certificate of its Secretary or an Assistant Secretary attaching and certifying as to (A) the resolutions of the Board of Directors or committee thereof duly authorizing the execution, delivery and performance by it of each Operative Document to which it is or will be a party, (B) its certificate of incorporation and by-laws, and (C) the incumbency and signature of persons authorized to execute and deliver on its behalf the Operative Documents to which it is a party and (ii) a certificate of good standing with respect to it issued by the Secretary of State of the State of Delaware no earlier than thirty (30) days prior to the Initial Acquisition Date or such earlier date as is acceptable to the Lessor. (c) Opinion of Counsel to the Company and the Lessees. The Participants shall have received an opinion of Paul, Weiss, Rifkind, Wharton & Garrison, special counsel to the Company and the Lessees, which is reasonably acceptable in form and substance to the Participants. (d) Fees. The Company, as agent for the Lessees, shall have paid in full all Facility Fees and the Structuring Agent's fee then due and payable pursuant to the Participation Agreement and the Fee Letter. SECTION 6.3. Conditions Precedent to Each Acquisition Date. Each Acquisition Date shall occur on the date on which all the conditions precedent thereto set forth in this Section 6.3 with respect to such acquisition shall have been satisfied or waived by the applicable parties as set forth herein. The parties hereto agree that the Lessor's obligations to acquire any Property or Equity Interest shall not be subject to any conditions precedent set forth in this Section 6.3 to the extent such conditions are actions required of the Lessor. The obligation of the Lessor to acquire any Property or Equity Interest on any Acquisition Date and to make the Advance in respect of the Property Costs for such Property or Equity Interest on the applicable Acquisition Date, the obligation of the Lessor to fund any related Lessor Amount on the applicable Acquisition Date and the obligation of each Lender to make any related Loan on the applicable Acquisition Date, are subject to satisfaction or waiver of the following conditions precedent: (a) Funding Request. The Lessor and the Lease Agent shall have received a fully executed counterpart of the applicable Funding Request in accordance with Section 3.4. The delivery of a Funding Request shall constitute a representation and warranty by all of the Lessees and the Company that on such Acquisition Date (both immediately before and after giving effect to the making of such Advance and the application of the proceeds thereof), the statements made in Section 8.2 are true and correct in all material respects. (b) Transfer Documents. In the case of the acquisition of an Equity Interest, on or prior to such Acquisition Date, each of the Equity Interests to be acquired on such Acquisition Date shall have been transferred to the Lessor pursuant to appropriate instruments of transfer in form and substance reasonably satisfactory to the Lessor. (c) Deed; Bill of Sale for Certain Properties. In the case of the acquisition of a direct fee ownership interest in any Property, on or prior to such Acquisition Date, the Lessor shall have received (i) a Deed with respect to such Property in form and substance reasonably satisfactory to it and (ii) if such Property includes personal property, a warranty bill of sale (a "Bill of Sale"), conveying title to the Lessor in any Improvements and other personal property (other than inventory) comprising part of such Property (and the parties hereto acknowledge that the Properties to be acquired on the Initial Acquisition Date do not include any personal property). (d) Supplement to Assignment of Lease and Rent. On or prior to such Acquisition Date, the Lessor shall have delivered to the Collateral Agent one or more Supplements to the Assignment of Lease and Rent substantially in the form of Exhibit A thereto covering each Property to be acquired on such Acquisition Date (or, in the case of an acquisition of an Equity Interest, covering the Property relating to such Equity Interest), together with a consent to and acknowledgement of such Supplement duly executed by the applicable Lessee. (e) Lease Supplement/Memorandum of Lease. On or prior to such Acquisition Date, for each Property the applicable Lessee and the Lessor shall have delivered the original counterpart of the Lease Supplement, in recordable form, executed by the Lessee and the Lessor with respect to such Property to the Lenders. (f) Responsible Officer's Certificate. On or prior to such Acquisition Date, the Lessor and the Lenders shall each have received (x) a Responsible Officer's Certificate of the Company and (y) a Responsible Officer's Certificate of each Lessee of a Property being acquired on such Acquisition Date (or, in the case of an acquisition of an Equity Interest, the Lessee of the Property relating to such Equity Interest), each in substantially the form of Exhibit C attached hereto, dated as of the applicable Acquisition Date, stating that (i) to such Responsible Officer's actual knowledge, without investigation, each and every representation and warranty of each of the Company or the applicable Lessee, as applicable, contained in each Operative Document to which it is a party is true and correct in all material respects on and as of the applicable Acquisition Date, (ii) to such Responsible Officer's actual knowledge, without investigation, no Default or Event of Default has occurred and is continuing under any Operative Document to which either of the Company or the applicable Lessee, as applicable, is a party, (iii) to such Responsible Officer's actual knowledge, without investigation, each Operative Document to which either the Company or the applicable Lessee, as applicable, is a party is in full force and effect with respect to it, and (iv) to such Responsible Officer's actual knowledge, each of the Company or the applicable Lessee, as applicable, has duly performed and complied with all conditions contained herein or in any other Operative Document required to be performed or complied with by it on or prior to the Acquisition Date. (g) Lease Facility Mortgage. On or prior to such Acquisition Date, the applicable Lessee shall have delivered to the Collateral Agent (with a copy thereof delivered to the Lessor) a Lease Facility Mortgage covering the Property to be leased by such Lessee under the Master Lease and applicable Lease Supplement, in form and substance reasonably satisfactory to the Participants. (h) Lease Facility Financing Statements. On or prior to such Acquisition Date, for each Property the applicable Lessee shall have delivered to the Lessor all Lease Facility Financing Statements relating to such Property as the Lessor or any Participant reasonably may request in order to protect the security interest of the Collateral Agent for the benefit of the Secured Parties. (i) Recordation of Mortgages and Filing of Lease Facility Financing Statements. Each of the Lessor and the Participants shall have received evidence reasonably satisfactory to it that each of (i) the Lease Facility Mortgages, (ii) the Assignment of Lease and Rent and (iii) the Lease Facility Financing Statements, in each case relating to the applicable Property, has been, or will be promptly, recorded or filed, as applicable, in a manner sufficient to properly secure each of their interests therein. (j) Evidence of Property Insurance. The Lessor shall have received evidence that the insurance obtained by the Lessees with respect to the applicable Property satisfies the requirements set forth in Article XIII of the Master Lease, setting forth the respective coverage, limits of liability, carrier, policy number and period of coverage. (k) Environmental Audit. The Lessor and the Lease Agent shall have received an Environmental Audit with respect to the applicable Property in form and substance reasonably satisfactory to the Lessor and the Lease Agent. (l) Property Survey. On or prior to such Acquisition Date, each Lessee or the Company shall have delivered to the Lessor, on behalf of the Lenders, an American Land Title Association ("ALTA")/1992 (Urban) Survey of the applicable Property certified to the title company and otherwise in form reasonably acceptable to the Participants. (m) Title Insurance. On or prior to such Acquisition Date, the Lessor and the Lease Agent shall have received from a title company satisfactory to them a commitment to deliver an ALTA extended owners and lenders title insurance policy covering the applicable Property in favor of the Lessor and the Lenders, respectively, such policy in an amount not less than the related Property Cost and to be reasonably satisfactory to the Lessor and the Lease Agent with such customary endorsements issued by the title company as a routine matter, if reasonably requested by the Lessor. (n) Appraisal. On or prior to such Acquisition Date, the Lessor and the Lenders shall have received an Appraisal of the applicable Property, in form and substance reasonably satisfactory to the Lessor and the Lenders, which Appraisal shall show that, as of such Acquisition Date and the Expiration Date, the Fair Market Sales Value of each Property being acquired on such Acquisition Date (or, in the case of an acquisition of an Equity Interest, the Property relating to such Equity Interest) shall not be less than 100% of the Property Cost for such Property. (o) Opinion of Local Counsel. If the Property being acquired on the applicable Acquisition Date (or, in the case of an acquisition of an Equity Interest, the Property relating to such Equity Interest) is located in a state in which there exists no other Property already covered by any Lease Supplement, then on or prior to such Acquisition Date, the Lessor and each Lender shall have received an opinion, in form and substance satisfactory to them, of counsel qualified with respect to the laws of the jurisdiction in which the applicable Property is located. (p) Fees. All Facility Fees then due and payable pursuant to this Participation Agreement and all fees due and payable pursuant to the Fee Letter shall have been paid. (q) Representations and Warranties. On the applicable Acquisition Date, the representations and warranties of each Lessee and the Company contained in Section 8.2 and in each of the other Operative Documents shall be true and correct in all material respects as though made on and as of such date, except to the extent such representations or warranties relate solely to an earlier date, in which case such representations and warranties shall have been true and correct in all material respects on and as of such earlier date. (r) Taxes. All taxes, fees and other charges in connection with the execution, delivery, recording, filing and registration of the Operative Documents shall have been paid or provisions for such payment shall have been made by the applicable Lessee to the reasonable satisfaction of the Lessor and the Lenders. (s) Governmental Approvals. All necessary Governmental Actions required by any Requirement of Law or any Property Legal Requirements for the purpose of authorizing the Lessor to acquire the applicable Property (and, if applicable, the Equity Interest related thereto) shall have been obtained or made and be in full force and effect. (t) Litigation. No action or proceeding shall have been instituted, nor, to the actual knowledge (without investigation) of any Lessee or the Company, shall any action or proceeding be threatened, before any Governmental Authority, nor shall any order, judgment or decree have been issued or proposed to be issued by any Governmental Authority either (i) to set aside, restrain, enjoin or prevent the full performance of this Participation Agreement, any other Operative Document or any transaction contemplated hereby or thereby, (ii) which is reasonably likely to Materially adversely affect any Lessee, the Company or the Property, or (iii) that question the validity in a material sense of the Operative Documents or the rights or remedies of the Lessor or the Lenders with respect to any Lessee, the Company or any Property under the Operative Documents. (u) Requirements of Law. In the reasonable opinion of the Lessor and the Lenders and their respective counsel, the transactions contemplated by the Operative Documents do not and will not violate in any material respect any Requirement of Law and do not and will not subject the Lessor or the Lenders to any adverse regulatory prohibitions or constraints. (v) No Default. There shall not have occurred and be continuing any Default or Event of Default under any of the Operative Documents, and no Default or Event of Default under any of the Operative Documents will have occurred after giving effect to the acquisition of the Properties. All documents and instruments required to be delivered pursuant to this Section 6.2 shall be delivered at the offices of Paul, Weiss, Rifkind, Wharton & Garrison, 1285 Avenue of the Americas, New York, New York, or at such other location as may be determined by the Lessor, the Lenders, the Company and the Lessee. ARTICLE VII DISTRIBUTIONS SECTION 7.1. Basic Rent (Interest/Yield). The Collateral Agent or the Lease Agent (as specified in Section 10.4) shall distribute to the Lenders, from each payment of Basic Rent (Interest/Yield) received by the Collateral Agent or the Lease Agent, as applicable (and from any payment of interest on overdue installments of Basic Rent (Interest/Yield) received by the Lessor), an amount equal to the interest due on the Loans in accordance with Section 2.4 of the Loan Agreement as well as any overdue interest due to the Lenders (to the extent permitted by applicable law). The Collateral Agent or the Lease Agent, as applicable shall distribute to the Lessor, as payment of Yield on the Lessor Amount (as well as payment of any overdue Yield due to the Lessor, to the extent permitted by applicable law), all payments of Basic Rent (Interest/Yield) received by the Collateral Agent or the Lease Agent, as applicable (and all payments of interest on overdue installments of Basic Rent (Interest/Yield) received by the Collateral Agent or the Lease Agent, as applicable), to the extent such payments exceed amounts then due and payable by the Lessor with respect to interest on the Loans. SECTION 7.2. Purchase Payments by the Lessees. (a) Any payment received by the Collateral Agent or the Lease Agent, as applicable, as a result of: (i) the purchase of all of the Properties in connection with the exercise of the Purchase Option under Section 18.1(a) of the Master Lease, or (ii) compliance with the obligation to purchase (or cause its designee to purchase) all of the Properties in accordance with Section 18.2 of the Master Lease, or (iii) compliance with the obligation to purchase all unsold Properties in accordance with Section 16.2(e) of the Master Lease, or (iv) failure to fulfill one or more of the conditions to exercise of the Remarketing Option with respect to any Property pursuant to Section 20.1 of the Master Lease and the Lessor's receipt of the Lease Balance pursuant to the provisions of Section 20.1 of the Master Lease, shall be distributed by the Collateral Agent or the Lease Agent, as applicable, to pay in full the Participant Balance of each Lender and the Lessor. (b) Any payment received by the Collateral Agent or the Lease Agent, as applicable, as a result of the payment of the Property Balance with respect to any Property in accordance with Section 15.1 or 18.1(b) of the Master Lease shall be distributed by the Collateral Agent or the Lease Agent, as applicable, among the Lenders and the Lessor pro rata without priority of one over the other, in the proportion that the Participant Balance of each of the Lenders and the Lessor bears to the aggregate of all of the Participant Balances. SECTION 7.3. Payment of Lease Recourse Amount. The payment of the Lease Recourse Amount to the Collateral Agent or the Lease Agent, as applicable, in accordance with Section 20.1(j) of the Master Lease upon the exercise of the Remarketing Option shall be distributed to the Tranche A Lenders for application to pay in full the Participant Balance of each Tranche A Lender. SECTION 7.4. Sales Proceeds of Remarketing of Properties. Any payments received by the Collateral Agent or the Lease Agent, as applicable, as proceeds from the sale of the Properties sold pursuant to the exercise of the Remarketing Option pursuant to Article XX of the Master Lease, together with any payment made as a result of an appraisal pursuant to Section 13.2, shall be distributed in the funds so received in the following order of priority: first, among the Tranche B Lenders and the Lessor pro rata without priority of one over the other, in the proportion that the Participant Balance of each of the Tranche B Lenders and the Lessor bears to the aggregate of all of the Participant Balances of the Tranche B Lenders and the Lessor, and second, the balance, if any, after payment in full of the Participant Balances of the Tranche B Lenders and the Lessor shall be promptly distributed to the Company as agent for the Lessees. SECTION 7.5. Supplemental Rent. All payments of Supplemental Rent received by the Collateral Agent or the Lease Agent, as applicable (excluding any amounts payable pursuant to the preceding provisions of this Article VII) shall be promptly distributed upon receipt thereof to the Persons entitled thereto pursuant to the Operative Documents. SECTION 7.6. Reserved. SECTION 7.7. Distribution of Payments after Lease Event of Default. (a) Prior to the payment in full of all obligations of the Company and the Subsidiary Co-Borrowers owing to the Credit Facility Banks under the Credit Facility Documents and the permanent termination of all commitments of the Credit Facility Banks thereunder, all amounts received by the Collateral Agent during the continuance of a Lease Event of Default (including without limitation all amounts received from any sale of any Property and all amounts realized in connection with any Casualty or Condemnation affecting any Property) shall be distributed in accordance with the provisions of Section 2.14 of the Intercreditor Agreement (and each party hereto hereby acknowledges and agrees that all such payments shall be distributed as aforesaid). (b) After payment in full of all obligations of the Company and the Subsidiary Co-Borrowers owing to the Credit Facility Banks under the Credit Facility Documents and the permanent termination of all commitments of the Credit Facility Banks thereunder, all payments received and amounts realized by the Collateral Agent or the Lease Agent during the continuance of a Lease Event of Default shall be turned over to the Lease Agent (if received by the Collateral Agent) and distributed by the Lease Agent as follows: (x) All payments received and amounts realized in connection with any Casualty or Condemnation shall be distributed as follows: (i) in the event that the Lease Agent, at the direction of the Required Participants, elects to pay all or a portion of such amounts to the applicable Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with Section 14.1(a) of the Master Lease, then such amounts shall be distributed to the applicable Lessee, and (ii) in the event that the Lease Agent, at the direction of the Required Participants, elects to apply all or a portion of such amounts to the purchase price of the related Property in accordance with Section 14.1(a) of the Master Lease, then such amounts shall be distributed in accordance with clause (y). (y) All other payments received and amounts realized shall be distributed in the following order of priority: first, so much of such payment or amount as shall be required to reimburse the Lease Agent for any tax, expense or other loss incurred by the Lease Agent (to the extent not previously reimbursed and to the extent incurred in connection with any duties as the Lease Agent) and any unpaid ongoing fees of the Lease Agent shall be distributed to the Lease Agent for its own account; second, so much of such payments or amounts as shall be required to pay the then existing or prior Lenders and the Lessor the amounts payable to them pursuant to any expense reimbursement or indemnification provisions of the Operative Documents shall be distributed to each such Participant without priority of one over the other in accordance with the amount of such payment or payments payable to each such Person; third, to the Lenders and the Lessor pro rata in accordance with, and for application to, the Participant Balance of each Lender and the Lessor; and fourth, after payment in full of the Participant Balance of each Lender and the Lessor and all other amounts due and owing to any Lender or the Lessor, the balance, if any, of such payment or amounts remaining thereafter shall be promptly distributed to, or as directed by, the Company as agent for the Lessees. (c) All amounts received or realized by the Collateral Agent or the Lease Agent and otherwise distributable pursuant to Sections 7.1 and 7.2 shall be distributed by the Collateral Agent or the Lease Agent, as applicable, in accordance with this Section 7.7. SECTION 7.8. Other Payments. (a) Except as otherwise provided in Sections 7.1, 7.2, 7.7 and clause (b) below, any payment received by the Collateral Agent or the Lease Agent for which no provision as to the application thereof is made in the Operative Documents or elsewhere in this Article VII shall be distributed pro rata among the Lenders and the Lessor without priority of one over the other, in the proportion that the Participant Balance of each bears to the aggregate of all the Participant Balances, to be applied to the outstanding Loans and Lessor Amounts, with any balance payable in accordance with the Operative Documents. (b) Except as otherwise provided in Sections 7.1, 7.2 and 7.7, all payments received and amounts realized by the Collateral Agent or the Lease Agent under the Master Lease or otherwise with respect to the Properties to the extent received or realized at any time after indefeasible payment in full of the Participant Balances of all of the Lenders and the Lessor and any other amounts due and owing to the Lenders or the Lessor, shall be distributed in accordance with the provision of Section 2.14 of the Intercreditor Agreement. (c) Except as otherwise provided in Sections 7.1 and 7.2, any payment received by the Collateral Agent or the Lease Agent for which provision as to the application thereof is made in an Operative Document but not elsewhere in this Article VII shall be distributed forthwith to the Person and for the purpose for which such payment was made in accordance with the terms of such Operative Document. SECTION 7.9. Casualty and Condemnation Amounts. Subject to Sections 7.7 and 7.8(b), any amounts payable to the Collateral Agent or the Lease Agent, as applicable, as a result of a Casualty or Condemnation pursuant to Section 14.1 of the Master Lease and the Assignment of Lease and Rent shall be distributed as follows: (a) all amounts payable to a Lessee for the repair of damage caused by such Casualty or Condemnation in accordance with Section 14.1(a) of the Master Lease shall be distributed to such Lessee, and (b) all amounts that are to be applied to the purchase price of the related Property in accordance with Section 14.1(a) and Article XV of the Master Lease shall be distributed to the Lenders and the Lessor pro rata without priority of one over the other, in the proportion that the Participant Balance of each bears to the aggregate of all of the Participant Balances. Section 13.10 shall not apply to any distribution or prepayment made pursuant to this Section 7.9(b). SECTION 7.10. Order of Application. To the extent any payment made to any Lender or the Lessor pursuant to Section 7.2, 7.3, 7.4 or 7.7 is insufficient to pay in full the Participant Balance of such Lender or the Lessor, then each such payment shall first be applied to accrued interest or Yield and then to the principal of the Loans or the Lessor Amount, as applicable. SECTION 7.11. Deemed Receipt. Receipt by the Collateral Agent or the Lease Agent, as applicable, of any amount paid by the Lessees distributable to the Lenders or other Persons pursuant to this Article VII shall be deemed to be receipt by each such party to the extent allocable to such party and upon payment of any such amount by the Lessees to the Collateral Agent or the Lease Agent, as the case may be, the Lessees shall have no further obligations to make such payment. SECTION 7.12. Agreement of Collateral Agent and Participants. Pursuant to the Assignment of Lease and Rent, all of the payments (other than amounts expressly excluded from the assignment contained therein) have been assigned to the Collateral Agent for the benefit of each of the Secured Parties. The Collateral Agent hereby agrees that it shall distribute all such payments pursuant to the requirements of this Article VII and the Intercreditor Agreement to each Participant or other Person entitled thereto as promptly as possible (it being understood that any such payment received on a timely basis in accordance with the provisions of the Master Lease, this Participation Agreement and the other Operative Documents shall be distributed by the Collateral Agent on the same Business Day as received to the extent practicable). ARTICLE VIII REPRESENTATIONS SECTION 8.1. Representations of the Participants. Each Participant represents and warrants to each other Participant, the Company and the Lessees that: (a) ERISA. Such Participant is purchasing its interest in its Lease Facility Note or funding its Lessor Amount, as the case may be, with assets that are not assets of any Employee Benefit Plan (or its related trust) which is subject to Title I of ERISA or Section 4975 of the Code; and it is not a "Benefit Plan Investor" as defined in 29 C.F.R. S 2510.3-101, and is not purchasing its interest in its Lease Facility Note or funding its Lessor Amount, as the case may be, with any assets of any Benefit Plan Investor. (b) Status. Such Participant is a commercial bank, savings and loan association, savings bank, depository institution, insurance company, branch or agency of a foreign bank or other similar financial institution, or an Affiliate thereof. (c) Organization, Good Standing and Due Qualification. Such Participant is duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, has the corporate power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged, and is duly qualified as a foreign corporation and in good standing under the laws of each other jurisdiction in which such qualification is required for the consummation of the transactions contemplated hereby. (d) Power and Authority, No Conflicts. The execution, delivery and performance by such Participant of the Operative Documents to which it is a party have been duly authorized by all necessary corporate action and do not and will not: (i) require any consent or approval of its stockholders, partners or members that has not been obtained; (ii) contravene its charter or by-laws or partnership or operating agreement; (iii) violate in any material respect any provision of, or require any filing, registration, consent or approval under, any law, rule, regulation (including, without limitation, Regulation U), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it; (iv) result in a breach of or constitute a default or require any consent under any indenture or loan or credit agreement or any other agreement, lease or instrument to which it is a party or by which it or its properties may be bound or affected if such breach, default or failure to obtain consent could reasonably be expected to adversely effect the transactions contemplated hereby; (v) result in, or require, the creation or imposition of any Lien, upon or with respect to any of the properties now owned or hereafter acquired by it; or (vi) cause it to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or, if such default could reasonably be expected to adversely effect the transactions contemplated hereby. (e) No Affiliation With Lessor. It is not an Affiliate of the Lessor (or if it is the Lessor it is not an Affiliate of any Lender) and will not in the future become such an Affiliate unless it has provided the Company, as agent for the Lessees, sixty (60) days' prior written notice and upon the determination of the Company, as agent for the Lessees, that such affiliation will cause a Rate Setting Commission Trigger Event to occur, it will, upon payment in full of all amounts owed to such Participant, assign its interests hereunder to a third party designated by the Company, as agent of the Lessees. (f) Legally Enforceable Agreements. Each Operative Document to which such Participant is a party is, or when delivered under this Agreement will be, a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. The making of any Loan or the advancing of any Lessor Amount on any Acquisition Date shall constitute an affirmation by the subject Participant of the preceding representations and warranties. SECTION 8.2. Representations of the Company and the Lessees. The Company and each Lessee hereby represent and warrant to each Participant that: (a) Organization, Good Standing and Due Qualification. It is duly incorporated or organized, validly existing and in good standing under the laws of the jurisdiction of its incorporation or organization, has the corporate, partnership or limited liability company power and authority to own its assets and to transact the business in which it is now engaged or proposed to be engaged, and is duly qualified as a foreign corporation, partnership or limited liability company and in good standing under the laws of each other jurisdiction in which such qualification is required and where such failure to qualify could reasonably be expected to have a Material Adverse Effect. (b) Power and Authority, No Conflicts. The execution, delivery and performance of the Operative Documents to which it is a party have been duly authorized by all necessary corporate, partnership or limited liability company action and do not and will not: (i) require any consent or approval of its stockholders, partners or members that has not been obtained; (ii) contravene its charter or by-laws or partnership or operating agreement; (iii) violate any provision of, or require any filing (other than the recordation of the Lease Facility Mortgages, the Lease Facility Financing Statements, the Lease Supplements, the Assignment of Lease and Rent and the Supplements to the Assignment of Lease and Rent), registration, consent or approval under, any law, rule, regulation (including, without limitation, Regulation U), order, writ, judgment, injunction, decree, determination or award presently in effect having applicability to it; (iv) result in a breach of or constitute a default or require any consent under any indenture or loan or credit agreement or any other agreement, lease or instrument to which it is a party or by which it or its properties may be bound or affected if such breach, default or failure to obtain consent could reasonably be expected to have a Material Adverse Effect; (v) result in, or require, the creation or imposition of any Lien (other than Permitted Property Liens and as created under the Security Documents), upon or with respect to any of the properties now owned or hereafter acquired by it; or (vi) cause it to be in default under any such law, rule, regulation, order, writ, judgment, injunction, decree, determination or award or, if such default could reasonably be expected to have a Material Adverse Effect, any such indenture, agreement, lease or instrument. (c) Legally Enforceable Agreements. Each Operative Document to which it is a party is, or when delivered under this Agreement will be, a legal, valid and binding obligation of such Person enforceable against such Person in accordance with its terms, except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency and other similar laws affecting creditors' rights generally. (d) Litigation. Except as disclosed in Item 8.2(d) of Schedule II hereto, there are no actions, suits or proceedings pending or, to its actual knowledge without investigation, threatened, against or affecting it before any court, Governmental Authority or arbitrator which could reasonably be expected to have a Material Adverse Effect. (e) Financial Statements. The consolidated balance sheets of the Consolidated Entities as at December 31, 1995, 1994, 1993, 1992 and 1991, and the related consolidated income statements and statements of cash flows and changes in stockholders' equity of the Consolidated Entities, for the fiscal years then ended, and the accompanying footnotes, together with the opinion on the consolidated statements of KPMG Peat Marwick L.L.P., independent certified public accountants, and the interim unaudited consolidated balance sheet of the Consolidated Entities as at September 30, 1996, and the related consolidated income statement and statements of cash flows and changes in stockholders' equity of the Consolidated Entities, for the three month period then ended, copies of which have been furnished to each of the Participants, are complete and correct and fairly present the financial condition of the Consolidated Entities at such dates and the results of the operations of the Consolidated Entities for the periods covered by such statements, all in accordance with GAAP consistently applied. Except as set forth on the consolidated balance sheet of the Consolidated Entities as at September 30, 1996, there are no liabilities of any Consolidated Entity, fixed or contingent, which are material but are not reflected in the financial statements or in the notes thereto and which would be required to be recorded in such financial statements or notes in accordance with GAAP. No written information, exhibit or report furnished by the Company or any Lessee to the Participants in connection with the negotiation of this Agreement (after giving effect to information so furnished that corrects, supplements or supersedes information previously furnished) contained any material misstatement of fact or omitted to state a material fact or any fact necessary to make the statements contained therein not materially misleading in each case as determined as of the date of the provision of such information, exhibit or report. Since September 30, 1996, there has been no change which could reasonably be expected to have a Material Adverse Effect. (f) ERISA. Each Plan and, to the best knowledge of the Company and each Lessee, Multiemployer Plan, is in compliance in all material respects with, and has been administered in all material respects in compliance with, the applicable provisions of ERISA, the Code and any other applicable Federal or state law, and no event or condition is occurring or exists concerning which the Company or any Lessee would be under an obligation to furnish a report to the Credit Facility Banks in accordance with Section 7.08(g) of the Credit Agreement. As of the most recent valuation date for each Plan, each Plan other than The Breyut Convalescent Center, Inc. Pension Fund was "fully funded", which for purposes of this Section 8.2(f) shall mean that the fair market value of the assets of the Plan is not less than the present value of the accrued benefits of all participants in the Plan, computed on a Plan termination basis. To the best knowledge of the Company and each Lessee, no such Plan has ceased being fully funded as of the date these representations are made with respect to any Loan under this Agreement. With respect to The Breyut Convalescent Center, Inc. Pension Fund, benefit accruals were frozen as of December 31, 1990 and the Unfunded Benefit Liabilities as projected by such Plan's enrolled actuary as of August 1, 1993 were $1,139,854. (g) Hazardous Materials. To its actual knowledge, each Lessee is in compliance in all material respects with all Environmental Laws. No Lessee has received any (i) notice, demand letters, inquiry, or requests for information from any Governmental Authority or any third party alleging any actual or threatened injury or damage to any person or property or the environment arising from any Release or threatened Release of Hazardous Materials at or from such Lessee's present or previously-owned or leased real properties or (ii) notice of any Lien held by any Governmental Authority under any Environmental Law that has attached to any revenues of, or to, any real properties owned or leased by such Lessee. (h) Governmental Regulation. Neither the Company nor any Lessee is subject to regulation under the Public Utility Holding Company Act of 1935, the Investment Company Act of 1940, the Interstate Commerce Act, the Federal Power Act or any statute or regulation limiting its ability to incur indebtedness for money borrowed as contemplated hereby. (i) Solvency. (i) The present fair saleable value of the assets of the Company and each Lessee after giving effect to all the transactions contemplated by the Operative Documents and the funding of the Commitments hereunder exceeds the amount that will be required to be paid on or in respect of the existing debts and other liabilities (including contingent liabilities) of such Person as they mature. (ii) The Property of the Company and each Lessee does not constitute unreasonably small capital for such Person to carry out its business as now conducted and as proposed to be conducted including the capital needs of such Person. (iii) The Company and each Lessee does not intend to, nor does such Person believe that it will, incur debts beyond its ability to pay such debts as they mature (taking into account the timing and amounts of cash to be received by such Person, and of amounts to be payable on or in respect of indebtedness of such Person). The cash available to such Person after taking into account all other anticipated uses of the cash of such Person, is anticipated to be sufficient to pay all such amounts on or in respect of debt of such Person when such amounts are required to be paid. (iv) The Company and each Lessee does not believe that final judgments against it in actions for money damages will be rendered at a time when, or in an amount such that, such Person will be unable to satisfy any such judgments promptly in accordance with their terms (taking into account the maximum reasonable amount of such judgments in any such actions and the earliest reasonable time at which such judgments might be rendered). The cash available to such Person after taking into account all other anticipated uses of the cash of such Person (including the payments on or in respect of debt referred to in paragraph (iii) of this Section 8.2(i)), is anticipated to be sufficient to pay all such judgments promptly in accordance with their terms. (j) Lessees. Each Lessee is an indirect wholly-owned Subsidiary of the Company. (k) Property. Each Property, and the contemplated use thereof by each Lessee and its agents, assignees, employees, lessees, licensees and tenants, will comply with all Material Requirements of Law (including, without limitation, all zoning and land use laws and Environmental Laws) and Material Insurance Requirements, except for such Requirements of Law as such Lessee shall be contesting in good faith by appropriate proceedings. There is no action, suit or proceeding (including any proceeding in condemnation or eminent domain or under any Environmental Law) pending or, to the best of the Company's and the applicable Lessee's actual knowledge, threatened with respect to the Company, such Lessee or any Property which Materially adversely affects the title to, or the use, operation or value of, any Property. (l) Condition of Property. All water, sewer, electric, gas, telephone and drainage facilities and all other utilities required to adequately service the applicable Improvements for each Property's intended use are available pursuant to adequate permits (including any that may be required under applicable Environmental Laws). No fire or other casualty with respect to any Property has occurred which fire or other casualty has had a Material adverse effect on any such Property. All Material services of public facilities and other utilities necessary for use and operation of each Property and the other Improvements for their primary intended purposes are available, including, without limitation, adequate water, gas and electrical supply, storm and sanitary sewerage facilities, telephone, other required public utilities and means of access between such Improvements and public highways for pedestrians and motor vehicles. All utilities serving each Property are located in either public rights-of-way abutting each Property or Appurtenant Rights. All Material licenses, approvals, authorizations, consents, permits (including building, demolition and environmental permits, licenses, approvals, authorizations and consents), easements and rights-of-way, including proof and dedication, required for the use, treatment, storage, transport, disposal or disposition of any Hazardous Substance on, at, under or from each Property have either been obtained from the appropriate Governmental Authorities having jurisdiction or from private parties, as the case may be. (m) [Intentionally Omitted]. (n) Insurance. Each Lessee has obtained, or will timely obtain, insurance coverage covering the applicable Property which meets the requirements of the Master Lease, and such coverage is in full force and effect. (o) Flood Hazard Areas. If any Property is located in an area identified as a special flood hazard area by the Federal Emergency Management Agency or other applicable agency, then flood insurance has been obtained for such Property in accordance with Article XIII of the Lease and in accordance with the National Flood Insurance Act of 1968, as amended. SECTION 8.3. Representation of Lessor. In addition to its representations and warranties set forth in Section 8.1 hereof, the Lessor represents and warrants to the Company and the Lessees that as of the Initial Acquisition Date it is a wholly-owned subsidiary of Key Bank, N.A., and that it is not financing its acquisition of the Equity Interests or any Property with non-recourse debt representing more than 97% of the acquisition cost of such Equity Interests or Property. The Lessor further represents and warrants that it will use reasonable commercial efforts with respect to itself to accommodate accounting pronouncements issued from time to time by the Financial Accounting Standards Board and reasonable interpretations thereof so that the Lessees may continue to treat the Lease as an operating lease under GAAP from the Lessor to the Lessees for purposes of the Lessees' financial reporting. ARTICLE IX PAYMENT OF CERTAIN EXPENSES The Lessees agree, for the benefit of the Lessor and the Lenders, that: SECTION 9.1. Transaction Expenses. (a) The Lessees shall pay, or cause to be paid, from time to time, all Transaction Expenses on the Documentation Date, or, to the extent not due and payable on the Documentation Date, on each Acquisition Date; provided, however, that, if the Lessees have not received written invoices therefor prior to such date, such Transaction Expenses shall be paid within thirty (30) days after the Lessees have received written invoices therefor. (b) The Lessees shall pay or cause to be paid (i) the fees set forth in the Fee Letter as provided therein, (ii) all Transaction Expenses incurred by the Lessor or any Lender in entering into any future amendments or supplements with respect to any of the Operative Documents, whether or not such amendments or supplements are ultimately entered into, or giving or withholding of waivers of consents hereto or thereto, in each case which have been requested by or approved by the Lessees, (iii) all Transaction Expenses incurred by the Lessor, the Lessees or the Lenders in connection with any purchase of the Property by any Lessee or other Person pursuant to Articles XVIII and XXI of the Master Lease and (iv) all Transaction Expenses incurred by any of the other parties hereto in respect of the successful enforcement of any of their rights or remedies against any Lessee in respect of the Operative Documents. SECTION 9.2. Brokers' Fees and Stamp Taxes. The Lessees shall pay or cause to be paid any brokers' fees and any and all stamp, transfer and other similar taxes, fees and excises, if any, including any interest and penalties, which are payable in connection with the transactions contemplated by this Participation Agreement and the other Operative Documents. ARTICLE X OTHER COVENANTS AND AGREEMENTS SECTION 10.1. Covenants of the Company and each Lessee. The Company and each Lessee hereby agree, for the benefit of the Lenders and the Lessor, to comply in full with all of their respective obligations under Articles 7, 8 and 9 (and successor provisions thereto) of the Credit Agreement, as such Credit Agreement may be amended from time to time in accordance with Section 3.01 of the Intercreditor Agreement, and to deliver (a) to each Participant a copy of each notice required to be delivered to any Credit Facility Bank pursuant to the provisions of such Articles of the Credit Agreement and (b) to the Lessor and the Lease Agent a copy of each notice required to be delivered to the Credit Facility Agent pursuant to the provisions of such Articles of the Credit Agreement, in each case within the time period specified in the Credit Agreement for delivery to the Credit Facility Banks or Credit Facility Agent, as applicable. If on any date (x) the Credit Agreement shall cease to be in effect or (y) all obligations of the Company and the Subsidiary Co-Borrowers shall have been paid in full and the commitments of the Credit Facility Banks thereunder shall be terminated in their entirety, then the provisions of Articles 7, 8 and 9 (and successor provisions thereto) of the Credit Agreement (as in effect immediately prior to such date) and all ancillary definitions related thereto shall automatically and without further action be incorporated by reference herein and made a part hereof as if originally set forth herein in full. SECTION 10.2. Right of Inspection. At any reasonable time and from time to time, but not more often than once per calendar year, and upon reasonable advance written notice but no advance notice shall be required if a Lease Default or a Lease Event of Default then exists, permit the Lessor or any Lender or any agent or representative thereof, to examine its records and books of account, and to discuss the affairs, finances and accounts of each Lessee, as applicable, with any of their respective officers and directors and independent accountants. Information not otherwise publicly available obtained in any such examination and identified as confidential shall be maintained in confidence by the Lessor or such Lender, as the case may be, and utilized only in connection with the transactions contemplated hereby. SECTION 10.3. Further Assurances. The Lessees and the Company hereby agree that so long as this Participation Agreement is in effect the Lessees and the Company shall take or cause to be taken from time to time all action reasonably necessary to assure that the intent of the parties pursuant to the Operative Documents is given effect as contemplated by this Participation Agreement and that the Collateral Agent holds a perfected Lien on each Property securing the obligations of the Company, the Lessees and the Lessor owing to the Secured Parties. The Lessees shall execute and deliver, or cause to be executed and delivered, to the Lessor from time to time, promptly upon request therefor, any and all other and further instruments (including correction instruments and supplemental mortgages, deeds of trust and security agreements) that may be reasonably requested by the Lessor to cure any deficiency in the execution and delivery of the Master Lease or any Operative Document to which it is a party. SECTION 10.4. Agreement of Parties With Respect to Assignment of Payments. Each of the parties hereto acknowledges and agrees that, after payment in full of all obligations of the Company and the Subsidiary Co- Borrowers owing to the Credit Facility Banks under the Credit Facility Documents and the permanent termination of all commitments of the Credit Facility Banks thereunder, the assignment of payments and rights made under the Assignment of Lease and Rent shall inure to the benefit of the Lease Agent on behalf of the Lenders and, in furtherance of the foregoing, all payments to be made under the Master Lease or any other Operative Document to the Collateral Agent shall instead be made to the Lease Agent for distribution by the Lease Agent in accordance with Article VII. SECTION 10.5. Removal of Liens. (a) The Lessor hereby agrees that so long as this Participation Agreement is in effect, (i) it will not create, incur, assume or suffer to exist any Lessor Lien upon the Master Lease, the Lease Supplements or any of the Properties and (ii) it will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Lessor Liens on the Properties (and its rights under the Operative Documents) attributable to it. (b) Each of the Lease Agent and the Collateral Agent hereby severally agrees that so long as this Participation Agreement is in effect, (i) it will not create, incur, assume or suffer to exist any Agent Lien attributable to it upon the Master Lease, the Lease Supplements or any of the Properties and (ii) it will, at its own cost and expense, promptly take such action as may be necessary duly to discharge, or to cause to be discharged, all Agent Liens on the Properties (and its rights under the Operative Documents) attributable to it. SECTION 10.6. Massachusetts Circular Letter. Each of the Lessees intends to fully comply with the requirements of Circular Letter DHCQ 4-95-351 of the Department of Public Health of the Commonwealth of Massachusetts. Each of the Lenders and the Lessor hereby acknowledges that the Lessees shall be deemed to be owners of the long-term care facility business for the purpose of Circular Letter DHCQ 4-95-351. SECTION 10.7. Cure Rights of Lessees. So long as no Lease Event of Default shall have occurred and be continuing, upon the occurrence of any Loan Agreement Event of Default, the Lessees shall have the right, but not the obligation, to take any such action in order to cure such Loan Agreement Event of Default upon written notice to the Lessor or to terminate the Loan Agreement and the Lease and purchase the Properties. SECTION 10.8. Non-Disturbance of Lessees. Notwithstanding any other provision herein or in any other Operative Document to the contrary, so long as no Event of Default (as defined in the Intercreditor Agreement) shall have occurred and be continuing, the Lenders shall not terminate the Master Lease (except pursuant to the terms thereof), accelerate any Rent or other amounts payable by any Lessee thereunder, demand the purchase of any or all of the Properties by any Lessee (whether pursuant to Section 16.2(e) of the Master Lease or otherwise), foreclose on any or all of the Properties (except as to the Lessor's interest therein), or disturb any Lessee's use, enjoyment and possession of the Properties, or take any action in violation of or inconsistent with the "non-disturbance" provisions of any Lease Facility Mortgage; provided, however, that nothing contained in this Section 10.8 shall in any way limit, restrict or impair any of the rights or remedies of the Lenders and the Lease Agent with respect to the Lessor under the Loan Agreement (except to the extent the exercise of such rights and remedies would be inconsistent with any of the foregoing provisions of this Section 10.8) and the Assignment of Lease and Rent. ARTICLE XI LESSEE DIRECTIONS SECTION 11.1. Lessee Directions. The Lessor, the Lenders, and the Lessees hereby agree that, so long as no Lease Event of Default exists, the Company, as agent for the Lessees, shall have the exclusive right to exercise any right of the Lessor under the Loan Agreement at any time, and the Lessor shall not exercise any right under the Loan Agreement without giving notice to the Company, as agent for the Lessees, at least two (2) Business Days' prior written notice, and following such notice, shall take such action or forebear from taking such action, as the Company, as agent for the Lessees, shall direct. The Lessor and the Lenders hereby acknowledge that Conversion/Continuation Notices given by the Company, as agent for the Lessees, to the Lessor shall be deemed, and considered as, notices given by the Lessor under the Loan Agreement. ARTICLE XII TRANSFERS OF PARTICIPANTS' INTERESTS SECTION 12.1. Assignments. All or any part of the interest of any Participant in, to or under this Participation Agreement, the other Operative Documents, the Properties or the Lease Facility Notes may be assigned or transferred by such Participant at any time; provided, however, that (a) each assignment or transfer shall comply with all applicable securities laws, (b) any assignment or transfer to a Person that is not an Affiliate of the transferor thereof shall, so long as no Lease Event of Default has occurred and is continuing, be subject to the prior written consent of the Company acting on behalf of the Lessees and the Lessor (which consent shall not be unreasonably withheld), and (c) any assignee or transferee acknowledges that the obligations to be performed from and after the date of such transfer or assignment under this Participation Agreement and all other Operative Documents are its obligations, including the obligations imposed by this Section 12.1 (and the transferor and transferee Participant shall deliver to the Lessees and the Lessor an Assignment Agreement, in substantially the form of Exhibit D (an "Assignment Agreement"), executed by the assignee or transferee; and provided, further, that (i) the Lessor may assign all or part of its interest in any of the foregoing without the prior written consent of the Company, as agent for the Lessees, if the retention of such interest constitutes a violation of Applicable Law or is contrary to the policy of SELCO Service Corporation, and the Lessor causes to be delivered to the Company, at the time of such assignment, a certificate of an officer of SELCO Service Corporation to such effect,) and (ii) any assignee or transferee further represents and warrants to the Lessor, each Participant and the Lessees that: (A) it is a commercial bank, savings and loan association, savings bank, depository institution, insurance company, branch or agency of a foreign bank or other similar financial institution, in each case, having a minimum capital and surplus of $50,000,000; (B) it has the requisite power and authority to accept such assignment or transfer; (C) it will not take any action with respect to such Lease Facility Note or the Properties, as the case may be, that would violate any applicable securities laws; (D) it will not assign or transfer any interest in such Lease Facility Note or its interest in the Properties, as the case may be, except in compliance with this Section 12.1; (E) it is purchasing its interest in its Lease Facility Note or funding its Lessor Amount, as the case may be, with assets that are not assets of any Employee Benefit Plan (or its related trust) which is subject to Title I of ERISA or Section 4975 of the Code; and it is not a "Benefit Plan Investor" as defined in 29 C.F.R. S 2510.3-101, and is not purchasing its interest in its Lease Facility Note or funding its Lessor Amount, as the case may be, with any assets of any Benefit Plan Investor; (F) it is not an Affiliate of the Lessor (or if it is the Lessor it is not an Affiliate of any Lender) and will not in the future become such an Affiliate unless it has provided the Company, as agent for the Lessees, sixty (60) days' prior written notice and upon the determination of the Company, as agent for the Lessees, that such affiliation will cause a Rate Setting Commission Trigger Event to occur, it will, upon payment in full of all amounts owed to such Participant, assign its interests hereunder to a third party designated by the Company, as agent of the Lessees; and (G) it will not transfer such Lease Facility Note or its interest in the Properties, as the case may be, unless the proposed transferee makes the foregoing representations and covenants. No assignment or transfer by a Participant prior to the Initial Acquisition Date will relieve such Participation from its obligation to fund an Advance hereunder if such Participant's assignee or transferee wrongfully fails to fund such Advance. Each assigning or transferring Participant shall remain liable under the Operative Documents, to the extent provided therein, for its acts and omissions occurring prior to any such assignment or transfer. SECTION 12.2. Participations. Any Participant may at any time sell to one or more commercial banks or other Persons (each of such commercial banks and other Persons being herein called a "Sub-Participant"), participating interests in all or a portion of its rights and obligations under this Participation Agreement, the other Operative Documents, the Properties or its Lease Facility Notes (including, without limitation, all or portion of the Rent owing to it); provided, however, that (a) no participation contemplated in this Section 12.2 shall relieve such Participant from its obligations hereunder or under any other Operative Document; (b) such Participant shall remain solely responsible for the performance of its Commitment and such other obligations; (c) the Lessees shall continue to deal solely and directly with such Participant in connection with such Participant's rights and obligations under this Participation Agreement and each of the other Operative documents; (d) no Sub-Participant shall be entitled to require such Participant to take or refrain from taking any action hereunder or under any other Operative Document except with respect to any change in the amount or timing of the payment of any interest, principal or other amounts payable under the Loan Agreement or this Agreement; and (e) no Sub-Participant shall be an Affiliate of the Lessor (or if it is a Sub-Participant of the Lessor it is not an Affiliate of any Lender) and will not in the future become such an Affiliate unless it has provided the Company, as agent for the Lessees, sixty (60) days' prior written notice and upon the determination of the Company, as agent for the Lessees, that such affiliation will cause a Rate Setting Commission Trigger Event to occur, it will, upon payment in full of all amounts owed to such Sub-Participant, sell its interests hereunder to a third party designated by the Company, as agent of the Lessees. Each Participant agrees that it will notify the Lessees promptly of the identity of each Sub-Participant to which it sells a participating interest hereunder and the amount of such participating interest. Each Lessee acknowledges and agrees that each Sub-Participant, for purposes of Article XIII, shall be considered a Participant. Notwithstanding anything to the contrary herein, no Sub-Participant shall be entitled to receive any greater amount than the transferor Participant would have been entitled to receive in respect of the amount of the participation transferred by such Participant had no such transfer occurred. SECTION 12.3. Withholding Taxes; Disclosure of Information; Pledge Under Regulation A. (a) If any Participant (or the assignee of or Sub-Participant in any Lease Facility Note of a Participant, each a "Transferee") is organized under the laws of any jurisdiction other than the United States or any State thereof, then such Participant or the Transferee of such Participant, as applicable, shall (as a condition precedent to acquiring or participating in such Loan and as a continuing obligation to the Lessor and the Lessee) (i) furnish to the Lessor and the Lessees in duplicate, for each taxable year of such Participant or Transferee during the term of the Lease, a properly completed and executed copy of either Internal Revenue Service Form 4224 or Internal Revenue Service Form 1001 and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any additional form (or such other form) as is necessary to claim complete exemption from United States withholding taxes (wherein such Transferee claims entitlement to complete exemption from United States withholding taxes on all payments hereunder), and (ii) provide to the Lessor and the Lessees a new Internal Revenue Service Form 4224 or Internal Revenue Service Form 1001 and Internal Revenue Service Form W-8 or Internal Revenue Service Form W-9 and any such additional form (or any successor form or forms) upon the expiration or obsolescence of any previously delivered form and comparable statements in accordance with applicable United States laws and regulations and amendments duly executed and completed by such Participant or Transferee, and to comply from time to time with all applicable United States laws and regulations with regard to such withholding tax exemption. By its acceptance of a participation or assignment of a Participant's Lease Facility Note or interest in the Properties, as the case may be, each Transferee shall be deemed bound by the provisions set forth in this Article XII. (b) Any Participant may, in connection with any assignment or participation or proposed assignment or participation pursuant to this Article XII, disclose to the assignee or participant or proposed assignee or participant, any information relating to the applicable Lessee, subject to any confidentiality requirements relating to such information. (c) Anything in this Article XII to the contrary notwithstanding, any Participant may without the consent of the Lessees assign and pledge all or any portion of the Lease Facility Notes held by it to any Federal Reserve Bank, the United States Treasury or to any other financial institution as collateral security pursuant to Regulation A of the F.R.S. Board and any operating circular issued by the Federal Reserve System and/or the Federal Reserve Bank or otherwise; provided, any payment by any Lessee for the benefit of the assigning or pledging Participant shall be deemed to satisfy such Lessee's obligations with respect thereto. (d) Anything in this Article XII to the contrary notwithstanding, each participation described herein shall be at the sole expense of the Participant engaging in such participation and shall not be subject to reimbursement by any Lessee or the Company. ARTICLE XIII INDEMNIFICATION SECTION 13.1. General Indemnification. The Lessees, jointly and severally, agree to assume liability for, and to indemnify, protect, defend, save and keep harmless each Indemnitee, on an After Tax Basis, from and against, any and all Claims that may be imposed on, incurred by or asserted against such Indemnitee, whether or not such Indemnitee shall also be indemnified as to any such Claim by any other Person, in any way relating to or arising out of: (a) any of the Operative Documents or any of the transactions contemplated thereby, and any amendment, modification or waiver in respect thereof; (b) the Properties or any part thereof or interest therein or any transfer of the Equity Interests to the Lessor or the dissolution of the Equity Interests by the Lessor (as is contemplated by the parties hereto); (c) the purchase, design, construction, preparation, installation, inspection, delivery, non-delivery, acceptance, rejection, ownership, management, possession, operation, rental, lease, sublease, repossession, maintenance, repair, alteration, modification, addition or substitution, storage, transfer of title, redelivery, use, financing, refinancing, disposition, operation, condition, sale (including, without limitation, any sale pursuant to Section 16.2(c), 16.2(e) or 18.2 of the Master Lease or any sale pursuant to Article XV, XVIII or XX of the Master Lease), return or other disposition of all or any part or any interest in the Properties or the imposition of any Lien other than Lessor Liens or Agent Liens (or incurring of any liability to refund or pay over any amount as a result of any Lien) thereon, including, without limitation: (1) Claims or penalties arising from any violation of law or in tort (strict liability or otherwise), (2) latent or other defects, whether or not discoverable, (3) any Claim based upon a violation or alleged violation of the terms of any restriction, easement, condition or covenant or other matter affecting title to the Properties, (4) the making of any Modifications in violation of any standards imposed by any insurance policies required to be maintained by the applicable Lessee pursuant to the Lease which are in effect at any time with respect to the Properties or any part thereof, (5) any Claim for patent, trademark or copyright infringement arising from the Lessor's ownership of the Properties or the Equity Interests, and (6) Claims arising from any public improvements with respect to the Properties resulting in any change or special assessments being levied against the Property or any plans to widen, modify or realign any street or highway adjacent to any of the Properties, or any Claim for utility "tap-in" fees; (d) the breach by the Company or any Lessee of any covenant, representation or warranty made by it or deemed made by it in any Operative Document or any certificate required to be delivered by any Operative Document; (e) the retaining or employment of any broker, finder or financial advisor by the Company or any Lessee to act on its behalf in connection with this Participation Agreement; (f) the existence of any Lien on or with respect to the Properties, the Improvements, any Basic Rent or Supplemental Rent, title thereto, or any interest therein including any Liens which arise out of the possession, use, occupancy, construction, repair or rebuilding of the Property or by reason of labor or materials furnished or claimed to have been furnished to any Lessee, or any of its contractors or agents or by reason of the financing of any personalty or equipment purchased or leased by any Lessee or Modifications constructed by any Lessee, except Lessor Liens, Agent Liens and Liens in favor of the Collateral Agent, the Lease Agent, the Lenders or the Lessor; or (g) subject to the accuracy of any Participant's representation set forth in Section 8.1(a), as to such Participant, the transactions contemplated by the Lease or by any other Operative Document, in respect of the application of Parts 4 and 5 of Subtitle B of Title I of ERISA and any prohibited transaction described in Section 4975(c) of the Code; provided, however, that the Lessees shall not be required to indemnify any Indemnitee under this Section 13.1 for any of the following: (1) any Claim to the extent resulting from the willful misconduct or gross negligence of such Indemnitee or any member of its Indemnitee Group (it being understood that the Lessees shall be required to indemnify an Indemnitee even if the ordinary (but not gross) negligence of such Indemnitee caused or contributed to such Claim) or the breach of any representation, warranty or covenant of such Indemnitee set forth in any Operative Document, (2) any Claim resulting from Lessor Liens which the Lessor or the Lenders is responsible for discharging under the Operative Documents, (3) any Claim to the extent attributable to acts or events occurring after the expiration of the Term or the return or remarketing of the Property so long as the Lessor and the Lenders are not exercising remedies against the Lessees or any of them in respect of the Operative Documents, (4) any Claim arising from a breach or alleged breach by the Lenders or the Lessor of any agreement entered into in connection with the assignment or participation of any Loan or Lessor Amount, and (5) any Claim indemnified against in Section 13.2, 13.3 or 13.5. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under the Lease or any other Operative Document. Without limiting the express rights of any Indemnitee under this Section 13.1, this Section 13.1 shall be construed as an indemnity only and not a guaranty of residual value of the Properties or as a guaranty of the Lease Facility Notes. SECTION 13.2. End of Term Indemnity. (a) If the Lessees elect the Remarketing Option and there would, after giving effect to the proposed remarketing transactions, be a Shortfall Amount, then prior to the Expiration Date and as a condition to the Lessees' right to complete the remarketing of the Properties pursuant to Section 20.1 of the Lease, the Lessees shall cause to be delivered to the Lessor at least one hundred twenty (120) days prior to the Expiration Date, at the Lessees' sole cost and expense, a report from the Person that delivered the Appraisal in form and substance satisfactory to the Participants (the "End of the Term Report") which shall state the appraiser's conclusions as to the reason for any decline in the Fair Market Sales Value of any of the Property from that anticipated for such date in the Appraisal delivered on the applicable Acquisition Date. (b) If the Lessees exercise the Remarketing Option, then on or prior to the Expiration Date the Lessees shall pay to the Lessor an amount (not to exceed the Shortfall Amount) equal to the portion of the Shortfall Amount that the End of the Term Report demonstrates was the result of a decline in the Fair Market Sales Value of the applicable Property due to (i) failure to maintain, to repair, to restore, to rebuild or to replace, failure to comply with all applicable laws, failure to use, workmanship, method of installation or removal or maintenance, repair, rebuilding or replacement, (excepting in each case ordinary wear and tear), in each case as required under the Lease, or (ii) any Modification made to, or any rebuilding of, the applicable Properties or any part thereof by the applicable Lessee not meeting the criteria required under the Lease, or (iii) the existence of any Hazardous Activity, Hazardous Materials or Environmental Violations as prohibited under the Lease, the indemnity for which shall not exceed the cost of the remediation thereof, or (iv) any use of any of the applicable Properties or any part thereof by the applicable Lessee or any sublessee other than as a long-term care or similar or related facility, or (v) any grant, release, dedication, transfer, annexation or amendment of the type referred to in Section 11.2 of the Master Lease other than those permitted under Section 11.2 of the Master Lease, or (vi) the failure of the Lessor to have good and marketable title to any of the applicable Properties free and clear of all Liens (excluding Permitted Property Liens), or (vii) the existence of any sublease relating to any of the applicable Properties that shall survive the Expiration Date. SECTION 13.3. Environmental Indemnity. Without limitation of the other provisions of this Article XIII, each Lessee hereby agrees to indemnify, defend and hold each Indemnitee harmless from and against any and all claims (including without limitation third party claims for personal injury or real or personal property damage), losses, damages, liabilities, fines, penalties, administrative and judicial proceedings (including informal proceedings) and orders, judgments and enforcement actions of any kind, and all reasonable and documented costs and expenses incurred in connection therewith (including reasonable and documented attorneys' and/or paralegals' fees and expenses), including all costs incurred in connection with any investigation or monitoring of environmental conditions or any clean-up, remedial, removal or restoration work by any federal, state or local government agency, arising in whole or in part, out of (a) the presence on or under any of the Properties of any Hazardous Materials, or any Release of any Hazardous Materials on, under, from or onto any of the Properties, or (b) any violation of or non-compliance with any Environmental Laws by any Lessee or any of its agents, or contractors; provided, however, no Lessee shall be required to indemnify any Indemnitee under this Section 13.3 for (1) any Claim to the extent resulting from the willful misconduct or gross negligence of such Indemnitee or (2) any Claim to the extent attributable to acts or events occurring after the expiration of the Term or the return or remarketing of any such Property so long as the Lessor and the Lenders are not exercising remedies against the applicable Lessee in respect of the Operative Documents. It is expressly understood and agreed that the indemnity provided for herein shall survive the expiration or termination of and shall be separate and independent from any remedy under the Lease or any other Operative Document. SECTION 13.4. Proceedings in Respect of Claims. With respect to any amount that a Lessee is requested by an Indemnitee to pay by reason of Section 13.1 or 13.3, such Indemnitee shall, if so requested by the Lessee and prior to any payment, submit such additional information to the Lessee as the Lessee may reasonably request and which is in the possession of such Indemnitee to substantiate properly the requested payment. In case any action, suit or proceeding shall be brought against any Indemnitee, or if any Indemnitee becomes aware of a Claim or potential Claim, such Indemnitee promptly shall notify the applicable Lessee in writing of the commencement or existence thereof. If the Indemnitee fails to notify the applicable Lessee promptly, the applicable Lessee's obligation to indemnify such Indemnitee shall be relieved to the extent such failure limits the ability of the Lessee to contest such Claim. The applicable Lessee shall be entitled, at its expense, to participate in, and, to the extent that the Lessee desires to, assume and control the defense of any such Claim; provided, however, that such Lessee shall have acknowledged in writing its obligation to fully indemnify such Indemnitee in respect of such action, suit or proceeding, and the Lessee shall keep such Indemnitee fully apprised of the status of such action, suit or proceeding and shall provide such Indemnitee with all information with respect to such action, suit or proceeding as such Indemnitee shall reasonably request, and provided, further, that the applicable Lessee shall not be entitled to assume and control the defense of any such action, suit or proceeding if and to the extent that, (A) in the reasonable opinion of such Indemnitee, (x) such action, suit or proceeding involves any risk of imposition of criminal liability or will involve a risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Property Lien) on the Property or any part thereof unless, in the case of civil liability, the applicable Lessee shall have posted a bond or other security satisfactory to the relevant Indemnitees in respect to such risk or (y) the control of such action, suit or proceeding would involve an actual or potential conflict of interest between such Indemnitee and the applicable Lessee, (B) such proceeding involves Claims not fully indemnified by the applicable Lessee which the applicable Lessee and the Indemnitee have been unable to sever from the indemnified claim(s), or (C) an Event of Default under the Lease has occurred and is continuing. The Indemnitee will join in the applicable Lessee's efforts to sever such action. The Indemnitee may participate in a reasonable manner at its own expense and with its own counsel in any proceeding conducted by the applicable Lessee in accordance with the foregoing. The applicable Lessee shall not enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under Section 13.1 or 13.3 without the prior written consent of the Indemnitee, which consent shall not be unreasonably withheld or delayed in the case of a money settlement not involving an admission of liability of such Indemnitee; provided, however, that in the event that such Indemnitee withholds consent to any settlement or other compromise, the applicable Lessee shall not be required to indemnify such Indemnitee to the extent that the applicable Claim (x) is for legal fees and expenses incurred after the date of the proposed settlement or (y) results in a judgment in excess of such offered money settlement. Each Indemnitee shall at the expense of the applicable Lessee supply the applicable Lessee with such information and documents reasonably requested by the applicable Lessee as are necessary or advisable for such Lessee to participate in any action, suit or proceeding to the extent permitted by Section 13.1 or 13.3. Unless an Event of Default under the Lease shall have occurred and be continuing, no Indemnitee shall enter into any settlement or other compromise with respect to any Claim which is entitled to be indemnified under Section 13.1 or 13.3 without the prior written consent of the applicable Lessee, which consent shall not be unreasonably withheld, unless such Indemnitee waives its right to be indemnified under Section 13.1 or 13.3 with respect to such Claim. Upon payment in full of any Claim by the applicable Lessee pursuant to Section 13.1 or 13.3 to or on behalf of an Indemnitee, the applicable Lessee, without any further action, shall be subrogated to any and all claims that such Indemnitee may have relating thereto (other than claims in respect of insurance policies maintained by such Indemnitee at its own expense), and such Indemnitee shall execute such instruments of assignment and conveyance, evidence of claims and payment and such other documents, instruments and agreements as may be necessary to preserve any such claims and otherwise cooperate with the applicable Lessee and give such further assurances as are necessary or advisable to enable the applicable Lessee vigorously to pursue such claims. Any amount payable to an Indemnitee pursuant to Section 13.1 or 13.3 shall be paid to such Indemnitee promptly upon receipt of a written demand therefor from such Indemnitee, accompanied by a written statement describing in reasonable detail the basis for such indemnity and the computation of the amount so payable and, if requested by the applicable Lessee, such determination shall be verified by a nationally recognized independent accounting firm mutually acceptable to the Lessee and the Indemnitee at the expense of the applicable Lessee; provided, however, that if the applicable Lessee has assumed the defense of the related Claim or is paying the costs of the Indemnitee's defense of the related Claim on an ongoing basis, the Lessee shall not be required to pay such amount to the applicable Indemnitee until such time as a judgment is entered with respect to such Claim, the enforcement of which is not stayed or which judgment is not bonded over, or the Claim is otherwise settled or lost. SECTION 13.5. General Tax Indemnity. (a) Indemnification. The Lessees, jointly and severally, shall pay and assume liability for, and do hereby agree to indemnify, protect and defend the applicable Property and all Tax Indemnitees, and hold them harmless against, all Impositions on an After Tax Basis. (b) Contests. Except as otherwise provided in Section 12.1 of the Master Lease with respect to Property Taxes, if any claim shall be made against any Tax Indemnitee or if any proceeding shall be commenced against any Tax Indemnitee (including a written notice of such proceeding) for any Imposition as to which the Lessees may have an indemnity obligation pursuant to this Section 13.5, or if any Tax Indemnitee shall receive notice that any Imposition to which the Lessees may have an indemnity obligation pursuant to this Section 13.5 may be payable, such Tax Indemnitee shall promptly (and, in any event, within 30 days) notify the Company, as agent for the Lessees, in writing (provided that failure to so promptly notify the Company within 30 days shall not alter such Tax Indemnitee's rights under this Section 13.5 except to the extent such failure precludes or materially adversely affects the ability to conduct a contest of any indemnified Taxes) and shall not take any action with respect to such claim, proceeding or Imposition without the written consent of the Company, as agent for the Lessees, (such consent not to be unreasonably withheld or unreasonably delayed) for 30 days after the receipt of such notice by the Company or thereafter if the applicable Lessee has commenced to take appropriate action; provided, however, that in the case of any such claim or proceeding, if such Tax Indemnitee shall be required by law or regulation to take action prior to the end of such 30-day period, such Tax Indemnitee shall in such notice to the applicable Lessee, so inform the Company, as agent for the Lessees, and such Tax Indemnitee shall not take any action with respect to such claim, proceeding or Imposition without the consent of the Company, as agent for the Lessees, (such consent not to be unreasonably withheld or unreasonably delayed) for 10 days after the receipt of such notice by the Company or thereafter if the applicable Lessee has commenced to take appropriate action, unless such Tax Indemnitee shall be required by law or regulation to take action prior to the end of such 10-day period. The Company shall be entitled for a period of 30 days from receipt of such notice from such Tax Indemnitee (or such shorter period as such Tax Indemnitee has notified the Lessees is required by law or regulation for such Tax Indemnitee to commence such contest), to request in writing that such Tax Indemnitee contest the imposition of such Tax, at the expense of the applicable Lessee. If (x) such contest can be pursued in the name of the applicable Lessee and independently from any other proceeding involving a Tax liability of such Tax Indemnitee for which the applicable Lessee has not agreed to indemnify such Tax Indemnitee, (y) such contest must be pursued in the name of such Tax Indemnitee, but can be pursued independently from any other proceeding involving a Tax liability of such Tax Indemnitee for which the applicable Lessee has not agreed to indemnify such Tax Indemnitee or (z) such Tax Indemnitee so requests, then the applicable Lessee shall be permitted to control the contest of such claim, provided that in the case of a contest described in clause (y), if such Tax Indemnitee determines reasonably and in good faith that such contest by the applicable Lessee could have a material adverse impact on the business or operations of such Tax Indemnitee and provides a written explanation to such Lessee of such determination, such Tax Indemnitee may elect to control or reassert control of the contest, and provided, that by taking control of the contest, the applicable Lessee acknowledges that it is responsible for the Imposition ultimately determined to be due by reason of such claim, and provided, further, that in determining the application of clauses (x) and (y) above, each Tax Indemnitee shall take any and all reasonable steps to segregate claims for any Taxes for which the applicable Lessee indemnifies hereunder from Taxes for which the applicable Lessee is not obligated to indemnify hereunder, so that the applicable Lessee can control the contest of the former. In all other claims requested to be contested by the Company, as agent for the Lessees, such Tax Indemnitee shall control the contest of such claim, acting through counsel reasonably acceptable to the Company, as agent for the Lessees. In no event shall the applicable Lessee be permitted to contest (or such Tax Indemnitee required to contest) any claim, (A) if such Tax Indemnitee provides the applicable Lessee with a legal opinion of counsel reasonably acceptable to the applicable Lessee that such action, suit or proceeding involves a material risk of imposition of criminal liability or will involve a material risk of the sale, forfeiture or loss of, or the creation of any Lien (other than a Permitted Lien) on any Property or any part of any thereof unless the applicable Lessee shall have posted and maintained a bond or other security satisfactory to the relevant Tax Indemnitee in respect to such risk, (B) if an Event of Default has occurred and is continuing unless the applicable Lessee shall have posted and maintained a bond or other security satisfactory to the relevant Tax Indemnitee in respect of the Taxes subject to such claim and any and all expenses for which the applicable Lessee is responsible hereunder reasonably foreseeable in connection with the contest of such claim, (C) unless the applicable Lessee shall have agreed to pay and shall pay, to such Tax Indemnitee on demand all reasonable out-of-pocket costs, losses and expenses that such Tax Indemnitee may incur in connection with contesting such Imposition including all reasonable legal, accounting and investigatory fees and disbursements, or (D) if such contest shall involve the payment of the Tax prior to the contest, unless the applicable Lessee shall provide to such Tax Indemnitee an interest-free advance in an amount equal to the Imposition that the Indemnitee is required to pay (with no additional net after-tax costs to such Tax Indemnitee). In addition for Tax Indemnitee controlled contests and claims contested in the name of such Tax Indemnitee in a public forum, no contest shall be required: (A) unless the amount of the potential indemnity (taking into account all similar or logically related claims that have been or could be raised in any audit involving such Tax Indemnitee with respect to any period for which the applicable Lessee may be liable to pay an indemnity under this Section 13.5(b)) exceeds $25,000 and (B) unless, if requested by such Tax Indemnitee, the applicable Lessee shall have provided to such Tax Indemnitee an opinion of counsel selected by the Company (which may be in-house counsel) (except, in the case of income taxes indemnified hereunder which shall be an opinion of independent tax counsel selected by such Tax Indemnitee and reasonably acceptable to the applicable Lessee) that a reasonable basis exists to contest such claim. In no event shall a Tax Indemnitee be required to appeal an adverse judicial determination to the United States Supreme Court. The party conducting the contest shall consult in good faith with the other party and its counsel with respect to the contest of such claim for Taxes (or claim for refund) but the decisions regarding what actions to be taken shall be made by the controlling party in its sole judgement, provided, however, that if such Tax Indemnitee is the controlling party and the applicable Lessee recommends the acceptance of a settlement offer made by the relevant Governmental Authority and such Tax Indemnitee rejects such settlement offer then the amount for which the applicable Lessee will be required to indemnify such Tax Indemnitee with respect to the Taxes subject to such offer shall not exceed the amount which it would have owed if such settlement offer had been accepted. In addition, the controlling party shall keep the noncontrolling party reasonably informed as to the progress of the contest, and shall provide the noncontrolling party with a copy of (or appropriate excerpts from) any reports or claims issued by the relevant auditing agents or taxing authority to the controlling party thereof, in connection with such claim or the contest thereof. Each Tax Indemnitee shall at the applicable Lessee's expense supply the applicable Lessee with such information and documents reasonably requested by the Company as are necessary or advisable for the applicable Lessee to participate in any action, suit or proceeding to the extent permitted by this Section 13.5(b). Notwithstanding anything in this Section 13.5(b) to the contrary, no Tax Indemnitee shall enter into any settlement or other compromise or fail to appeal an adverse ruling (which appeal has been requested in writing by the applicable Lessee) with respect to any claim which may be entitled to be indemnified under this Section 13.5 without the prior written consent of the applicable Lessee, such entering into of a settlement or compromise, or such failure to appeal, without such consent, shall constitute a waiver of all rights to indemnification under this Section 13.5 with respect to such claim. Notwithstanding anything contained herein to the contrary, a Tax Indemnitee will not be required to contest (and the applicable Lessee shall not be permitted to contest) a claim with respect to the imposition of any Tax if such Tax Indemnitee shall waive in writing, in a form acceptable to the Lessees, its right to indemnification under this Section 13.5 with respect to such claim (and any claim with respect to such year or any other taxable year the contest of which is materially adversely affected as a result of such waiver). (c) Reimbursement for Tax Savings. If (x) a Tax Indemnitee or any Affiliate thereof realizes a deduction, offset, credit or refund of any Taxes or any other savings or benefit (by way of allowance, allocation or otherwise) as a result of any indemnity paid by the applicable Lessee pursuant to this Section 13.5 or (y) by reason of the incurrence or imposition of any Tax (or the circumstances or event giving rise thereto) for which a Tax Indemnitee is indemnified hereunder or any payment made to or for the account of such Tax Indemnitee by the applicable Lessee pursuant to this Section 13.5 or any payment made by a Tax Indemnitee to the applicable Lessee by reason of this Section 13.5(c), such Tax Indemnitee at any time actually realizes a reduction in any Taxes, which reduction in Taxes was not taken into account in computing such payment by the applicable Lessee to or for the account of such Tax Indemnitee or by such Tax Indemnitee to the applicable Lessee, then such Tax Indemnitee shall promptly pay to the applicable Lessee (xx) amount of such deduction, offset, credit, refund, or other savings or benefit together with the amount of any interest received by such Tax Indemnitee on account of such deduction, offset, credit, refund or other savings or benefit or (yy) an amount equal to such reduction in Taxes, as the case may be, in either case together with an amount equal to any reduction in Taxes payable by such Tax Indemnitee as a result of such payment; provided that no such payment shall be made so long as a Default or Event of Default shall have occurred and be continuing but shall be paid promptly after cure of such Default or Event of Default. Each Tax Indemnitee agrees to take such actions as the applicable Lessee may reasonably request (provided in the good faith judgment of such Tax Indemnitee, such actions would not result in a material adverse effect on such Tax Indemnitee for which such Tax Indemnitee is not entitled to indemnification from the Lessee) and to otherwise act in good faith to claim such refunds and other available Tax benefits, and take such other actions as may be reasonable to minimize any payment due from the applicable Lessee pursuant to this Section 13.5 and to maximize the amount of any Tax savings available to it. The disallowance or reduction of any credit, refund or other savings with respect to which a Tax Indemnitee has made a payment to the applicable Lessee under this Section 13.5(e) shall be treated as a Tax for which the applicable Lessee is obligated to indemnify such Tax Indemnitee hereunder. (d) Payments. Any Imposition indemnifiable under this Section 13.5 shall be paid within thirty (30) days after receipt of a written demand therefor from the relevant Tax Indemnitee accompanied by a written statement describing in reasonable detail the amount so payable, but not before two Business Days prior to the date that the relevant Taxes are due; such amount shall be paid directly (but not until such Taxes are due) to the applicable taxing authority if direct payment is practicable and permitted or, if not practical or permitted, to such Indemnitee. Any payments made to a Tax Indemnitee or to any Lessee pursuant to this Section 13.5 shall be made directly to such Tax Indemnitee entitled thereto or the applicable Lessee, as the case may be, in immediately available funds at such bank or to such account as specified by the payee in written directions to the payor, or, if no such direction shall have been given, by check of the payor payable to the order of the payee by certified mail, postage prepaid at its address as set forth in Schedule I hereto. Upon the request of any Tax Indemnitee with respect to a Tax that any Lessee is required to pay, such Lessee shall furnish to such Tax Indemnitee the original or a certified copy of a receipt for such Lessee's payment of such Tax or such other evidence of payment as is reasonably acceptable to such Tax Indemnitee. (e) Reports. In the case of any report, return or statement required to be filed with respect to any Taxes that are subject to indemnification under this Section 13.5 and of which the applicable Lessee has knowledge, the applicable Lessee shall promptly notify such Tax Indemnitee of such requirement and, at the applicable Lessee's expense (i) if the applicable Lessee is permitted (unless otherwise requested by such Tax Indemnitee) by Applicable Law, timely file such report, return or statement in its own name or (ii) if such report, return or statement is required to be in the name of or filed by such Tax Indemnitee or such Tax Indemnitee otherwise requests that such report, return or statement be prepared for filing by such Tax Indemnitee, the applicable Lessee shall prepare such report, return or statement in such manner as shall be reasonably satisfactory to such Tax Indemnitee and send the same to such Tax Indemnitee for filing no later than 15 days prior to the due date therefor. In any case in which such Tax Indemnitee will file any such report, return or statement, the applicable Lessee shall, upon written request of such Tax Indemnitee, provide such Tax Indemnitee with such information as is reasonably necessary to allow such Tax Indemnitee to file such report, return or statement. (f) Verification. At the applicable Lessee's request, the amount of any indemnity payment by the applicable Lessee or any payment by a Tax Indemnitee to the applicable Lessee pursuant to this Section 13.5 shall be verified and certified by an independent public accounting firm mutually acceptable to such Lessee and such Tax Indemnitee. The costs of such verification shall be borne by the applicable Lessee unless such verification shall result in an adjustment in the applicable Lessee's favor of the lesser of (i) $10,000, and (ii) 5 percent of the payment as computed by such Tax Indemnitee, in which case such fee shall be paid by such Tax Indemnitee. In no event shall the applicable Lessee have the right to review such Tax Indemnitee's tax returns or receive any other confidential information from such Tax Indemnitee in connection with such verification; provided that all information reasonably necessary to perform such verification shall be made available to such accounting firm. Any information provided to such accountants by any Person shall be and remain the exclusive property of such Person and shall be deemed by the parties to be (and the accountants will confirm in writing that they will treat such information as) the private, proprietary and confidential property of such Person, and no Person other than such Person and the accountants shall be entitled thereto and all such materials shall be returned to such Person. Such accounting firm shall be requested to make its determination within 30 days of the applicable Lessee's request for verifications and the computations of the accounting firm shall be final, binding and conclusive upon the applicable Lessee and such Tax Indemnitee. The parties agree that the sole responsibility of the independent public accounting firm shall be to verify the amount of a payment pursuant to this Agreement and that matters of interpretation of this Agreement are not within the scope of the independent accounting firm's responsibilities. (g) Tax Ownership. Each Tax Indemnitee represents and warrants that it will not, prior to the termination of the Master Lease, claim ownership of (or any tax benefits, including depreciation, with respect to) any Property for any income tax purposes, it being understood that each Lessee is and will remain the owner of the applicable Property for such income tax purposes at least until the termination of the Master Lease. If, notwithstanding the income tax intentions of the parties as set forth herein, any Tax Indemnitee actually receives any income tax deductions, reductions in income tax or other income tax benefit as a result of any claim for, or recharacterization or other event or circumstance requiring such party to take, any tax benefits attributable to ownership of any Property for income tax purposes, such Tax Indemnitee shall pay to the applicable Lessee, together with an amount equal to any reduced Taxes payable by such Tax Indemnitee as a result of such payment, the amount of such income tax savings realized by such Tax Indemnitee (less the amount of any anticipated increase in income tax which such Tax Indemnitee determines is currently payable as a result of such claim or recharacterization), provided that each Lessee shall agree to reimburse such Tax Indemnitee for any subsequent increase in such Tax Indemnitee's income taxes resulting from such claim or recharacterization not taken into account in the payment made to such Lessee, up to the net amount paid to such Lessee by each Tax Indemnitee. The parties agree that this Section 13.5(g) is intended to require a payment to a Lessee if and only if a Tax Indemnitee shall have received tax savings with respect to any Property that would not have been received if such Tax Indemnitee had advanced funds to such Lessee in the form of a loan secured by such Property in an amount equal to the applicable Property Cost. Each Tax Indemnitee shall be required in good faith to take any affirmative action to realize any such tax savings except if in its reasonable judgment such action will have a material adverse affect on such Tax Indemnitee. SECTION 13.6. Indemnity Payments in Addition to Lease Obligations. The Lessees acknowledge and agree that the obligation to make indemnity payments under this Article XIII are separate from, in addition to, and do not reduce, the Lessees' obligations to pay under the Lease that portion of the Lease Balance constituting the Lease Recourse Amount. SECTION 13.7. LIBO Rate Lending Unlawful. If, on or after the date hereof, the adoption of any applicable law, rule or regulation, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or compliance by any Participant (or its Funding Office) with any request or directive (whether or not having the force of law) of any such authority, central bank or comparable agency shall make it unlawful or impossible for the Lessor or any Lender, as the case may be (or its Funding Office) to make, maintain or fund Loans or Lessor Amount, as applicable, at the LIBO Rate (Reserve Adjusted) and such Participant shall promptly so notify the Company, as agent for the Lessees, whereupon until such Participant notifies the Company that the circumstances giving rise to such suspension no longer exist, the obligation to continue LIBO Rate Amounts or convert ABR Amounts into LIBO Rate Amounts shall be suspended. Such Participant, with the consent of the Company, as agent for the Lessees, (which consent shall not unreasonably be withheld), will designate a different Funding Office if such designation will avoid the need for giving such notice and will not, in the judgment of such Participant, be otherwise disadvantageous to such Participant. If such notice is given, then (i) the Company, as agent for the Lessees, shall be entitled upon its request to a reasonable explanation of the factors underlying such notice and (ii) each LIBO Rate Amount of such Participant then outstanding shall automatically convert into an ABR Amount either (a) on the last day of the then current Interest Period applicable thereto, if such Participant may lawfully continue to maintain and fund such LIBO Rate Amount to such day or (b) immediately, if such Participant shall determine that it may not lawfully continue to maintain and fund such LIBO Rate Amount to such day. SECTION 13.8. Deposits Unavailable. If any of the Participants shall have determined that (i) Dollar deposits in the relevant amount and for the relevant Interest Period are not available to the Participant in its relevant market; or (ii) by reason of circumstances affecting the Participant's relevant market, adequate means do not exist for ascertaining the Applicable Rate applicable to such Participant's LIBO Rate Amounts, then such Participant shall promptly notify the Company, as agent for the Lessees, of same and, upon notice from such Participant to the Company, as agent for the Lessees, and the other Participants, (i) the obligations of the Participants to continue LIBO Rate Amounts or convert ABR Amounts into LIBO Rate Amounts shall be suspended as of the last day of the then current Interest Period applicable thereto and (ii) each outstanding LIBO Rate Amount shall automatically convert into an ABR Amount on the last day of the then current Interest Period applicable thereto. SECTION 13.9. Increased Costs, etc. (a) In the event that the adoption of any applicable law, rule or regulation, or any change therein or in the interpretation or application thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof or compliance by any Participant with any request or directive after the date hereof (whether or not having the force of law) of any such authority, central bank or comparable agency: (i) does or shall subject any Participant to any additional tax of any kind whatsoever with respect to the Operative Documents or any Loan or Lessor Amount, as applicable, made by it, or change the basis or the applicable rate of taxation of payments to such Participant of principal, interest or any other amount payable hereunder (except for the imposition of or change in any tax on or measured by or with respect to the overall gross or net income, or gross or net receipts (including, without limitation, any minimum taxes, income or capital gains taxes, or taxes on, or measured by or with respect to or in the nature of capital, net worth, excess profits, items of tax preference, capital stock, business privilege or doing business or any other similar taxes) of such Participant (other than any such tax imposed by means of withholding and specifically excluding income taxes merely collected by means of withholding) or any tax imposed in lieu thereof); (ii) does or shall impose, modify or hold applicable any reserve, special deposit, insurance assessment, compulsory loan or similar requirement against assets held by, or deposits or other liabilities in or for the account of, advances or loans by, or other credit extended by, or any other acquisition of funds by, any office of such Participant which are applicable to banks generally and not otherwise included in determination of the rate of interest on Loan or Lessor Amount, as applicable, hereunder; or (iii) does or shall impose on such Participant any other condition applicable to banks generally; and the result of any of the foregoing is to increase the cost to such Participant of making or maintaining any LIBO Rate Amount, or to reduce any amount receivable hereunder, then in any such case, such Participant shall promptly notify the Company, as agent for the Lessees, and the Lessees shall promptly pay to such Participant, upon demand, any additional amounts necessary to compensate such Participant for such increased cost or reduced amount receivable which such Participant deems to be material as determined by such Participant with respect to any LIBO Rate Amount, and the Lessees may act to minimize such increased cost or the reduction in the amount receivable, so long as such action does not adversely affect such Participant. (b) If any Participant shall have determined that, after the date hereof, the adoption of any applicable law, rule or regulation regarding capital adequacy, or any change therein, or any change in the interpretation or administration thereof by any governmental authority, central bank or comparable agency charged with the interpretation or administration thereof, or any request or directive regarding capital adequacy (whether or not having the force of law) of any such authority, central bank or comparable agency, has or would have the effect of reducing the rate of return on capital of such Participant (or any entity directly or indirectly controlling such Participant) as a consequence of such Participant's obligations under the Operative Documents to a level below that which such Participant (or any entity directly or indirectly controlling such Participant) could have achieved but for such adoption, change, request or directive (taking into consideration its policies with respect to capital adequacy) by an amount deemed by such Participant to be material, then such Participant shall promptly notify the Company, as agent for the Lessees, of same and, from time to time, within fifteen (15) days after demand by such Participant, the Lessees shall pay to such Participant such additional amount or amounts as will compensate such Participant (or its Parent) for such reduction, and the Lessees may act to minimize such increased cost or the reduction in the amount receivable, so long as such action does not adversely affect such Participant. (c) Each Participant will promptly notify the Company, as agent for the Lessees, of any event of which it has knowledge, occurring after the date hereof, which will entitle such Participant to compensation pursuant to this Section and will, if practicable, with the consent of the Company, as agent for the Lessees (which consent shall not unreasonably be withheld), designate a different Funding Office or take any other reasonable action if such designation or action will avoid the need for, or reduce the amount of, such compensation and will not, in the judgment of such Participant, be otherwise disadvantageous to such Participant. A certificate of such Participant claiming compensation under this Section and setting forth in reasonable detail its computation of the additional amount or amounts to be paid to it hereunder shall be presumed correct in the absence of demonstrable error. In determining such amount, such Participant may use any reasonable averaging and attribution methods. (d) Notwithstanding the foregoing clauses (a) and (b) of this Section 13.9, the Lessees shall only be obligated to compensate such Participant for any amount arising or accruing both: (i) during (A) any time or period commencing (x) in the case of subsection (a), not earlier than the first day of any Interest Period in effect on the date which, and (y) in the case of subsection (b), not earlier than the date on which, such Participant notifies the Company, as agent for the Lessees, that it proposes to demand such compensation and identifies to the Company in such notice the statute, regulation or other basis upon which the claimed compensation is or will be based and how amounts owing thereunder are to be allocated to the Lessees and (B) any time or period during which, because of the retroactive application of such statute, regulation or other basis, such Participant did not know that such amount would arise or accrue; and (ii) within six months prior to any demand therefor, accompanied by a certificate of such Participant claiming compensation and setting forth in reasonable detail its computation of the additional amount or amounts to be paid to it hereunder. SECTION 13.10. Funding Losses. The Lessees shall pay to the Lease Agent for the account of each Participant, upon the request of such Participant through the Lease Agent, such amount or amounts as shall be sufficient (in the reasonable opinion of such Participant) to compensate it for any loss, cost or expense which such Participant determines is attributable to: (a) any payment, prepayment, conversion or renewal of a LIBO Rate Amount made by such Participant on a date other than the last day of an Interest Period for such LIBO Rate Amount (whether pursuant to an assignment under Section 14.15 or by reason of acceleration or otherwise); or (b) any Loans or Lessor Amounts not being made as LIBO Rate Amounts in accordance with the Funding Request therefor, or any Loans or Lessor Amounts not being continued as, or converted into, LIBO Rate Loans in accordance with the Interest Period Selection/Continuation/Conversion Notice therefor. Without limiting the foregoing, such compensation shall include an amount equal to the excess, if any, of (i) the amount of interest or Yield which otherwise would have accrued on the principal amount so paid, prepaid, converted or renewed or not made, converted, prepaid or renewed for the period from and including the date of such payment, prepayment or conversion or failure to be made, converted, prepaid or renewed to but excluding the last day of the then current Interest Period for such LIBO Rate Amount (or, in the case of a failure to make, convert, prepay or renew LIBO Rate Amounts, to but excluding the last day of the Interest Period for such LIBO Rate Amount which would have commenced on the date specified therefor in the relevant notice) at the Applicable Rate for such LIBO Rate Amount provided for in Section 4.1(a), over (ii) the amount of interest or Yield (as reasonably determined by such Participant) such Participant would have bid in the London interbank market for Dollar deposits for amounts comparable to such principal amount of Loans or Lessor Amounts, as the case may be, and maturities comparable to such period. A determination of any Participant as to the amounts payable pursuant to this Section 13.10 shall be conclusive absent manifest error; provided that such determination is made on a reasonable basis. ARTICLE XIV MISCELLANEOUS SECTION 14.1. Survival of Agreements. The representations, warranties, covenants, indemnities and agreements of the parties provided for in the Operative Documents, and the parties' obligations under any and all thereof, shall survive the execution and delivery of this Participation Agreement, the transfer of the Equity Interests and Properties to the Lessor, any disposition of any interest of the Lessor in the Properties or any Improvements or any interest of the Lessor in the Properties and the payment of the Lease Facility Notes and any disposition thereof and shall be and continue in effect notwithstanding any investigation made by any party and the fact that any party may waive compliance with any of the other terms, provisions or conditions of any of the Operative Documents. SECTION 14.2. New Lessees. Any wholly-owned Subsidiary of the Company may become a "Lessee" for all purposes of the Master Lease and the other Operative Documents by executing and delivering an Adoption Agreement, substantially in the form of Exhibit E hereto (an "Adoption Agreement"), to the Lessor and each Lender. Upon receipt by the Lessor and each Lender of an Adoption Agreement duly executed by any such Subsidiary, and upon satisfaction of all conditions to effectiveness thereof set forth in such Adoption Agreement, such Subsidiary shall be deemed to be a party to this Participation Agreement and the Master Lease as a "Lessee" hereunder and thereunder as if such Subsidiary was originally a party hereto and thereto. SECTION 14.3. Notices. Unless otherwise specifically provided herein, all notices, consents, directions, approvals, instructions, requests and other communications required or permitted by the terms hereof to be given to any Person shall be given in writing by United States mail, by nationally recognized courier service or by hand and any such notice shall become effective five Business Days after being deposited in the mails, certified or registered with appropriate postage prepaid or one Business Day after delivery to a nationally recognized courier service specifying overnight delivery or, if delivered by hand, when received, and shall be directed to the address of such Person as indicated on Schedule I. From time to time any party may designate a new address for purposes of notice hereunder by written notice to each of the other parties hereto in accordance with this Section. SECTION 14.4. Counterparts. This Participation Agreement may be executed by the parties hereto in separate counterparts, each of which when so executed and delivered shall be an original, but all such counterparts shall together constitute but one and the same instrument. SECTION 14.5. Amendments. (a) Prior to the termination of the Intercreditor Agreement, neither this Participation Agreement, any other Operative Document nor any of the terms hereof or thereof may be amended, supplemented, replaced, renewed, extended, refinanced, waived or modified except in accordance with the provisions of Section 3.01 of the Intercreditor Agreement. (b) At all times after the earlier of (x) the termination of the Intercreditor Agreement and (y) the payment in full of all obligations of the Company and the Subsidiary Co-Borrowers owing to the Credit Facility Banks under the Credit Facility Documents and the termination of all commitments of the Credit Facility Banks thereunder: (i) the provisions of this Participation Agreement may from time to time be amended, modified or waived by an instrument in writing signed by the Company, each Lessee, and the Required Participants; provided, however, that no amendment or waiver of any provision relating to payment to any Participant shall be effective against such Participant unless it has been consented to in writing by such Participant; (ii) neither any Operative Document nor any of the terms thereof may be terminated (except upon payment in full of the Lease Balance or effective exercise and consummation of the Remarketing Option in accordance with Article XX of the Master Lease and payment in full of all amounts due in accordance therewith), amended, supplemented, waived or modified without the written agreement or consent of each party thereto and, regardless of whether the Lenders and the Lessor are parties thereto, the Required Participants; provided, however, that: (x) no such termination, amendment, supplement, waiver or modification shall without written agreement or consent of each Participant: (i) modify any of the provisions of this Section 14.5, change the definition of "Required Participants" or modify or waive any provision of an Operative Agreement requiring action by the foregoing; (ii) amend, modify, waive or supplement any of the provisions of Article VII or Section 2.5, 2.6, 2.7, or 2.8 of the Loan Agreement; (iii) reduce, modify, amend or waive any fees or indemnities in favor of any Participant, including amounts payable pursuant to Article XIII (except that any Person may consent to any reduction, modification, amendment or waiver of any indemnity payable to it); (iv) modify, postpone, reduce or forgive, in whole or in part, any payment of Rent (other than pursuant to the terms of any Operative Document), any Loan or Lessor Amount, the Lease Balance, the Loan Balance, the Lease Recourse Amount, fees due pursuant to the Fee Letter, amounts due pursuant to Section 20.2 of the Lease, interest or Yield (except that any Person may consent to any modification, postponement, reduction or forgiveness of any payment of any fee payable to it) or, subject to clause (iii) above, any other amount payable under the Lease or this Participation Agreement, or modify the definition or method of calculation of Rent (other than pursuant to the terms of any Operative Document), Applicable Rate, Applicable Lease Margin, Applicable Loan Margin, Loans or Lessor Amount, Lease Balance, Loan Balance, Lease Recourse Amount, fees due pursuant to the Fee Letter, Shortfall Amount, Property Improvement Costs, Estimated Improvement Costs, Participant Balance, or any other definition which would affect the amounts to be advanced or which are payable under the Operative Documents; or (v) consent to any assignment of any Lease by a Lessee other than to an Affiliate of a Lessee, releasing such Lessee from its obligations in respect of the payments of Rent, Loan Balance, Lease Recourse Amount or Lease Balance or changing the absolute and unconditional character of such obligations; (y) no other termination, amendment, supplement, waiver or modification shall, without the written agreement or consent of the Required Participants, be made to any Lease or Article VI of this Participation Agreement or the definition of "Loan Agreement Default"; and (z) no such termination, amendment, supplement, waiver or modification that would increase the obligations of any Lessee thereunder or deprive such Lessee of any of its rights thereunder shall be effective against such Lessee without the written agreement or consent of such Lessee; and (iii) neither the Agent, the Lenders nor the Lessor shall amend, supplement or otherwise modify any provision of the Operative Documents in a manner which adversely affects the rights of the Lessees without the prior written consent of the Lessees. (c) It is the intent of the parties hereto that the percentages per annum contained in the definition of "Applicable Lease Margin" and "Applicable Loan Margin" (with respect to the Tranche A Loans) shall at all times, for each Pricing Level, be equal to the percentage per annum set forth in the definition of "Applicable Margin" in the Credit Agreement under the caption "Applicable Margin Fixed Rate Loans" for such Pricing Level and, further, that the definitions of "Pricing Level I", "Pricing Level II", "Pricing Level III" and "Pricing Level IV" conform to the definitions thereof contained in the Credit Agreement, in each case as the Credit Agreement may be amended from time to time in accordance with Section 3.01 of the Intercreditor Agreement (but subject to the provisions of Section 3.01(c) of the Intercreditor Agreement). Accordingly, notwithstanding the provisions of clauses (a) and (b) above, the definitions of "Applicable Lease Rate", "Applicable Loan Rate" (with respect to Tranche A Loans) and "Pricing Level" (and all ancillary definitions related thereto) shall, without any further act on the part of any party hereto, automatically be deemed to be amended by, and to the extent set forth in, any amendment to the analogous definitions contained in the Credit Agreement effected in accordance with the provisions of Section 3.01 of the Intercreditor Agreement (but subject to the provisions of Section 3.01(c) of the Intercreditor Agreement), so that at all times the Applicable Lease Margin and the Applicable Loan Margin with respect to the Tranche A Loans shall, for each Pricing Level, be equal to the "Applicable Margin" (as defined in the Credit Agreement) for such Pricing Level. In addition, if at any time the "Applicable Margin" under the Credit Agreement for Variable Rate Loans (as defined in the Credit Agreement) shall be more than 0.00% for any Pricing Level, then the definition of "Alternate Base Rate" contained in Appendix A hereto shall, without any further act on the part of any party hereto, automatically be deemed to be amended to include a margin for such Pricing Level equal to the "Applicable Margin" for Variable Rate Loans for such Pricing Level set forth in the Credit Agreement. SECTION 14.6. Headings, etc. The Table of Contents and headings of the various Articles and Sections of this Participation Agreement are for convenience of reference only and shall not modify, define, expand or limit any of the terms or provisions hereof. SECTION 14.7. Parties in Interest. Except as expressly provided herein, none of the provisions of this Participation Agreement is intended for the benefit of any Person except the parties hereto and their permitted assigns and successors. Neither the Company nor any Lessee shall assign or transfer any of its rights or obligations under the Operative Documents except in accordance with the terms and conditions thereof. SECTION 14.8. GOVERNING LAW. THIS PARTICIPATION AGREEMENT SHALL IN ALL RESPECTS BE GOVERNED BY THE LAW OF THE STATE OF NEW YORK (EXCLUDING ANY CONFLICT-OF-LAW OR CHOICE-OF-LAW RULES WHICH MIGHT LEAD TO THE APPLICATION OF THE INTERNAL LAWS OF ANY OTHER JURISDICTION) AS TO ALL MATTERS OF CONSTRUCTION, VALIDITY AND PERFORMANCE. SECTION 14.9. Severability. Any provision of this Participation Agreement that is prohibited or unenforceable in any jurisdiction shall, to the full extent permitted by law, as to such jurisdiction, be ineffective to the extent of such prohibition or unenforceability without invalidating the remaining provisions hereof, and any such prohibition or unenforceability in any jurisdiction shall not invalidate or render unenforceable such provision in any other jurisdiction. SECTION 14.10. Liability Limited. (a) The parties hereto agree that except as specifically set forth herein or in any other Operative Document, the Lessor shall have no personal liability whatsoever to the Company, any Lessee, any Lender or any other Secured Party or their respective successors and assigns for any claim based on or in respect hereof or any of the other Operative Documents or arising in any way from the transactions contemplated hereby or thereby and the recourse shall be solely had against the Lessor's interest in the Property; provided, however, that the Lessor shall be liable in its individual capacity (a) for its own willful misconduct or gross negligence (or negligence in the handling of funds), (b) breach of any of its representations, warranties, obligations or covenants under the Operative Documents (including its obligation under Section 10.5), or (c) for any Tax based on or measured by any fees, commission or compensation received by it for acting as the Lessor as contemplated by the Operative Documents. It is understood and agreed that, except as provided in the preceding sentence: (i) Lessor shall have no personal liability under any of the Operative Documents as a result of acting pursuant to and consistent with any of the Operative Documents; (ii) all obligations of the Lessor to any Lessee, any Lender or any other Secured Party are, in each case, solely nonrecourse obligations except to the extent that it has received payment from others; and (iii) all such personal liability of the Lessor is expressly waived and released as a condition of, and as consideration for, the execution and delivery of the Operative Documents by the Lessor. (b) No Participant shall have any obligation to any other Participant or to any Lessee with respect to transactions contemplated by the Operative Documents, except those obligations of such Participant expressly set forth in the Operative Documents or except as set forth in the instruments delivered in connection therewith, and no Participant shall be liable for performance by any other party hereto of such other party's obligations under the Operative Documents except as otherwise so set forth. SECTION 14.11. Further Assurances. The parties hereto shall promptly cause to be taken, executed, acknowledged or delivered, at the sole expense of the Lessees, all such further acts, conveyances, documents and assurances as the other parties may from time to time reasonably request in order to carry out and preserve the security interests and Liens (and the priority thereof) intended to be created pursuant to this Participation Agreement, the other Operative Documents, and the transactions thereunder (including the preparation, execution and filing of any and all Uniform Commercial Code financing and termination statements and other filings or registrations which the parties hereto may from time to time request to be filed or effected or terminated); provided, however, that the Lessees shall not be required to pay expenses pursuant to this Section or elsewhere to the extent arising from the assignment or participation of any Loan or Lessor Amount. Each Lessee, at its own expense and without need of any prior request from any other party, shall take such action as may be reasonably necessary (including any action specified in the preceding sentence), or (if the Lessor shall so request) as so reasonably requested, in order to maintain and protect all security interests provided for hereunder or under any other Operative Document. SECTION 14.12. Submission to Jurisdiction. The Company and each Lessee hereby submits to the nonexclusive jurisdiction of the United States District Court for the Southern District of New York for purposes of all legal proceedings arising out of or relating to the Operative Documents or the transactions contemplated hereby. The Company and each Lessee irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such proceeding brought in such a court and any claim that any such proceeding brought in such a court has been brought in an inconvenient forum. SECTION 14.13. Setoff. The Lessor and the Lenders shall, upon the occurrence of any Lease Event of Default, have the right to appropriate and apply to the payment of the obligations under the Lease as security for the payment of such obligations, any and all balances, credits, deposits, accounts or moneys of each Lessee then or thereafter maintained with the Lessor or any Lender. The rights of the Lessor and the Lenders under this Section are in addition to other rights and remedies (including other rights of setoff under applicable law or otherwise) which such Person may have. SECTION 14.14. Replacement of Lender. If a Lender fails to fund its share of the Loans, then, in addition to any other right or remedies that Lessees may have at law or in equity, the Company, as agent for the Lessees, shall have the right (but not the obligation) to require such Lender, upon receipt by such Lender of all its Participant Balance plus all other amounts owing to such Lender under the Operative Documents (including, without limitation, amounts payable to such Lender under Section 13.10 as a result of such payment of its Participant Balance) to assign and delegate in accordance with Section 12.1 all of such Lender's total Loans and Commitment to any of the Lenders or to any other financial institution selected by Company, as agent for the Lessees, that, in each case, is willing to accept such assignment and delegation. SECTION 14.15. Assignment of Tranche A Loans in Connection with an Increase in Commitments. In the event that the aggregate Loan Commitments of the Tranche A Lenders is increased after the Documentation Date (whether through an increase in any Tranche A Lender's Loan Commitment or through additional Commitments from new Tranche A Lenders) then each Tranche A Lender agrees that, on and as of the Acquisition Date immediately following such Commitment increase, (i) the Tranche A Lenders that have increased their Loan Commitments or are new Tranche A Lenders shall purchase outstanding Tranche A Loans from the other Tranche A Lenders and (ii) the other Tranche A Lenders shall sell and assign a portion of their outstanding Tranche A Loans to the Tranche A Lenders that have increased their Loan Commitments and the new Tranche A Lenders. SECTION 14.16. WAIVER OF JURY TRIAL. THE PARTIES HERETO VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS PARTICIPATION AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER VERBAL OR WRITTEN) OR ACTIONS OF ANY OF THE PARTIES HERETO. THE PARTIES HERETO HEREBY AGREE THAT THEY WILL NOT SEEK TO CONSOLIDATE ANY SUCH LITIGATION WITH ANY OTHER LITIGATION IN WHICH A JURY TRIAL HAS NOT OR CANNOT BE WAIVED. THE PROVISIONS OF THIS SECTION 14.15 HAVE BEEN FULLY NEGOTIATED BY THE PARTIES HERETO AND SHALL BE SUBJECT TO NO EXCEPTIONS. THE COMPANY AND EACH LESSEE ACKNOWLEDGE AND AGREE THAT IT HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER OPERATIVE DOCUMENT TO WHICH IT IS A PARTY) AND THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE PARTICIPANTS ENTERING INTO THIS PARTICIPATION AGREEMENT AND EACH SUCH OTHER OPERATIVE DOCUMENT. [THE REMAINDER OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK] IN WITNESS WHEREOF, the parties hereto have caused this Participation Agreement to be duly executed by their respective officers thereunto duly authorized as of the day and year first above written. THE MULTICARE COMPANIES, INC., as the Company By BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice-President ACADEMY NURSING HOME, INC., as a Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President NURSING AND RETIREMENT CENTER OF THE ANDOVERS, INC., as a Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President PRESCOTT NURSING HOME, INC., as a Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President WILLOW MANOR NURSING HOME, INC.,, as a Lessee By ALAN D. SOLOMONT Name: Alan D. Solomont Title: President ADS/MULTICARE, INC., as a Lessee By BRADFORD C. BURKETT Name: Bradford C. Burkett Title: Vice President SELCO SERVICE CORPORATION, as Lessor By Name: Title: NATIONSBANK, N.A., as Lease Agent and as Collateral Agent By Name: Title: TORONTO-DOMINION (NEW YORK), INC., as a Tranche A Lender By Name: Title: BANQUE PARIBAS, as a Tranche A Lender By Name: Title: CREDITANSTALT CORPORATE FINANCE, INC., as a Tranche A Lender By Name: Title: MELLON BANK, N.A., as a Tranche A Lender By Name: Title: FBTC LEASING CORP., as a Tranche B Lender By Name: Title: ANNEX A COMMITMENTS PARTICIPANT COMMITMENT FUNDING PERCENTAGE Toronto-Dominion (New York) Inc. $10,000,000 18.73445% Tranche A Banque Paribas, New York Branch $15,000,000 28.10167% Tranche A Creditanstalt Corporate Finance, Inc. $10,000,000 18.73445% Tranche A Mellon Bank, N.A. $10,000,000 18.73445% Tranche A FBTC Leasing Corp. $7,616,988 12.69498% Tranche B SELCO Service $1,800,000 3.00000% Corporation Lessor TOTAL: $54,416,988 100.00%
The foregoing Funding Percentages are based on a Lease Recourse Amount of 84.30502% of the sum of the outstanding Loans and Lessor Amounts. In the event the Lease Recourse Amount with respect to any Property financed after the Initial Acquisition Date differs from 84.30502%, the parties hereto agree to reallocate the Funding Percentages to take account of such different Lease Recourse Amount so that the aggregate Funding Percentages of all Tranche A Lenders equals the Lease Recourse Amount. SCHEDULE I Notice Information, Wire Instructions, Funding Offices and LIBOR Office SCHEDULE II Item 8.2(d): Litigation Each of the Company and the Lessees is party to claims and legal actions arising in the ordinary course of its business. Management of the Company or any Lessee does not believe that any litigation to which the Company or any Lessee is currently a party will have a Material Adverse Effect. TABLE OF CONTENTS Page ARTICLE I DEFINITIONS; INTERPRETATION ARTICLE II INTENTIONALLY OMITTED ARTICLE III FUNDING OF ADVANCES SECTION 3.1. Lessor Acquisition. . . . . . . . . . . . . . . . . 3 SECTION 3.2. Lessor's Commitment . . . . . . . . . . . . . . . . 4 SECTION 3.3. Lenders' Commitments. . . . . . . . . . . . . . . . 4 SECTION 3.4. Procedures for Advances . . . . . . . . . . . . . . 4 SECTION 3.5. Interest Period Selection/Continuation/ Conversion Elections . . . . . . . . . . . . . . . . . . . . . 5 SECTION 3.6. Funding of Certain Modifications; Construction Financings. . . . . . . . . . . . . . . . . . . . . 5 ARTICLE IV COMPUTATION OF BASIC RENT; INTEREST ON LOANS; FEES SECTION 4.1. Computation of Basic Rent (Interest/Yield). . . . . 6 SECTION 4.2. Interest on Loans . . . . . . . . . . . . . . . . . 6 SECTION 4.3. Yield on Lessor Amount. . . . . . . . . . . . . . . 7 SECTION 4.4. Prepayments of Loans and Lessor Amount. . . . . . . 7 SECTION 4.5. Fees. . . . . . . . . . . . . . . . . . . . . . . . 7 (a) Facility Fees . . . . . . . . . . . . . . . . . 7 (b) Structuring Agent's Fees. . . . . . . . . . . . 7 ARTICLE V CERTAIN INTENTIONS OF THE PARTIES SECTION 5.1. Nature of the Transaction . . . . . . . . . . . . . 8 SECTION 5.2. Amounts Due Under Lease . . . . . . . . . . . . . . 8 ARTICLE VI CONDITIONS PRECEDENT SECTION 6.1. Documentation Date. . . . . . . . . . . . . . . . . 9 (a) Participation Agreement. . . . . . . . . . . . 9 (b) Master Lease . . . . . . . . . . . . . . . . . 9 (c) Loan Agreement . . . . . . . . . . . . . . . . 9 (d) Assignment of Lease and Rent . . . . . . . . . 9 (e) Intercreditor Agreement . . . . . . . . . . . 10 (f) Security Documents.. . . . . . . . . . . . . . 10 (g) [Intentionally Omitted]. . . . . . . . . . . . 10 (h) Certain Transaction Expenses . . . . . . . . . 10 SECTION 6.2. Initial Acquisition Date. . . . . . . . . . . . . . 10 (a) Lessees' Resolutions and Incumbency Certificate, etc. . . . . . . . . . . . . . . . . . . . . . 10 (b) Company's Resolutions and Incumbency Certificate, etc. . . . . . . . . . . . . . . . . . . . . . 11 (c) Opinion of Counsel to the Company and the Lessees. . . . . . . . . . . . . . . . . . . . 11 (d) Fees . . . . . . . . . . . . . . . . . . . . 11 SECTION 6.3. Conditions Precedent to Each Acquisition Date 11 (a) Funding Request . . . . . . . . . . . . . . . . 12 (b) Transfer Documents. . . . . . . . . . . . . . . 12 (c) Deed; Bill of Sale for Certain Properties . . . 12 (d) Supplement to Assignment of Lease and Rent. . . 12 (e) Lease Supplement/Memorandum of Lease. . . . . . 13 (f) Responsible Officer's Certificate . . . . . . . 13 (g) Lease Facility Mortgage . . . . . . . . . . . . 13 (h) Lease Facility Financing Statements . . . . . . 14 (i) Recordation of Mortgages and Filing of Lease Facility Financing Statements . . . . . . . . . 14 (j) Evidence of Property Insurance. . . . . . . . . 14 (k) Environmental Audit . . . . . . . . . . . . . . 14 (l) Property Survey . . . . . . . . . . . . . . . . 14 (m) Title Insurance . . . . . . . . . . . . . . . . 14 (n) Appraisal . . . . . . . . . . . . . . . . . . . 15 (o) Opinion of Local Counsel. . . . . . . . . . . . 15 (p) Fees . . . . . . . . . . . . . . . . . . . 15 (q) Representations and Warranties. . . . . . . . . 15 (r) Taxes . . . . . . . . . . . . . . . . . . . . 15 (s) Governmental Approvals. . . . . . . . . . . . . 15 (t) Litigation . . . . . . . . . . . . . . . . . . 16 (u) Requirements of Law . . . . . . . . . . . . . . 16 (v) No Default . . . . . . . . . . . . . . . . . . 16 ARTICLE VII DISTRIBUTIONS SECTION 7.1. Basic Rent (Interest/Yield) . . . . . . . . . . . . . 16 SECTION 7.2. Purchase Payments by the Lessees. . . . . . . . . . . 17 SECTION 7.3. Payment of Lease Recourse Amount. . . . . . . . . . . 18 SECTION 7.4. Sales Proceeds of Remarketing of Properties . . . . . 18 SECTION 7.5. Supplemental Rent . . . . . . . . . . . . . . . . . . 18 SECTION 7.6. Reserved . . . . . . . . . . . . . . . . . . . . . . 18 SECTION 7.8. Other Payments. . . . . . . . . . . . . . . . . . . . 20 SECTION 7.9. Casualty and Condemnation Amounts . . . . . . . . . . 21 SECTION 7.10. Order of Application. . . . . . . . . . . . . . . . . 21 SECTION 7.11. Deemed Receipt. . . . . . . . . . . . . . . . . . . . 21 SECTION 7.12. Agreement of Collateral Agent and Participants. . . . 22 ARTICLE VIII REPRESENTATIONS SECTION 8.1. Representations of the Participant. . . . . . . . . . 22 (a) ERISA . . . . . . . . . . . . . . . . . . . . . . . 22 (b) Status . . . . . . . . . . . . . . . . . . . . . . . 22 (c) Organization, Good Standing and Due Qualification . . 22 (d) Power and Authority, No Conflicts . . . . . . . . . . 23 (e) No Affiliation With Lessor. . . . . . . . . . . . . . 23 (f) Legally Enforceable Agreements. . . . . . . . . . . . 23 SECTION 8.2. Representations of the Company and the Lessees. . . . 24 (a) Organization, Good Standing and Due Qualification . . 24 (b) Power and Authority, No Conflicts . . . . . . . . . . 24 (c) Legally Enforceable Agreements . . . . . . . . . . . 25 (d) Litigation . . . . . . . . . . . . . . . . . . . . . 25 (e) Financial Statements. . . . . . . . . . . . . . . . . 25 (f) ERISA . . . . . . . . . . . . . . . . . . . . . . . . 26 (g) Hazardous Materials . . . . . . . . . . . . . . . . . 26 (h) Governmental Regulation . . . . . . . . . . . . . . . 27 (i) Solvency. . . . . . . . . . . . . . . . . . . . . . . 27 (j) Lessees . . . . . . . . . . . . . . . . . . . . . . . 28 (k) Property. . . . . . . . . . . . . . . . . . . . . . . 28 (l) Condition of Property . . . . . . . . . . . . . . . . 28 (m) [Intentionally Omitted] . . . . . . . . . . . . . . . 29 (n) Insurance . . . . . . . . . . . . . . . . . . . . . . 29 (o) Flood Hazard Areas . . . . . . . . . . . . . . . . . 29 ARTICLE IX PAYMENT OF CERTAIN EXPENSES SECTION 9.1. Transaction Expenses. . . . . . . . . . . . . . . . . 30 SECTION 9.2. Brokers' Fees and Stamp Taxes . . . . . . . . . . . . 30 ARTICLE X OTHER COVENANTS AND AGREEMENTS SECTION 10.1. Covenants of the Company and each Lessee . . . . . . 30 SECTION 10.2. Right of Inspection . . . . . . . . . . . . . . . . 31 SECTION 10.3. Further Assurances . . . . . . . . . . . . . . . . 31 SECTION 10.4. Agreement of Parties . . . . . . . . . . . . . . . . 32 SECTION 10.5. Removal of Liens . . . . . . . . . . . . . . . . . . 32 SECTION 10.6. Massachusetts Circular Letter. . . . . . . . . . . . 32 ARTICLE XI LESSEE DIRECTIONS SECTION 11.1. Lessee Directions. . . . . . . . . . . . . . . . . . 33 ARTICLE XII TRANSFERS OF PARTICIPANTS' INTERESTS SECTION 12.1. Assignments . . . . . . . . . . . . . . . . . . . . 34 SECTION 12.2. Participations . . . . . . . . . . . . . . . . . . . 35 SECTION 12.3. Withholding Taxes; Disclosure of Information; Pledge Under Regulation A . . . . . . . . . . . . . . . . . 36 ARTICLE XIII INDEMNIFICATION SECTION 13.1. General Indemnification. . . . . . . . . . . . . . . 38 SECTION 13.2. End of Term Indemnity . . . . . . . . . . . . . . . 40 SECTION 13.3. Environmental Indemnity. . . . . . . . . . . . . . . 41 SECTION 13.4. Proceedings in Respect of Claims . . . . . . . . . . 42 SECTION 13.5. General Tax Indemnity . . . . . . . . . . . . . . . 44 SECTION 13.6. Indemnity Payments in Addition to Lease Obligations 51 SECTION 13.7. LIBO Rate Lending Unlawful . . . . . . . . . . . . . 51 SECTION 13.8. Deposits Unavailable . . . . . . . . . . . . . . . 52 SECTION 13.9. Increased Costs, etc. . . . . . . . . . . . . . . . 52 SECTION 13.10. Funding Losses . . . . . . . . . . . . . . . . . . 55 ARTICLE XIV MISCELLANEOUS SECTION 14.1. Survival of Agreements . . . . . . . . . . . . . . . 55 SECTION 14.2. New Lessees . . . . . . . . . . . . . . . . . . . . 55 SECTION 14.3. Notices . . . . . . . . . . . . . . . . . . . . . . 56 SECTION 14.4. Counterparts . . . . . . . . . . . . . . . . . . . . 56 SECTION 14.5. Amendments . . . . . . . . . . . . . . . . . . . . . 56 SECTION 14.6. Headings, etc. . . . . . . . . . . . . . . . . . . . 59 SECTION 14.7. Parties in Interest. . . . . . . . . . . . . . . . . 59 SECTION 14.8. GOVERNING LAW . . . . . . . . . . . . . . . . . . . 59 SECTION 14.9. Severability . . . . . . . . . . . . . . . . . . . 59 SECTION 14.10. Liability Limited . . . . . . . . . . . . . . . . . 60 SECTION 14.11. Further Assurances . . . . . . . . . . . . . . . . 60 SECTION 14.12. Submission to Jurisdiction . . . . . . . . . . . . . 61 SECTION 14.13. Setoff . . . . . . . . . . . . . . . . . . . . . . 61 SECTION 14.14. Replacement of Lender . . . . . . . . . . . . . . . 61 SECTION 14.15. Assignment of Tranche A Loans in Connection with an Increase in Commitments . . . . . . . . . . . . . . 62 SECTION 14.16. WAIVER OF JURY TRIAL . . . . . . . . . . . . . . . . 62 ANNEXES ANNEX A Participants' Commitments SCHEDULES SCHEDULE I Notice Information, Wire Instructions, Funding Offices, and LIBOR Office SCHEDULE II Item 8.2(d): Litigation EXHIBITS EXHIBIT A Form of Funding Request EXHIBIT B Form of Interest Period Selection/Continuation/Conversion Notice EXHIBIT C Form of Responsible Officer's Certificate EXHIBIT D Form of Assignment Agreement EXHIBIT E Form of Adoption Agreement EX-99 9 FOR IMMEDIATE RELEASE December 12, 1996; 7:00 am EST Contact: Stephen R. Baker Executive Vice President, Chief Operating Officer (201) 488-8818 Melody A. Carey Director, Investor Relations (201) 525-5985 MULTICARE COMPLETES ADS ACQUISITION -Company is the Largest Provider of Long-Term Care in Massachusetts- HACKENSACK, NJ, December 12, 1996 -- The Multicare Companies, Inc. (NYSE: MUL) announced today that it has completed the previously announced acquisition of The ADS Group, a privately-held long-term care company headquartered in Newton, Massachusetts. Alan D. Solomont, founder and chairman of ADS (and a member of Multicare's board of directors) has joined Multicare as its vice chairman and Susan S. Bailis, formerly president, chief operating officer and a principal of ADS, has joined Multicare as a senior vice president as well as president of the new ADS/Multicare subsidiary. Multicare also announced that it has amended and restated its $350 million credit facility and in connection therewith has entered into a new lease facility in the amount of approximately $55 million. The Agent for these facilities is NationsBank, N.A. ADS owns, operates or manages 23 long-term care facilities with 3,072 beds, 20 hospital- based subacute units with 514 beds and eight assisted living facilities, totaling 820 beds, almost all of which are located in Massachusetts. ADS also provides consulting services to an additional 14 facilities with 1,668 beds, operates several ancillary businesses including home health, both Medicare certified and private, and provides out-patient rehabilitation services at numerous locations. Under the terms of the agreement, Multicare paid approximately $60.1 million and assumed or repaid approximately $24.6 million in debt and issued 554,973 shares of its common stock for ADS. "This acquisition is a strategic fit for Multicare and is consistent with the Company's clustering and geographic approach," said Daniel E. Straus, president and co-chief executive officer of Multicare. "The Company has not only strengthened its New England presence, but has enhanced its capability in the assisted living and subacute areas." Multicare, founded in 1984, is a leading provider of high quality long-term care and specialty medical services. Multicare owns, leases or manages over 150 long-term care facilities with more than 16,000 beds in 11 states. Multicare also owns and operates a number of ancillary health care businesses, including a significant institutional pharmacy business. The Company's long-term care services include skilled nursing care, subacute care, assisted living, home health care and related support activities traditionally provided in long-term care facilities. Certain of the matters discussed in this press release contain forward- looking statements that involve risk and uncertainties. Although Multicare believes that the assumptions accompanying such forward-looking statements are reasonable, it cannot give any assurance that expected results will occur. A significant variation between actual results and any of such assumptions may cause actual results to differ materially from expectations. Reference should be made to Multicare's Form 10-K for the year ended December 31, 1995 for more specific information concerning such risks and assumptions. -----END PRIVACY-ENHANCED MESSAGE-----